Remitting or Transmitting Funds: the Concept Behind Many Payment Models

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, a business that offers remitting or transmitting funds as a service is a money services business — PCMLTFA s. 5(h) for businesses in Canada, s. 5(h.1) for foreign businesses directing services at people in Canada — and registration with FINTRAC under s. 11.1 is required before operating. The words sound like they describe wire-transfer storefronts, but they reach any arrangement where a business moves value between parties as a service. That is why founders who set out to build software often end up doing an MSB analysis: the product category is payments, but the legal category may be funds transmission.

Current FINTRAC guidance frames the analysis around a handful of questions: who receives the payment instruction, who controls or directs the movement of funds, who holds the customer relationship, and whether the transfer is provided as a business service. The answers come from contracts, account structures, and settlement flows — not from how the business describes itself. Saying "we're just a processor" or "we're a technology provider" does not settle anything; control over the movement of funds does.

A useful contrast: a business that receives customer money into an account it controls and pays it out on the customer's instruction is moving funds. A business that only generates or transmits payment information, while a bank or other regulated entity actually holds and moves the money, is doing something different — sending payment information is not the same as moving funds. Most real models sit somewhere between these poles, which is why the analysis has to be done on the actual flow rather than by analogy.

Paying bills or invoices on a customer's behalf can itself be remitting or transmitting funds, and therefore an MSB service. The fact that money goes to a biller or a business rather than to an individual does not remove it from the analysis — the statute is about moving funds, not about who the recipient is.

The practical dividing line between an invoice-payment service and ordinary collections is receipt of funds plus onward payment. A platform that collects invoice payments from payers into its own account and then remits to billers is doing both halves; a service that only forwards payment details for the payer's bank to execute is not receiving or transmitting the funds. When a model mixes the two — say, holding funds for some billers and passing instructions for others — each leg deserves its own look against the current FINTRAC guidance.

A payroll platform that briefly holds employer funds before paying employees, a rent platform that collects from tenants and pays landlords, a tuition service that collects from families and pays schools — these are all the same invoice-payment pattern: collect from a payer, pay a payee. The sector label carries no weight in the analysis. Nothing about payroll, rent, or tuition is exempt as a category; what matters is whether the business receives funds and arranges onward payment.

The same goes for the payment rail. A bill-pay model that pulls funds from customer accounts by pre-authorized debit and pays billers raises the same questions as one funded by card or e-transfer. Direct debit is not a bank-only mechanic, and using it does not by itself put a service in or out of scope.

Businesses that concluded years ago that they were out of scope as "payment processors" should revisit that conclusion. FINTRAC withdrew its PI-7670 positions on merchant servicing and payment processing effective April 27, 2022, and confirmed the change in a further notice on July 21, 2022. Those earlier interpretations are historical context only; an analysis that leans on them needs to be redone against the current guidance and the FINTRAC 2022 notices.

Whatever the conclusion, businesses typically record it: a short funds-flow memo answering the four questions, a diagram of the accounts money actually touches, the contracts that assign instruction and control, and the date and basis of the decision. If the conclusion is that the service is remitting or transmitting funds, registration under PCMLTFA s. 11.1 comes before launch, not after. Either way, the memo gets revisited whenever the settlement model, account structure, or customer relationship changes — the analysis follows the flow, and flows change.