A money services business (MSB) is a non-bank financial entity that engages in money transmission, conversion, or exchange. These activities include selling money orders, cashing checks, and converting foreign currency. MSBs are regulated by the Financial Crimes Enforcement Network (FinCEN) and must adhere to the regulations set by the Bank Secrecy Act (BSA) as well as implement a robust Anti-money Laundering (AML) compliance policy. To qualify as an MSB, a money transaction must involve one person in an amount of $1,000 or more in a single day.
Types of Money Services Business
1. Currency Dealer or Exchanger: These MSBs exchange one currency for another, such as converting US dollars into Euros.
2. Check Cashier: Check cashing services provide access to funds for individuals without a personal checking account.
3. Issuer of Traveler’s Checks, Money Orders, or Stored Value: MSBs that offer travelers checks, money orders, or stored value items like gift cards.
4. Seller or Redeemer of Traveler’s Checks, Money Orders, or Stored Value: Locations where funds are exchanged or redeemed.
5. Money Transmitter: Entities that electronically transfer funds from one business or individual to another.
6. US Postal Service: The postal service offers money orders and gift cards, qualifying it as an MSB.
MSBs and Regulations
Every bank, credit union, or MSB must establish an internal AML policy to detect suspicious transactions. The Anti-money Laundering (AML) compliance program aims to identify and prevent financial crimes involving “dirty money.” The Bank Secrecy Act (BSA) ensures accurate record-keeping of cash transactions and suspicious activity, including reporting cash transactions over $10,000 and filing suspicious activity reports (SARs).
How to Register as a Money Services Business
1. Determine if you qualify as an MSB.
2. Complete registration through the FinCEN website using Form 107 within 180 days of establishing MSB status.
3. Follow instructions on filing required reports and suspicious activity.
What to Do to Avoid Processing Criminal Transactions
To prevent money laundering and financial crimes, MSBs should:
– Install transaction monitoring software
– Appoint a compliance officer
– Train employees on BSA and AML policies
– Evaluate risk programs regularly
– Follow Know Your Customer (KYC) procedures
– Stay updated on regulatory changes
– File reports promptly
– Refine internal controls continuously
How to Transact Cash Without Using an MSB
Businesses can avoid MSB fees by opening a dedicated business bank account for electronic transactions, wire transfers, and vendor payments. This allows for easy access to funds and online banking services, reducing the need for in-person visits to MSBs.
In conclusion, MSBs play a crucial role in financial services and must adhere to strict regulations to prevent money laundering and financial crimes. By following AML and BSA guidelines, MSBs can operate ethically and securely in the financial industry.