Creditors are sometimes surprised, actually shocked, to find out that some of their business activities result in their becoming money service businesses (MSBs) requiring registration as such with the Financial Crimes Enforcement Network (FinCEN). This is a rather unwelcomed development.
A business that provides one or more of the following products or services is an MSB and must register:
• Sale of money orders, traveler’s checks or stored value cards, or redeeming such, other than purely as an agent for another.
• Transmitting money via ACH or other electronic networks.
• Cashing checks for customers in an amount greater than $1000 for any one person on any one day in one or more transactions.
• Dealing in or exchanging currency.
To meet the definition of an MSB, a person must conduct more than $1000 in business with one person in one or more transactions in one of the activities listed above in one day; however, there
is no dollar threshold applicable to money transmitters. So, your actual business practices ultimately determine whether you are an MSB.
If you are, then you do need to register with FinCEN. Then, you must maintain records of each transaction exceeding $10,000, which record must contain the name and address of the party, the date, amount, nature and purpose of the transaction, and a record of each request or instruction regarding a funds transfer of more than $10,000. This may not happen very frequently in your MSB—but when it does, you must have a record.
Also, if you are indeed an MSB, you are responsible for compliance with the Know Your Customer regulations under the guidance of the Financial Industry Regulatory Authority, and for having a specific Anti-Money Laundering Program as required by the USA Patriot Act. You are also responsible for Suspicious Activity reporting and Currency Transaction reporting under the Bank Secrecy Act. So, the record keeping requirements multiply for MSBs.
Perhaps the biggest problem that comes along with being identified as an MSB is that our bankers don’t particularly like their customers to be designated as an MSB. It seems that the bank regulators look with some disfavor on their regulated entities opening bank accounts for MSBs.
Maurice L. Shevin
Birmingham
