| |
|
|
|
|
 - MSB Frequently Asked Questions
|
|
|
|
|
|
- What is the U.S. FinCEN Money Services Business (MSB) definition?
- Is money service business (MSB) registration on FinCEN Form 107 required?
- Why do some money services businesses need to re-register using FinCEN Form 107?
- What is the difference between money service business (MSB) registration and MSB State Licensing requirements?
- Effect of non compliance with MSB State license in USA?
- Are Foreign MSBs required to register with FinCEN to conduct business in the USA?
- How does the PATRIOT ACT impact money services businesses (MSBs)?
- What is the BSA/AML Examination Manual for Money Services Businesses?
- Are MSBs required to perform an AML risk assessment?
- How can I make it easier to get a money services business (MSB) bank account?
- Do foreign-located MSBs have special FinCEN Form 107 registration requirements?
What is the U.S. FinCEN Money Services Business (MSB) definition?
- The U.S. Financial Crimes Enforcement Network, Department of the Treasury (FinCEN), uses the following money services business definition:
A person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in 1) through (7). This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States.
(1) Dealer in Foreign Exchange. A person that accepts the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more countries in exchange for the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more other countries in an amount greater than $1,000 for any other person on any day in one or more transactions, whether or not for same-day delivery.
(2) Check Casher.
(i) In general. A person that accepts checks (as defined in the Uniform Commercial Code), or monetary instruments (as defined at §1010.100(dd)(1)(ii), (iii), (iv), and (v)) in return for currency or a combination of currency and other monetary instruments or other instruments, in an amount greater than $1,000 for any person on any day in one or more transactions.
(ii) Facts and circumstances; Limitations. Whether a person is a check casher as described in this section is a matter of facts and circumstances. The term "check casher" shall not include: (A) A person that sells prepaid access in exchange for a check (as defined in the Uniform Commercial Code), monetary instrument or other instrument; (B) A person that solely accepts monetary instruments as payment for goods or services other than check cashing services; (C) A person that engages in check cashing for the verified maker of the check who is a customer otherwise buying goods and services; (D) A person that redeems its own checks; or (E) A person that only holds a customer's check as collateral for repayment by the customer of a loan.
(3) Issuer or Seller of Traveler's Checks or Money Orders. A person that
(i) Issues traveler's checks or money orders that are sold in an amount greater than $1,000 to any person on any day in one or more transactions; or
(ii) Sells traveler's checks or money orders in an amount greater than $1,000 to any person on any day in one or more transactions.
(4) Provider of Prepaid Access.
(i) In general. A provider of prepaid access is the participant within a prepaid program that agrees to serve as the principal conduit for access to information from its fellow program participants. The participants in each prepaid access program must determine a single participant within the prepaid program to serve as the provider of prepaid access.
(ii) Considerations for provider determination. In the absence of registration as the provider of prepaid access for a prepaid program by one of the participants in a prepaid access program, the provider of prepaid access is the person with principal oversight and control over the prepaid program. Which person exercises "principal oversight and control" is a matter of facts and circumstances. Activities that indicate "principal oversight and control" include: (A) Organizing the prepaid program; (B) Setting the terms and conditions of the prepaid program and determining that the terms have not been exceeded; (C) Determining the other businesses that will participate in the prepaid program, which may include the issuing bank, the payment processor, or the distributor; (D) Controlling or directing the appropriate party to initiate, freeze, or terminate prepaid access; and (E) Engaging in activity that demonstrates oversight and control of the prepaid program.
(iii) Prepaid program. A prepaid program is an arrangement under which one or more persons acting together provide(s) prepaid access. However, an arrangement is not a prepaid program if: (A) It provides closed loop prepaid access to funds not to exceed $2,000 maximum value that can be associated with a prepaid access device or vehicle on any day; (B) It provides prepaid access solely to funds provided by a Federal, State, local, Territory and Insular Possession, or Tribal government agency; (C) It provides prepaid access solely to funds from pre-tax flexible spending arrangements for health care and dependent care expenses, or from Health Reimbursement Arrangements (as defined in 26 U.S.C. 105(b) and 125) for health care expenses; or (D) ( 1 ) It provides prepaid access solely to: (i) Employment benefits, incentives, wages or salaries; or
(ii) Funds not to exceed $1,000 maximum value and from which no more than $1,000 maximum value can be initially or subsequently loaded, used, or withdrawn on any day through a device or vehicle; and ( 2 ) It does not permit: (i) Funds or value to be transmitted internationally; (ii) Transfers between or among users of prepaid access within a prepaid program; or (iii) Loading additional funds or the value of funds from non-depository sources.
(5) Money Transmitter
(i) In general. (A) A person that provides money transmission services. The term "money transmission services" means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. "Any means" includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or (B) Any other person engaged in the transfer of funds.
(ii) Facts and circumstances; Limitations. Whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term "money transmitter" shall not include a person that only: (A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services; (B) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller; (C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions. This includes but is not limited to the Fedwire system, electronic funds transfer networks, certain registered clearing agencies regulated by the Securities and Exchange Commission ("SEC"), and derivatives clearing organizations, or other clearinghouse arrangements established by a financial agency or institution; (D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person primarily engaged in such business, such as an armored car, from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided that the person engaged in physical transportation has no more than a custodial interest in the currency, other monetary instruments, other commercial paper, or other value at any point during the transportation; (E) Provides prepaid access; or (F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.
(6) U.S. Postal Service. The United States Postal Service, except with respect to the sale of postage or philatelic products.
(7) Seller of Prepaid Access. Any person that receives funds or the value of funds in exchange for an initial loading or subsequent loading of prepaid access if that person:
(i) Sells prepaid access offered under a prepaid program that can be used before verification of customer identification under §1022.210(d)(1)(iv); or
(ii) Sells prepaid access (including closed loop prepaid access) to funds that exceed $10,000 to any person during any one day, and has not implemented policies and procedures reasonably adapted to prevent such a sale.
(8) Limitation. For the purposes of this section, the term “money services business” shall not include:
(i) A bank or foreign bank;
(ii) A person registered with, and functionally regulated or examined by, the SEC or the CFTC, or a foreign financial agency that engages in financial activities that, if conducted in the United States, would require the foreign financial agency to be registered with the SEC or CFTC; or
(iii) A natural person who engages in an activity identified in paragraphs (1) through (5) of this section on an infrequent basis and not for gain or profit.
Learn more about our money services business (MSB) registration services.
Is money service business (MSB) registration on FinCEN Form 107 required?
- Yes. In general, the Bank Secrecy Act (BSA) requires all money services businesses (MSBs) to register with FinCEN using Form 107 "on or before the end of the 180-day period beginning on the day following the date the [money services] business is established." Relevant statutory language is as follows:
"Any person who owns or controls a money transmitting business shall register the business (whether or not the business is licensed as a money transmitting business in any State) with the Secretary of the Treasury [FinCEN] not later than the end of the 180-day period beginning on the later of (A) the date of enactment of the Money Laundering Suppression Act of 1994; or (B) the date on which the business is established...This section shall not be construed as superseding any requirement of State law relating to money transmitting businesses operating in such State...The filing of false or materially incomplete information in connection with the registration of a money transmitting business shall be considered as a failure to comply with the requirements of this subchapter."
Inasmuch as FinCEN regulations and the BSA use two different terms to encompass the same group of businesses (FinCEN uses the "money services business" definition while the BSA refers to "money transmitting business"), there can be confusion. However, a review of the BSA definition of "money transmitting business," particularly as enhanced by the USA PATRIOT ACT, clears up any confusion:
"The term "money transmitting business" means any business other than the United States Postal Service which— (A) provides check cashing, currency exchange, or money transmitting or remittance services, or issues or redeems money orders, travelers' checks, and other similar instruments or any other person who engages as a business in the transmission of funds, including any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or internationally outside of the conventional financial institutions system; (B) is required to file reports under section 5313; and (C) is not a depository institution (as defined in section 5313 (g))."
"The term "money transmitting service" includes accepting currency or funds denominated in the currency of any country and transmitting the currency or funds, or the value of the currency or funds, by any means through a financial agency or institution, a Federal reserve bank or other facility of the Board of Governors of the Federal Reserve System, or an electronic funds transfer network."
MSBs (including non-U.S. MSBs that operate in the U.S.) that fail to register with FinCEN using Form 107, or that file false or materially incomplete information, are subject to a civil penalty of $5,000 for each violation. Each day that a violation continues is the equivalent of a new violation and may result in an additional $5,000 penalty. (See Money Transmitter License Freedom).
Learn more about our money services business (MSB) registration services.
Why do some money services businesses need to re-register using FinCEN Form 107?
- Money services businesses (MSB) that undergo a change in ownership or control, or that transfer more than 10% of voting power or equity control, or that experience a more than 50% increase in the number of MSB agents may be required to register with FinCEN using Form 107. The applicable regulations describe three events that trigger the MSB re-registration requirement:
(1) If a money services business registered as a MSB under the laws of any U.S. State experiences a change in ownership or control that requires the money services business to be re-registered under State law, the money services business must also re-register with FinCEN.
(2) In addition, if there is a transfer of more than 10 percent of the voting power or equity interests of a money services business (other than a money services business that must report such transfer to the U.S. Securities and Exchange Commission), the money services business must re-register with FinCEN.
(3) Finally, if a money services business experiences a more than 50% increase in the number of its agents during any registration period, the money services business must re-register with FinCEN.
The money services business must file FinCEN Form 107 not later than 180 days after the change in ownership, transfer of voting power or equity interests, or increase in agents. The calendar year in which the change, transfer, or increase occurs is treated as the first year of a new two-year registration period.
Learn more about our money services business (MSB) registration services.
What is the difference between money service business (MSB) registration and MSB State Licensing requirements?
- The difference between money services business registration on FinCEN Form 107 and MSB State Licensing requirements is the difference between data collection/analysis and regulation. FinCEN is the U.S.’ Financial Intelligence Unit (FIU) and is responsible for managing, analyzing, safeguarding, and sharing the financial transaction information it collects pursuant to the BSA and other statutes and regulations. FinCEN shares the information that it collects with financial regulators, federal, state, and local law enforcement agencies, intelligence agencies, foreign FIUs, and others.
Contrast FinCEN's focus with that of the various state regulators. The primary focus of the states is typically consumer protection which is accomplished by vetting through required licensing. For example, one State makes the following statement in its MSB statute, "Licensing standards.—To qualify for licensure as a money services business under this chapter, an applicant must: (1) Demonstrate to the office the character and general fitness necessary to command the confidence of the public and warrant the belief that the money services business or deferred presentment provider shall be operated lawfully and fairly." Follow this link to learn how to get a money transmitter license in your State.
The BSA, which requires money services businesses to register with the U.S. federal government using FinCEN Form 107, clearly states that the FinCEN Form 107 registration requirement "shall not be construed as superseding any requirement of State law relating to money transmitting businesses operating in such State." This means that each MSB must investigate and adhere to the licensing requirements of each state that the MSB operates in. Failure to comply with state licensing and/or registration requirements may lead to violation of both state law and federal law. (See Money Service Business Compliance).
Learn more about our money services business (MSB) registration services.
Effect of non compliance with MSB State License in the USA?
- Failure to comply with US State money services licensing requirements could result in up to five years in prison and a fine up to $250,000...for each violation. The specifics can be found in 18 USC 1960 "Prohibition of Unlicensed Money Transmitting Businesses":
(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.
(b) As used in this section—
(1) the term "unlicensed money transmitting business" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and—
(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;
(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or
(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity;
(2) the term "money transmitting" includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and
(3) the term "State" means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States.
Learn more about our money services business (MSB) registration services.
Are Foreign MSBs required to register with FinCEN to conduct business in the USA?
- In 2011, FinCEN released a new money services business definition clarifying the registration requirement for foreign MSBs that conduct business in the USA. A "money services business" is "a person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States."
In a July 18, 2011 news release, FinCEN stated, "whether a person is subject to regulation as an MSB does not depend on factors such as whether the person is licensed as a business, has employees, or is engaged in a for-profit venture. This rule clarifies that it is the activities performed that cause a person to be categorized as an MSB subject to anti-money laundering rules."
"In addition, an entity qualifies as an MSB based on its activity within the United States, not the physical presence of one or more of its agents, agencies, branches, or offices in the United States. This requirement arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations. FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of their physical location."
Further guidance specifies, "foreign-located MSBs [] have the same reporting and recordkeeping and other requirements as MSBs with a physical presence in the United States, with respect to their activities in the United States. Foreign-located MSBs [are] subject to the same civil and criminal penalties as MSBs with a physical presence in the United States, with respect to their failure to comply with regulatory requirements. Foreign-located MSBs [are] also [] required to designate a person who resides in the United States to function as an agent to accept service of legal process, including with respect to BSA compliance."
Learn more about our money services business (MSB) registration services.
How does the PATRIOT ACT impact money services businesses (MSBs)?
- Section 359 of the USA PATRIOT Act amended the BSA definition of "financial institution" [31 USC 5312(a)(2)(R)] to include informal value transfer systems and hawala.
"(R) a licensed sender of money or any other person who engages as a business in the transmission of funds, including any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or internationally outside of the conventional financial institutions system;"
Following this USA PATRIOT Act amendment, all informal value transfer systems, hawala or "network[s] of people who engage as a business in facilitating the transfer of money" and operate in the US [see above FAQ] are required to register with FinCEN using Form 107.
Learn more about our money services business (MSB) registration services.
What is the BSA/AML Examination Manual for Money Services Businesses?
- In 2008 FinCEN released the Bank Secrecy Act/Anti Money Laundering Examination Manual for Money Services Businesses. A collaborative effort of the IRS, state agencies responsible for MSB regulation, the Money Transmitter Regulators Association, the Conference of Bank Supervisors, and FinCEN, the Examination Manual is a roadmap to MSB BSA/AML examinations. The Examination Manual also provides guidance on identifying and controlling risks associated with money laundering and terrorist financing.
Learn more about our money services business (MSB) registration services.
Are MSBs required to perform an AML risk assessment?
- The BSA requires each MSB to implement a BSA anti money laundering (AML) program "commensurate with the risks posed by the location and size of, and the nature and volume of the financial services provided by, the money services business." Although neither the BSA nor applicable regulation explicitly mandate a written risk assessment, a well documented risk assessment is the first step towards effectively demonstrating BSA AML compliance.
The BSA/AML Examination Manual for Money Services Businesses [see above FAQ] states, "Although MSBs are not required by regulation to create a written risk assessment, management is encouraged to document its risk assessment in writing in order to provide a clear basis for the MSB's policies and procedures. If the MSB does not have a written risk assessment, the examiner will generally need to conduct more in depth interviews in order to determine the MSB's risk profile.
Learn more about our money services business (MSB) registration services.
How can I make it easier to get a money services business (MSB) bank account?
- The April 26, 2005 Interagency Interpretive Guidance on Providing Banking Services to Money Services Businesses in the United States sought to clarify the responsibilities of banks when providing banking services to MSBs. Banking institutions were instructed to provide MSB banking services "on a risk-assessed basis." The April 2005 Guidance went on to state, "[p]ut simply, a local grocer that also cashes payroll checks for customers purchasing groceries cannot be equated with a money transmitter specializing in cross-border wire transfers to jurisdictions posing heightened risk for money laundering or the financing of terrorism, and therefore the Bank Secrecy Act obligations on a banking organization will differ significantly."
Banking institutions were informed that the following are "minimum due diligence expectations" based on existing BSA requirements:
Compliance with the bank's Customer Identification Program;
Confirmation that the MSB is registered with FinCEN;
Confirmation that the MSB is in compliance with state or local licensing requirements, if applicable;
Confirmation of the MSB's status as an agent of another MSB, if applicable; and
Performance of a basic BSA/AML risk assessment to determine the level of risk associated with the account and whether further due diligence is necessary.
To make it easier to get a money services business bank account, MSBs should keep the above "minimum due diligence expectations" in mind, and arrive at the bank fully able to document compliance with the minimum expectations including the BSA/AML risk assessment. MSBs that are perceived as being "high risk" can expect to encounter enhanced due diligence expectations. The 2005 Guidance provides the following indicators of potentially "lower risk" and "higher risk":
Examples of potentially lower risk indicators: The money services business –
primarily markets to customers that conduct routine transactions with moderate frequency in low amounts;
offers only a single line of money services business product (for example, only check cashing or only currency exchanges);
is a check casher that does not accept out of state checks;
is a check casher that does not accept third-party checks or only cashes payroll or government checks;
is an established business with an operating history;
only provides services such as check cashing to local residents;
is a money transmitter that only remits funds to domestic entities; or
only facilitates domestic bill payments.
Examples of potentially higher risk indicators: The money services business –
allows customers to conduct higher-amount transactions with moderate to high frequency;
offers multiple types of money services products;
is a check casher that cashes any third-party check or cashes checks for commercial businesses;
is a money transmitter that offers only, or specializes in, cross-border transactions, particularly to jurisdictions posing heightened risk for money laundering or the financing of terrorism or to countries identified as having weak anti-money laundering controls;
is a currency dealer or exchanger for currencies of jurisdictions posing heightened risk for money laundering or the financing of terrorism or countries identified as having weak anti-money laundering controls;
is a new business without an established operating history; or
is located in an area designated as a High Risk Money Laundering and Related Financial Crimes Area or a High-Intensity Drug Trafficking Area.
Learn more about our money services business (MSB) registration services.
Do foreign-located MSBs have special FinCEN Form 107 registration requirements?
- Under U.S. regulations, non-U.S. foreign-located money services businesses must designate a U.S. agent for service of legal process, and must maintain certain documents and information at a U.S. address.
"Foreign-located money services business. Each foreign-located person doing business, whether or not on a regular basis or as an organized or licensed business concern, in the United States as a money services business shall designate the name and address of a person who resides in the United States and is authorized, and has agreed, to be an agent to accept service of legal process with respect to compliance with this chapter, and shall identify the address of the location within the United States for records pertaining to paragraph (b)(1)(iii) of [the regulations]."
Part VI of FinCEN Form 107, "Location of Supporting Documentation," requires that foreign-located money services businesses designate a U.S. location where a copy of the completed FinCEN Form 107, specified information about the MSB,and an agent list will be maintained for five (5) years after the date of registration. Specifically, the following is required:
Money services businesses must retain for five (5) years certain information at a location within the United States. That information includes:
1. A copy of the executed FinCEN Form 107.
2. Annual estimate of the volume of the MSB's business in the coming year.
3. The following information regarding ownership or control of the business: the name and address of any shareholder holding more than 5% of the MSB’s stock, any general partner, any trustee, and/or any director or officer of the business.
4. An agent list. If the money services business has agents it must prepare and maintain a list of its agents. That agent list must be updated annually and retained by the business at the location in the United States reported on FinCEN Form 107 in Part II or Part VI [Location of Supporting Documentation]. The agent list should not be filed with the FinCEN Form 107. The agent list must include: a. Each agent's name, b. Each agent's address, c. Each agent's telephone number, d. The type of service(s) provided by each agent on behalf of the money services business, e. A listing of the months in the immediately preceding 12 months in which the gross transaction amount of each agent with respect to financial products/services issued by the MSB exceeds $100,000, f. The name and address of any depository institution at which each agent maintains a transaction account for the money services business activities conducted by the agent on behalf of the MSB, g. The year in which each agent first became an agent of the money services business, and h. The number of branches or subagents of each agent.
Learn more about our money services business (MSB) registration services.
|
|
|
|
 |
- Money Service Business License
|
New FinCEN Form 107 Registration Package. Everything you need to comply and move on. US$799.95 everyday value rate includes 30 minutes of MSB legal advice.
- FinCEN Form 107 Registration Guide;
- MSB BSA/AML Risk Assessment (template);
- MSB Anti-Money Laundering Program (template);
- Designation of Compliance Officer (template);
- Independent Audit Function Assignment (template);
- Business Volume Annual Estimate (template);
- MSB Ownership and Control Information (template);
- MSB Agent List (template).
Call now to receive your introductory rate good until 1 March 2012 (US$299.99 - 10 minutes of legal advice included): 1 646 435 0668. |
|
|
|
|
