Amendment to the Bank Secrecy Act RegulationsDefinitions Relating to, and Registration of, Money Services Businesses
Federal RegisterAug 20, 1999
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 103
RIN 1506-AA09
Amendment to the Bank Secrecy Act Regulations--Definitions
Relating to, and Registration of, Money Services Businesses
AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.
ACTION: Final rule.
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SUMMARY: This document contains amendments to the regulations
implementing the statute generally referred to as the Bank Secrecy Act.
The amendments revise the definitions of certain non-bank financial
institutions for purposes of the Bank Secrecy Act and group the revised
definitions together in a separate category called ``money services
businesses.'' The amendments also require certain money services
businesses to register with the Department of the Treasury and to
maintain a current list of their agents for examination, on request, by
any appropriate law enforcement agency. The amendments regarding
registration and maintenance of agent lists by money services
businesses reflect changes to the law made by the Money Laundering
Suppression Act of 1994.
DATES: Effective Date: September 20, 1999.
Applicability Date: Registration of money services businesses will
not be required prior to December 31, 2001, and maintenance of the
agent list will not be required prior to January 1, 2002. See
Sec. 103.41(f) of the final rule contained in this document.
FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director,
FinCEN, (703) 905-3930; Charles Klingman, Financial Institutions Policy
Specialist, FinCEN, (703) 905-3602; Stephen R. Kroll, Chief Counsel,
Cynthia L. Clark, Deputy Chief Counsel, and Albert R. Zarate and
Christine L. Schuetz, Attorney-Advisors, Office of Chief Counsel,
FinCEN, (703) 905-3590.
SUPPLEMENTARY INFORMATION:
I. Statutory Provisions--General
The Bank Secrecy Act, Titles I and II of Public Law 91-508, as
amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31
U.S.C. 5311-5330, authorizes the Secretary of the Treasury, inter alia,
to issue regulations requiring financial institutions to keep records
and file reports that are determined to have a high degree of
usefulness in criminal, tax, and regulatory matters, and to implement
counter-money laundering programs and compliance procedures.
Regulations implementing Title II of the Bank Secrecy Act (codified at
31 U.S.C. 5311-5330) appear at 31 CFR Part 103. The authority of the
Secretary to administer Title II of the Bank Secrecy Act has been
delegated to the Director of FinCEN.
31 U.S.C. 5312. The Bank Secrecy Act generally applies to financial
institutions, a term broadly defined in 31 U.S.C. 5312(a)(2)(A-Z). The
statutory definition includes, inter alia:
* * * * *
(J) a currency exchange;
(K) an issuer, redeemer, or cashier of travelers' checks,
checks, money orders, or similar instruments;
* * * * *
(R) a licensed sender of money;
* * * * *
(Y) any business or agency which engages in any activity which
the Secretary of the Treasury determines, by regulation, to be an
activity which is similar to, related to, or a substitute for any
activity in which any business described in this paragraph is
authorized to engage; or
(Z) any other business designated by the Secretary whose cash
transactions have a high degree of usefulness in criminal, tax, or
regulatory matters.
31 U.S.C. 5330. 31 U.S.C. 5330 was added to the Bank Secrecy Act by
section 408 of the Money Laundering Suppression Act of 1994 (the
``Money Laundering Suppression Act''), Title IV of the Riegle Community
Development and Regulatory Improvement Act of 1994, Public Law 103-325
(September 23, 1994). Under that section, any person who owns or
controls a money services business (which the statute refers to as a
``money transmitting business'' 1), whether or not the
business is licensed as a money services business in any State, must
register the business with the Secretary of the Treasury. 31 U.S.C.
5330(a). (A money services business required to be registered under 31
U.S.C. 5330 remains subject to any State law requirements relating to
the operation of the business in the State. 31 U.S.C. 5330(a)(3).) The
form and manner of registration must be prescribed by regulations.
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\1\ The statute uses the term ``money transmitting business'' to
name those businesses subject to registration. See 31 U.S.C.
5330(a)(1) and (d)(1). However, FinCEN believes that the statute's
use of this term to refer to all the types of businesses subject to
registration and its later use of the nearly identical term ``money
transmitting service'' to refer to a particular type of business
subject to registration, compare 31 U.S.C. 5330(d)(1)(A) with 31
U.S.C. 5330(d)(2), may lead to confusion. Therefore, FinCEN has
adopted the term ``money services business'' in place of the term
``money transmitting business'' throughout this document and under
the final rule.
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The purpose of the registration requirement is to assist
supervisory and law enforcement agencies in the enforcement of
criminal, tax, and regulatory laws and to prevent money services
businesses from engaging in illegal activities. See, section 408(a), of
the Money Laundering Suppression Act. 31 U.S.C. 5311 (Note). In
requiring the registration of money services businesses, Congress found
that such businesses are largely unregulated and are frequently used in
sophisticated schemes to transfer large amounts of money that are the
proceeds of unlawful enterprises and to evade the
[[Page 45439]]
requirements of Title II of the Bank Secrecy Act, the Internal Revenue
Code of 1986, and other laws of the United States. Congress also found
that information on the identity of each money services business and
the names of the persons who own or control, or are officers or
employees of, a money services business would have a high degree of
usefulness in criminal, tax, or regulatory investigations and
proceedings. Id.
The statute defines a ``money transmitting business'' 2
as any business, other than the United States Postal Service, that is
required to file reports under 31 U.S.C. 5313 and that provides check
cashing, currency exchange, or money transmitting or remittance
services,3, or issues or redeems money orders, traveler's
checks or other similar instruments. 31 U.S.C. 5330(d)(1). Depository
institutions (as defined in 31 U.S.C. 5313(g)), however, are not within
the classes of institutions required to register under the statute. 31
U.S.C. 5330(d)(1)(C).
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\2\ Although the statutory term is ``money transmitting
business,'' FinCEN has decided to use the term ``money services
business'' in this rule. See footnote 1, supra.
\3\ The term ``money transmitting service'' includes accepting
currency or funds denominated in the currency of any country and
transmitting the currency or funds, or the value of the currency or
funds, by any means through a financial agency or institution, a
Federal Reserve Bank or other facility of the Board of Governors of
the Federal Reserve System, or an electronic funds transfer network.
31 U.S.C. 5330(d)(2).
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Section 5330 specifies the information that must be included as
part of the registration. 31 U.S.C. 5330(b). The required information
is--
(1) The name and location of the business;
(2) The name and address of each person who owns or controls the
business, is a director or officer of the business, or otherwise
participates in the conduct of the affairs of the business;
(3) The name and address of any depository institution at which the
business maintains a transaction account (as defined in section
19(b)(1)(C) of the Federal Reserve Act);
(4) An estimate of the volume of business in the coming year, which
shall be reported annually to the Secretary; and
(5) Such other information as the Secretary of the Treasury may
require.
Section 5330 contains two provisions directed explicitly at agents
of money services businesses. First, a money services business must
maintain a list containing the names and addresses of its agents and
such other information about the agents as the Secretary may require,
and the list must be made available on request to any appropriate law
enforcement agency. See 31 U.S.C. 5330(c)(1). Second, the Secretary is
to establish by regulation, on the basis of such criteria as the
Secretary deems appropriate, a threshold point for treating an agent of
a money services business as itself a money services business for
purposes of section 5330.
Section 5330 prescribes a civil penalty for any person who fails to
comply with any requirement of 31 U.S.C. 5330 or the regulations
thereunder. The penalty is $5,000 for each violation; each day a
violation of 31 U.S.C. 5330 or the regulations thereunder continues
constitutes a separate violation. 31 U.S.C. 5330(e). A failure to
comply with 31 U.S.C. 5330 or the regulations under section 5330 may
also result in a criminal penalty under 18 U.S.C. 1960.
Under section 5330, a money services business must be registered
not later than the end of the 180-day period beginning on the later of
the date of enactment of the Money Laundering Suppression Act of 1994
(September 23, 1994), and the date on which the business is
established. 31 U.S.C. 5330(a). On May 18, 1995, FinCEN issued a notice
explaining that regulations prescribing the form and manner of
registration would not require initial registration of money services
businesses before the 90th day following the effective date of the
implementing regulations. FinCEN Notice 95-1. The notice further
explained that no penalty or other compliance sanction would be imposed
under the provisions of the Bank Secrecy Act on account of the failure
of any money services business to register before the last date for
initial registration specified by the implementing regulation.
II. Money Services Businesses--General
The rulemaking of which this final rule is a part deals with a
number of aspects of the application of the Bank Secrecy Act to money
services businesses. In conducting the rulemaking, FinCEN and the
Department of the Treasury are not only following the mandate of
Congress in the Money Laundering Suppression Act and the Annunzio-Wylie
Anti-Money Laundering Act, Title XV of the Housing and Community
Development Act of 1992, Public Law 102-550, but are more generally
responding to the need to update and more carefully tailor the
application of the Bank Secrecy Act to a major, if little understood,
part of the financial sector in the United States.4
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\4\ The Congress has long-recognized the need generally to
address problems of abuse by money launderers of ``non-bank''
financial institutions. See, e.g., Permanent Subcommittee on
Investigations, Senate Comm. on Governmental Affairs, Current Trends
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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The term ``money services business'' refers to five distinctive
types of financial services providers: currency dealers or exchangers;
check cashers; issuers of traveler's checks, money orders, or stored
value; sellers or redeemers of traveler's checks, money orders, or
stored value; and money transmitters. (The five types of financial
services are complementary and are often provided together at a common
location.) These businesses are quite numerous; based on a study
performed for FinCEN by Coopers & Lybrand LLP (now a part of
PriceWaterhouse Coopers LLP), they comprise approximately 158,000
5 outlets or selling locations, and provide financial
services involving approximately $200 billion annually. To some
significant extent, the customer base for such businesses lies in that
part of the population that does not use traditional financial
institutions, primarily banks.
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\5\ The number does not include Post Offices (which sell money
orders and other money services business financial products),
participants in stored value product trials, or sellers of various
stored value or smart cards in use in, e.g., public transportation
systems.
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Money services businesses, like banks, can be large or small. It is
estimated that approximately eight business enterprises account for the
bulk of money services business financial products (that is, money
transmissions, money orders, traveler's checks, and check cashing and
currency exchange availability) sold within the United States, and also
account, through systems of agents, for the bulk of locations at which
these financial products are sold. Members of this first group include
large firms, with significant capitalization, that are publicly traded
on major securities exchanges.
A far larger group of (on average) far smaller enterprises competes
with the eight largest firms in a highly bifurcated market for money
services. In some cases, these small enterprises are based in one
location with two to four employees. Moreover, the members of this
second group may provide both financial services and unrelated products
or services to the same sets of customers.6 Far less is
known about this
[[Page 45440]]
second tier of firms than about the major providers of money service
products.7
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\6\ Members of the second group may include, for example, a
travel agency, courier service, convenience store, grocery or liquor
store.
\7\ For example, according to the Coopers & Lybrand study, at
the time of that study, two money transmitters and two traveler's
check issuers made up approximately 97 per cent of their respective
known markets for non-bank money services. Three enterprises made up
approximately 88 per cent of the $100 billion in money orders sold
annually (through approximately 146,000 locations). The retail
foreign currency exchange sector was found by Coopers & Lybrand to
be somewhat less concentrated, with the top two non-bank market
participants accounting for 40 per cent of a known market that
accounts for $10 billion. Check cashing is the least concentrated of
the business sectors; the two largest non-bank check cashing
businesses make up approximately 20 per cent of the market, with a
large number of competitors.
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Because money services businesses primarily serve individuals, they
have grown to provide a set of financial products, albeit in large part
for non-depository customers, that others look to banks to provide. For
example, a money services business customer who receives a paycheck can
take his or her check to a check casher to have it converted to cash.
He or she can then purchase money orders to pay his or her bills.
Finally, he or she may choose to send funds to relatives abroad, using
the services of a money transmitter.
III. Notice of Proposed Rulemaking
On May 21, 1997, FinCEN published a notice of proposed rulemaking,
62 FR 27890--27900 (the ``Notice''), that described several proposed
changes to the Bank Secrecy Act rules of the Department of the
Treasury. First, the Notice proposed amendment of 31 CFR 103.11 to
revise definitions of certain non-bank financial services businesses
that had been treated as financial institutions for purposes of the
Bank Secrecy Act (or in the case of stored value, to add a definition
of a product whose issuers, sellers, and redeemers would be so treated)
and to group the revised and new definitions together under the heading
money services business; the businesses involved generally provide
check cashing, currency exchange, or money transmitting services, or
issue, sell, or redeem money orders, traveler's checks, or other
similar instruments. Second, the Notice proposed the addition to 31 CFR
part 103 of a set of new rules to require certain money services
businesses to register with the Department of the Treasury and, as part
of the registration requirement, to maintain a current list of their
agents in a central location for examination by appropriate law
enforcement agencies.8 The rules proposed in this portion of
the Notice were designed to implement the terms of 31 U.S.C. 5330.
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\8\ The Notice proposed to place section 103.41 in a new subpart
D, Special Rules for Money Services Businesses, of Part 103, and to
redesignate existing subparts D through F as subparts E through G of
Part 103. The sections in redesignated subparts E through G were to
be redesignated to reflect the addition of new subpart D, and
corresponding changes were to be made to the references to such
redesignated sections in other portions of part 103.
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The Notice was one of three notices of proposed rulemaking dealing
with money services businesses issued on May 21, 1997. The second
notice, 62 FR 27900--27909, proposed to amend the Bank Secrecy Act
rules to require money transmitters, and issuers, sellers, and
redeemers of money orders and traveler's checks, to report suspicious
transactions to the Department of the Treasury. The third notice, 62 FR
27909-27917, proposed to add a special currency transaction reporting
requirement--and related customer verification requirements--for money
transmitters involved in the transmission or other transfer of funds to
persons outside of the United States.
The proposed rules were designed as part of a coordinated approach
to dealing with abuse of money services businesses by criminals and to
strengthening the application of general Bank Secrecy Act concepts to
this part of the nation's payment system. The decision to deal with
each rule separately, rather than finalizing the rules as a group,
reflects a number of practical and policy considerations, most
importantly the desire to allow time for the construction of the
necessary administrative and compliance structures by both the
Department of the Treasury and the money services businesses subject to
the rules. As indicated in greater detail below, following the Section-
by-Section Analysis, the Department of the Treasury is planning next to
issue the rule relating to the reporting of suspicious transactions,
and will be working with interested parties, independently of the
rulemaking itself, to advance the preparation of guidance about
particular patterns of suspicious activity of which money services
businesses must be aware.
FinCEN held five public meetings during the summer of 1997, in
order to provide interested parties with the opportunity to present
their views about the potential effects of the three proposed
regulations, as well as to provide FinCEN with additional information
useful in preparing the final rule.9 Transcripts of these
meetings were then made available by FinCEN to requesting parties.
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\9\ These public meetings were held in Vienna, Virginia, on July
22, 1997; New York, New York, on July 28, 1997; San Jose,
California, on August 1, 1997; Chicago, Illinois, on August 15,
1997; and Vienna, Virginia, on September 3, 1997.
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The first of the five meetings, which was held in Vienna, Virginia,
dealt particularly with issues raised by the Notice, and the San Jose,
California, meeting dealt with the Notice's treatment of stored value.
The final meeting, also held in Vienna, Virginia, dealt with the
details of the various prototype compliance forms designed in
connection with the issuance of both the Notice and the two related
notices of proposed rulemaking and produced further discussion of the
money services business registration requirements.
The comment period for the three notices of proposed rulemaking
originally ended on August 19, 1997, but it was extended to September
30, 1997, by a notice published on July 30, 1997 (62 FR 40779). FinCEN
received a total of 82 comment letters on the three notices of proposed
rulemaking; 60 comment letters dealt in whole or in part with issues
raised by the Notice. Of these, 17 were submitted by money services
businesses and their affiliates, 11 by banks or bank holding companies,
17 by financial institution trade associations, 5 by law firms, 5 by
agencies of the United States government, 2 by credit unions, and 3 by
private individuals.
IV. Summary of Comments and Revisions
A. Introduction
The format of the final rule is generally consistent with the
Notice. The terms of the final rule, however, differ from the terms of
the Notice in the following significant respects:
Definitions
The definition of money services business has been revised
to exclude from treatment as money services businesses for any purpose
banks and persons registered with, and regulated or examined by, the
Securities and Exchange Commission or the Commodity Futures Trading
Commission.
The definition of money transmitter has been revised to
make plain that the activity that makes one a money transmitter must be
carried on as a business and to provide a general limitation to the
definition.
The dollar thresholds for treatment of persons as money
services businesses on account of activities related to check cashing,
currency exchange, and money order, traveler's checks, and stored value
transactions has been raised from $500 to $1,000.
[[Page 45441]]
Registration
Registration will not be required prior to December 31,
2001.
Persons are excluded from the registration requirements to
the extent that they are issuers, sellers, or redeemers of stored value
products.10
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\10\ Although the final rule expressly excludes redeemers of
stored value products, it should be noted that as with redeemers of
traveler's checks and money orders, FinCEN did not intend that the
Notice would apply to redeemers of stored value products to the
extent the products are taken in exchange for goods or general
services.
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The requirement that agents whose gross transaction amount
exceeds $50,000 for any month must register has been eliminated;
registration by a person that is a money services business solely
because that person serves as an agent of another money services
business is indefinitely deferred.
The agent list maintained by each money services business
that offers its products or services through agents must include an
indication of each month in the preceding 12 months in which the gross
transaction amount of an agent exceeded $100,000.
A money services business is not required to keep records
required by section 103.41 in a centralized location so long as the
records are maintained in the United States and are readily available
at the request of FinCEN or any appropriate law enforcement agency; the
agent list, however, must be maintained in a central location in the
United States.
Certain publicly traded businesses are not required to re-
register before the end of their renewal period when there is a 10-per
cent or more change in the ownership of such businesses.
Agent lists must be updated annually, as of January 1 of
each year, rather than quarterly.
For any agent that is an agent of the money services
business maintaining the list before the first day of the month
beginning after February 16, 2000, the agent list need not include
information about the year in which the agent first became an agent and
the agent's branches or subagents, but such information must be readily
available at the request of FinCEN or any appropriate law enforcement
agency.
The effective date of the registration rule is September
20, 1999; the initial registration must be filed, by December 31, 2001,
and the initial agent list must be prepared by January 1, 2002.
B. Comments on the Notice--Overview and General Issues
Definitions
Comments on the proposed changes to the Bank Secrecy Act
definitions relating to money services businesses concentrated on five
matters: (i) The relationship between the general Bank Secrecy Act
definitions and the language of 31 U.S.C. 5330(d)(1) and (2), defining
the businesses required to register as money services businesses; (ii)
whether the Notice properly invoked the authority required for a change
in the general Bank Secrecy Act definitions; (iii) the proposed
inclusion of businesses issuing, selling, or redeeming stored value
within the definition of ``financial institution'' for Bank Secrecy Act
purposes; (iv) the treatment under the Notice of financial businesses
subject to other federal regulatory systems; and (v) the application of
the money services business definition to various kinds of businesses
whose activities include the transmission of funds.11
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\11\ A related issue, whether and the extent to which it was
necessary to define the term ``agent'' as used both in the
definition of money services business and the registration
provisions, is discussed below.
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1. Relationship between 31 U.S.C. 5312 and 31 U.S.C. 5330. Several
commenters argued that the Department of the Treasury mistakenly relied
upon the terms of 31 U.S.C. 5330, in seeking to revise the definition
of financial institution, as part of proposed 31 CFR 103.11(uu). These
commenters asserted that the Notice reflected a misunderstanding of the
relationship of the general Bank Secrecy Act definitional provision, 31
U.S.C. 5312, and the registration provisions. In their view, the
definition of the sorts of businesses required to be registered under
31 U.S.C. 5330 bore no relationship to the definition of the
``financial institutions'' covered by the remainder of the Bank Secrecy
Act, and the designation of registrable businesses in 31 U.S.C. 5330
provides no independent authority for making such businesses otherwise
subject to the Bank Secrecy Act. In support of this argument, the
commenters cited the language at the beginning of 31 U.S.C. 5330(d)
that the definitions of a money transmitting business and money
transmitting service apply ``[f]or purposes of this section.'' In
addition, they cited the requirement that the definition be limited
only to a business that ``is required to file reports under [31 U.S.C.]
section 5313.'' Thus, according to the commenters, the broad
definitional language in section 5330 cannot be used to define a
financial institution for a Bank Secrecy Act purpose other than
registration. This language further suggests, according to the
commenters, that the class of registrable money services businesses is
necessarily larger than the class of money services businesses that
were both registrable and otherwise subject to the Bank Secrecy Act's
reporting and recordkeeping rules.
FinCEN believes that this argument misperceives both the
relationship of the registration provisions to the remainder of the
Bank Secrecy Act and the basis for the redefinition of money services
business proposed in the Notice. In enacting 31 U.S.C. 5330, Congress
made a direct finding that:
Money transmitting businesses are subject to the recordkeeping
and reporting requirements of subchapter II of chapter 53 of title
31. * * * Section 408(a)(1)(A) of the Money Laundering Suppression
Act, 31 U.S.C. 5330 (Note).
Thus, Congress assumed that the sorts of businesses for which it was
requiring registration were precisely the sorts that would be (and
indeed that were already) subject to the Bank Secrecy Act's rules.
FinCEN therefore believes that Congress intended the definition of
money transmitting business to describe that class of enterprises that
were both financial institutions and required to register as money
transmitting services (or money services businesses) and that the
harmonized definitions could not be read to include any businesses that
were not otherwise eligible for treatment as financial institutions
under 31 U.S.C. 5311. The purpose of the changes to the definitions of
financial institution was, in accordance with this understanding of
Congress' intent and as stated in the Notice (62 FR 27890 and 27891),
to harmonize the two sets of rules by modernizing the definitions of
money transmitter and the other terms included as components in the new
money services business subcategory of the general definition of
``financial institution.''
While the final definition of money transmitter tracks to some
extent the language used in 31 U.S.C. 5330, this in no way indicates a
reliance upon that section for authority, but instead indicates the
Department of the Treasury's desire to follow Congress' lead in
construing the term ``money transmitter'' in a way that reflects
technological advances, and the need to adapt the application of the
Bank Secrecy Act to the continually evolving nature of the industry
that comprehends ``financial institutions.''
31 U.S.C. 5312 does provide such authority, there is every reason
for the definitions to be the same, and the language of the preamble to
the Notice, although not perhaps ideal, was sufficient to put the
public on notice
[[Page 45442]]
that both matters were at issue in the rulemaking.
2. Authority for Revisions to the Definition of Financial
Institution. Commenters argued that the Notice gave insufficient
indication that a general exercise of Treasury's authority to define
financial institution for purposes of the Bank Secrecy Act in proposing
31 CFR 103.11(uu) was a subject of the rulemaking. They also argued
that no findings had been made, or suggested by the Notice, that the
changes were required to fight money laundering, and that there was no
basis in the record in any event for such findings.
Combining the new registration requirements with the rewriting of
provisions of the financial institution definition in a single document
may have led to a misunderstanding of the reasons or basis for the
definitional changes. However, as indicated above, FinCEN believes that
the Notice made it clear that the revision of existing Bank Secrecy Act
definitions involved in the components of money services business was
proposed under the authority of 31 U.S.C. 5312 and for all purposes of
the Bank Secrecy Act. See 62 FR 27890, 27893, and 27897.
In addition, the changes made to the definitions, with the
exception of the addition of ``stored value,'' discussed separately
below, merely clarified the scope of the coverage already inherent in
the existing language of the Bank Secrecy Act definitions. For example,
the definition of money transmitter contained in 31 CFR 103.11(n)(5)
(revised as of July 1, 1999), which section 103.11(uu)(5) of the final
rule will replace, stated that the term financial institution included:
(5) A licensed transmitter of funds, or other person engaged in
the business of transmitting funds.
In adopting the revised definition, FinCEN is clarifying the meaning of
the term ``person engaged in the business of transmitting funds''
within the scope of the interpretive range of the existing language of
the rule; in that context, adoption of the language provided by the
Congress in the registration provisions is appropriate--if not
mandated--in light of the Congress' view that it was itself simply
explicating the scope of the existing regulatory language in requiring
registration of certain types of financial institutions. Treasury,
indeed, explicitly sought (and received) comments on whether ``it is
necessary or appropriate specifically to exclude certain activities
from the scope of registration of money services businesses (and
perhaps as well from the definition of money transmitter for purposes
of the Bank Secrecy Act regulations generally).'' 62 FR 27893.
Other commenters argued that the definitional changes could not be
made in any event without specific findings showing that the changes
were required to fight money laundering. The purposes of the Bank
Secrecy Act are not so narrowly set. The statute is aimed at assuring
the maintenance of records constituting a financial trail, and the
reporting of certain transactions, in each case because the records and
reports ``have a high degree of usefulness in criminal, tax, or
regulatory investigations and proceedings.'' The Congressional findings
underlying the money services business registration rules adopt the
same objective.12
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\12\ Information about the identity and ownership of money
services businesses ``would have a high degree of usefulness in
criminal, tax, or regulatory investigations or proceedings''; the
registration requirement will assist federal and other law
enforcement and supervisory authorities ``to effectively enforce the
criminal tax, [sic] and regulatory laws and prevent such money
services businesses from engaging in illegal activities.'' See
section 408(a)(1)(C) and (a)(2) of the Money Laundering Suppression
Act, 31 U.S.C. 5330 (Note).
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3. Stored Value. The final rule continues to treat ``stored value''
as a financial instrument whose issuers and sellers are financial
institutions for purposes of the Bank Secrecy Act. However, the final
rule revises the Notice to exempt stored value issuers and sellers from
any money services business registration obligation. Under the
circumstances, the only immediate consequence of the rule will be to
make clear that currency transactions in excess of $10,000 by stored
value issuers and sellers require reporting under the Bank Secrecy Act
(rather than under section 6050I of the Internal Revenue Code) and that
businesses that participate as financial intermediaries in transactions
in which stored value is transferred electronically may, if otherwise
covered, be subject to the rules requiring the maintenance of records
for funds transfers of $3,000 or more.
This limited treatment of stored value--which frees the industry
from registration requirements to which issuers and sellers of money
orders and traveler's checks will be subject--eliminates the ``chilling
effect'' on the technology industry to which commenters objected. The
limited step that is being taken should create certainty as to the
outlines of the Bank Secrecy Act's application to electronic funds
equivalents, while allowing further development prior to any rulemaking
that deals with more specific issues such as, for example, exemptions
for ``closed system'' or small denomination stored value devices or the
terms for possible tailored application of the registration or other
Bank Secrecy Act requirements to aspects of these emerging payment
products.
4. Other Regulated Financial Businesses. A number of commenters
argued that the final rule should eliminate any possible application to
other classes of financial institutions, of rules aimed at money
services businesses; the argument was made by banks, securities
businesses subject to the jurisdiction of the Securities and Exchange
Commission, and futures commission merchants and other businesses
regulated by the Commodity Futures Trading Commission. (Banks and
brokers and dealers in securities are, of course, already subject to
the Bank Secrecy Act.)
Congress characterized money services businesses as ``largely
unregulated,'' and FinCEN believes that Congress generally did not find
a need for the money services business regime under the Bank Secrecy
Act to extend to other federally regulated financial services
providers. Accordingly, under the final rule, depository institutions,
or securities brokers and dealer, futures commission merchants, or
other persons registered with and regulated or examined by, the
Securities and Exchange Commission or the Commodity Futures Trading
Commission are explicitly excluded from the money services business
definition. (For further discussion, see ``Section-by-Section
Analysis,'' below.)
5. Application of Money Transmitter Definition to Other Businesses
Whose Activities Include Transmission of Funds. A number of commenters
sought clarification of the definition of money transmitter and
objected to any interpretation of the definition that would cause to be
classed as money transmitters particular businesses that simply
transmit funds as part of their other business activities. Commenters
raising such issues included, for example, operators of hedge funds and
public and private investment companies, representatives of financial
professionals, persons involved in real estate closing activities, bank
credit card systems, clearing corporations and associations, insurance
companies, and bank holding companies and subsidiaries. All of these
commenters sought assurance that their businesses could not fall within
the definition of money transmitter in the Notice.
FinCEN agrees that the breadth of the definition of money
transmitter proposed in the Notice requires limitation to avoid both
unnecessary
[[Page 45443]]
burden and the extension of the Bank Secrecy Act to businesses whose
money transmission activities either do not involve significant
intermediation or are ancillary to the completion of other
transactions. But the varieties of methods by which funds are
transmitted and remitted by persons performing the function of
financial intermediary for that purpose, as well as the pace of
financial change, make any rigid definition both impossible and
inadvisable. Ultimately, the question of whether a particular person is
in the ``business'' of transmitting funds is a question of facts and
circumstances. The final rule attempts to respond to the comments, as
described in more detail below, by providing a limitation on the scope
of the definition to make clear that the acceptance and transmission of
funds as an integral part of the execution and settlement of a
transaction other than the funds transmission or transfer, for example,
a bona fide sale of securities or other property, will not cause a
person to be a money transmitter for purposes of the Bank Secrecy Act.
Registration
Comments on the proposed registration requirements concentrated on
four matters: (i) exclusions from those requirements, (ii) agent
registration, (iii) registration procedures, and (iv) the content and
terms of the agent list.
1. Exclusions from the Registration Requirements. The Notice
excluded the following persons from the registration requirements: the
United States Postal Service, depository institutions (as defined in 31
U.S.C. 5313(g)), the United States, a State or political subdivision of
a State, or a person registered with, and regulated or examined by, the
Securities and Exchange Commission or the Commodity Futures Trading
Commission. In response to a specific request for comment in the
preamble to the Notice, FinCEN received comments suggesting that other
persons should be excluded from the registration requirements.
A number of commenters asked that issuers, sellers, or redeemers of
stored value products be so excluded. Those commenters were concerned
that the application of the registration requirements to issuers of
stored value products would cause the issuers to defer the development
of such products, or limit their design in commercially undesirable
ways simply in order to avoid the registration requirements. They were
also concerned that businesses that might otherwise wish to sell or
redeem stored value products would not do so if they might be required
to comply with the registration requirements, and that the manner in
which the new products would be marketed was not sufficiently settled
to permit the design of a reasonable registration system.
Some commenters, however, agreed with the inclusion of businesses
engaged in issuing or selling stored value products within the scope of
the registration requirements. In general, these commenters believed it
was appropriate to subject non-bank providers of electronic payment
systems to Bank Secrecy Act requirements in order to treat purveyors of
competing financial services in the same manner.
The final rule excludes issuers, sellers, or redeemers of stored
value products from the registration requirements. Although the final
rule expressly excludes redeemers of stored value products, it should
be noted that as with redeemers of traveler's checks and money orders,
FinCEN did not intend that the Notice would apply to redeemers of
stored value products to the extent the products are taken in exchange
for goods or general services.
One commenter recommended that a money services business should not
be required to register if it would qualify as an exempt person under
the currency transaction reporting rules (31 CFR 103.22(d)). The final
rule does not adopt this suggestion. The suggestion would exclude from
registration, and consequently the agent list requirement, publicly
traded money services businesses that could qualify as exempt persons
under 31 CFR 103.22(d). Because these publicly traded money services
businesses operate through extensive networks of agents, which may not
be exempt from currency transaction reporting, the suggestion would
seriously limit information about agents of money services businesses.
Several commenters were concerned that because some credit unions
provide money transmitting services to their customers, and some banks
might be acting as agents of a money services business, these
depository institutions could be subject to the registration rules in
Sec. 103.41. The commenters asked for clarification that banks and
credit unions are not required to be registered. Paragraph (a)(1) of
Sec. 103.41 of the Notice provided that the section did not apply to
depository institutions. The final rule goes further and expressly
excepts banks from the definition of money services business so that
the sentence in proposed paragraph (a)(1) relating to depository
institutions is no longer necessary. Under the final rule, all of
section 103.41 is inapplicable to depository institutions such as banks
and credit unions.
Several commenters asked that non-bank affiliates and subsidiaries
of banks be excluded from the registration requirements.13
One commenter argued that because these companies are subject to
regulation by the Federal Reserve Board under the Bank Holding Company
Act, they should be excluded. Another commenter recommended excluding a
bank's non-bank affiliates and subsidiaries if they can demonstrate
that they have some type of Bank Secrecy Act compliance program in
place.
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\13\ The preamble to the Notice clarified that if a bank has a
non-bank subsidiary or affiliate (e.g. a brother-sister subsidiary
owned by the bank's holding company) that itself engages in a money
services business (or a broker-dealer has a non-broker-dealer
affiliate that engages in a money services business), the affiliate
must register even though the bank (or broker-dealer) is not
required to register.
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The Bank Secrecy Act rules, in general, do not adopt a consolidated
group approach to determining whether a company is or is not subject to
particular Bank Secrecy Act provisions. That is, the Bank Secrecy Act
rules do not look to the status of a parent company in a bank holding
company group for the purpose of determining what rules a company owned
by the parent must apply. For example, the Bank Secrecy Act regulations
do not generally treat non-bank subsidiaries as falling within the
definition of bank for purposes of the Bank Secrecy Act regulations.
Thus, the final rule continues to require non-bank affiliates and
subsidiaries to register and maintain a list of their agents.
One commenter suggested that issuers of monetary instruments that
are sold only through banks should be excluded from the registration
requirements. In light of 31 CFR 103.29, which requires banks to keep
records of certain transactions, the commenter believed there would be
little informational value gained by requiring such issuers to
register. The final rule does not adopt this suggestion. The
registration requirements are designed to create a comprehensive
picture of money services businesses, which will provide law
enforcement agencies with information either currently not available or
not available in an accessible format. Excluding an issuer whose
products are sold exclusively through banks would eliminate information
about a segment of this industry.
One commenter questioned the sufficiency of the rulemaking record
[[Page 45444]]
with respect to the registration of check cashers. According to the
commenter, nothing in the record, including the New York enforcement
operations and geographic targeting orders discussed in the May 21,
1997 notices of proposed rulemaking, supports the proposition that the
check cashing function has been or is being abused by the illicit drug
industry and criminal money laundering. The comment fails to take into
account the fact that Congress specifically included check cashers
among those businesses that are required to register with the
Department of the Treasury when it enacted 31 U.S.C. 5330.
A commenter also recommended that check cashers should not be
required to register if they engage in other money services business
activities, for example, money transmitting, as an agent for others.
The commenter indicated that approximately 90 per cent of check cashers
are also agents for money transmitters and would be included on the
agent lists of the transmitters. The final rule does not adopt this
recommendation. Section 5330 does not contemplate that businesses that
conduct money services activities on their own behalf will be excluded
from registration simply because they also act as agents for other
money services businesses.
One commenter suggested that, in the future, ``wire transmitters''
should be exempt from state registration requirements if the
transmitters comply with federal registration requirements. FinCEN is
interested in sharing information, and otherwise coordinating with,
state regulators to reduce administrative burden, but 31 U.S.C.
5330(a)(3) states that the federal registration requirements ``shall
not be construed as superseding any requirement of State law relating
to money [services] businesses operating in such State.''
2. Agent Registration. Commenters raised a number of issues about
agent registration. Most of the comments sought a clarification of the
meaning of the term ``agent,'' sought an increase in the dollar amount
of the registration threshold, and questioned the need for agent
registration.
The Notice did not contain a specific definition of the term
``agent'' for purposes of the money services business registration
rules, including the requirement that a list of agents be maintained by
each money services business as part of its registration requirement.
Instead the Notice spoke simply of ``agents.'' Commenters recommended
that the term ``agent'' be defined or that the term be replaced with a
more neutral term such as selling outlet. A number of commenters argued
that they did not believe that the terms of the contracts under which
they authorize persons to sell their money services products should be
read to treat those persons as agents.
FinCEN believes that the relationship between issuers or service
providers and persons at the point of sale for particular products is
governed by the law of agency, and that in most (if not all) cases the
businesses at which these products or services are sold to the public
are non-servant agents of the issuers or service providers
14; thus, such businesses must be included on the agent
lists required to be maintained with respect to ``agents'' by 31 U.S.C.
5330(c)(1)(A). As indicated elsewhere in this preamble, Congress's use
of the term ``agent'' in 31 U.S.C. 5330 indicates a similar
understanding. Thus, it is expected that a money services business will
include on the agent list any businesses it authorizes to sell its
money services or money products.
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\14\ Of course, in cases in which the products or services are
offered at branches of the issuers or providers, the individuals
involved are likely servants of the issuers or providers. (It has
long been clear that an ``agent'' of a financial institution is
itself a financial institution. See, 31 CFR 103.11(n).) FinCEN is
aware of few, if any, claims prior to the issuance of the Notice,
that the language in section 103.11(n) does not fully comprehend
businesses at which money services products were sold to the public.
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The bulk of the comments on the registration requirement concerned
the registration of businesses whose status as money services
businesses derived solely from the fact that they sold products or
services issued or performed by others. The Notice had required
independent registration of such agent businesses if the volume of
money services products or services sold or performed through such
businesses was $50,000 in any month.
Commenters questioned the level of the proposed registration
threshold. Most of these commenters believed that the threshold was too
low and recommended increasing the threshold to at least $100,000 a
month or preferably $500,000 a month (or $500,000 a month, annualized).
One commenter, however, recommended lowering the threshold to $25,000 a
month or even zero. Another commenter suggested that a threshold based
on an annual rather than a monthly amount would be less likely to cause
agents to meet the threshold because of seasonal or holiday sales. As
explained below, the final rule defers agent registration and thus
eliminates the registration threshold.
Commenters argued that because a money services business includes
information about its agents on its agent list, no agent should be
required to register independently with Treasury. Instead, several of
these commenters argued, a money services business should register its
agents with Treasury, or as one commenter suggested, should simply
submit its agent lists to the Treasury Department.
This registration requirement for agents reflected the terms of 31
U.S.C. 5330(c)(2). That paragraph states that:
The Secretary of the Treasury shall prescribe regulations
establishing, on the basis of such criteria as the Secretary
determines to be appropriate, a threshold point for treating an
agent of a money transmitting business as a money transmitting
business for purposes of [section 5330].
The mandate to require registration of ``large agents'' was tempered
both by the grant to the Secretary of discretion to fix the criteria
defining registrable agents, and by a Congressional statement, in the
Conference Report accompanying the bill, that:
The intent of the Conferees is to eliminate the need for all
agents of money transmitting businesses to register with the
Secretary. Such massive registration of thousands of agents would
only create another needless and costly administrative burden. This
legislation is designed to reduce unnecessary paperwork, not create
additional administrative burdens for law enforcement.
The statute's agent registration requirement permits the
identification of significant points for the movement of funds into the
financial system, especially points at which one or more money services
business products or services are grouped together (as, for example, in
so-called ``giro houses''). But selecting criteria that will further
that objective in a cost efficient manner is difficult at best. Money
services business volume levels are unlikely to be uniform throughout
the nation, and even within particular areas variations can reflect the
size of an agent's other business rather than any absolute variation
from a theoretical norm.
Rather than attempting to set criteria on the basis of imperfect
knowledge, the Department of the Treasury has decided to defer any
implementation of the agent registration provisions. Instead, money
services businesses are asked simply to note on the agent lists they
are required to maintain the months in the preceding twelve month
period in which every agent generated a volume of money services
business products of more than $100,000.
Thus, under the final rule, a firm that is a money services
business solely
[[Page 45445]]
because it offers products or services on behalf of another money
services business need not now register with the Department of the
Treasury. It should be noted that a firm that both offers products or
services on behalf of another money services business and in addition
offers its own money services products or services (that is, exchanges
currency, cashes checks, or transmits funds for customers through
channels or mechanisms of its own) is required independently to
register under this rule (and, to the extent that it is an agent, must
be carried on the agent list of another money services business as
well).
3. Registration Procedures. The Notice set forth the general
requirement to register a money services business and to report on the
registration form the information required by section 5330(b) and any
other information required by the form. In the preamble to the Notice,
FinCEN noted its understanding that information required to be included
on the registration form (and on the agent list) might include
privileged and confidential trade secrets, commercial, and financial
information. FinCEN also explained that while Congress affirmed in the
legislative history that confidential proprietary or trade secret
information provided by registrants may be disclosed only subject to
applicable law, Congress anticipated that certain information derived
from the registration material would be made available to the public,
but in a manner that balances the need to protect confidential business
information and the need for the public to have access to information
about businesses on which the public relies. H.R. Conf. Rep. No. 652,
103 Cong., 2d Sess. 192-93 (1994). FinCEN specifically invited comment
on how to make certain information provided by registrants available to
the public without revealing confidential business information.
Several commenters expressed concerns about the need, for
competitive reasons, to avoid disclosure to the public of confidential
information on the registration form or agent list, particularly
information about business volume and the dollar size of transactions.
FinCEN will not release confidential information on the registration
form or agent list except as required or permitted by law. Moreover,
before FinCEN releases any other information that may be included on
the registration form or agent list, FinCEN will work with money
services businesses to establish specific procedures for release of
such information to the public. FinCEN anticipates that such procedures
would exclude the release of information (other than perhaps limited
statistical information) about agents of money services businesses.
4. Agent List. Most of the commenters addressing the agent list
requirement recommended that a money services business be permitted to
provide less information than the Notice required. The commenters
argued that information not now on agent lists prepared for state
licensing purposes--especially information about the year in which an
agent first became an agent and about the agent's transaction
accounts--would be difficult to provide. The commenters indicated they
would either have to compile the rest of the information from other
records (which might not be in electronic format, or in a format,
electronic or otherwise, that was easily retrievable) or request the
necessary information from their agents. Some commenters suggested that
money services businesses be permitted to provide all the requested
information prospectively rather than trying to gather the information
for existing agents. Alternatively, commenters suggested that the
information required to be included on the agent list should be limited
to the same information that a money services business must provide
about its agents for state licensing purposes. Generally this
information includes only the name of the agent, the agent's locations,
and the services the agent provides.15
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\15\ More than one commenter argued that requiring the
information requested on the agent list exceeds FinCEN's authority
under 31 U.S.C. 5330. According to the commenters, FinCEN may ask
for the agent's name and address only. Although section 5330
specifically requires the agent's name and address, the section does
not constrain FinCEN's authority in the manner suggested by the
commenters. Section 5330 authorizes FinCEN to request, in addition
to the name and address, ``such other information about such agents
as the Secretary may require.'' 31 U.S.C. 5330(c)(1)(A).
---------------------------------------------------------------------------
The final rule continues generally to require that the information
requested by the Notice must be included on the agent list. In response
to the comments, however, the final rule provides that with respect to
any agent that is an agent of the money services business maintaining
the list before the first day of the month beginning after February 16,
2000, the list need not include information about the year in which the
agent first became an agent and the agent's branches or subagents. Such
information must be made available, however, upon the request of FinCEN
or any other appropriate law enforcement agency (including, without
limitation, the examination function of the Internal Revenue Service in
its capacity as delegee of Bank Secrecy Act examination authority).
With respect to any agent that becomes an agent on or after the first
day of the month beginning after February 16, 2000, the list must
include all of the requested information, including the date the agent
first becomes an agent and the agent's branches or subagents.
As indicated above, one additional element is added to the
information required to be included in the agent list. That element is
the notation of each month in the 12-month period immediately preceding
January 1, 2002, and each January 1 thereafter, in which the gross
transaction amount of the agent's sale of products or services offered
by the money services business maintaining the list exceeded $100,000.
Setting the requirement at $100,000 generally limits it to agents doing
more than $1 million of money services business transactions annually,
is an amount suggested in the comments as a threshold for agent
registration, and gives knowledge about agent volume which can be
evaluated to determine whether the implementation of agent registration
should continue to be deferred. That requirement is prospective, does
not take effect for at least 18 months, and involves a single
recordkeeping threshold. Moreover, the requirement involves only
information that must flow to each money services business in the
performance of its normal business functions, and the addition of this
element to the agent list derives from the elimination from the rule of
the most heavily criticized element of the original proposal, the agent
registration requirement.
V. Section-by-Section Analysis
A. 103.11--Meaning of Terms
1. 31 CFR 103.11(c)(7)--Definition of ``Bank''
One component of the definition of ``bank'' in 31 CFR 103.11(c)
speaks of ``[a]ny other organization chartered under the banking laws
of any State and subject to the supervision of the bank supervisory
authorities of a State.'' In many states, various money services
businesses are licensed or examined by state banking departments. In
order to avoid any confusion about the interaction of the ``bank'' and
``money services business'' definitions, the phrase ``(except a money
services business)'' has been added to 31 CFR 103.11(c)(7).
2. 31 CFR 103.11(n)(3)--Definition of Financial Institution to Include
``Money Services Business''
The final rule retains the addition of a new category called
``money services
[[Page 45446]]
business'' to the definition of financial institution. The new category
includes the financial institutions previously defined at 31 CFR
103.11(n)(3), (4), (5), and (10), and will permit these institutions to
be referred to, when necessary, by one convenient term. FinCEN believes
this restructuring of the definition of financial institution will
clarify, and facilitate flexibility in the administration of, the Bank
Secrecy Act regulations. (As a result of this restructuring, 31 CFR
103.11(n)(4), (5), and (10) will be deleted, and 31 CFR 103.11(n)(6),
(7), (8) and (9) will be redesignated as 31 CFR 103.11(n)(4), (5), (6)
and (7)).
3. 31 CFR 103.11(uu)--Definition of Money Services Business
This section defines money services business. The term includes
each agent, agency, branch, or office within the United States of any
person doing business, whether or not on a regular basis or as an
organized business concern, in one or more of the capacities listed in
(1)-(6) below. (It should be noted that only one registration form per
money services business is required.)
Regulated Businesses. The definition of ``money services business''
excludes persons registered with, and regulated or examined by, the
Securities and Exchange Commission or the Commodity Futures Trading
Commission. This provision excludes from the new regulatory structure
for money services businesses the financial services businesses
regulated by those agencies. The exclusion from the definition does not
apply to issuers whose securities offerings are registered with the SEC
under the Securities Act of 1933 or companies whose securities are
registered with the Commission under the Securities Exchange Act of
1934. The companies themselves are not registered with the SEC, and
these entities are not intended to be excluded from the rule's
definition of money services businesses because the Commission neither
regulates nor examines the business activities of those companies.
Instead, it establishes, by regulation, disclosure, accounting, and
other related standards for them. Accordingly, businesses that engage
in the activities described in 31 CFR 103.11(uu) are not excluded from
the definition merely because their shares are publicly held and
registered with the SEC.
Several commenters asked that any exemption for depository
institutions or other regulated businesses be extended to holding
companies or subsidiaries of those businesses--for example to bank
holding companies or bank operating subsidiaries. As explained in
greater detail at ``Exclusion from the Registration Requirement''
above, the Bank Secrecy Act rules at present operate on an individual
entity rather than a consolidated group basis; so long as that is so,
each corporation in a controlled group must be analyzed separately to
determine its characterization under the Bank Secrecy Act and its
rules.
Thresholds. The Notice contained a threshold of $500 for any person
any day at or below which a business otherwise included within the
definition of a currency dealer or exchanger, a check casher, or an
issuer, seller, or redeemer of money orders, traveler's checks or
stored value would not be a money services business. In the final rule
that threshold has been raised in each case to $1,000 for any person
any day in one or more transactions.
The addition of explicit floors in the definitions relating to
currency exchange and check cashing businesses is an attempt to
eliminate from Bank Secrecy Act treatment those businesses, such as
grocery stores and hotels, that cash checks or exchange currency as an
accommodation to customers who are otherwise purchasing goods,
services, or lodging from the businesses involved. (Of course, currency
exchange and check cashing businesses that exceed the threshold become
subject to the general Bank Secrecy Act reporting and recordkeeping
requirements if the amounts involved are sufficiently high to implicate
particular reporting or recordkeeping thresholds, for example, the
$10,000 threshold for currency transaction reporting.)
In determining whether the $1,000 definitional floor is met in the
case of a particular definition, different money services provided by
the same business are not aggregated. Thus, for example, a hotel that
in fact limits its check cashing services to $650 for a customer on any
day and in fact limits its currency exchange services to $600 for a
customer on any day does not meet the $1,000 definitional floor for
check cashers or for currency exchangers.
(1) Currency dealer or exchanger. The definition of currency dealer
or exchanger is unchanged, other than for the increase of the $500
threshold to $1,000. The Notice invited comment on whether the old
definition of currency dealer or exchanger appearing at 31 CFR
103.11(i) was still necessary in light of the carve out of banks from
the recordkeeping requirements of 31 CFR 103.37. In response to
comments, that definition is removed from 31 CFR 103.11(i), but the
language of the recordkeeping rules of 31 CFR 103.37 is being amended
specifically to exclude banks that offer services in dealing or
exchanging currency to their customers as an adjunct to their regular
services.
(2) Check casher. The definition of check casher is also unchanged,
other than for the increase of the $500 threshold to $1,000. Several
commenters suggested that the threshold should be lowered rather than
raised; however, the registration of businesses that only cash checks,
especially those that do so as an accommodation for customers and then
in an amount of $1,000 or less per day, is not necessary at this time
to accomplish the Congressional intent behind section 5330.
(3) Issuer of traveler's checks, money orders, or stored value. The
definition of issuer of traveler's checks or money orders or stored
value is also unchanged other than for the increase of the $500
threshold to $1,000.16
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\16\ The definition eliminates the phrase ``similar
instruments'' in response to comments that said the phrase was too
vague. The phrase has also been eliminated from the definition of
seller or redeemers.
---------------------------------------------------------------------------
(4) Seller or redeemer of traveler's checks, money orders, or
stored value. The definition of seller or redeemer of traveler's checks
or money orders or stored value is also unchanged other than for the
increase of the $500 threshold to $1,000.
The $1,000 floor in 31 CFR 103.11(uu)(4) replaces the definitional
floor (of $150,000 sold in instruments per 30-day period) for selling
agents in 31 CFR 103.11(n)(4). The $150,000 limitation produces a great
deal of unnecessary complexity (dealing with the movement of particular
businesses into or out of the scope of the Bank Secrecy Act) and does
not, in FinCEN's view, any longer provide a meaningful threshold for
distinguishing between businesses that ought to, or that need not,
incorporate appropriate Bank Secrecy Act rules into their operations
(or the operations they undertake on behalf of their principals).
Moreover, the operation of the $150,000 limitation would exclude from
Bank Secrecy Act treatment particular transactions (for example
purchases of money orders of more than $3,000 under the customer
verification and recordkeeping rules of 31 CFR 103.29, or transactions
in excess of $10,000 under the currency transaction reporting rules of
31 CFR 103.22) that ought not be so excluded, regardless of the overall
volume of sales of a particular business.
The definition in 31 CFR 103.11(uu)(4) extends to ``redeemers'' of
money orders and traveler's checks only insofar as the instruments
involved are
[[Page 45447]]
redeemed for monetary value--that is, for currency or monetary or other
negotiable or other instruments. The taking of the instruments in
exchange for goods or general services is not a redemption for purposes
of these rules. (See, however, 26 CFR 1.6050I-1(c)(1)(ii)(B) for
situations in which certain traveler's checks or money orders (among
other instruments) may be treated as currency, if taken in exchange for
certain goods or services, for purposes of the requirement that
businesses not subject to the rules in 31 CFR part 103 report
transactions in currency in excess of $10,000.)
(5) Money transmitter. The definition of money transmitter
continues to reflect the determination that the definitions of that
term for purposes of the general Bank Secrecy Act rules and the
registration rules should be the same. As noted above, a limitation on
the definition has been added to clarify insofar as possible the reach
of the definition, when it is combined with the general limitation on
the scope of money services business.17 Particular classes
or subclasses of money transmitters can be excluded from the operation
of the definition for particular substantive rules (as for example the
proposed rule relating to the reporting of suspicious activities by
money transmitters excluded from its coverage sellers or transmitters
of stored value or other advanced electronic payment system products).
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\17\ The term ``money transmitter'' in 31 CFR 103.11(uu)(5) is
not necessarily synonymous with the term ``transmittor's financial
institution'' in existing 31 CFR 103.11(mm). The term
``transmittor's financial institution'' in existing 31 CFR
103.11(mm) was designed with a narrower purpose in mind--''to
preserve as much uniformity as possible'' between the special rules
for recordkeeping for wire transfers and the language of Article 4A
of the Uniform Commercial Code. See 60 FR 220 (January 3, 1995).
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(6) United States Postal Service. The definition of United States
Postal Service has not been changed. Thus, unlike the prior regulation,
which treated the United States Postal Service as a financial
institution only with respect to the sale of money orders, the final
rule treats the Postal Service as a financial institution with respect
to its provision of any money services products. The Postal Service, in
its comments, requested clarification of the status of an
``international postal money order'' under the rules. FinCEN believes
that that topic is not appropriate for treatment in a general
rule.18
---------------------------------------------------------------------------
\18\ This comment, like a number of other comments, concerns the
application of these rules in specific situations, for example,
armored car companies. FinCEN does not believe it is appropriate to
resolve those fact specific situations in the context of a general
rulemaking, but is willing to consider them in the context of
specific, fact based inquiries.
---------------------------------------------------------------------------
4. 31 CFR 103.11(vv)--Definition of Stored Value
The definition of stored value is unchanged. Given the
determination to exclude stored value from the registration
requirements, FinCEN does not believe that it is necessary now to
exclude particular ``closed systems'' from the limited application of
the Bank Secrecy Act to such instruments, or to issue a threshold
exclusion based upon the maximum value capable of storage on particular
media. It agrees that consideration of both such steps would be
appropriate if the treatment of stored value under the Bank Secrecy Act
were to be expanded at a future date.
B. 103.41--Registration of Money Services Businesses
1. 31 CFR 103.41(a)(1)--Registration Requirement; In General
The final rule continues to provide that a money services business
(whether or not licensed as a money services business by any State)
must register with the Department of the Treasury and, as part of that
registration, must maintain a list of its agents. The final rule
expressly excludes from the registration and list requirements the
following persons: the United States Postal Service, an agency of the
United States, of any State, or of any political subdivision of a
State, and any person to the extent that the person is an issuer,
seller, or redeemer of stored value. Unlike the Notice, the final rule
does not expressly exclude from the registration and list requirements
a depository institution (as defined in 31 U.S.C. 5313(g)) or a person
registered with, and regulated or examined by, the Securities and
Exchange Commission (SEC) or the Commodity Futures Trading Commission
(CFTC). Such an express exclusion in paragraph (a)(1) of section 103.41
is unnecessary because the final rule revises the definition of money
services businesses to exclude those persons.
2. 103.41(a)(2)--Agent Registration
As noted above, the final rule defers indefinitely implementation
of a requirement that a money services business that offers products or
services as an agent on behalf of another money services business
register with the Department of the Treasury if the former firm exceeds
a ``threshold point'' set by the Secretary. If, however, a firm in
addition to offering products or services on behalf of another money
services business, offers its own money services products or services
(that is, exchanges currency, cashes checks, or transmits funds for
customers through channels or mechanisms of its own), the firm must
register independently.
3. 31 CFR 103.41(a)(3)--Agent Status.
The final rule provides that the determination of whether a person
is an agent depends on all the facts and circumstances.
4. 31 CFR 103.41(b)(1)--Registration Procedures; In General
The Notice set forth the general requirement to register a money
services business and to report on the registration form the
information required by 31 U.S.C. 5330 and any other information
required by the form. A draft of the registration form was discussed at
a public meeting in September 1997. Although this section of the
preamble discusses comments on the draft form, money services
businesses should bear in mind that FinCEN expects to continue to work
with the money services business industry to develop the registration
form. As part of that process, FinCEN will publish in the Federal
Register a separate notice regarding the form.
A commenter pointed out that for certain items, for example, the
name and address of directors, the instructions to the draft form
discussed at the September 1997 public meeting request a more limited
set of information than could be required under section 5330(b). The
commenter asked that the information requested by the final rule be
limited in the same manner as in the instructions to the form.
Accordingly, the final rule continues to set forth the general
requirement to register and report the information required by 31
U.S.C. 5330, but the words ``to the extent required by the form'' have
been added after the words ``the information required by 31 U.S.C.
5330.'' A similar change has been made regarding the identity of the
person who is responsible for filing the registration form.
Section 5330(b) provides that the registration shall include an
``estimate of the volume of business in the coming year (which shall be
reported annually to the Secretary).'' The instructions to the draft
form thus require an estimate of business volume. Several comments
objected to the business volume requirement, and one commenter asked
for clarification of how an annual estimate would be made when the form
is filed only every other year.
Because section 5330 specifically requires, as part of the
registration information, that a money services
[[Page 45448]]
business make an estimate of its business volume, FinCEN anticipates
that the form will continue to require the estimate. Although a money
services business is required to make an annual estimate of its
business volume, FinCEN anticipates that the registration form will not
require the estimate to be reported on the form itself but will permit
the business to retain the estimate in its records and make it
available upon request. Thus, the annual estimate requirement may be
satisfied even though the registration form is required to be filed
only every other year.
One commenter urged that money services businesses be permitted to
file the registration form electronically. FinCEN will consider this
recommendation as it works to finalize the form and the filing
procedures for the form.
The Notice required a money services business to retain, at a
central location in the United States, a copy of any registration form
the business files and to report that location on the form. One
commenter recommended that as an alternative to the requirement to keep
information in a centralized file, a money services business be
required only to have access to information within a reasonable period
of time. One commenter requested that money services businesses be
permitted to keep records concerning registration outside the United
States, provided that the information was readily available at the
request of FinCEN or any appropriate law enforcement agency.
The final rule continues to require records concerning registration
to be maintained in the United States. The final rule does not require
a money services business to keep records in a central location so long
as information is readily available at the request of FinCEN or any
appropriate law enforcement agency; however, the agent list must be
maintained in a central location in the United States.
5. 31 CFR 103.41(b)(2)--Registration Period
Paragraph (b)(2) of the final rule continues to provide that after
an initial registration period of two calendar years, the registration
must be renewed every two years. One commenter asked that the
registration and renewal periods be increased to five years. Given the
frequency of change in this segment of the financial industry and law
enforcement's need for relatively current information about these
businesses, FinCEN does not believe the registration and renewal
periods should be increased from two years to five years.
6. 31 CFR 103.41(b)(3)--Due Date
Paragraph (b)(3) of the final rule sets forth the due date for
filing the registration form for the initial registration period and
each renewal period. The Notice would have required the registration
form for the initial registration period to be filed by the end of the
180-day period beginning on the later of (i) the date on which the
final rules are published in the Federal Register, and (ii) the date
the business is established. Commenters asked for more time to file the
initial registration form. The final rule does not require the initial
registration form to be filed until December 31, 2001.
7. 31 CFR 103.41(b)(4)--Events Requiring Reregistration
Paragraph (b)(4) of the final rule continues to provide that a
money services business must be re-registered before the end of a
renewal period upon the occurrence of certain events. That paragraph
requires re-registration if the money services business experiences a
change in ownership or control that requires re-registration under a
State law registration program for money services businesses, more than
10 per cent of its voting power or equity interests is transferred
(except in the case of certain publicly-traded businesses, as explained
below), or the number of its agents increases by more than 50 per cent
during any registration period.
One commenter argued that publicly-traded companies should not be
required to re-register when required by state law or when there is a
more than 50 per cent increase in the their agents. The final rule
continues to require publicly-traded companies to register in these
situations.
Several commenters suggested that re-registration was unnecessary
in the case of a 10 per cent change in ownership of publicly-traded
companies. One of the commenters suggested that because a 10 per cent
change in ownership of a publicly-traded company would require a filing
with the Securities and Exchange Commission, law enforcement agencies
could get information about the ownership change from the filing. The
final rule provides that a money services business is not required to
re-register before the end of its regular registration or renewal
period on account of a 10 per cent ownership change if that change must
be reported to the Securities and Exchange Commission.
One commenter suggested that for smaller businesses, a 50 per cent
change in ownership (rather than 10 per cent) would be a more
appropriate standard for requiring re-registration. The final rule does
not adopt this suggestion because it would permit significant changes
in the ownership of smaller money services businesses, which are
generally subject to little federal oversight, to take place between
renewal periods without Treasury's knowledge.
One commenter recommended that ``wire transmitters'' be exempted
from the re-registration requirements if the transmitters are required
to re-register by state law. The final rule does not adopt this
recommendation. FinCEN believes that it is important to establish
uniform, national registration requirements for money services
businesses.
8. 31 CFR 103.41(c)--Persons Required to File Registration Form
The Notice provided that, as required by 31 U.S.C. 5330(a), any
person who owns or controls a money services business shares the
responsibility for seeing that the business is registered. (Only one
registration form, however, is required to be filed for each
registration period.) Commenters pointed out that the instructions to
the draft form take a more limited approach, requiring only certain
owners or controlling persons to register. Paragraph (c) of the final
rule addresses this difference by adding the language ``to the extent
provided by the form'' after the language ``any person who owns or
controls.''
9. 31 CFR 103.41(d)(1)--List of Agents; In General
Paragraph (d)(1) of the final rule provides that a money services
business must prepare and maintain a list of its agents, and must
revise the agent list to contain current information. The Notice
required the agent list to be revised each quarter. Several commenters
objected to the requirement to make quarterly updates of the agent
list, arguing that annual updates are more reasonable. One commenter,
however, stated that quarterly updates of internal records of seller
information could be required without any additional burden. The final
rule requires annual updates of the agent list.
The Notice provided that the list of agents is not filed with the
registration form but is maintained at the location in the United
States reported on the registration form. Several commenters asked that
the final rule clarify that an agent list need not be kept in the
United States so long as the list is readily available. As indicated
above, the agent list must be maintained in the United States.
[[Page 45449]]
Upon request, a money services business must make its list of
agents available to FinCEN and any other appropriate law enforcement
agency (including, without limitation, the examination function of the
Internal Revenue Service in its capacity as delegee of Bank Secrecy Act
examination authority). One commenter stated that the requirement to
make the agent list available to law enforcement is vague and
potentially burdensome. This commenter suggested that it would be
preferable to route all law enforcement requests for the lists through
FinCEN, which would then evaluate both the appropriateness of the
requests and the bona fides of the law enforcement agency.
The maintenance and ready availability of ``agent lists and other
information'' is a crucial part of the scheme of 31 U.S.C. 5330. But it
is equally true that a system in which money services businesses are
overrun by duplicative or otherwise burdensome requests is in no one's
interest. In response to the comment, and in light of the fact that 31
U.S.C. 5330(c)(1)(B) authorizes the Secretary of the Treasury to issue
rules defining the terms of law enforcement access to agent list
information, the final rule states that requests for agent list
information shall be coordinated through FinCEN in the manner and to
the extent determined by FinCEN. Such coordination will (i) avoid the
imposition of unnecessary burden on money services businesses, (ii)
ensure the confidentiality of sensitive business information, and (iii)
facilitate the orderly administration of the agent list requirement.
The same commenter also suggested that agent lists could
voluntarily be filed by money services businesses with the Department
of the Treasury, under a system in which law enforcement agencies
obtain access through Treasury, rather than by seeking information from
the money services businesses that chose to file such lists. FinCEN
believes that such a system has merit, and it intends to work with the
affected businesses to develop such a system, during the period
provided for implementation of this rule prior to January 1, 2002.
The Notice provided that the original list of agents and any
revised list must be retained for five years, as specified in 31 CFR
103.38(d). Commenters objected to the requirement to retain lists of
agents for five years. As indicated above, the requirement to update
agent lists has been relaxed from quarterly updates to annual updates.
Further, the Bank Secrecy Act rules generally require Bank Secrecy Act
information to be retained for five years. Thus, the final rule
continues to require agent lists to be maintained for five years.
One commenter recommended that FinCEN allow past lists to be
substituted, in the discretion of the money services business, with any
``readily accessible'' records of the information no longer on the
current list. The final rule does not adopt this recommendation. The
revisions the final rule makes regarding the information on the agent
list and the decrease from quarterly to annual revisions to the agent
list will reduce the amount of information that has to be retained.
10. 31 CFR 103.41(d)(2)--Information Included on the List of Agents
The final rule provides that the following information must be
included on the agent list--
(i) The name of the agent, including any trade names or doing-
business-as names,
(ii) The address of the agent, including street address, city,
state, and ZIP code,
(iii) The telephone number of the agent,
(iv) The type of service or services (sale or redemption of money
orders, traveler's checks, check sales, check cashing, currency
exchange, and money transmitting) the agent provides,
(v) A listing of the months in the 12 months immediately preceding
the date of the most recent agent list in which the gross transaction
amount of the agent with respect to financial products or services
issued by the money services business maintaining the agent list
exceeded $100,000. For this purpose, the money services gross
transaction amount is the agent's gross amount (excluding fees and
commission) received from transaction of one or more businesses
described in Sec. 103.11(uu),
(vi) The name and address of any depository institution at which
the agent maintains a transaction account (as defined in 12 U.S.C.
461(b)(1)(C)) for all or part of the funds received in or for its money
services business whether in the name of the agent or of the money
services business for which the agent acts or whose products it sells,
(vii) The year in which the agent first became an agent of the
money services business, and
(viii) The number of branches or subagents the agent has.
As noted above, the final rule requires a money services business
to include information about the months in the preceding 12-month
period in which its agent's gross transaction amount exceeded $100,000.
Again, the $100,000 need reflect only business done for the particular
``prinicipal''. Thus, money services business are not expected to
obtain information about the gross transaction amount for business
their agents may conduct for other principals or to disaggregate
information about the gross transaction amount of any agent that
conducts business for more than one principal and provides a principal
with an aggregate figure reflecting business conducted for both
principals. To allow time to intregrate information, the final rule
provides that information about agent volume must be current within 45
days of the due date of the list.
For any agent that is an agent of the money services business
maintaining the list before the first day of the month beginning after
February 16, 2000, the final rule does not require the following
information to be included on the list: the year in which the agent
first became an agent and the agent's branches or subagents. Such
information must be made available upon the request of FinCEN and any
other appropriate law enforcement agency (including, without
limitation, the examination function of the Internal Revenue Service in
its capacity as delegee of Bank Secrecy Act examination authority).
Several commenters asked that the final rule clarify that a money
services business is not required to include on its agent list any
agent that is a depository institution. The final rule expressly
excepts banks from the definition of money services business. Thus, a
money services business is not required to include on its agent list
any agent that is a depository institution.
Another commenter suggested that only agents in the United States
should be included on the agent list. FinCEN agrees that only agents
doing business in the United States should be included on the agent
list.
Commenters indicated that because of the way they currently
maintain information about their agents and the need to devote computer
programming resources to the Year 2000 problem in general, they would
need more time than allowed by the Notice to prepare the initial list
of their agents. The final rule does not require the preparation of the
initial agent list to be completed until January 1, 2002. This change
should provide sufficient time for money services businesses to prepare
their agent lists.
VI. Other Pending Notices of Proposed Rulemaking Concerning Money
Services Businesses
The second rule proposed on May 21, 1997 (the ``Proposed SAR
Rule''), would require money transmitters, and issuers,
[[Page 45450]]
sellers, and redeemers of money orders and traveler's checks to report
suspicious transactions to the Department of the Treasury. See 62 FR
27900-27909. Suspicious activity reporting by all classes of financial
institutions covered by the Bank Secrecy Act is an essential part of
the government's counter-money laundering efforts generally and its
efforts to strengthen counter-money laundering controls at money
services businesses in particular. The Department of the Treasury is
committed to producing the most cost-effective reporting regime, for
both law enforcement and the industries involved. To permit effective
implementation, suspicious activity reporting by the relevant classes
of money services businesses will not begin until the initial
registration process is complete.
The Department also believes that it is critical to provide written
guidance about what must be reported, at the time the final rule is
issued. It intends to work with the money transmission, money order,
and traveler's check industries to shape that guidance, independent of
the rulemaking itself. That work should be assisted by the information
gathered during initial stages of implementation of the registration
rule.
The third rule proposed on May 21, 1997 (the ``Proposed Special CTR
Rule''), would add a special currency transaction reporting
requirement--and related customer verification requirements--for money
transmitters involved in the transmission or other transfer of funds to
persons outside the United States. See 62 FR 27909-27917. Action on the
Proposed Special CTR Rule is being deferred, but it is not being
withdrawn at this time.
VII. Executive Order 12866
The Department of the Treasury has determined that this final rule
is not a significant regulatory action under Executive Order 12866.
VIII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an
agency prepare a budgetary impact statement before promulgating a rule
that includes a federal mandate that may result in expenditure by
state, local and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 202 of the Unfunded Mandates Act
also requires an agency to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule. FinCEN has
determined that it is not required to prepare a written statement under
section 202 and has concluded that on balance this final rule provides
the most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
IX. Regulatory Flexibility Act
FinCEN certifies that this rule will not have a significant
economic impact on a substantial number of small entities. FinCEN
anticipates that the provisions of the rule generally excluding agents
of money services businesses from registration will limit the impact of
the rule on small businesses. Further, most of the recordkeeping and
reporting requirements that would be imposed by the rule concern
information already found in routine business records. For example, as
part of their business records, money services businesses (to the
extent such businesses are small entities) will generally have
information needed for the required agent list, such as the name and
addresses of their agents and agent transaction account information,
because such information is necessary to establish and maintain the
relationship between the businesses and their agents. In addition to
recordkeeping and reporting requirements, other requirements of the
rule may also be satisfied with information that is currently
available. For example, many businesses currently have policies in
place regarding the maximum dollar amount of a money service
transaction they will perform for a customer, such as the maximum
amount for which a business will cash a check, which may help (assuming
the policy is observed) them determine whether they have exceeded the
$1,000 floor in several of the definitions in the rule.
X. Paperwork Reduction Act
The collection of information contained in this final regulation
has been reviewed and approved by the Office of Management and Budget
(OMB) in accordance with the requirements of the Paperwork Reduction
Act (44 U.S.C. 3507(d)) under control number 1506-0013. An agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a valid control number
assigned by OMB.
The collection of information in this final rule is in 31 CFR
103.41(d). This information is required to be provided pursuant to 31
U.S.C. 5330. This information will be used to locate agents of money
services businesses to ensure that they are complying with the
provisions of the Bank Secrecy Act. The information will also be used
by law enforcement agencies in the enforcement of criminal, tax, and
regulatory laws and to prevent money services businesses from engaging
in illegal activities. The collection of information is mandatory. The
likely recordkeepers are businesses.
The estimated average burden associated with the collection of
information in this final rule is 130 hours per recordkeeper.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be directed to the
Financial Crimes Enforcement Network, Department of the Treasury, 2070
Chain Bridge Road, Suite 200, Vienna, VA 22187, and to OMB, Attention:
Desk Officer for the Department of Treasury, FinCEN, Office of
Information and Regulatory Affairs, Washington, D.C. 20503.
List of Subjects in 31 CFR Part 103
Administrative practice and procedure, Authority delegations
(Government agencies), Banks and banking, Currency, Foreign banking,
Foreign currencies, Gambling, Investigations, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Securities, Taxes.
Amendment
For the reasons set forth above in the preamble, 31 CFR part 103 is
amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. Section 103.11 is amended by--
a. Revising paragraph (c)(7),
b. Removing and reserving paragraph (i),
c. Revising paragraph (n)(3),
d. Removing paragraphs (n)(4), (n)(5), and (n)(10),
e. Redesignating paragraphs (n)(6), (n)(7), (n)(8), and (n)(9) as
paragraphs (n)(4), (n)(5), (n)(6), and (n)(7) respectively,
f. In newly redesignated paragraphs (n)(5) and (n)(6), removing the
period at the end of the paragraph and adding a semicolon in its place,
g. In newly redesignated paragraph (n)(7), removing ``;.'' and
adding a period in its place, and
[[Page 45451]]
h. Adding new paragraphs (uu) and (vv).
The revised and added paragraphs read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(c) Bank. * * *
(7) Any other organization (except a money services business)
chartered under the banking laws of any state and subject to the
supervision of the bank supervisory authorities of a State;
* * * * *
(n) Financial institution. * * *
(3) A money services business as defined in paragraph (uu) of this
section;
* * * * *
(uu) Money services business. Each agent, agency, branch, or office
within the United States of any person doing business, whether or not
on a regular basis or as an organized business concern, in one or more
of the capacities listed in paragraphs (uu)(1) through (uu)(6) of this
section. Notwithstanding the preceding sentence, the term ``money
services business'' shall not include a bank, nor shall it include a
person registered with, and regulated or examined by, the Securities
and Exchange Commission or the Commodity Futures Trading Commission.
(1) Currency dealer or exchanger. A currency dealer or exchanger
(other than a person who does not exchange currency in an amount
greater than $1,000 in currency or monetary or other instruments for
any person on any day in one or more transactions).
(2) Check casher. A person engaged in the business of a check
casher (other than a person who does not cash checks in an amount
greater than $1,000 in currency or monetary or other instruments for
any person on any day in one or more transactions).
(3) Issuer of traveler's checks, money orders, or stored value. An
issuer of traveler's checks, money orders, or, stored value (other than
a person who does not issue such checks or money orders or stored value
in an amount greater than $1,000 in currency or monetary or other
instruments to any person on any day in one or more transactions).
(4) Seller or redeemer of traveler's checks, money orders, or
stored value. A seller or redeemer of traveler's checks, money orders,
or stored value (other than a person who does not sell such checks or
money orders or stored value in an amount greater than $1,000 in
currency or monetary or other instruments to or redeem such instruments
for an amount greater than $1,000 in currency or monetary or other
instruments from, any person on any day in one or more transactions).
(5) Money transmitter--(i) In general. Money transmitter:
(A) Any person, whether or not licensed or required to be licensed,
who engages as a business in accepting currency, or funds denominated
in currency, and transmits the currency or funds, or the value of the
currency or funds, by any means through a financial agency or
institution, a Federal Reserve Bank or other facility of one or more
Federal Reserve Banks, the Board of Governors of the Federal Reserve
System, or both, or an electronic funds transfer network; or
(B) Any other person engaged as a business in the transfer of
funds.
(ii) Facts and circumstances; Limitation. Whether a person
``engages as a business'' in the activities described in paragraph
(uu)(5)(i) of this section is a matter of facts and circumstances.
Generally, the acceptance and transmission of funds as an integral part
of the execution and settlement of a transaction other than the funds
transmission itself (for example, in connection with a bona fide sale
of securities or other property), will not cause a person to be a money
transmitter within the meaning of paragraph (uu)(5)(i) of this section.
(6) United States Postal Service. The United States Postal Service,
except with respect to the sale of postage or philatelic products.
(vv) Stored value. Funds or monetary value represented in digital
electronics format (whether or not specially encrypted) and stored or
capable of storage on electronic media in such a way as to be
retrievable and transferable electronically.
3. Part 103 is further amended by redesignating the following
subparts and sections as follows:
------------------------------------------------------------------------
New subparts
Old subparts and sections subpart D and sections
subpart E
------------------------------------------------------------------------
103.41.................................................. 103.51
103.42.................................................. 103.52
103.43.................................................. 103.53
103.44.................................................. 103.54
103.45.................................................. 103.55
103.46.................................................. 103.56
103.47.................................................. 103.57
103.48.................................................. 103.58
103.49.................................................. 103.59
103.50.................................................. 103.60
103.51.................................................. 103.61
103.52.................................................. 103.62
103.53.................................................. 103.63
103.54.................................................. 103.64
Subpart E Subpart F
103.61.................................................. 103.71
103.62.................................................. 103.72
103.63.................................................. 103.73
103.64.................................................. 103.74
103.65.................................................. 103.75
103.66.................................................. 103.76
103.67.................................................. 103.77
Subpart F Subpart G
103.70.................................................. 103.80
103.71.................................................. 103.81
103.72.................................................. 103.82
103.73.................................................. 103.83
103.74.................................................. 103.84
103.75.................................................. 103.85
103.76.................................................. 103.86
103.77.................................................. 103.87
------------------------------------------------------------------------
4. Add a new subpart D to part 103 to read as follows:
Subpart D--Special Rules for Money Services Businesses
Sec.
103.41 Registration of money services businesses.
Subpart D--Special Rules for Money Services Businesses
Sec. 103.41 Registration of money services businesses.
(a) Registration requirement--(1) In general. Except as provided in
paragraph (a)(2) of this section, relating to agents, each money
services business (whether or not licensed as a money services business
by any State) must register with the Department of the Treasury and, as
part of that registration, maintain a list of its agents as required by
31 U.S.C. 5330 and this section. This section does not apply to the
United States Postal Service, to agencies of the United States, of any
State, or of any political subdivision of a State, or to a person to
the extent that the person is an issuer, seller, or redeemer of stored
value.
(2) Agents. A person that is a money services business solely
because that person serves as an agent of another money services
business, see Sec. 103.11(uu), is not required to register under this
section, but a money services business that engages in activities
described in Sec. 103.11(uu) both on its own behalf and as an agent for
others must register under this section. For example, a supermarket
corporation that acts as an agent for an issuer of money orders and
performs no other services of a nature and value that would cause the
corporation to be a money services business, is not required to
register; the answer would be the same if the supermarket corporation
served as an agent both of a money order issuer and of a money
transmitter. However, registration would be required if the
[[Page 45452]]
supermarket corporation, in addition to acting as an agent of an issuer
of money orders, cashed checks or exchanged currencies (other than as
an agent for another business) in an amount greater than $1,000 in
currency or monetary or other instruments for any person on any day, in
one or more transactions.
(3) Agency status. The determination whether a person is an agent
depends on all the facts and circumstances.
(b) Registration procedures--(1) In general. (i) A money services
business must be registered by filing such form as FinCEN may specify
with the Detroit Computing Center of the Internal Revenue Service (or
such other location as the form may specify). The information required
by 31 U.S.C. 5330(b) and any other information required by the form
must be reported in the manner and to the extent required by the form.
(ii) A branch office of a money services business is not required
to file its own registration form. A money services business must,
however, report information about its branch locations or offices as
provided by the instructions to the registration form.
(iii) A money services business must retain a copy of any
registration form filed under this section and any registration number
that may be assigned to the business at a location in the United States
and for the period specified in Sec. 103.38(d).
(2) Registration period. A money services business must be
registered for the initial registration period and each renewal period.
The initial registration period is the two-calendar-year period
beginning with the calendar year in which the money services business
is first required to be registered. However, the initial registration
period for a money services business required to register by December
31, 2001 (see paragraph (b)(3) of this section) is the two-calendar
year period beginning 2002. Each two-calendar-year period following the
initial registration period is a renewal period.
(3) Due date. The registration form for the initial registration
period must be filed on or before the later of December 31, 2001, and
the end of the 180-day period beginning on the day following the date
the business is established. The registration form for a renewal period
must be filed on or before the last day of the calendar year preceding
the renewal period.
(4) Events requiring re-registration. If a money services business
registered as such under the laws of any State experiences a change in
ownership or control that requires the business to be re-registered
under State law, the money services business must also be re-registered
under this section. In addition, if there is a transfer of more than 10
percent of the voting power or equity interests of a money services
business (other than a money services business that must report such
transfer to the Securities and Exchange Commission), the money services
business must be re-registered under this section. Finally, if a money
services business experiences a more than 50-per cent increase in the
number of its agents during any registration period, the money services
business must be re-registered under this section. The registration
form must be filed not later than 180 days after such change in
ownership, transfer of voting power or equity interests, or increase in
agents. The calendar year in which the change, transfer, or increase
occurs is treated as the first year of a new two-year registration
period.
(c) Persons required to file the registration form. Under 31 U.S.C.
5330(a), any person who owns or controls a money services business is
responsible for registering the business; however, only one
registration form is required to be filed for each registration period.
A person is treated as owning or controlling a money services business
for purposes of filing the registration form only to the extent
provided by the form. If more than one person owns or controls a money
services business, the owning or controlling persons may enter into an
agreement designating one of them to register the business. The failure
of the designated person to register the money services business does
not, however, relieve any of the other persons who own or control the
business of liability for the failure to register the business. See
paragraph (e) of this section, relating to consequences of the failure
to comply with 31 U.S.C. 5330 or this section.
(d) List of agents--(1) In general. A money services business must
prepare and maintain a list of its agents. The initial list of agents
must be prepared by January 1, 2002, and must be revised each January
1, for the immediately preceding 12 month period; for money services
businesses established after December 31, 2001, the initial agent list
must be prepared by the due date of the initial registration form and
must be revised each January 1 for the immediately preceding 12-month
period. The list is not filed with the registration form but must be
maintained at the location in the United States reported on the
registration form under paragraph (b)(1) of this section. Upon request,
a money services business must make its list of agents available to
FinCEN and any other appropriate law enforcement agency (including,
without limitation, the examination function of the Internal Revenue
Service in its capacity as delegee of Bank Secrecy Act examination
authority). Requests for information made pursuant to the preceding
sentence shall be coordinated through FinCEN in the manner and to the
extent determined by FinCEN. The original list of agents and any
revised list must be retained for the period specified in
Sec. 103.38(d).
(2) Information included on the list of agents--(i) In general.
Except as provided in paragraph (d)(2)(ii) of this section, a money
services business must include the following information with respect
to each agent on the list (including any revised list) of its agents--
(A) The name of the agent, including any trade names or doing-
business-as names;
(B) The address of the agent, including street address, city,
state, and ZIP code;
(C) The telephone number of the agent;
(D) The type of service or services (money orders, traveler's
checks, check sales, check cashing, currency exchange, and money
transmitting) the agent provides;
(E) A listing of the months in the 12 months immediately preceding
the date of the most recent agent list in which the gross transaction
amount of the agent with respect to financial products or services
issued by the money services business maintaining the agent list
exceeded $100,000. For this purpose, the money services gross
transaction amount is the agent's gross amount (excluding fees and
commissions) received from transactions of one or more businesses
described in Sec. 103.11(uu);
(F) The name and address of any depository institution at which the
agent maintains a transaction account (as defined in 12 U.S.C.
461(b)(1)(C)) for all or part of the funds received in or for the
financial products or services issued by the money services business
maintaining the list, whether in the agent's or the business
principal's name;
(G) The year in which the agent first became an agent of the money
services business; and
(H) The number of branches or subagents the agent has.
(ii) Special rules. Information about agent volume must be current
within 45 days of the due date of the agent list. The information
described by paragraphs (d)(2)(i)(G) and (d)(2)(i)(H) of this section
is not required to be included in an agent list with respect to
[[Page 45453]]
any person that is an agent of the money services business maintaining
the list before the first day of the month beginning after February 16,
2000 so long as the information described by paragraphs (d)(2)(i)(G)
and (d)(2)(i)(H) of this section is made available upon the request of
FinCEN and any other appropriate law enforcement agency (including,
without limitation, the examination function of the Internal Revenue
Service in its capacity as delegee of Bank Secrecy Act examination
authority).
(e) Consequences of failing to comply with 31 U.S.C. 5330 or the
regulations thereunder. It is unlawful to do business without complying
with 31 U.S.C. 5330 and this section. A failure to comply with the
requirements of 31 U.S.C 5330 or this section includes the filing of
false or materially incomplete information in connection with the
registration of a money services business. Any person who fails to
comply with any requirement of 31 U.S.C. 5330 or this section shall be
liable for a civil penalty of $5,000 for each violation. Each day a
violation of 31 U.S.C. 5330 or this section continues constitutes a
separate violation. In addition, under 31 U.S.C. 5320, the Secretary of
the Treasury may bring a civil action to enjoin the violation. See 18
U.S.C. 1960 for a criminal penalty for failure to comply with the
registration requirements of 31 U.S.C. 5330 or this section.
(f) Effective date. This section is effective September 20, 1999.
Registration of money services businesses under this section will not
be required prior to December 31, 2001.
Sec. 103.36 [Amended]
5. Paragraph (b)(10) of Sec. 103.36 is amended by removing the
language ``Sec. 103.54(a)'' and adding the language ``Sec. 103.64(a)''
in its place.
6. Section 103.37 is amended by adding a new paragraph (c) to read
as follows:
Sec. 103.37 Additional records to be made and retained by currency
dealers or exchangers.
* * * * *
(c) This section does not apply to banks that offer services in
dealing or changing currency to their customers as an adjunct to their
regular service.
Sec. 103.56 [Amended]
7. Paragraph (b)(7) of newly redesignated Sec. 103.56 is amended by
removing the language ``Sec. 103.48'' and adding the language
``Sec. 103.58'' in its place.
Sec. 103.57 [Amended]
8. Newly redesignated Sec. 103.57 is amended by:
a. In paragraph (d) removing the language ``Sec. 103.48'' and
adding the language ``Sec. 103.58'' in its place.
b. In the first sentence of paragraph (e) removing the language
``Sec. 103.53'' and adding the language ``Sec. 103.63'' in its place.
Sec. 103.72 [Amended]
9. Newly redesignated Sec. 103.72 is amended by removing the
language ``Sec. 103.61'' from the introductory text and adding the
language ``Sec. 103.71'' in its place.
Sec. 103.73 [Amended]
10. Newly redesignated Sec. 103.73 is amended by:
a. In paragraph (a) introductory text removing the language
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
b. In paragraph (a)(1) removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
c. In paragraph (b) introductory text removing the language
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
d. In paragraph (b)(1) removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
Sec. 103.74 [Amended]
11. Newly redesignated Sec. 103.74 is amended by removing the
language ``Sec. 103.62'' from paragraph (a) and adding the language
``Sec. 103.72'' in its place.
Sec. 103.75 [Amended]
12. Newly redesignated Sec. 103.75 is amended by:
a. In the first sentence of paragraph (a) removing the language
``Sec. 103.62'' and adding the language ``Sec. 103.72'' in its place.
b. In paragraph (c) introductory text removing the language
``103.62(a)'' and adding the language ``103.72(a)'' in its place and
removing the language ``Sec. 103.62 (b) or (c)'' and adding the
language ``Sec. 103.72 (b) or (c)'' in its place.
Sec. 103.76 [Amended]
13. Newly redesignated Sec. 103.76 is amended by:
a. In the first sentence removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
b. In the second sentence removing the language ``Sec. 103.62(a)''
and adding the language ``Sec. 103.72(a)'' in its place.
Sec. 103.82 [Amended]
14. Newly redesignated Sec. 103.82 is amended by removing the
language ``Sec. 103.71'' from the first sentence and adding the
language ``Sec. 103.81'' in its place.
Sec. 103.83 [Amended]
15. Paragraph (b) of newly redesignated Sec. 103.83 is amended by:
a. In the first sentence removing the language ``Sec. 103.71'' and
adding the language ``Sec. 103.81'' in its place.
b. In the last sentence removing the language ``Sec. 103.71'' and
adding the language ``Sec. 103.81'' in its place.
Sec. 103.85 [Amended]
16. Newly redesignated Sec. 103.85 is amended by removing the
language ``Sec. 103.71'' from the first sentence and adding the
language ``Sec. 103.81'' in its place.
Sec. 103.86 [Amended]
17. Newly redesignated Sec. 103.86 is amended by:
a. In paragraph (a) introductory text removing the language
``Sec. 103.75'' and adding the language ``Sec. 103.85'' in its place.
b. In the second sentence of paragraph (b) removing the language
``Sec. 103.71'' and adding the language ``Sec. 103.81'' in its place.
Dated: August 17, 1999.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 99-21667 Filed 8-18-99; 8:45 am]
BILLING CODE 4820-03-P
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