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Insights and Expertise

part of the Americas should have a local business partner
and/or a local attorney who can set expectations for the
legal framing of local relationships.

In the end, my client won the case but never collected. As
is the case in so many jurisdictions, winning a court case
is only the beginning of getting justice.
Payments throughout Canada: Easiest of all

Expanding into Canada is often as easy as adding a Cana-
the Americas: Legal dian pricing addendum to your existing U.S. ISO agree-
ment. Large U.S. processors treat Canada as a +1 without
many complications. Some U.S. ISOs will be required to
issues when taking incorporate a Canadian company, which is easy and takes
only a few days.
on the hemisphere The most common jurisdiction for a Canadian company

these days is British Columbia because companies in-
By Adam Atlas corporated there can have 100 percent U.S. directors and
shareholders. Despite all the trade drama between the
Attorney at Law United States and Canada, there is still an effective tax
treaty in place between the two countries that means you
ust because there are all kinds of tariffs does not will not be caught paying tax twice on the same revenue.
mean you can't open an ISO north or south of
the border; merchants need processing wher- Depending on the acquirer and the services to be offered
J ever they are and the skills of a U.S. ISO are in Canada, a Canadian incorporation may or may not be
valuable outside of the United States. The purpose of this necessary. Reckoning with Canadian taxes is not rocket
article is to highlight some of the key legal issues when science and can be handled easily by a Canadian account-
expanding into the rest of the Americas—Canada, Mexico ing firm, preferably one with which your U.S. accounting
and beyond. firm already has a working relationship.

You're not in Kansas any more
There is actually law in Canada on merchant services in
I'll never forget being called to provide expert testimony the form of the Federal Code of Conduct for the Payment
for a Belize court. The white-pillared and teak-paneled Card Industry in Canada. The "Code of Conduct," as it is
courthouse was beautiful but without air conditioning called, mandates transparency in pricing, prior notice of
in 100-degree weather. It turns out that Belize, a country fee increases, a merchant right to terminate for non-pass-
founded by English pirates in the mid-17th century, is through fee increases and other consumer-protection-
part of the old British Commonwealth, now the Common- style rights for merchants. The Code of Conduct makes
wealth of Nations, a group of 56 independent countries, merchants a little harder to hold on to, but it also tilts the
most of which were once part of the British Empire. market slightly toward greater competition.
I learned that day in Belize court that part of the Common- An ISO that has gateway technology or provides PCI-
wealth is the exchange of judges. The judge presiding over compliant card tokenization will fall under a substantial
my client's case in Belize City was actually from Africa on regulatory burden, having to register with the Bank of
exchange in Belize. I was about to learn that Belize judges Canada as a Payment Service Provider (PSP). PSP status
on exchange from Africa do not want to hear opinions brings with it a substantial compliance burden and a duty
from experts that are too pointed. to file certain reports with the Bank of Canada. But a so-
phisticated ISO will find all of those requirements well
When I expressed my opinion on the legally correct out- within reach.
come of the case—that the bank owed some millions of
dollars to my ISO client—the judge promptly dressed me Canada has no agent-of-the-payee exemption, so if the ISO
down. He was entirely put out because I had the gall to handles funds, it is a money transmitter under Canadian
tell the court what I thought was the correct outcome of law and has a high compliance barrier in terms of AML,
the case. sanctions, transaction screening and the like.
Mexico Lindo
The point of this story is to share a first principle of for-
eign payments businesses: you're not in Kansas anymore! Expanding into Mexico is a little more complicated than
Cultural and legal expectations often vary significantly expanding into Canada. Depending on the acquirer and
from typical U.S. scenarios. An ISO expanding to another the ISO's role, expansion may be handled through an ad-
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