Key takeaways from Canada's amendments to the Retail Payment Activities Act

Payment service providers and money services businesses must pay attention to recent amendments to Canada's Retail Payment Activities Act, and future announcements.

The Canadian government enacted the Retail Payments Activities Act (RPAA) in June 2021. In broad terms, RPAA is intended to introduce a regulatory oversight framework to govern the retail payments ecosystem in Canada.

According to the Bank of Canada, the RPAA has been enacted but is not currently in force as it awaits the drafting of regulations by Canada's Department of Finance. Once the regulations are drafted, the Treasury Board's approval is sought, before subsequent publishing.

Legislators have subsequently announced several clarifications and amendments to the regulations, with more still to come. For example, in April 2022, the Canadian government introduced legal amendments which have the potential to drastically change how certain money services businesses (MSBs) and payment service providers (PSPs) operate in Canada under the RPAA.

Here's what we know about the present legislation, and what clarifications we're looking for in future announcements.

What is the Retail Payment Activities Act?

The Retail Payment Activities Act (RPAA) is a framework to legislate the responsibilities of payment service providers and their role in protecting Canadian consumers and businesses. The Act was introduced in June 2021.

What are the recent legislative amendments?

The most recent amending regulations mainly coincide with the temporary orders made under the Emergencies Act invoked by the Canadian government in early 2022. The Emergencies Act required crowdfunding platforms and PSPs to register with the Financial Transactions and Reports Analysis Centre (FINTRAC), Canada's watchdog that monitors transactions which could be related to money laundering or terrorist financing.

They expand the scope of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to specifically include crowdfunding platform services and PSPs. This means crowdfunding platforms (for example, GoFundMe and GiveSendGo) now fall under the same umbrella as traditional MSBs in Canada.

These amending regulations impacting crowdfunding platforms and PSPs will eventually coexist with the RPAA. Once in force, the RPAA will be overseen and administered by the Bank of Canada (BoC) and is expected to impose the following obligations on PSPs:

• Registration —A PSP will need to register with the Bank of Canada before performing any retail payment activities.
• Mitigation of operational risk —A PSP will need to show that it has a framework in place to manage risk and respond to incidents.
• Safeguarding end-user funds —A PSP will be expected to keep end-user funds separate from other money used in its business operations.
• Reporting —Annual reporting and updates to the Bank of Canada of any significant changes made to its payment methods or systems.
• Fee payment—All PSPs will need to pay a fee when submitting a registration application.

Some uncertainty exists regarding the extent to which the amending regulations reflect the government's decision to transfer some of the responsibility for regulating the retail payments ecosystem from the Bank of Canada to FINTRAC, and whether this transfer is being made on a temporary or a permanent basis.

As the full context of the proposed changes is still not fully understood, stakeholders must await more clarity on the full scope and impact of the amending regulations, and how the new requirements will be harmonized with other legislation that the federal government is currently developing.

What is the impact on money services businesses?

As it is not entirely clear how these amendments will impact both domestic and foreign MSBs currently, FINTRAC has indicated its intent to publish updated guidance soon.

According to the Bank of Canada, MSBs performing retail payment activities captured by the RPAA, will eventually need to register with the Bank of Canada. What remains to be seen is if the Bank of Canada intends to shift this regulatory and oversight responsibility to FINTRAC.

Another development that might impact MSBs is the amending regulations which repealed the part of the definition of electronic funds transfer (EFT) which excluded certain transactions “carried out by means of a credit or debit card or a prepaid payment product if the beneficiary has an agreement with the payment service provider that permits payment … of good and services.” According to the new amendments, an organization's transactions using a debit or credit card will now be considered the same as an EFT, and reporting obligations will be the same.

What should you do now?

MSBs and foreign money services businesses that are already registered with FINTRAC, and which offer services now covered under the RPAA, must update their registration information to reflect this development. The obligations relating to these services include:

• Updating their compliance program to reflect this additional service
• Identifying their clients
• Keeping records and reporting certain types of financial transactions to FINTRAC, including suspicious transactions

Although much uncertainty still exists and more clarifications are yet to come, there are a few concrete steps domestic and foreign MSBs can take now to prepare for this new regulatory regime. Any MSBs carrying out payment services should continue to stay current with regulatory updates including registration requirements with the Bank of Canada and additional guidelines from FINTRAC.

MNP is here to help

Navigating this new regulatory environment can be challenging, and no organization needs to go through it alone. If you want to gain more clarity about your obligations, contact MNP's Anti-Money Laundering (AML) team today.

Corey Bloom, FCPA, CA•IFA, CFF, CFE, ACFE Regent Emeritus
[email protected]
514.228.7863 

Mondiu Jaiyesimi, CAMS, CBP, FIS, MSc.  
[email protected]
647.475.4500 

Sara Chambers, CPA, CFE, CAMS, CFF
[email protected]
403.536.5582