Amendments to Anti-Money Laundering Regulations Expand Scope to Crowdfunding Platforms and Certain Payment Service Providers
On April 5, 2022, amendments to the regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) (the ““Amendments”) came into force that, among other things, expanded the scope of the PCMLTFA to capture crowdfunding platforms and certain payment service providers (“PSPs”) and amended the definition of electronic funds transfers (“EFTs”). In addition, the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) issued a related notice in respect of such changes and updated certain guidance, including Guidelines 8A, 8B and 8C in respect of EFT reports.
The Amendments were introduced following developments under the Emergencies Act and the Emergency Economic Measures Order earlier this year, whereby the scope of entities subject to the PCMLTFA as money services businesses (“MSBs”) and foreign money services businesses (“FMSBs”) was temporarily expanded to include crowdfunding platforms and certain payment service providers.
Amendments to the EFT Definition
The Amendments revised the definition of EFT by removing the exclusion from the definition of EFT of any “transmission of instructions for the transfer of funds carried out by means of a credit or debit card or a prepaid payment product if the beneficiary has an agreement with the payment service provider that permits payment by that means for the provision of good and services” (“Payment Card Transfer Instructions”), such that these are now captured.
However, the Amendments also carve out Payment Card Transfer Instructions from obligations that apply to financial entities and casinos from obligations in respect of international EFTs (i.e. EFT reporting obligations, EFT record-keeping obligations, EFT identification obligations, EFT politically exposed person determination obligation and travel rule obligations).
Payment Service Providers
In connection with the Amendments and the changes to the definition of EFT described above, FINTRAC advised that it has retracted its prior position with respect to merchant servicing and payment processing (former Policy Interpretation-7670). As a result, businesses that provide merchant services (i.e. the provision of settlements directly to merchants on behalf of the merchant’s customers for the purchase of goods and services), as well as payment processing for utility bills, mortgage and rent, payroll, and tuition, will now fall within the definition of MSB and FMSB, as applicable, and required to comply with related requirements.
The Amendments defined crowdfunding platforms as “a website or an application or other software that is used to raise funds or virtual currency through donations” and crowdfunding platform services as “the provision and maintenance of a crowdfunding platform for use by other persons or entities to raise funds or virtual currency for themselves or for persons or entities specified by them”. Businesses falling under such definition will now be subject to the requirements for MSBs or FMSBS under the PCMLTFA and its regulations.
In addition, crowdfunding platform services will be subject to the following specific requirements:
- Keeping an information record in respect of the person or entity to which they provide services and verifying the identify of such person or entity;
- Keeping a record of the purpose for which the funds or virtual currency (“VC”) are being raised;
- If the person or entity for which the funds or VC are being raised is different from the person or entity referred to in paragraph (a),
- keeping a record of their name, and
- take reasonable measures to obtain their address, the nature of their principal business or their occupation and, in the case of a person, their date of birth, and keep a record of the information obtained.; and
- Verifying the identify of any individual, entity or corporation that donates $1,000 or more in funds or VC using the crowdfunding platform.
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