Money transfers (remittance) and MSB: cases, limits, reporting

Money Services Business (MSB) — is a business that provides financial services that do not fall under a banking license, but that work with money transfers, currency exchange, and other operations. In Canada, anyone who provides such services is required to register with FINTRAC — the federal regulator for combating money laundering and terrorist financing.

An important nuance: registration — is not approval or a license, and it cannot be claimed that a product is approved or certified by FINTRAC. Registration only makes the company a reporting entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This means that even if a province has issued its own license, federal registration remains mandatory.

Failure to register — is not an administrative oversight. The violation is punishable by a fine of up to $250,000 or imprisonment for up to two years on summary conviction, or a fine of up to $500,000 or imprisonment for up to five years on indictment. At the same time, MapleBiz regularly encounters clients who start a business without realizing the need to register. We help entrepreneurs go through the procedure correctly from the very beginning, minimizing the risk of operations being halted.

Types of services: transfers, currency exchange, cryptocurrency

MSB — are persons or organizations offering one or more of the following services: currency exchange, transfer or remittance of funds, issuance or redemption of money orders, virtual currency transactions, crowdfunding platforms, transportation of currency. Each category has its own documentation and MSB reporting requirements.

Money transfers (remittance) — are the most common MSB service. This includes sending funds from one person to another through an electronic transfer network or by any other means, including hawala, hundi, fei ch'ien, and chitti. Companies that work with payment cards also fall under the definition of MSB if the recipient has an agreement with a payment service provider.

Cryptocurrency transactions have been integrated into the MSB regime since June 2020. Transactions with digital assets exceeding CAD 10,000 require reporting, which is consistent with FATF recommendations. The requirements apply both to exchanging cryptocurrency for fiat money and to exchanges between digital assets.

Limits and reporting thresholds under the PCMLTFA

Canada's anti-money laundering system is built on clear threshold values. Understanding these thresholds is critically important to avoid sanctions. The legislation does not forgive even good-faith mistakes — FINTRAC inspections identify discrepancies during audits, and the absence of reports for prior periods leads to cumulative penalties.

Electronic transfers of $10,000+: procedures and deadlines

MSBs must report to FINTRAC any electronic funds transfer of $10,000 or more, whether it is a single transaction or a series of related transactions. The report must be submitted within five business days. This applies to both outgoing and incoming international transfers.

The 24-hour rule applies to transaction aggregation: if several transfers from one client within 24 hours exceed the threshold in total, they must be reported as a single event. This detail is often overlooked by MSB owners, who mistakenly believe that only individual large transactions need to be tracked.

For alternative transfer systems (for example, hawala), the same thresholds apply. When you transfer $1,000 or more in funds at the request of a person or organization by means other than an electronic transfer, records must be kept. At the same time, customer KYC requirements remain identical to formal banking channels.

Large cash transactions: documentation

MSBs must keep records of large cash transactions when they receive $10,000 or more in cash. Documentation is mandatory for each such transaction, regardless of whether it occurs through the head office or through agents.

Records must be retained for at least five years and include: customer identification data, amount, date, purpose of the transaction, method of receiving the funds. Records must be kept so that they can be provided to FINTRAC within 30 days upon request. This requirement is checked during every audit, and violations here are one of the most common reasons for fines.

Informal transfer systems: hawala/hundi

Hawala, hundi, fei ch'ien, and other informal value transfer systems (IVTS) are actively used by immigrants to send money home. They are based on trust and operate outside the traditional banking infrastructure. However, in Canada these systems are fully regulated and subject to the same requirements as ordinary MSBs.

Regulatory requirements for alternative methods

MSBs include alternative money transfer systems such as hawala, hundi, chitti. Despite their informal nature, operators are required to register with FINTRAC, implement a compliance program, verify customer identity, and report prescribed transactions.

Informal value transfer includes dealers who facilitate the transfer of value to a third party in another jurisdiction without the physical movement of funds. Final settlement between brokers takes place through cash exchange, trade, or other means. This creates a vulnerability to money laundering, as transaction trails are blurred.

Regulators recognize that informal value transfer systems are regulated by the PCMLTFA, but they are often successfully exploited by criminal groups. Special attention is paid to links with high-risk jurisdictions. FINTRAC inspections specifically look for patterns characteristic of the illegal use of hawala.

Money laundering risks and KYC requirements

The main risk of hawala — is anonymity. Informal banking systems and the formal banking system inevitably intersect, since certain transactions require the use of the formal banking system. At this stage, activity is partially observed by regulated financial institutions and falls under FINTRAC reporting obligations.

To work with informal transfers, MSBs must comply with strict identification requirements. It is necessary to verify the identity of each person requesting a transfer of $1,000 or more through informal value transfer systems such as hawala at the time of the transaction. This includes checking a passport or other government-issued identification, as well as verifying the address.

Failure to follow proper customer KYC procedures when working with hawala — is a typical mistake of small MSBs that believe community traditions replace formal identification. This is not the case. The MapleBiz team often advises clients on implementing adequate identification procedures adapted to the specifics of informal systems, but fully compliant with Canadian law.

AML/KYC programs for MSBs

An anti-money laundering and anti-terrorist financing program (AML/ATF) — is not just a document for the regulator. It is a living system that must be embedded in the business's daily operations. MSBs are reporting entities under the PCMLTFA and must implement and maintain an AML program, as well as undergo a compliance effectiveness review (CER) at least once every two years.

An effective program includes: appointing a compliance officer, assessing customer and product risks, written policies and procedures, employee training, and an independent audit every two years. Each element must be documented and available for FINTRAC inspections.

Compliance checklist and common mistakes

Basic compliance checklist for MSBs:

• Registration with FINTRAC and updating information within 30 days of changes
• Appointment of a competent compliance officer with real authority
• Written AML/ATF program tailored to the business's risks
• Customer identification (KYC) procedures for all applicable transactions
• Transaction monitoring system for suspicious activity
• Reporting processes: STR, LCTR, EFTR, LVCTR
• Customer screening against sanctions lists
• Staff and agent training (documented)
• Record retention for five years
• Independent program review every two years

Typical reporting mistakes:

1. Ignoring the 24-hour rule. The absence of specific descriptions of how an MSB determines whether reportable transactions are related leads to missed aggregated transactions.
2. Incomplete data in reports. Omitting fields such as the beneficiary's address or the purpose of payment makes the report invalid.
3. Late filing of STRs. A suspicious transaction must be reported "immediately" — in practice, this means it takes priority over other tasks.
4. Failure to train agents. Interviews with staff during an inspection reveal a lack of understanding of the requirements, which indicates ineffective training.
5. Insufficient sanctions screening. Many MSBs mistakenly believe that their banking partner is responsible for sanctions screening. FINTRAC expects MSBs to conduct sanctions screening independently. This misunderstanding — is one of the most common sources of non-compliance findings.
6. Failure to update registration data. Failure to submit updated information when significant changes occur — is a common compliance problem. Failing to update registration on time every two years — is a serious mistake.

The consequences of these mistakes can be severe. In October 2025, FINTRAC imposed a record fine of $176.96 million on an MSB, citing more than 2,590 violations, including failure to report suspicious transactions linked to darknet markets and sanctions evasion. Previously, a $19.5 million fine was imposed on another foreign MSB. For small and medium-sized businesses, even small fines can be devastating.

How MapleBiz helps with MSB registration

Navigating the maze of Canadian MSB requirements requires not only knowledge of the law, but also an understanding of how it is applied in practice. MapleBiz specializes in legal support for financial services businesses, and MSB registration — is one of our key competencies.

We offer a comprehensive solution for entrepreneurs planning to launch an MSB or already operating in this field:

• Preliminary audit — we assess whether your business falls under the definition of an MSB, identify risks and gaps in existing procedures
• Document preparation — we draft an AML/ATF program, policies, and procedures tailored to your business specifics
• FINTRAC registration — we prepare and submit the application, and interact with the regulator if additional information is requested
• Compliance officer support — we advise the appointed officer on current reporting and monitoring issues
• Staff training — we develop and conduct training for employees and agents on PCMLTFA requirements
• Ongoing compliance — we help prepare for independent audits and update procedures when legislation changes

We pay special attention to working with informal transfer systems. Understanding the cultural specifics of hawala and hundi, we help clients build a compliance system that preserves the trust-based nature of these services while fully complying with Canadian requirements. This includes developing customer KYC procedures adapted to communities where traditional identification methods may be insufficient.

Registration — is only the beginning of the journey. The key challenge — is maintaining ongoing compliance, especially amid increased scrutiny. FINTRAC actively uses its enforcement powers, issuing a record number of large administrative monetary penalties. In this new era of enforcement, a passive approach to compliance no longer works.

At MapleBiz, we do not just help with paperwork — we build a functioning risk management system that protects your business from sanctions and reputational damage. Contact us for a consultation on how to structure MSB operations correctly from day one.