Companies could be fined $10 million if they fail to register with the central bank
Article content
The Bank of Canada will on Friday launch a new oversight program for payment service providers under new mandates set by Parliament.
The Retail Payments Activities Act was passed by the federal government in 2021, giving the central bank the power to supervise the estimated 3,000 payment service providers (PSPs) (such as payment apps and point-of-sale software companies) operating in Canada. .
Advertisement 2
Article content
“Every time you tap your card at a payment terminal or make a purchase online, at least two, and sometimes three or four, payment service providers withdraw money from your account and transfer it to the merchant’s account. “We’re very involved in that,” said executive Ron Morrow. The Director of Payments, Supervision and Supervision at the Bank of Canada said:
“Canadians place their trust in these PSPs every day. The purpose behind this legislation is to ensure that trust is well established, that the PSP holds your funds, and that those funds are adequately protected. to guarantee that.”
Bank of Canada supervision will help ensure these companies manage operational risks, including contingency plans for cybersecurity incidents, protection of end-user funds, and mandatory annual reporting submissions to the central bank. Probably.
Moreau said being registered with the central bank allows these companies to become part of Canada’s payments infrastructure directly under the Bank of Canada’s umbrella without having to look for partner banks.
He said he doesn’t understand the sense that the retail payments space is a “wild west” environment, but there have been cases in other jurisdictions where PSPs have gone out of business and lost users’ money.
Article content
Advertisement 3
Article content
“I don’t know of any specific instance of that happening in Canada,” he said. “The idea is to provide a framework that prevents such outcomes.”
PSPs operating in Canada, including companies such as Moneris Solutions and Stripe, will be required to register with the Bank of Canada from November 1 to November 15.
Parna Sabet-Stevenson, partner and leader in financial services and technology at Goring WLG, says the number of companies the Bank of Canada is seeking to regulate is huge and her law firm is looking to assist clients with the application process. He said he was busy.
“I have to say 3,000 people is obviously a huge number,” she says. “There will be some very small companies, like start-ups, or companies that just have a small number of employees.”
Sabet Stevenson said there is a big difference between small tech companies and large, established companies like PayPal Holdings. He added that some companies in the fintech space may be subject to multiple regulatory regimes, including regulations that already exist under the Financial Transactions Reporting and Analysis Center of Canada (FINTRAC).
Advertisement 4
Article content
“Let’s say you have a first reporting requirement, which could be the same as a second and third requirement,” she said. “In some cases, you may end up applying three times. It will be interesting to see how things evolve.”
Moreau, who heads a team of 150 people, said registration is mandatory and failure to comply will result in public notice that the company is not in compliance. If a company follows these notices and fails to register, it may be subject to enforcement action.
Recommendations from the editorial department
-
What the central bank’s massive interest rate cut says about the economy
-
Interest rate cuts signal economic downturn, so keep an eye on the dollar
“It is our finding that PSP “We will publish on our website that this is a violation,” he said. “The maximum fine is $10 million.”
This regulatory system will come into effect from September next year.
• Email: jgowling@postmedia.com
Please support our journalism by bookmarking our website: Don’t miss out on the business news you need to know. Add financialpost.com to your bookmarks and sign up for our newsletter here.
Article content
https://financialpost.com/news/bank-of-canada-oversight-retail-payment-providers