01/10/25
Canadian fintechs handling cross-border payments face increasingly complex compliance obligations. What has changed recently - and how can businesses remain onside of both financial crime and tax reporting rules?
📜 Regulatory Landscape and Governing Standards
Canadian cross-border payment compliance is anchored in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), administered by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
• Electronic Funds Transfers (EFTs): Reporting entities must file an EFT Report within five business days when initiating or receiving an international transfer of CAD 10,000 or more. The 24-hour rule requires aggregation of multiple smaller transactions to the same beneficiary.
• Travel Rule: Canadian financial entities, money services businesses (MSBs), and foreign MSBs must ensure that identifying information for both sender and recipient (e.g. name, address, account reference) accompanies every transfer.
• Compliance Programmes: All MSBs must register with FINTRAC, implement a compliance framework, perform client due diligence, and maintain records for at least five years.
• CRA & Tax Reporting: Under Part XIX (CRS) of the Income Tax Act, financial institutions must share financial account data with the Canada Revenue Agency (CRA) for onward exchange with partner jurisdictions.
• Digital Platforms – Part XX Rules: Effective for the 2024 calendar year (first reporting deadline 31 January 2025), digital platform operators must collect and report information on sellers, including names, addresses, tax identification numbers and aggregate income.
• Backlog Reporting: FINTRAC set 31 March 2025 as the deadline for entities to clear backlogs in EFT reporting - failure may result in administrative monetary penalties.
⚖️ Analysis and International Comparison
Canada’s reporting thresholds are broadly consistent with those in other major economies but differ in detail:
• Threshold Approach: The CAD 10,000 threshold aligns with US FinCEN rules, though Canada aggregates transfers over 24 hours, whereas other regimes may demand single-transaction reporting.
• Travel Rule Implementation: While aligned with FATF standards, the Canadian travel rule remains threshold-based, whereas some EU states apply stricter, near-real-time reporting requirements for smaller transactions.
• Digital Platform Reporting: Canada’s new Part XX obligations are wider in scope than some comparable OECD implementations, covering a broader class of sellers. Transitional relief allows new operators to complete due diligence by year-end, with extended deadlines in certain cases.
• Evolving Enforcement: The Canadian government has proposed expanding FINTRAC’s investigative powers, increasing penalties significantly, and criminalising false or incomplete submissions. These proposals, if enacted, will bring Canada closer to the stricter regimes seen in the EU and the US.
The interplay between CRA and FINTRAC rules means fintechs often face dual obligations: payment reporting on the AML side and platform/tax reporting for digital operators. This overlap requires careful systems integration to ensure data consistency and avoid gaps.
🏦 Practical Examples and Compliance Scenarios
• Large Single Transfer: A CAD 15,000 transfer from a Canadian client to an overseas beneficiary must be reported to FINTRAC within five business days, including full originator and recipient data.
• Multiple Small Transfers: Two payments of CAD 6,000 and CAD 5,500 sent within 24 hours to the same beneficiary are aggregated under the 24-hour rule and must be reported as CAD 11,500.
• Platform Seller Reporting: A fintech platform operator enabling cross-border sales must report each seller’s income to the CRA, and where sellers are in CRS partner jurisdictions, data will also be exchanged internationally.
• Travel Rule Breach: If a fintech omits a beneficiary’s account reference or address from the transfer, it is non-compliant under the travel rule and risks FINTRAC enforcement action.
• Backlog Risks: Firms failing to clear EFT reporting backlogs by 31 March 2025 risk penalties and reputational exposure, as FINTRAC has signalled tighter oversight.
These examples highlight the importance of implementing comprehensive compliance programmes - including monitoring tools, audit trails, and strict KYC processes. The move towards ISO 20022 messaging standards further raises expectations that data accompanying payments will be complete and reliable.
🔎 Conclusion
Canadian fintechs engaged in cross-border payments now operate under a significantly more demanding regime. Obligations span AML reporting, the travel rule, EFT aggregation, CRS disclosures, and digital platform reporting. The recent enforcement focus - including the 31 March 2025 backlog deadline - underlines regulators’ expectations.
Organisations must therefore invest in compliance infrastructure, train staff, and maintain transparent systems to avoid enforcement risk. With pending legislative proposals on the horizon, the compliance burden will only intensify.
👉 If your business needs advice or representation in structuring compliance programmes, managing cross-border reporting, or dealing with regulators, NUR Legal is ready to assist. Contact us to discuss how we can help you navigate these obligations.
#Fintech #CrossBorderPayments #AML #FINTRAC #EFTReporting #TravelRule #DigitalPlatformReporting #CRS #CanadianCompliance #TaxReporting
Emil Korpinen