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Bank of Canada Announces Supervisory Framework for Retail Payments Activities Act

By Kevin Landry and Colton Smith

The Bank of Canada (“BoC”) has announced the supervisory framework (the “Framework”) it will use to oversee payment service providers under the Retail Payments Activities Act.

The Retail Payments Activities Act was enacted by the federal government in June 2021 with the objective of regulating retail payment providers in Canada. See our previous update about it here.

The Role of the Bank of Canada

Under the Retail Payments Activities Act, the BoC has been provided a supervisory authority over payment service providers performing retail payment activities. The BoC’s objectives pursuant to the legislation are to (a) supervise payment service providers to determine their compliance with the Retail Payments Activities Act (b) promote the adoption by payment service providers of policies and procedures intended to ensure compliance, and (c) monitor and evaluate developments and issues in the world of retail payment activities.

How the Bank of Canada’s Supervisory Framework is Outlined

The Framework focuses on three activities: (1) registration, (2) risk monitoring, and (3) enforcement. Supervisory expectations will be informed by the Retail Payments Activities Act, its regulations, and additional guidance that is expected to be published by the BoC to help payment services providers understand their obligations.

(1) Registration

Certain individuals or entities will be required to register with the BoC by submitting an application along with a registration fee. Information regarding the BoC’s approach to fees can be found here.

Under the Framework, the criteria for registration are:

Under the geographic scope criteria, an individual or entity must either have a place of business in Canada or perform retail payment activities for an end user in Canada and direct retail payment activities at individuals or entities that are in Canada.

Individuals and entities excluded from registration include banks and authorized foreign banks (under the Bank Act), credit unions, insurance companies, trust and loan companies, provincially regulated loan companies, payment service providers agents and mandataries and Payments Canada. Transactions involving automatic teller machines and internal transactions between affiliated entities are also excluded activities under the Retail Payments Activities Act.

The BoC is currently developing a web application allowing payment service providers to register, pay fees, update information, and comply with legislated reporting requirements. Registration decisions will be posted on the BoC website, including those where registration is refused or revoked and the reasons why.

Applicant information of individuals and entities who meet the criteria for registration will be shared with the Department of Finance Canada to conduct a national security review and with Financial Transaction and Reports Analysis Centre of Canada (FINTRAC).

Applicants will be responsible for responding to requests for information during the applications process as well as keeping their information up to date. Once registered, payment service providers are required to comply with the Retail Payments Activities Act and pay an annual assessment fee.

(2) Risk Monitoring

Under the Retail Payments Activities Act, payment service providers must establish, implement and maintain an operational risk management and incident response framework. Additionally, payment service providers have an obligation to implement certain measures to safeguard end-user funds, if applicable.

The BoC will monitor and assess registered payment service providers performance of the above noted obligations. To do so, payment service providers will be required to submit annual reports, significant change or new activity reports, and incident reports. The BoC will use these reports, along with responses to requests submitted to payment service providers, to assess a payment service providers compliance. Assessment may include, desk reviews, on-site visits, or a special audit, each being more onerous than the last.

(3) Enforcement

The BoC will use a variety of tools to address non-compliance with the Retail Payments Activities Act. These include:

  • A compliance agreement with a payment service provider to rectify non-compliance;
  • A notice of violation accompanied with a monetary penalty;
  • A notice of violation accompanied with an offer to enter into a compliance agreement (which would cut the monetary penalty in half);
  • A compliance order, ordering a payment service provider to stop an action, refrain from taking an action, or to remedy the situation.

The BoC may also apply for a court order requiring a payment service provider to: 1) stop an action that violates the Retail Payments Activities Act, 2) comply with a provision of the Retail Payments Activities Act, or 3) comply with the terms of a compliance order. If a payment service provider disagrees with a notice of refusal of registration, notice of intent to revoke registration, a notice of violation or a notice of default, the payment service provider may appeal the decision to the Governor. If the Governor upholds the decision, a payment service provider may then appeal to the Federal court.

Anticipated Developments

The BoC notes that it may update the supervisor framework before or after the Retail Payments Activities Act comes into force in order to respond to regulations published by the Department of Finance Canada, changes in the retail payments sector, and to respond to lessons learned through the implementation of the Framework. Draft regulations and further guidance are expected to be published by the Department of Finance Canada in 2023.


This update is intended for general information only. If you have questions about the above, please contact the author(s) to discuss your needs for specific legal advice relating to the particular circumstances of your situation.

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