Financial Crime World

Canada Introduces Anti-Money Laundering Regulations for Crowdfunding Services, Fintechs, and Payment Service Providers

The federal government of Canada has introduced new anti-money laundering (AML) and anti-terrorist financing (ATF) regulations that will impact crowdfunding services, fintechs, and payment service providers in the country. The changes aim to strengthen Canada’s AML/ATF regime by bringing these sectors under the oversight of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Key Changes

  • As of April 5, 2022, crowdfunding platforms are now characterized as money services businesses (MSBs) and are required to register with FINTRAC.
    • Develop a compliance program
    • Report suspicious transactions
    • Maintain accurate records
  • Fintechs and payment service providers who process merchant transactions must also register with FINTRAC and comply with AML/ATF obligations for electronic funds transfers (EFTs).
  • Previously, these entities were exempt from certain reporting requirements, but the new regulations require them to meet AML/ATF regime obligations.

Objectives of the Regulations

The changes are aimed at addressing money laundering and terrorist financing risks that may arise from the development of new products and business practices. The federal government has stated that these regulations will extend AML/ATF regime obligations to approximately 1,000 businesses in the crowdfunding and payment service provider sectors.

FINTRAC Compliance Activities

FINTRAC will focus its compliance activities on:

  • Registration requirements
  • Educating impacted sectors on their obligations under the Act and Regulations
  • Providing guidance to help reporting entities build a compliance program and meet their obligations

What You Need to Do

If you are a payment service provider or crowdfunding platform affected by the regulations, you must:

  • Register with FINTRAC immediately
  • Develop a compliance program that includes:
    • Reporting suspicious transactions
    • Maintaining accurate records
    • Conducting know-your-client obligations

Québec Regime

The Québec regime typically follows the federal regime in relation to MSBs. Therefore, payment service providers and crowdfunding platforms will likely need to register in Québec as well.

Next Steps

The Department of Finance has stated that it will update its guidance to address the regulations, and industry experts are awaiting clarity on the scope and impact of these changes.

Note: This article is a summary of the original text and may not include all the details. It is recommended to consult the official sources for more information.