Payment service providers and crowdfunding platforms to be impacted by Emergencies Act

If you are a crowdfunding platform or payment service provider (PSP), the recently announced federal public order emergency can have an immediate impact on your business.

On February 15, 2022, the Canadian government invoked the Emergencies Act in response to illegal blockades across the country. Among other measures, the Act expanded Canadian anti-money laundering (AML) rules to cover payment service providers and crowdfunding platforms.

During the 30 days, the public emergency order will be in effect, crowdfunding platforms and PSPs are expected to register with Canada’s AML regulator, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) if they are in possession or control of property that is owned, held or controlled by or on behalf of a designated person. They will also be required to file reports in line with the requirements under Canada’s AML law - the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Access FINTRAC’s pre-registration portal here.

The crowdfunding platforms and PSPs in possession or control of funds (including government-issued currency or virtual currency) owned / controlled by anyone involved in the illegal blockades are also expected to report to the Director of the Canadian Security Intelligence Service (CSIS) or the RCMP, and file suspicious transaction reports to FINTRAC.

Definitions

Crowdfunding platform – According to the European Commission, crowdfunding is a way of raising money to finance projects and businesses that enables fundraisers to collect money from a large number of people via online platforms. A crowdfunding platform connects the fundraiser to the general public and provides an avenue for the public to make payments/ contributions to the fundraiser in a secure manner.

Money services business - FINTRAC has previously provided guidance on the differences between a money service business (MSB) and a PSP, indicating MSBs engage in qualifying activities such as:

• foreign exchange dealing
• remitting funds or transmitting funds by any means or through any person, entity, or electronic funds transfer network
• issuing or redeeming money orders, traveller’s cheques, or other similar negotiable instruments except for cheques payable to a named person or entity
• dealing in virtual currencies
• any prescribed service

FINTRAC believes these entities are not engaged in the business of remitting or transmitting funds for the sake of the service and the transfer of funds is simply a “corollary of their actual service,” which is payment processing.

Impacts to your business

As the public order emergency is currently in force, PSPs and crowdfunding platforms should undertake the following steps as soon as possible to address the requirements and risks associated with the Act:

• Scan client list for individuals or entities named as involved in the blockade using open-source intelligence tools.
• If you have custody of client funds related to the illegal blockades, temporarily cease providing any services to individuals or entities associated to those funds.
• Review transactions with these individuals or entities to identify any behaviour/transactions that could relate to laundering money or furthering the illegal blockades. If you establish reasonable grounds to suspect, then file a report with FINTRAC.
• Review transactions for any instances where you received $10,000 in international electronic funds transfer (EFT) within 24 hours. If you identify any EFTs then file a respective report with FINTRAC.
• Review transactions for any instances where you received $10,000 in cash or virtual currency within 24 hours. If you identify any transactions, then file a respective report with FINTRAC (link to LCTR and LVCTR filing guidance).
• Review transactions and business relationships for any instances where you might be required to file a terrorist property report to FINTRAC.
• Keep up to date with FINTRAC updates on the emergency measures regulations as well as additional guidelines on reporting requirements.

What is the impact to my business after the public order emergency ends?

Once the public order emergency ends, there will be more clarity on the regulatory expectations for crowdfunding platforms and PSPs. Also, banking and financial institution partners may be triggered by this experience to consider your business type as higher risk and require you to have an AML program in place.

Contact us

For more information, contact:

Mondiu Jaiyesimi, CAMS, CBP, FIS, MSc. Economics
Manager, AML, and Forensics Services
647.475.4500
[email protected]

Sara Chambers, CPA, CFE, CAMS, CFF
Manager, Investigative and Forensic Services
403.536.5582
[email protected]