New Rules Would Affect Money Transmitters, Check Cashers, and other Money Services Businesses
On May 12, 2009, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, issued proposed regulations that would revise the way money services businesses (MSBs) are defined for purposes of anti-money laundering (AML) compliance under the Bank Secrecy Act. The proposed changes would affect certain grocery chains, convenience stores, and other business that offer money transmitting and check cashing services or issue, sell and/or redeem traveler’s checks, money orders, and gift cards.
The proposed regulations reflect an acknowledgment by FinCEN that the current AML regulations require an update in light of changes in technology, industry practice, and past guidance and rulings. FinCEN proposes to make the following changes to the regulations:
- Clarify that it is an entity’s activity and the context in which the activity occurs, and not an entity’s status as a registered business, that determines whether the entity is an MSB;
- Expand the regulatory definition of MSB to include foreign-located entities that are engaged in covered activities that take place wholly or in substantial part within the United States;
- Clarify that MSBs include entities that are dealers who exchange currency, as well as other monetary instruments, funds, or other instruments denominated in the currency, and that the exchange need not involve U.S. dollars;
- Redesignate a “check casher” as an entity that accepts both checks and monetary instruments, such as traveler’s checks and money orders, in return for currency or a combination of currency and other monetary instruments or stored value cards;
- Clarify that a “check casher” does not include an entity that sells stored value cards limited to a defined merchant or location that are purchased with a check, monetary instrument, or other instrument; an entity that redeems its own checks; or an entity that only holds a customer’s check as collateral for repayment by the customer of a loan;
- Redesignate an “issuer or seller of traveler’s checks or money orders” as an entity that issues traveler’s checks or money orders that are sold, or itself sells such instruments, in an amount greater than $1,000 for any person on any day in one or more transactions;
- Group together “issuer, seller, or redeemer of stored value” into one category;
- Clarify that a “money transmitter” includes an entity that accepts and transmits currency and funds, as well as other value that substitutes for currency, such as stored value cards;
- Clarify that a “money transmitter” does not include an entity that only provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;acts as a payment processor to facilitate the purchase or payment of a bill for a good or service through a clearance and settlement system by agreement with the creditor or seller;operates a clearance and settlement system or otherwise acts as an intermediary solely between institutions regulated under the Bank Secrecy Act; provides stored value that is limited to a defined merchant or location;physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person engaged in such business from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided the person has no more than a custodial interest at any point during the transportation; andaccepts and transmits funds that are integral to the sale of goods or the provision of services, other than money transmission services.
- provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;
- acts as a payment processor to facilitate the purchase or payment of a bill for a good or service through a clearance and settlement system by agreement with the creditor or seller;
- operates a clearance and settlement system or otherwise acts as an intermediary solely between institutions regulated under the Bank Secrecy Act; provides stored value that is limited to a defined merchant or location;
- physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person engaged in such business from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided the person has no more than a custodial interest at any point during the transportation; and
- accepts and transmits funds that are integral to the sale of goods or the provision of services, other than money transmission services.
Written comments on these proposed revisions to the regulations, as well as several other areas identified by FinCEN, must be submitted on or before September 9, 2009.
McGuireWoods’ Government Investigations group has experience in anti-money laundering compliance and investigation matters. For more information about our capabilities and resources in connection with anti-money laundering and related issues, please contact the author or any other McGuireWoods attorney.