In the Canadian financial system, the term "individual with significant control" (Individual with Significant Control, ISC) refers to natural persons who actually own or control a corporation. An ISC is a person who owns or controls a corporation. For companies providing money services business (MSB) services, understanding this concept is critically important, since as of October 2025 the requirements for verifying beneficial ownership have been significantly tightened.
The legislative basis for identifying ISCs is set out in the Canada Business Corporations Act (CBCA). Since January 22, 2024, corporations incorporated under the CBCA have been required to file information about their individuals with significant control with Corporations Canada. This requirement is intended to increase transparency of corporate ownership and combat money laundering — an issue that is especially relevant to the MSB sector.
For MSBs, understanding ISC goes beyond ordinary compliance: it is a tool for assessing the risk of each corporate client. FINTRAC, Canada’s financial transactions regulator, requires reporting entities not merely to collect data, but also to actively verify its accuracy through government registries.
Canadian law establishes two main criteria for determining an ISC. A person is considered an ISC if, individually, jointly, or in concert, they own, control, or direct 25% or more of the voting shares, or 25% or more of all shares. However, the quantitative threshold — is not the only criterion.
An individual with significant control has influence over a corporation that is equivalent to "actual control." This means that even without formal share ownership, a person may be recognized as an ISC if they are able to influence the company’s finances, operations, and day-to-day management. For MSBs, this creates additional complexity: it is necessary to analyze not only documented ownership, but also the real power relationships within clients’ corporate structures.
In practical terms, this means that when working with high-risk clients, MSBs must go beyond a superficial document review and examine the actual management structure of the company.
The most labor-intensive part of ISC verification arises when dealing with complex corporate structures. If a trust owns or controls 25% or more of a corporation’s shares, the persons controlling the trust are considered ISCs and must be entered in the register, including those who have the authority to control or actually control the trust.
Multi-tier structures present a particular challenge: MSBs need to "work through" chains of holding companies in order to identify the ultimate beneficial owners. For example, if corporation A owns 100% of corporation B, which owns 30% of corporation C, the individual controlling corporation A is an ISC for corporation C.
In cases of joint ownership of a significant number of shares, each member of the group must be entered in the ISC register. This means that spouses or business partners jointly owning 25% of the shares are both registered as ISCs, even if each individually owns less than 25%.
October 2025 became a turning point for Canadian MSBs. The new requirements created an additional layer of oversight that significantly increases the administrative burden, but at the same time strengthens the integrity of the financial system.
As of October 1, 2025, reporting entities regulated by FINTRAC are required to report to Corporations Canada any material discrepancies identified between the beneficial ownership information they obtained and the ISC information available in the Corporations Canada database, when the reporting entity determines that an active corporation incorporated under the CBCA presents a high risk of money laundering or terrorist financing.
The key point: the verification obligation applies only to high-risk clients. Verification must be carried out when the reporting entity considers the federal corporation high-risk either during onboarding or during ongoing monitoring. This means that MSBs must have clear risk-assessment criteria defining which clients require additional verification.
For the MapleBiz team, this means the need to integrate new processes into the existing compliance system. MSBs must not only implement technical solutions for checking the Corporations Canada database, but also train staff to recognize high-risk indicators and properly document each verification step.
The practical implementation of the new requirements requires a systematic approach. Here is an action algorithm for MSBs:
It is critically important to understand that verification is not a one-time action. It must be repeated as part of ongoing monitoring of business relationships with high-risk clients.
The concept of a "material discrepancy" is at the center of the new MSB obligations, but its definition leaves room for interpretation.
A material discrepancy is a significant inconsistency between the beneficial ownership information of a corporation incorporated under the Canada Business Corporations Act and the individuals with significant control listed in the Corporations Canada database, which may affect proper identification or conceal persons who own or control the corporation.
In practice, discrepancies that materially distort the picture of ownership or control are considered material. Examples include:
NOT considered material: spelling mistakes, minor variations in the spelling of a name and address, the presence of a business address in one source and a home address in another. This boundary between material and minor requires MSB compliance professionals to exercise professional judgment and understand the risks.
If the comparison reveals a "material discrepancy" — an inconsistency significant enough to conceal or distort information about who owns or controls the corporation, — the reporting entity must file a beneficial ownership discrepancy report with Corporations Canada within 30 days and retain proof of filing for five years.
Important timing nuances:
For record retention, the five-year rule applies: MSBs must keep a copy of the acknowledgment of receipt of the report from Corporations Canada for this period. Please note that re-issuance of acknowledgments of receipt is not possible, which makes initial retention critically important.
Discovery of a material discrepancy triggers a cascade of additional actions. MSBs are not required to immediately terminate the relationship with the client, but they must apply enhanced verification measures.
Reasonable additional measures may include:
If, after applying all reasonable measures, the MSB cannot confirm the accuracy of the beneficial ownership information, this should be treated as a risk factor in the client assessment and may lead to the need to file a suspicious transaction report.
Analysis of the first months under the new requirements has revealed several common pitfalls into which MSBs fall.
Mistake No. 1: Checking all clients indiscriminately. Some MSBs, in an effort to play it safe, check all corporate clients through the Corporations Canada database. This not only wastes resources inefficiently, but also creates excessive documentation. The obligation applies only to high-risk clients registered under the CBCA.
Mistake No. 2: Ignoring provincial corporations. The reverse problem is that MSBs forget that although the verification obligation through Corporations Canada applies only to federal corporations, the requirement to obtain and confirm beneficial ownership applies to all corporations. Provincial companies are not exempt from owner verification.
Mistake No. 3: Lack of clear process documentation. Non-compliance is now an offense under the PCMLTFA, punishable on summary conviction by a fine of up to $250,000 or imprisonment for up to two years, and on indictment by a fine of up to $500,000 or imprisonment for up to five years. Without proper documentation, proving compliance during a FINTRAC inspection is practically impossible.
Mistake No. 4: Underestimating the complexity of trusts and multi-tier structures. Many MSBs take a simplified approach to identifying ISCs, stopping at the first ownership level. When dealing with complex structures, ownership chains must be traced to the ultimate natural persons.
Mistake No. 5: Ignoring changes in ownership composition. Beneficial ownership verification is not a one-time action. MSBs must build repeat checks into ongoing monitoring processes, especially for high-risk clients.
MapleBiz specialists recommend developing internal policies that clearly define the criteria for high-risk clients, the procedure for data matching, and escalation when discrepancies are identified. A properly built compliance system not only protects against regulatory sanctions, but also reduces operational risks.
To ensure compliance with the requirements, use the following checklist:
|
Area |
Action |
Frequency |
|---|---|---|
|
Risk assessment |
Develop criteria for identifying high-risk CBCA clients |
Annual review |
|
ISC verification |
Match beneficial ownership against the Corporations Canada database for all high-risk federal corporations |
During onboarding and ongoing monitoring |
|
Documentation |
Record all verification steps, matching results, and decisions made |
Every verification |
|
Staff training |
Conduct training on identifying material discrepancies |
Annually |
|
Technical systems |
Ensure access to the Corporations Canada database and implement verification automation |
Continuously |
|
Reporting |
When a material discrepancy is identified, file a report within 30 days |
As needed |
|
Record retention |
Retain proof of report filing and all related documents |
At least 5 years |
The new beneficial ownership verification requirements present a serious challenge for MSBs operating in Canada. Understanding ISC criteria, properly identifying high-risk clients, and systematically reconciling with the Corporations Canada database are not merely administrative formalities, but essential tools for protecting the financial system from abuse. Penalties for non-compliance can reach half a million dollars, but even more important are reputational risks and the possible loss of an MSB license.
MapleBiz offers comprehensive legal services for structuring compliance systems for MSBs, including the development of internal policies, staff training, and audits of existing procedures. Our specialists will help not only implement the legal requirements, but also optimize processes so that compliance becomes a competitive advantage for your business. Contact us for a consultation to ensure that your beneficial ownership verification system meets current FINTRAC standards and protects your business from regulatory risks.
