If you are looking to open a bank account for your MSB, then keep reading on as we are going to uncover the next steps for operational and clients’ money accounts.
A Money Services Business (MSB) is a financial entity providing services related to money transfer, including money transmitters and currency exchanges. In Canada, MSB’s are regulated and licensed by FINTRAC.
Why MSB Needs An Operational Bank Account?
Operational account enables MSB to segregate own funds from customer funds and ensuring that the business is running smoothly.
An operational account is often used to cover business expenses such as payroll, office lease or rent, utilities and any other typical business expenses.
Operational accounts will never be used to hold or transact in clients funds. For clients funds, MSBs must open two different accounts: safeguarding account (to keep clients funds separately from its own money) and clients’ money accounts (to process transactions on behalf of their clients).
Opening an operational account for MSB is a straight forward process and requires a regular corporate onboarding preparation that consist of gathering company documents, identifying UBOs, getting POAs and POIs, and potentially a few more steps.
If you are looking to open an operational bank account for your MSB, get in touch with us and we will share MSB friendly banks list with you.
Opening A Safeguarding Account for MSB
A safeguarding account is a designated bank account used by MSBs to separate and safeguard customer funds from the company's operational funds, ensuring the protection and return of customer funds in the event of the institution's insolvency.
Safeguarding account can be only opened with a traditional bank holding a banking license. For the Canadian MSBs, it is fairly straight forward with opening a safeguarding account in Canada. However, it is often a struggle to get approved for a safeguarding account in the EU, UK or Asia. Our team is working with several banks across the globe to ensure that Canadian MSBs can open multi-currency safeguarding accounts and if you are looking for one, get in touch with us to proceed.
Opening A Clients Money Account Or Correspondent Account For Canadian MSB
The most important bank accounts that MSBs need are client money accounts or also so called 3rd party payments accounts (or often called correspondent accounts).
These accounts ensure that MSB is able to exchange currency, receive payments in and send payments out on behalf of their clients this way providing the intended services that clients signed up for.
Often MSBs will need to have at least several such accounts to ensure a global coverage and multi-currency capability. This is especially true if MSB is serving not only clients from Canada but also from abroad.
Often a newly established MSBs can first open pooled accounts only because of the lack of track record in their business. Pooled account have all the same capability as described above with a drawback of allowing clients to transact in the MSB name instead of individual named IBAN.
Correspondent accounts (often called PaaS or BaaS) will allow MSB to issue named client IBANs (accounts) and allow clients to transact in their own company name.
Moreover, we highly recommend to seek for clients money accounts that are supported via API connectivity for easier scalability and efficiency in conducting your money services.
If you are looking to open a client’s money account for your MSB, get in touch with us and we will share a list of MSB friendly banks via email.
Lastly, we would like to share a standard onboarding pack for Canadian MSB’s, that you should be aware and prepared for:
• Certificate of Registration or Incorporation
• Memorandum and Articles of Association; or Articles of Incorporation
• Official list of directors and shareholders
• IDs for all UBOs and all authorised signatories
• Proof of business trading address
• Licence number from FINTRAC
• Last Audited Accounts or alternative business bank statement
• AML/KYC/CDD policies
• Latest external AML audit report
• Management information: AML governance arrangements, sample CDD files and
customer risk assessment data.
• External AML audit which might need to be completed yearly
There might be more specific requests depending on a chosen bank and we would highly advise to comply with banks requests and provide as much detail as possible to guarantee the successful onboarding of your MSB.
In conclusion, establishing and managing bank accounts for a Canadian Money Services Business (MSB) involves navigating various account types, each serving specific purposes. From operational accounts ensuring smooth business operations to safeguarding accounts protecting customer funds and client money accounts facilitating currency exchange and global transactions, the process requires adherence to regulatory standards and documentation.