Cullen Commission spurs B.C. to pass Money Services Businesses Act

On June 15, 2022, the Cullen Commission of Inquiry into Money Laundering in British Columbia published its final Report (the “Cullen Report”). The Cullen Report identified the money laundering risks associated with Money Services Businesses (“MSBs”) and recommended a regulatory scheme to govern MSBs operating in British Columbia, in addition to the existing oversight of the Federal Financial Reports Analysis Centre of Canada ("FINTRAC").

MSBs are businesses that deal in foreign exchange, wire transfers, money orders, travellers cheques and similar services.

To give effect to the Cullen Report, on April 26, 2023, the Legislative Assembly of British Columbia passed the third reading of Bill 19, the Money Services Businesses Act (the “MSBA”). The MSBA is currently awaiting Royal Assent. In addition to the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”) and, shortly, the Retail Payment Activities Act, Bill 19 provides that the British Columbia Financial Services Authority (the “BCFSA”) regulate MSBs operating in British Columbia under the supervision of a Superintendent of MSBs (the “Superintendent”). Unlike the PCMLTFA, which focuses on on-going compliance, the MSBA will be a gatekeeping regime that aims to prevent “bad actors” from providing money services. At this time, no draft regulations have been published, nor have there been any updates on when such proposed regulations will be published.

Section 66 of Bill 19 states that the MSBA will come into force by regulation of the Lieutenant Governor in Council. No date has been given for this yet.

What businesses does the Act apply to?

The MSBA will apply to entities which carry on the business of providing “money services”. “Money services” are defined as including (a) foreign exchange dealing, (b) remitting funds or transmitting funds by any means or through any person, entity, or electronic funds transfer network, and (c) issuing or redeeming money orders, traveller’s cheques or other negotiable instruments, other than cheques payable to a named person.

Certain MSBs will be exempt from registration under the MSBA, including: (a) insurance companies, (b) savings institutions, (c) trust companies, (d) loan companies regulated by a provincial Act, (e) government-run permanent establishments, excluding registered charities, that hold themselves out to be a casino that conduct and manage (i) lottery schemes or (ii) more than fifty slot machines or other electronic gaming devices, (f) the boards of fairs or exhibitions or their lessees who operate concession stands in permanent establishments that hold themselves out as casinos that conduct and manage lottery schemes and (g) any other entity that becomes exempt under future regulations.

There is currently no requirement that MSBs be Canadian entities or have a physical presence or attorney resident in BC or Canada. Perhaps these and other requirements will be included in the regulations, which have yet to be published.

Registration

An MSB that is not exempt must register with the BCFSA under the MSBA. The application must include (a) any other information or records required by the Superintendent, (b) application fees, and (c) registration fees.

The MSBA prohibits an unregistered MSB from bringing an action for remuneration for providing money services. Remuneration is defined broadly as “any form of remuneration including any commission, fee, gain or reward, whether the remuneration is received, or is to be received, directly or indirectly.”

The Superintendent is empowered to register, amend, or refuse registrations or amendments. In the course of the Superintendent exercising this power, the Superintendent may (a) conduct an investigation or (b) require applicants to provide additional information, documents, or verification. If the Superintendent refuses to register or amend an application, the Superintendent must give the applicant written notice, provide the applicant with an opportunity to be heard, and advise the applicant of his/her right to appeal.

Once registered, the Superintendent must establish and maintain a public register. The register must hold the name, contact information, head office address, money services addresses, and any other specified information for each registrant.

Registrant duties

The MSBA imposes the following duties on registrants: (1) the duty to give written notice; (2) the duty to report; (3) the duty to maintain records, (4) the duty to not provide false or misleading information, and (5) the duty to report a commission of any offence. Under the PCMLTFA, MSBs are already subject to reporting and record keeping requirements. As the reporting and record maintenance obligations will be outlined in future regulations, at this time, it is unclear whether such duties will be in line with the PCMLTFA or create further obligations on MSBs.

Duty to give written notice

A registrant must give the Superintendent written notice if (a) there is a change in any of the information held in the registry (including if there is a change in the directors, officers, partners, or corporate interest holders); (b) the registrant engages an agent who is not specified in the registry; (c) the registrant ceases to carry on the business of providing money services; (d) an agent or associate of the registrant (i) is refused registration or licence under money services, real estate, insurance, mortgage services, or securities legislation in any jurisdiction, (ii) has their registration or licence cancelled or suspended under money services legislation in a jurisdiction other than British Columbia, (iii) is disciplined by a professional body, (iv) is convicted of an offence, or (v) is insolvent; or (e) prescribed circumstances occur.

Duty to report

After the end of the registrant’s fiscal year, the registrant must provide the Superintendent with a report about its activities. The content, form, and manner of reporting will be prescribed by regulation.

Duty to maintain records

The Registrants must maintain their own and agents’ books, accounts, and records as prescribed by regulation.

Prohibition against providing false or misleading information

A prospective registrant must not (a) submit an application for registration that contains false or misleading information or omits material facts, or (b) make or allow false or misleading statements in a record required under the MSBA.

Duty to report commission of offence

A registrant must immediately notify the Superintendent if the registrant has reason to believe that an offence may have been committed. Offences are (1) failing to register; (2) non-compliance with restrictions where a registrant is suspended or a registration is cancelled; (3) where a person is not registered or exempted from registration requirements, representing or holding oneself out as an authorized MSB; (4) obstructing or interfering with the Superintendent’s investigations; (5) providing false or misleading information to the Superintendent; and (5) any failure to comply with an order from the Superintendent. A failure to report the commission of an offence is also an offence.

Enforcement

The MSBA grants the Superintendent broad enforcement powers. The Superintendent has investigatory powers, the power to apply to a justice for search and seizure, the power to order a registrant’s suspension or cancellation of registration, the power to order an imposition of conditions or restrictions on a registrant’s registration, the power to prohibit a registrant from applying for registration for a specified period of time or until certain conditions are fulfilled, the power to order a cessation of the registrant’s provision of money services, the power to impose administrative penalties of up to $100,000, and the power to apply to the B.C. Supreme Court for injunctions.

In addition to the Superintendent’s broad enforcement powers, the Superintendent may also publish any orders, decisions, or notices and must provide a copy of any published order, notice or decision when requested.