PSP Exceptions: Own Goods, Own Services, and Adjacent Carve-Outs

Canada's MSB regime does not contain a list of named exceptions for payment businesses. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act defines who is a money services business — PCMLTFA s. 5(h) for domestic businesses and s. 5(h.1) for foreign businesses directing services at people in Canada — and s. 11.1 requires those businesses to register with FINTRAC. The 'carve-outs' discussed here are really fact patterns in which a business never meets that definition, most often because it is not in the business of transferring funds at all.

Every analysis therefore starts with the same question: is this business the seller of record collecting its own receipts, or is it enabling the movement of money between third parties? A business that answers the first way is a merchant. One that answers the second way is providing payment services, whatever its marketing says. Everything below is a variation on that single test.

A bakery accepting card payments, a software company billing subscriptions, an equipment dealer taking deposits — each receives money constantly, but only as payment for its own goods and services. That is a seller collecting its own receipts, not a provider of payment services to others, and it is why ordinary merchants are not treated as MSBs. Contrast a platform that collects a buyer's money and pays it out to third-party sellers: funds are now moving between other parties through the platform's hands, which is the core of what the funds-transfer test captures.

The line is easy to cross without noticing. A payroll platform that briefly holds employer funds before paying employees, or an invoicing tool that adds a 'collect on behalf of your clients' feature, has moved from collecting its own receipts to moving other people's money. Adding third-party merchant processing can change the position entirely — the analysis needs to be re-run at the feature level, not assumed from the company's original model.

What supports the position is documentation: contracts showing the business as seller of record, a flow-of-funds diagram showing that settlement accounts hold only the business's own revenue, and a short written analysis dated to the current product.

A company that sells or leases payment terminals — and does nothing else — is selling equipment, not payment services. It does not hold funds, does not settle transactions, and does not transmit payment instructions; those functions belong to the acquirer and processor whose agreements the merchant signs separately. Under current FINTRAC guidance, that position sits differently from a PSP's.

It survives only as long as the facts do. A hardware vendor that starts bundling settlement, routing transactions, or sitting in the payment-instruction chain has become something else. The useful record is a plain description of what the device does and does not do, plus copies of the settlement agreements showing that funds flow between the merchant and its acquirer — never through the vendor.

A collections company presents a different pattern: it receives a payer's money on behalf of a payee to settle a debt, and the money's journey effectively ends there — the funds go to the creditor, and no payment instructions are transmitted onward. Receiving payment to settle a debt in this way may fall differently under the funds-transfer test than remitting money onward on a payer's instructions. The distinguishing fact is exactly that: settlement of a debt versus onward transmission.

Applying it means checking three things: that a genuine debt exists, that the business acts for the payee or creditor rather than as the payer's transmitter, and that funds are not forwarded to further parties beyond the creditor. The common mistake runs in both directions — assuming every receipt of a payer's money is a regulated transfer, and assuming the debt-settlement framing covers a model that is functionally remittance. When the facts are mixed, check the current FINTRAC guidance and record the position in writing.

For years, payment businesses leaned on FINTRAC policy interpretations about merchant servicing and payment processing — the PI-7670 line. FINTRAC withdrew those positions effective April 27, 2022, confirming the change in notices dated April 27 and July 21, 2022. Any carve-out analysis built on those interpretations is historical context, not a current position, and should be redone against the statute and today's guidance.

The perimeter has also kept moving outward. Cheque-cashing and crowdfunding platform services are prescribed MSB services under PCMLTFR s. 29.1, feeding PCMLTFA s. 5(h)(v) and s. 5(h.1)(v). Transporting currency or negotiable instruments — armoured-car services — became a reporting-entity obligation on July 1, 2024, and acquirer services for private automated banking machines became a registerable MSB activity on October 1, 2025. A carve-out conclusion is a snapshot: date it, note the facts it depends on, and revisit it when the product changes or new prescribed services come into force.