On April 05, 2022, the Government of Canada announced a number of changes that impact the financial services industry.
One of these changes occurred through the amendment to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
The changes mostly pertained to broadening PCMLTFA’s regulatory capture to include crowdfunding businesses that operate in Canada.
As such, crowdfunding businesses must now register as a Money Service Business (MSB) or a Foreign MSB with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and will be considered a reporting entity.
We will outline these main changes and the actions crowdfunding businesses must take to comply with recent amendments to the PCMLTFA.
Crowdfunding Businesses under the PCMLTFA
The PCMLTFA describes crowdfunding businesses as “crowdfunding platform services” that provide and maintain crowdfunding services “for use by other persons or entities to raise funds or virtual currency for themselves or for persons or entities specified by them.”
Further, the PCMLTFA defines a crowdfunding platform as “a website or an application or other software that is used to raise funds or virtual currency through donations.” Therefore, any businesses that offer the above services must register with FINTRAC.
Crowdfunding businesses will be required to comply with the general obligations of MSBs and Foreign MSBs, by implementing the following:
- Register with FINTRAC;
- Develop and maintain a compliance program;
- Carry out know-your-client (KYC) requirements;
- Keep certain records, including records related to transactions and client identification; and
- Report certain transactions to FINTRAC.
Key Additions
Record Keeping
Crowdfunding businesses will need to keep records of the following:
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information records of any person or entity that is providing services (information records include the date of birth and nature of their principal business or occupation for a person and the nature of its principal business for an entity);
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record of the purpose for which the funds or virtual currency are being raised; and
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identify any beneficiary if the funds are being raised for a different person or entity other than the person or entity using the service.
Verification
Crowdfunding businesses are now required to verify the identity of a person, corporation, or other entity to whom crowdfunding services are offered, along with a person, corporation, or other entity that donates $1,000 or more in funds or virtual currency through that crowdfunding platform.
Crowdfunding businesses must verify a person’s identity when they receive an information record about that person to whom they are providing a crowdfunding service, including donations of $1,000 or more in funds or virtual currency through that crowdfunding platform.
Crowdfunding businesses must verify the identity of a corporation or entity other than a corporation within 30 days of receiving a donation from one on its crowdfunding platform.
Consult with a Lawyer to Obtain your MSB License
Patrola Law is a reputable Canadian law firm that can assist Canadian and international businesses secure a Canada MSB (Money Services Business) License.
Our firm provides quick turn-around service and flat-fee quotes for services, eliminating unexpected or ‘surprise’ bills.
Please call us directly at (778) 565-4700 or simply fill out our contact form to schedule a free consultation.
The preceding content is for informational purposes only and does not constitute legal or professional advice. To obtain such advice, please contact our offices directly.