On April 5, 2022, a number of modifications to the PCMLTFA regulations were published. This article provides an overview of recent amendments to the AML/TF regulations, which have implications for crowdfunding sites, and may bring a substantial impact on money service companies subject to their operational format.
By virtue of the new revision, a crowdfunding site is determined as one raising funds via giving money for charitable purposes and is now deemed as the MSB, therefore falls under the PCMLTFA (the Act) framework. In that respect, the recent statements noted that because of this change, a regulatory body, FINTRAC, will amend its last policy so that companies that offer crowdfunding, as well as PSPs and charitable organizations that allow private and corporate clientele to establish personal fundraising webpages would be regulated under the Act. It will not capture platforms that offer P2P loans. Although this is not a core in collecting contributions, the range of newly issued regulations is revised sufficiently to cover this.
The new framework entails updated obligations towards crowdfunding sites – these are identical to those relevant to MSBs, with several specifications that show the distinctive structure of their format. In particular, they are obliged to maintain appropriate notes regarding the receiver to whom they are delivering money and the grounds for raising money. In addition, necessary actions now encompass verification of the client that donates via the platform 1000 CAD or more.
Also, the meaning of an e-transfer of money (EFT) has been significantly altered. Particularly, the new framework expels one of the exceptions from the EFT meaning. Notably, one of the exceptions was any instructing for the money transferring if an arrangement was held between the beneficiary and the PSP that allows transactions for the delivery of products and services.
This elimination was implied to be applicable to the acquiring delivered by the traders. If a card was accepted for their products and services, transactions conducted by a PSP for the act of purchase were separated from the EFT rules according to the amendments.
This separation is worth of mention for a number of reasons. Although it has been ruled out, new EFT immunites have been applied. As a consequence, the EFT obligations regarding acquiring currently appertain only to MSB. Any EFTs that exceed 1000 CAD sent by MSB fall under the requirements as follows:
For MSBs that deal with foreign traders, these new amendments may prove quite difficult. Those businesses that fall under this framework should ensure their policies and procedures are updated to deal efficiently with the new rules.
As specified, the changes promote the appliance of the Act to PSPs. Particularly, according to the Act, the meaning of an MSB refers to a participant in the business activity of transferring or dealing with money through an EFT platform or an individual or company. Certainly, PSP operations are covered by this broad explanation. However, they have not yet been controlled by the PCMLTF Act. Hence, it is likely that the authority may not revise the Act to capture PSPs but in lieu will alter its explanation of what sort of operations is presently assumed to be under the supervision.
It has been obvious that the authority was seeking to accept another attitude on PSPs in terms of its clarification of the appliance of the Act. As for payment platforms and traders, partially, their operations are now encompassed in the meaning of an e-transfer of money, but it’s unclear whether they can be interpreted as an MSB.
Currently, a PSP is determined as both an individual or company that carries out payment services as a core operation. In that manner, this service has the following definitions:
The better part of these services will refer to the range of money transferring as to be encompassed by the MSB meaning. Now the point at issue is whether the rules will be altered to broaden the explanation of an MSB to reach these activities or whether the existing explanation will be deemed adequate after modifying on this point. Now it is not clear whether coming amendments are supposed to be relevant to PSP.
To keep you apprised of recent legislative and regulatory changes to AML/TF regulation in Canada and other jurisdictions, we are publishing short overviews identifying some of the key requirements useful to know. For more information regarding AML/TF regulation, please contact our specialists. You can also see our offers in the categories “Ready-made companies”, “Licenses for sale” and “Banks for sale”.