Money Services Businesses (MSBs) form a critical layer of the global financial ecosystem. They enable currency exchange, domestic and cross-border payments, remittances, and access to financial services for individuals and businesses that may not be fully served by traditional banks.
As financial crime risks and regulatory expectations continue to rise, understanding the different types of MSBs, how they operate, and the compliance obligations attached to each category has become essential—not only for operators, but also for fintech founders, compliance professionals, and investors.
This article provides a structured, regulator-aligned overview of the key types of Money Services Businesses, the risks associated with each, and the compliance and licensing considerations businesses must navigate, with particular relevance to Canada and comparable international jurisdictions.
A Money Services Business (MSB) is a non-bank financial institution that provides services involving the movement, exchange, or storage of money or monetary value.
In most jurisdictions, including Canada, MSBs are regulated separately from banks due to their higher exposure to money laundering (ML), terrorist financing (TF), and fraud risks.
While definitions vary slightly by country, MSBs typically include businesses engaged in activities such as:
In Canada, MSBs are regulated under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and supervised by FINTRAC, while similar frameworks exist globally.
MSBs often operate at the intersection of:
These characteristics make MSBs attractive targets for financial criminals seeking to move or disguise illicit funds. As a result, regulators impose stringent AML, KYC, and reporting obligations on MSBs, often exceeding those applied to traditional financial institutions in specific areas.
Below are the principal MSB categories recognized across most regulatory frameworks, including Canada, the U.S., the U.K., and other major financial jurisdictions.
What They Do
Currency exchange businesses allow customers to convert one fiat currency into another. These services are commonly used by:
Currency exchange may occur in physical locations, online platforms, or as part of broader financial services.
Key Risk Considerations
Compliance Expectations
Currency exchange MSBs must implement:
What They Do
Money transmitters facilitate the transfer of funds between parties, domestically or internationally. This includes:
Money transmission is one of the most heavily regulated MSB activities due to its exposure to cross-border ML/TF risks.
Key Risk Considerations
Compliance Expectations
Regulators typically require:
What They Do
Check-cashing businesses provide immediate cash to customers in exchange for checks, often without requiring a bank account. These services support financial inclusion but are considered high-risk due to their reliance on cash.
Key Risk Considerations
Compliance Expectations
Operators must ensure:
What They Do
This category includes businesses that issue or sell instruments such as:
These instruments function as cash equivalents and can be transferred with relative ease.
Key Risk Considerations
Compliance Expectations
Regulators require:
What They Do
Prepaid access providers issue physical or virtual products that store monetary value, such as:
These products are widely used in consumer payments, payroll, and online commerce.
Key Risk Considerations
Compliance Expectations
Prepaid MSBs are often subject to:
What They Do
Virtual currency MSBs facilitate the exchange, transfer, or custody of digital assets such as cryptocurrencies. In Canada and many other jurisdictions, crypto exchanges and virtual asset service providers (VASPs) are explicitly classified as MSBs.
Key Risk Considerations
Compliance Expectations
Virtual currency MSBs must typically implement:
While requirements vary by jurisdiction, most MSBs must comply with the following core obligations:
Operating an MSB involves navigating several structural challenges:
Failure to address these challenges can result in enforcement action, loss of banking relationships, or forced business closure.
Effective MSBs adopt a proactive, risk-based compliance approach, including:
Risk management is not a one-time exercise—it must evolve alongside business growth and regulatory change.
While the licensing process varies by jurisdiction, it typically involves:
Early planning and regulatory alignment significantly improve approval timelines and long-term sustainability.
Money Services Businesses play an indispensable role in modern financial systems, enabling global payments, access to currency, and financial inclusion. However, this role comes with heightened regulatory responsibility.
Understanding the key types of MSBs, their associated risks, and their compliance obligations is essential for building a sustainable operation in today’s regulatory environment.
For businesses seeking to establish or scale MSB operations while maintaining strong compliance foundations, RemitSo supports structured, risk-aligned approaches to MSB licensing, AML program design, and ongoing regulatory readiness.
A business is considered a Money Services Business (MSB) if it provides money transmission, currency exchange, check cashing, prepaid access, or virtual currency services outside traditional banking institutions.
MSBs are subject to targeted anti-money laundering (AML), reporting, and registration obligations due to elevated financial crime risks, while banks are regulated under broader prudential and capital frameworks.
Yes. Virtual currency exchanges and transfer service providers are classified as MSBs in Canada and must register with FINTRAC before operating.
In most jurisdictions, registration or licensing approval is mandatory before conducting regulated money services activities.
Weak AML controls and failure to identify, monitor, and report suspicious transactions represent some of the highest compliance risks for MSBs.
Yes. Many MSBs provide multiple regulated services and must comply with regulatory requirements applicable to each service category.
AML programs should be reviewed on a regular basis and updated whenever there are changes in business activities, risk exposure, or regulatory requirements.
Non-compliance can result in regulatory fines, license suspension or revocation, criminal liability, reputational damage, and potential loss of banking relationships.
