The FINTRAC Scoping Memo: a Defensible Record Before You Launch

A FINTRAC scoping memo is a short internal document that records what the business actually does, which regulated services under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act might be relevant, the facts supporting the analysis, the sources reviewed, and the decision reached. It is not a filing. Nothing is sent to FINTRAC and no template is prescribed. Its value is internal: it converts a vague "are we in scope?" question into a documented, reviewable rationale — for example, whether the business may be a money services business (MSB) under PCMLTFA s. 5(h) or a foreign MSB directing services at people in Canada under s. 5(h.1).

The memo does not need to quote the statute at length. It needs to show that someone read the definitions — in the Act and in PCMLTFR s. 1(2) — against the real product and reached a reasoned conclusion. A one-page memo written honestly before launch is worth more than a polished analysis reverse-engineered after a bank or a regulator starts asking questions.

A workable memo has six parts. First, the business activity in plain language: who pays whom, for what, through which accounts, and who holds funds at each step. Second, the potentially relevant regulated services — for a payments startup this usually means the MSB service categories, such as remitting or transmitting funds. Third, the supporting facts: contracts, flow-of-funds diagrams, and the settlement mechanics as they actually operate, not as the pitch deck describes them. Fourth, the assumptions the analysis rests on (for example, "we never take possession of customer funds; the licensed processor settles directly to the merchant"). Fifth, the decision reached and who made it. Sixth, an explicit review trigger — the product or funds-flow change that reopens the memo.

Write it before launching a new payment product, while the design is still honest about its own uncertainties. The memo is the artifact a reviewer, an incoming compliance officer, or outside counsel can reopen later without re-interviewing the founder.

The most common gap in startup memos is settlement mechanics. Consider a platform that collects payments from buyers, deducts its fee, and remits net proceeds to merchants — or a payroll platform that briefly holds employer funds before disbursing wages. Whether the business is remitting or transmitting funds turns on facts like these: who has legal and practical control of the money in transit, whose account it sits in, when title passes, and whether the deduction happens inside a regulated processor's flow or inside the startup's own.

Deducting a fee before net settlement does not by itself answer the scope question in either direction — which is exactly why the mechanics must be documented rather than assumed. A memo that states "we deduct 2% and remit net; funds sit in our operating account for up to two business days; here is the contract clause governing that period" gives a reviewer or counsel something to analyse. A memo that says "we're just software" gives them nothing.

Scope analysis in Canadian payments has a shelf life. FINTRAC withdrew its earlier policy-interpretation positions on merchant servicing and payment processing (PI-7670) effective April 27, 2022, and reinforced the change in a second notice on July 21, 2022. A memo that leans on the old interpretations without noting the withdrawal is already stale. Treat older policy interpretations as historical context and anchor the analysis in the current statute, regulations, and FINTRAC's 2022 notices.

The perimeter also keeps moving: armoured-car transport of currency or negotiable instruments became a reporting-entity obligation on July 1, 2024, and acquirer services for private automated banking machines became a registerable MSB and foreign-MSB obligation on October 1, 2025. None of this means a memo must predict the future. It means the memo should name its review triggers — a new corridor, a new way of touching funds, a legislative change — and someone should own the calendar for checking them.

Educational content, including this library, helps a team ask sharper questions. It does not replace legal advice for high-impact decisions. Move from reading to qualified counsel when the answer turns on a detailed funds-flow analysis, an MSB or foreign-MSB registration decision, a cross-border structure, any communication with a regulator, an enforcement-sensitive issue, or a genuinely novel product model that current guidance does not cleanly address.

The memo and counsel are complements, not substitutes. A well-drafted memo makes the legal engagement cheaper and faster: counsel starts from documented facts and assumptions instead of a discovery interview. And counsel's advice, once received, becomes part of the record — attach it, note what changed in the analysis, and reset the review trigger.