FinCEN Clarifies Definition of MSBs, Expands E-Filing

The Treasury’s Financial Crimes Enforcement Network (FinCEN) this week released a final rule, Definitions and Other Regulations Relating to Money Services Businesses, that more clearly defines which businesses qualify as Money Services Businesses (MSBs) and are therefore subject to anti-money laundering rules under the Bank Secrecy Act (BSA). The final rule says the changes “more clearly delineate the scope of entities regulated as MSBs, so that determining which entities are obligated to comply is more straightforward and predictable.”

FinCEN also said that the current version of the Registration of Money Services Business form (RMSB or FinCEN Form 107) can now be filed electronically via the agency’s Bank Secrecy Act (BSA) E-Filing System. The form is being updated in accordance with the final rule. FinCEN said electronic filing via the BSA E-Filing System will assist the agency in providing important information relating to money laundering and terrorist financing to law enforcement as quickly as possible.

The rule will be effective 60 days after publication in the Federal Register. Compliance with the registration requirements under the final rule will not be required until six months after publication in the Federal Register to allow time for Form 107 to be updated.

The final rule contains a threshold that requires an MSB to comply with BSA anti-money laundering rules if it conducts $1,000 worth of transactions per person per day. The threshold applies to all categories of MSBs other than money transmitters, which are subject to BSA rules if they engage in money transmission of any amount. The thresholds are unchanged from the prior rule, but FinCEN said it may consider changing these thresholds in future rulemaking.

The rule also ensures that certain “foreign-located persons” engaging in MSB activities within the United States are subject to BSA rules. Whether a foreign-located entity is an MSB subject to BSA rules is determined “based on its activity within the United States, not the physical presence of one or more of its agents, agencies, branches, or offices in the United States.” The final rule imposes “the same reporting and recordkeeping and other requirements [on foreign-located MSBs] as MSBs with a physical presence in the United States, with respect to their activities in the United States.”

The final rule also clarifies several provisions, among them:

• Revising MSB definitions to make clearer what activities subject a person to the BSA rules pertaining to MSBs.
• Updating the MSB definitions to reflect past guidance and rulings and current business operations and to accommodate evolving technologies and emerging lines of business.
• Separating the provisions dealing with stored value from those dealing with issuers, sellers and redeemers of traveler’s checks and money orders in order to more readily accommodate changes to be implemented in FinCEN’s pending Prepaid Access Rulemaking.
• Making minimal nomenclature changes with respect to certain MSB categories to help clarify distinctions between them.
• Replacing the term “dealer in foreign exchange” with the new term “currency dealer or exchanger,” a term used to include the exchange of instruments other than currency as a category of MSB.

The rule says that whether a person is subject to regulation as an MSB does not depend on whether the person is licensed as a business, has employees or is engaged in a for-profit venture. An entity’s activities, not its formal business status, determine whether it should be classified as an MSB subject to anti-money laundering rules.

FinCEN has developed a series of Questions & Answers to assist MSBs in using the BSA E-Filing System. The agency also plans to host a free webinar on BSA e-filing later this summer. A separate notice for registering will be posted on fincen.gov. A brochure outlines the benefits of using BSA e-filing. Questions on e-filing can be directed to the BSA E-Filing Help desk at 866-346-9478, Option 1. For questions about MSB regulatory requirements, call FinCEN’s Regulatory Helpline at 800-949-2732, Option 1.

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