Increased money service business regulation causes owners, managers, supervisors and directors of money services businesses (MSB) to face significant regulatory exposure. Recent changes to FinCEN's definition of "money services business" result in Bank Secrecy Act (BSA) rules being applied to all people and entities that conduct MSB activities within the United States, regardless of their physical location. To protect yourself, your assets and your business, no other approach is more effective than a thorough analysis of both federal and state licensing and/or registration requirements, followed by consistent compliance.

Reducing Exposure - Three Areas of Focus

Pursuant to the BSA as augmented by the USA PATRIOT Act, and 18 U.S.C. 1960, MSBs that operate in the U.S. but are not registered with FinCEN or licensed with one or more state regulators (if required) are subject to up to 5 years of felony imprisonment for each violation, civil fines of up to $5,000 for each violation, criminal fines of up to $250,000 per violation, and forfeiture of all assets (including real estate) that the U.S. concludes were used to commit or were otherwise associated with the violation. The consequences can be quite severe, and the law reaches formal money services businesses (see U.S. v Talebnejad), foreign MSBs (see U.S. v Mazza-Alaluf), hawala (see U.S. v Habbal), and informal value transfer systems (see U.S. v E-Gold, Ltd). Visit the Money Services Business FAQ page.

To minimize regulatory risk and enjoy access to a strong, growing market while avoiding forfeiture of assets and/or loss of personal freedom, MSB owners/operators should focus on three areas: money services business registration, msb banking relationships, and money service business compliance.

Money Transmitter License

BSA requirements mandate that all MSBs must register with FinCEN on Form 107 which can now be filed electronically. Most, but not all, U.S. states require MSBs to register and/or obtain a license to operate within the state. Businesses that do not provide services to third parties are generally not considered to be MSBs under U.S. federal requirements; however, due to the risk involved, each business is advised to analyze the facts of its particular situation. Click this link for State money transmitter license information.

Money services businesses that do business in the U.S., but are located outside of the U.S. are now firmly within the sweep of the Bank Secrecy Act and U.S. MSB registration requirements. Failure to get your money transmitter license could result in your being sentenced to a long stay in a U.S. federal penitentiary. If you conduct, control, manage, supervise, direct or own a non-U.S. MSB that does business in the U.S., you should take four steps to avoid loss of money and avoid losing your freedom. Click the above link to learn more.

New FinCEN Form 107 - Coming Soon

• Part II of FinCEN Form 107 will be revised by expanding the current Item 3 "Legal name of money services business" into three separate fields that call for the entry of: (a) "*3 Individual's last name, or entity's legal name" with a check box to indicate that the provided name is for an entity; (b) "*4 First name"; and (c) "5 Middle initial." The current Item 4 "Doing business as" will be revised to read as follows "6 Alternate name, e.g., AKA - individual or DBA - entity." Additional changes to Part II include the addition of a box to indicate a foreign country; the addition of a box to indicate the type of taxpayer identification number (TIN); the addition of a space for recording a Web site (URL) address if available; and the addition of spaces to identify the name and phone number of the compliance contact person for the MSB.
  
  
• Part III of FinCEN Form 107 will include revisions that mirror the Part II expansion of name entry and TIN and TIN type. The new Part III will also request E-mail and Web site addresses, and will no longer request the individual identification information (passport, driver's license/state ID, Alien registration) requested in box 23 of the current form.
  
  
• Part IV of the new FinCEN Form 107 will include a check box to indicate foreign locations. The major changes are directed to prepaid access (stored value) with the addition of check boxes to indicate seller of prepaid access and provider of prepaid access. Additionally, providers of prepaid access will be required to complete a series of information boxes regarding prepaid access, including the name of the prepaid program, the IIN/BIN (first six numbers), the name of the processor, the name and phone number of the prepaid programs compliance point of contact, and a check box to indicate if the listed program is useable internationally.
  
  
• In addition to currently requested information, Part V of the new FinCEN Form 107 adds requests for depository institution routing number, depository institution IBAN if the MSB is foreign-located, country code, and type of financial institution (depository institution, non-depository or foreign).
  
  
• Finally, Part VI of the new FinCEN Form 107 will require foreign-located money services businesses to enter contact information of the MSB's US agent for services of legal process. Part VII will change to indicate that "The signature of the owner, controlling person, authorized corporate officer, or U.S. agent for service of legal process is mandatory," a change that better reflects the reality of foreign-located MSBs.
  
  
• For more information, click to read the FinCEN Form 107 Registration Guide.

A more proactive approach to MSB banking relations consists of sound documentation of compliance with FinCEN Form 107 registration requirements, and compliance with state licensing requirements. A thorough analysis of the risks associated with the services your MSB offers, your customer base, the markets your money services business serves, and individual MSB locations will also provide comfort. Employee screening and training programs, along with an anti-money laundering program tailored to your MSB's operations round out the picture. Some banks may require disclosure of agent relationships, and other internal information.

MSB banking should be approached with a keen eye toward regulatory compliance. Banks routinely file suspicious activity reports about account holders they suspect of being unregistered and/or unlicensed MSBs. Additionally, FinCEN actively "encourages banking organizations and their money services business customers to consider how voluntary information sharing could enable each institution to more effectively discharge its anti-money laundering and suspicious activity monitoring obligation."

Find out how we can help you document FinCEN money services business registration compliance.

How to Get a Money Service Business Bank Account

When navigating money services business banking relationships, MSBs should bear in mind that to comply with Bank Secrecy Act requirements, banks must conduct a level of due diligence when opening and maintaining MSB bank accounts. The bank must: (i) satisfy its internal customer identification program; (ii) confirm the MSB's registration on FinCEN Form 107; (iii) if applicable, confirm that the MSB has complied with state or local licensing requirements; (iv) determine whether the MSB is an agent of another MSB; and (v) determine the level of risk that will be associated with the MSB bank account by conducting a BSA anti money laundering risk assessment. If after conducting its basic due diligence the bank determines that further due diligence is required, the bank will initiate a more invasive review in an attempt to assess and get comfortable with the MSB's risk management. A written MSB BSA / AML Risk Assessment may help avoid such a review or make it less painful.

See how we can help structure your money services business and document your MSB Risk Assessment.

Money Service Business Compliance

If you operate a money service business in the U.S. you should be worried. It is against the law for MSBs (even non-U.S. MSBs) to do business in the U.S. unless the MSB comlies with applicable registration, licensing, record keeping and agent list requirements. MSBs that register using incomplete or false information face 5 years of felony imprisonment for each violation and civil forfeiture of assets. Section 359 of the USA PATRIOT Act changed the definition of “financial institution” so that informal value transfer systems such as hawala and digital currency are now money service businesses. Additionally, both formal and informal MSBs may be subject to regulation at the State level. Take proactive steps to avoid loss of money, avoid loss of assets, and avoid losing your freedom. Click the above link to learn more.

All MSBs are required to adhere to BSA anti-money laundering (AML) requirements. Your MSB must develop, implement, and maintain an effective BSA/AML program. Failure to establish and implement an adequate written AML program could result in a penalty ranging from $25,000 to $100,000 (31 USC 5321(a)(1)). An effective anti-money laundering program is an AML that is reasonably designed to prevent your MSB from being used to facilitate money laundering and the financing of terrorist activities. Your BSA/AML program should be tailored to match the risks posed by the location and size of your MSB, and the nature and volume of the financial services provided. Your BSA / AML program must be in writing, with documented board of directors approval, and available for inspection by the Department of the Treasury (FinCEN). Your MSB BSA/AML compliance program must meet the four core BSA requirements, one of which is internal controls designed to detect and deter money laundering and terrorist financing based upon your MSB BSA/AML Risk Assessment.

Contact us for an independent review of your BSA/AML compliance and other money service business compliance.

Find out more about our special MSB registration services for foreign located money services businesses.