Are You A Money Service Business?

If you are licensed under the Check Cashers and Sellers Act, you may be a money services business (MSB) under the Bank Secrecy Act. Check Casher and Seller licensees are MSBs if they engage in money transmission, check cashing (only if the licensee cashes checks over $1,000 for any one person in any one day), check selling (only if the licensee sells checks or money orders over $1,000 for any one person in any one day), or selling stored value (only if the licensee sells stored value over $1,000 for any one person in any one day). What does this mean for you? If you are an MSB, your business may be subject to additional rules and regulations.

Background

The USA PATRIOT Act amended the Bank Secrecy Act in 2001 to include provisions for many non-bank financial institutions. The resulting rules can be found in 31 CFR 103 (http://www.access.gpo.gov/nara/cfr/waisidx_04/31cfr103_04.html).

Registration

Most MSBs are required to register with the Financial Crimes Enforcement Network (FinCEN). The registration is filed on FinCEN Form 107. Re-registration is required every two years, or when certain other provisions of 31 CFR 103.41 are met. MSBs acting solely as agents or authorized delegates for other MSBs are not required to register. For example, if your payday loan store makes wire transfers as an authorized delegate for Western Union, you are not required to register unless you conduct other MSB activities, such as check cashing.

Recordkeeping

MSBs are required to maintain records of customer information for certain transactions. For any sale of checks or money orders in the amount of $3,000 or more, a check seller must maintain information such as customer name, address, social security number, date of birth, identification number and type, date of purchase, and serial number and amount of any checks or money orders sold. This information can be found in 31 CFR 103.29.

Similar information is required for money transfers of $3,000 or more. Depending on the agreement your company has with the transmitting company, they may maintain this information for you. The required information for money transfers can be found in 31 CFR 103.33.

Reporting

MSBs are required to file Currency Transaction Reports (CTRs) with FinCEN within 15 calendar days of any transaction in currency that exceeds $10,000. For example, if John Smith brought in a check for $11,000 and you gave him $11,000 cash, you would have to file a CTR. If John Smith brought in a check for $11,000 and you gave him $2,000 cash and $9,000 in money orders, you would not have to file a CTR.

MSBs are also required to file Suspicious Activity Reports (SARs)for any transactions of $2,000 or more, where the transaction involves funds derived from illegal activity, is designed to evade reporting or recordkeeping requirements, serves no business or lawful purpose, or involves the use of an MSB to facilitate criminal activity. There are several other requirements under the suspicious activity reporting section that can be found in 31 CFR 103.20.

Retention

Records required to be kept under 31 CFR 103 must be retained for at least 5 years.

Anti-Money Laundering Program

All MSBs are required to design and implement an anti-money laundering program. An anti-money laundering program shall:

• Be 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.
• Be in writing, and made available for inspection to the Department of the Treasury and other regulatory agencies upon request.
• At a minimum incorporate policies, procedures, and internal controls reasonably designed to assure compliance with AML regulations, including requirements for:
  • Verifying customer information
  • Filing reports (such as Currency Transaction Reports and Suspicious Activity Reports)
  • Creating and retaining records
  • Responding to law enforcement requests
• Designate a compliance officer to assure day-to-day compliance with the program.
• Provide for periodic independent review to monitor and maintain an adequate program. The scope and frequency of the review shall be commensurate with the risk of the financial services provided by the money services business. This review may be conducted by an officer or employee of the money services business so long as the reviewer is not the designated compliance officer.
• Provide AML compliance training for employees concerning their responsibilities under the program, including training in the detection of suspicious transactions. Documentation showing that appropriate training was provided to all employees, including copies of training materials used to perform the training must be made available to the Department.

Common Examination Findings

The most common examination findings related to MSB requirements are:

• Failure to implement an anti-money laundering program
• Untimely, incomplete, or inaccurate SARs and CTRs
• Failure to file SARs or CTRs
• Failure to obtain an independent review of an anti-money laundering program
• Failure to re-register as an MSB

Additional Resources

www.msb.gov (Resource site for MSBs)
www.fincen.gov (Resource site for financial institutions)
http://www.gpo.gov/nara/cfr/waisidx_04/31cfr103_04.html (List of 31 CFR 103 regulations)

Articles In This Issue

• Message from Deb Bortner
• 2008 Payday Lending Report (PDF)
• Are You A Money Service Business?
• Enforcement Actions

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