Cash today is more of a guest in our wallets than a permanent resident. It has been replaced by cards, mobile apps, and QR codes. Along with that came providers of money circulation services – MSB companies. With them, money "travels" almost as easily as we do – between smartphone tabs.

Today, some of the most prominent players in the MSB market are companies licensed in Canada and the USA. But before diving into the specifics of their work, let’s define what MSB is and how it can affect our lives.

MSB (Money Services Business) – companies or individuals that conduct financial transactions outside of traditional banks. They can exchange currencies, transfer, send, or receive funds, and provide many other services.

MSBs include:
· Money transfer operators;
· Bill payment agents;
· Currency exchangers;
· Cheque cashers;
· Mobile or online payment service providers, etc.

To avoid confusing maple syrup with bourbon, let’s break down each license in more detail.

Canada

MSB Definition: What Does the Law Say?

In Canada, MSBs (PCMLTFA) are defined as natural or legal persons that operate a business in Canada and provide at least one of the following services:

• foreign currency exchange;

• transfer or transmission of funds;

• issuing or redeeming money orders, traveler’s cheques, or similar payment instruments;

• operations with virtual currencies and other financial services.

Who Regulates?

• FINTRAC – Financial Transactions and Reports Analysis Centre of Canada.

Who Must Register?

• Companies operating in Canada and providing services to Canadian clients.

What Are the MSB Requirements?

• Mandatory registration with FINTRAC;

• Implementation of a risk-based compliance program (AML/CTF);

• Mandatory client identification (KYC);

• Reporting to FINTRAC.

What Are the Penalties for Violations?

• Failure to comply with MSB rules may result in fines.

USA

MSB Definition: What Does the Law Say?

U.S. legislation (Code of Federal Regulations) defines MSBs as any persons engaged in currency exchange, cheque cashing, issuing traveler’s cheques, money orders or electronic money, money transmission, and the U.S. Postal Service.

Who Regulates?

• FinCEN – Financial Crimes Enforcement Network of the U.S. Department of the Treasury.

Who Must Register?

• All companies or individuals engaged in MSB activities (currency exchange, money transfers, etc.).

What Are the MSB Requirements?

• Mandatory registration within 180 days from the start of activity;

• AML program compliance;

• Mandatory KYC program;

• Reporting to FinCEN.

What Are the Penalties for Violations?

• Non-compliance results in fines, license revocation, and criminal liability.

At first glance, these two licenses may seem like twins. But as we know, the devil is in the details. So let’s take a closer look at their similarities and differences.

Similarities:

1. MSBs in both countries must comply with AML programs. Otherwise, they face penalties;

2. Both Canadian and U.S. MSBs can work with clients from other countries;

3. Both licenses cover almost identical lists of services.

Differences:

1. Type of license

• In Canada, in addition to the familiar MSB, there is also FMSB: Foreign MSB. This is a company that provides services to Canadian clients but is not located in Canada.

• The U.S. goes even further: there is no standalone MSB license in the country. MSB is an umbrella term for separate types of activities, such as MTL (Money Transmitter License). These are the ones requiring licensing.

2. Geography

• In Canada, the license is valid throughout the entire country;

• The USA is less accommodating and requires a license for each state.

3. Capital Requirements

• Canada makes life easier for businesses and does not impose capital requirements;

• The USA has separate requirements for each state (e.g., in Florida it is $100,000, while in Alabama – $5,000).

And what does this look like in practice? Let’s get acquainted with the most well-known players who have already obtained their licenses.

Canada:

• Western Union Canada – provides money transfers worldwide.

USA:

• MoneyGram – conducts international transfers and currency exchange.

Have you heard of them before? These and many other companies have long been part of our financial lives – even if we may not notice them behind banking apps and payment services.

Time to draw conclusions: although MSBs in Canada and the USA operate in the same field, they play by different rules. While Canada does not create a thorny path to obtaining the desired license, the USA turns it into a quest where each jurisdiction is a new level with completely different conditions. However, the finish line is the same in both cases – licensed activity that meets all legal requirements. So, if you’re ready to obtain an MSB license, choose your difficulty level and head toward your dream business.

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