Would Canco, which is a Canadian-based business that provides payment processing services to payors such as peer-to-peer money transfer services and payroll-like bulk payment services and which maintains non-interest bearing pooled bank accounts owned by it for the benefit of its customers, qualify as a “Canadian Financial Institution” as defined under s. 263(2)? CRA responded:
In accordance with subparagraph l(l) of Article 1 of the [Canada-US Intergovernmental Agreement], a CFI means “(1) any Financial Institution that is resident in Canada, but excluding any branch of such Financial Institution that is located outside Canada, and (2) any branch of a Financial Institution that is not resident in Canada, if such branch is located in Canada”. In accordance with subparagraph 1(g) of Article 1 of the IGA, the term “Financial Institution” includes a “Depository Institution”. In accordance with subparagraph 1(i) of Article 1 of the IGA, a “Depository Institution” is any entity “that accepts deposits in the ordinary course of banking or similar business.” Paragraph 3.7 of the [CRA Part XVIII] Guidance provides clarifying language…stating…:
Facilitating money transfers by instructing agents to transmit funds (without financing the transactions) is not seen as the acceptance of a deposit and an entity will not be considered to be engaged in banking or similar business or a depository institution because of this activity alone.
Whether or not a particular entity which carries on a MSB would be considered a Depository Institution as defined in subparagraph 1(i) of Article 1 of the IGA is a question of fact and beyond the scope of this request.