Canada’s new Retail Payment Activities Act (the “RPAA”), which governs Payment Service Providers (“PSPs”), requires registration with the Bank of Canada (the “BoC”) within a registration window that runs from November 1, 2024 to November 15, 2024. The BoC will review applications for registration and will publish its registration decisions after the end of the transition period, which extends from November 1, 2024 to September 7, 2025.
Summary of the Requirements
- Current retail PSPs can continue to provide services during the transition period if they submit an application for registration during the registration window.
- Those who wish to start operating as a PSP after the registration window, but within the transition period, must (if they did not apply during the registration window) submit their application at least 60 days before they plan to start conducting retail payment activities.
- Additional requirements come into force after the transition period, and the BoC is equipped with a suite of tools to enforce RPAA requirements.
Application of the RPAA
The RPAA and its regulations establish the legal framework for the BoC to supervise PSPs. The RPAA requires an individual or entity to register with the BoC as a PSP if all four of the following criteria are met:
1. Payment Service Providers
The individual or entity performs one or more of the following five payment functions identified in the RPAA as a service that is not incidental to any non-payment service or business activity:
- provision or maintenance of an account that is held on behalf of one or more end users;
- holding funds on behalf of an end user;
- initiation of an electronic funds transfer at the request of an end user;
- authorization of an electronic funds transfer or transmission, reception or facilitation of an instruction in relation to an electronic funds transfer; and
- provision of clearing or settlement services.
2. Retail Payment Activities
The individual or entity performs a payment function related to an electronic funds transfer (an “EFT”) that is made in a fiat currency or a prescribed unit.
3. Geographic Scope
The individual or entity either:
- has a place of business in Canada; or
- both directs services at, and performs services for, individuals or entities in Canada.
4. Exclusions
The individual or entity or their retail payment activities are not excluded from the RPAA. The RPAA excludes certain individuals or entities and certain activities from its application, such as:
- banks, authorized foreign banks, and provincially-regulated trust companies; and
- incidental activities, securities related transactions, and internal and closed loop transactions.
The BoC has published a self-assessment tool to help individuals or entities determine whether they are required to register, a guide to help complete the application, and other supervisory policies and guidelines.
Many of these requirements are subject to interpretation and nuances. The potential PSPs will need to review carefully if they are covered.
Consequences of Non-compliance
Failure to register or comply with the RPAA can lead to a range of sanctions, such as administrative monetary penalties of up to $10 million per violation.
The authors would like to acknowledge the support and assistance of Jivan Maharaj, articling student at law.
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