Interagency Interpretive Guidance on the Provision of Banking Services to Money Services Businesses Operating in the United States

Financial Crimes Enforcement Network

Board of Governors of the Federal Reserve System

Federal Deposit Insurance Corporation

National Credit Union Administration

Office of the Comptroller of the Currency

Office of Thrift Supervision

April 26, 2005

Interagency Interpretive Guidance on Providing Banking Services to Money Services

Businesses Operating in the United States

The Financial Crimes Enforcement Network (“FinCEN”), along with the Board of

Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the

National Credit Union Administration, the Office of the Comptroller of the Currency, and

the Office of Thrift Supervision (collectively, the “Federal Banking Agencies”), issue this

interpretive guidance to clarify further the requirements of the Bank Secrecy Act and its

implementing regulations (including the parallel provisions issued by the Federal

Banking Agencies) for banking organizations when providing banking services to money

services businesses operating in the United States.

As a follow-up to the joint statement issued on March 30, 2005, this guidance sets forth

the minimum steps that banking organizations should take when providing banking

services to money services businesses. Additionally, this guidance provides assistance to

banking organizations in assessing and minimizing the risk of money laundering posed

by individual money services business customers. While banking organizations are

expected to manage risk associated with all accounts, including money services business

accounts, banking organizations will not be held responsible for their customers’

compliance with the Bank Secrecy Act and other applicable federal and state laws and

regulations.

By clarifying our expectations, FinCEN and the Federal Banking Agencies are

confirming that banking organizations have the flexibility to provide services to a wide

range of money services businesses while remaining in compliance with the Bank

Secrecy Act

be held responsible for their customers’

compliance with the Bank Secrecy Act and other applicable federal and state laws and

regulations.

By clarifying our expectations, FinCEN and the Federal Banking Agencies are

confirming that banking organizations have the flexibility to provide services to a wide

range of money services businesses while remaining in compliance with the Bank

Secrecy Act. This guidance will be reflected in the forthcoming interagency Bank

Secrecy Act/Anti-Money Laundering examination procedures.

Concurrent with this document, FinCEN is also issuing guidance to money services

businesses to emphasize their Bank Secrecy Act regulatory obligations and to notify them

of the type of information that they may be expected to produce to a banking organization

in the course of opening or maintaining an account relationship. Through regular

supervisory processes and through dissemination of additional information, FinCEN and

the Federal Banking Agencies will continue to provide guidance to assist banking

organizations on issues related to money services businesses, such as providing indicators

to banking organizations that would help in identifying entities that may be operating as

money services businesses when those entities have not disclosed the nature of their

1

business to the banking organizations and guidance on appropriate due diligence when

maintaining accounts for foreign providers of money services.

Background

Under existing Bank Secrecy Act regulations, FinCEN has defined money services

businesses to include five distinct types of financial services providers and the U.S.

Postal Service: (1) currency dealers or exchangers; (2) check cashers; (3) issuers of

traveler’s checks, money orders, or stored value; (4) sellers or redeemers of traveler’s

checks, money orders, or stored value; and (5) money transmitters

ting Bank Secrecy Act regulations, FinCEN has defined money services

businesses to include five distinct types of financial services providers and the U.S.

Postal Service: (1) currency dealers or exchangers; (2) check cashers; (3) issuers of

traveler’s checks, money orders, or stored value; (4) sellers or redeemers of traveler’s

checks, money orders, or stored value; and (5) money transmitters. There is a threshold

requirement for businesses in the first four categories – a business that engages in such

transactions will not be considered a money services business if it does not engage in

such transactions in an amount greater that $1,000 for any person on any day in one or

more transactions. See 31 CFR 103.11(uu).

With limited exceptions, money services businesses are subject to the full range of Bank

Secrecy Act regulatory controls, including the anti-money laundering program rule,

suspicious activity and currency transaction reporting rules, and various other

identification and recordkeeping rules.[See Footnote 1] Additionally, existing FinCEN regulations

require certain money services business principals to register with FinCEN.[See Footnote 2] Many

money services businesses, including the vast majority of money transmitters in the

United States, operate through a system of agents. While agents are not presently

required to register with FinCEN, they are themselves money services businesses that are

required to establish anti-money laundering programs and comply with the other

recordkeeping and reporting requirements described above. Finally, many states have

established anti-money laundering supervisory requirements, often including the

requirement that a money services business be licensed with the state in which it is

incorporated or does business

es money services businesses that are

required to establish anti-money laundering programs and comply with the other

recordkeeping and reporting requirements described above. Finally, many states have

established anti-money laundering supervisory requirements, often including the

requirement that a money services business be licensed with the state in which it is

incorporated or does business.

The money services business industry is extremely diverse, ranging from Fortune 500

companies with numerous outlets worldwide to small, independent “mom and pop”

convenience stores in communities with population concentrations that do not necessarily

have access to traditional banking services or in areas where English is rarely spoken.

Footnote 1 -- See 31 CFR 103.125 (requirement for money services businesses to establish and maintain an anti-money

laundering program); 31 CFR 103.22 (requirement for money services businesses to file currency

transaction reports); 31 CFR 103.20 (requirement for money services businesses to file suspicious activity

reports, other than for check cashing and stored value transactions); 31 CFR 103.29 (requirement for

money services businesses that sell money orders, traveler’s checks, or other instruments for cash to verify

the identity of the customer and create and maintain a record of each cash purchase between $3,000 and

$10,000, inclusive); 31 CFR 103.33(f) and (g) (rules applicable to certain transmittals of funds); and 31

CFR 103.37 (additional recordkeeping requirement for currency exchangers including the requirement to

create and maintain a record of each exchange of currency in excess of $1,000).[End of Footnote 1]

Footnote 2 -- See 31 CFR 103.41. The registration requirement applies to all money services businesses (whether or

not licensed as a money services business by any state) except the U.S

); and 31

CFR 103.37 (additional recordkeeping requirement for currency exchangers including the requirement to

create and maintain a record of each exchange of currency in excess of $1,000).[End of Footnote 1]

Footnote 2 -- See 31 CFR 103.41. The registration requirement applies to all money services businesses (whether or

not licensed as a money services business by any state) except the U.S. Postal Service; agencies

of the United States, of any state, or of any political subdivision of a state; issuers, sellers, or redeemers of

stored value, or any person that is a money services business solely because that person serves as an agent

of another money services business (however, a money services business that engages in activities

described in § 103.11(uu) both on its own behalf and as an agent for others is required to register).[End of Footnote 2]

2

The range of products and services offered, and the customer bases served by money

services businesses, are equally diverse. In fact, while they all fall under the definition of

a money services business, the types of businesses are quite distinct. In addition, many

money services businesses only offer money services as an ancillary component to their

primary business, such as a convenience store that cashes checks or a hotel that provides

currency exchange. Other money services businesses offer a variety of services, such as

check cashing and stored value card sales.

I.

Minimum Bank Secrecy Act Due Diligence Expectations

FinCEN and the Federal Banking Agencies expect banking organizations that open and

maintain accounts for money services businesses to apply the requirements of the Bank

Secrecy Act, as they do with all accountholders, on a risk-assessed basis. As with any

category of accountholder, there will be money services businesses that pose little risk of

money laundering and those that pose a significant risk

and the Federal Banking Agencies expect banking organizations that open and

maintain accounts for money services businesses to apply the requirements of the Bank

Secrecy Act, as they do with all accountholders, on a risk-assessed basis. As with any

category of accountholder, there will be money services businesses that pose little risk of

money laundering and those that pose a significant risk. It is essential that banking

organizations neither define nor treat all money services businesses as posing the same

level of risk. Put simply, a local grocer that also cashes payroll checks for customers

purchasing groceries cannot be equated with a money transmitter specializing in cross-

border wire transfers to jurisdictions posing heightened risk for money laundering or the

financing of terrorism, and therefore the Bank Secrecy Act obligations on a banking

organization will differ significantly.[See Footnote 3]

Registration with FinCEN, if required, and compliance with any state-based licensing

requirements represent the most basic of compliance obligations for money services

businesses; a money services business operating in contravention of registration or

licensing requirements would be violating Federal and possibly state laws.[See Footnote 4] As a result, it

is reasonable and appropriate for a banking organization to insist that a money services

business provide evidence of compliance with such requirements or demonstrate that it is

not subject to such requirements

esses; a money services business operating in contravention of registration or

licensing requirements would be violating Federal and possibly state laws.[See Footnote 4] As a result, it

is reasonable and appropriate for a banking organization to insist that a money services

business provide evidence of compliance with such requirements or demonstrate that it is

not subject to such requirements.

Footnote 3 -- Jurisdictions posing heightened risk include those that have been (1) identified by the Department of

State as a sponsor of international terrorism under 22 USC 2371; (2) designated as non-cooperative with

international anti-money laundering principles or procedures by an intergovernmental group or

organization of which the United States is a member (such as the Financial Action Task Force, www.fatf-

gafi.org) and with which designation the United States representative or organization concurs; or (3)

designated by the Secretary of the Treasury pursuant to 31 U.S.C. 5318A as warranting special measures

due to money laundering concerns. See also note 7, infra.[End of Footnote 3]

Footnote 4 -- In addition to violating the FinCEN registration regulation, which can result in both civil and criminal

penalties, failure to register with FinCEN is a violation of 18 U.S.C. 1960. See U.S. v. Uddin, No. 04-CR-

80192 (E.D.Mich. April 11, 2005). Under certain circumstances, failure to obtain a required state license to

operate a money services business can also result in a violation of 18 U.S.C. 1960. See U.S. v. Velastegui,

199 F.3d 590 (2nd Cir. 1999).[End of Footnote 4]

3

h civil and criminal

penalties, failure to register with FinCEN is a violation of 18 U.S.C. 1960. See U.S. v. Uddin, No. 04-CR-

80192 (E.D.Mich. April 11, 2005). Under certain circumstances, failure to obtain a required state license to

operate a money services business can also result in a violation of 18 U.S.C. 1960. See U.S. v. Velastegui,

199 F.3d 590 (2nd Cir. 1999).[End of Footnote 4]

3

Based on existing Bank Secrecy Act requirements applicable to banking organizations,

the minimum due diligence expectations associated with opening and maintaining

accounts for money services businesses are:

•

Apply the banking organization’s Customer Identification Program;[See Footnote 5]

•

Confirm FinCEN registration, if required;

•

Confirm compliance with state or local licensing requirements, if applicable;

•

Confirm agent status, if applicable; and

•

Conduct a basic Bank Secrecy Act/Anti-Money Laundering risk assessment to

determine the level of risk associated with the account and whether further due

diligence is necessary.

The Appendix to this guidance explains FinCEN’s registration and state-based licensing

requirements and outlines steps that banking organizations can take to confirm and

document the registration, licensing, or agent status of a money services business.

Basic Bank Secrecy Act/Anti-Money Laundering Risk Assessment

While the extent to which banking organizations should perform further due diligence

beyond the minimum compliance obligations set forth above will be dictated by the level

of risk posed by the individual customer, it is not the case that all money services

businesses will always require further due diligence. In some cases, no further customer

due diligence will be required. In other situations, the further due diligence required will

be extensive. In all cases, the level of due diligence applied will be dictated by the risks

associated with the particular customer

risk posed by the individual customer, it is not the case that all money services

businesses will always require further due diligence. In some cases, no further customer

due diligence will be required. In other situations, the further due diligence required will

be extensive. In all cases, the level of due diligence applied will be dictated by the risks

associated with the particular customer.

Accordingly, as with any business account, in determining how much, if any, further due

diligence would be required for any money services business customer, the banking

organization should consider the following basic information:

•

Types of products and services offered by the money services business

In order to properly assess risks, banking organizations should know the categories of

money services engaged in by the particular money services business accountholder.

In addition, banking organizations should determine whether the money services

business is a “principal” (with a fleet of agents) or is itself an agent of another money

services business. Other relevant considerations include whether or not the money

services business is a new or established operation, and whether or not money

services are the customer’s primary or ancillary business (such as a grocery store that

derives a small fraction of its overall revenue from cashing checks).

Footnote 5 -- See 31 CFR 103.121 (FinCEN); 12 CFR 21.21 (Office of the Comptroller of the Currency); 12 CFR

208.63(b), 211.5(m), 211.24(j) (Board of Governors of the Federal Reserve System); 12 CFR 326.8(b)

(Federal Deposit Insurance Corporation); 12 CFR 563.177(b) (Office of Thrift Supervision); 12 CFR

748.2(b) (National Credit Union Administration).[End of Footnote 5]

4

om cashing checks).

Footnote 5 -- See 31 CFR 103.121 (FinCEN); 12 CFR 21.21 (Office of the Comptroller of the Currency); 12 CFR

208.63(b), 211.5(m), 211.24(j) (Board of Governors of the Federal Reserve System); 12 CFR 326.8(b)

(Federal Deposit Insurance Corporation); 12 CFR 563.177(b) (Office of Thrift Supervision); 12 CFR

748.2(b) (National Credit Union Administration).[End of Footnote 5]

4

•

Location(s) and market(s) served by the money services business

Money laundering risks within a money services business can vary widely depending

on the locations, customer bases, and markets served by the money services business.

Relevant considerations include whether markets served are domestic or international,

or whether services are targeted to local residents or broad markets. For example, a

convenience store that only cashes payroll checks generally presents lower money

laundering risks than a check casher that cashes any type of third-party check or

cashes checks for commercial enterprises (which generally involve larger amounts).

•

Anticipated account activity

Banking organizations should ascertain the expected services that the money services

business will use, such as currency deposits or withdrawals, check deposits, or funds

transfers. For example, a money services business may operate out of one location

and use one branch of the banking organization, or may have several agents making

deposits at multiple branches throughout the banking organization’s network.

Banking organizations should also have a sense of expected transaction amounts.

•

Purpose of the account

Banking organizations should understand the purpose of the account for the money

services business. For example, a money transmitter might require the bank account

to remit funds to its principal U.S. clearing account or may use the account to remit

funds cross-border to foreign-based agents

king organizations should also have a sense of expected transaction amounts.

•

Purpose of the account

Banking organizations should understand the purpose of the account for the money

services business. For example, a money transmitter might require the bank account

to remit funds to its principal U.S. clearing account or may use the account to remit

funds cross-border to foreign-based agents.

Risk Indicators

To further assist banking organizations in determining the level of risk posed by a money

services business customer, set forth below are examples that may be indicative of lower

and higher risk, respectively. In determining the level of risk, a banking organization

should not take any single indicator as determinative of the existence of lower or higher

risk. Moreover, the application of these factors is fact-specific, and a conclusion

regarding an account should be based on a consideration of available information.

An effective risk assessment should be a composite of multiple factors, and depending

upon the circumstances, certain factors may be weighed more heavily than others.

Examples of potentially lower risk indicators: The money services business –

-

primarily markets to customers that conduct routine transactions with

moderate frequency in low amounts;

-

offers only a single line of money services business product (for example,

only check cashing or only currency exchanges);

-

is a check casher that does not accept out of state checks;

-

is a check casher that does not accept third-party checks or only cashes

payroll or government checks;

5

markets to customers that conduct routine transactions with

moderate frequency in low amounts;

-

offers only a single line of money services business product (for example,

only check cashing or only currency exchanges);

-

is a check casher that does not accept out of state checks;

-

is a check casher that does not accept third-party checks or only cashes

payroll or government checks;

5

-

is an established business with an operating history;

-

only provides services such as check cashing to local residents;

-

is a money transmitter that only remits funds to domestic entities; or

-

only facilitates domestic bill payments.

Examples of potentially higher risk indicators: The money services business –

-

allows customers to conduct higher-amount transactions with moderate to

high frequency;

-

offers multiple types of money services products;

-

is a check casher that cashes any third-party check or cashes checks for

commercial businesses;

-

is a money transmitter that offers only, or specializes in, cross-border

transactions, particularly to jurisdictions posing heightened risk for money

laundering or the financing of terrorism or to countries identified as

having weak anti-money laundering controls;[See Footnote 6]

-

is a currency dealer or exchanger for currencies of jurisdictions posing

heightened risk for money laundering or the financing of terrorism or

countries identified as having weak anti-money laundering controls;

-

is a new business without an established operating history; or

-

is located in an area designated as a High Risk Money Laundering and

Related Financial Crimes Area or a High-Intensity Drug Trafficking

Area.[See Footnote 7]

II.

Due Diligence for Higher Risk Customers

A banking organization’s due diligence should be commensurate with the level of risk of

the money services business customer identified through its risk assessment

ed operating history; or

-

is located in an area designated as a High Risk Money Laundering and

Related Financial Crimes Area or a High-Intensity Drug Trafficking

Area.[See Footnote 7]

II.

Due Diligence for Higher Risk Customers

A banking organization’s due diligence should be commensurate with the level of risk of

the money services business customer identified through its risk assessment. If a banking

organization’s risk assessment indicates potential for a heightened risk of money

laundering or terrorist financing, it will be expected to conduct further due diligence in a

manner commensurate with the heightened risk. This is no different from requirements

applicable to any other business customer and does not mean that a banking organization

cannot maintain the account.

Depending on the level of perceived risk, and the size and sophistication of the particular

money services business, banking organizations may pursue some or all of the following

actions as part of an appropriate due diligence review or risk management assessment of

a money services business seeking to establish an account relationship. Likewise, if the

banking organization becomes aware of changes in the profile of the money services

Footnote 6 -- Supra, note 3.[End of Footnote 6]

Footnote 7 -- While the operation of a money services business in either of these two areas does not itself require a

banking organization to conclude that the money services business poses a high risk, it is a factor that may

be relevant. Information concerning High Risk Money Laundering and Related Financial Crimes Areas

can be found at http://www.fincen.gov/le_hifcadesign.html. Designations of High Risk Money Laundering

and Related Financial Crimes Areas are made in the Treasury Department’s National Money Laundering

Strategy reports. Information concerning High-Intensity Drug Trafficking Areas can be found at

http://www.whitehousedrugpolicy.gov/hidta/.[End of Footnote 7]

6

nd Related Financial Crimes Areas

can be found at http://www.fincen.gov/le_hifcadesign.html. Designations of High Risk Money Laundering

and Related Financial Crimes Areas are made in the Treasury Department’s National Money Laundering

Strategy reports. Information concerning High-Intensity Drug Trafficking Areas can be found at

http://www.whitehousedrugpolicy.gov/hidta/.[End of Footnote 7]

6

business to which banking services are being provided, these additional steps may be

appropriate. However, it is not the expectation of FinCEN or the Federal Banking

Agencies that banking organizations will uniformly require any or all of the actions

identified below for all money services business customers:

-

review the money services business’s anti-money laundering program;

-

review results of the money services business’s independent testing of its anti-

money laundering program;

-

conduct on-site visits;

-

review list of agents, including locations, within or outside the United States,

that will be receiving services directly or indirectly through the money

services business account;

-

review written procedures for the operation of the money services business;

-

review written agent management and termination practices for the money

services business; or

-

review written employee screening practices for the money services business.

As with any other accountholder that is subject to anti-money laundering regulatory

requirements, the extent to which a banking organization should inquire about the

existence and operation of the anti-money laundering program of a particular money

services business will be dictated by the banking organization’s assessment of the risks of

the particular relationship. Given the diversity of the money services business industry

and the risks they face, banking organizations should expect significant differences

among anti-money laundering programs of money services businesses

ation of the anti-money laundering program of a particular money

services business will be dictated by the banking organization’s assessment of the risks of

the particular relationship. Given the diversity of the money services business industry

and the risks they face, banking organizations should expect significant differences

among anti-money laundering programs of money services businesses. However,

FinCEN and the Federal Banking Agencies do not expect banking organizations to act as

the de facto regulators of the money services business industry.

III.

Identification and Reporting of Suspicious Activity

Existing regulations require banking organizations to identify and report known or

suspected violations of law or/and suspicious transactions relevant to possible violations

of law or regulation. Risk-based monitoring of accounts maintained for all customers,

including money services businesses, is a key element of an effective system to identify

and, where appropriate, report violations and suspicious transactions. The level and

frequency of such monitoring will depend, among other things, on the risk assessment

and the activity in the account.

Based on the banking organization’s assessment of the risks of its particular money

services business customers, monitoring should include periodic confirmation that initial

projections of account activity have remained reasonably consistent over time. Account

activity would typically include deposits or withdrawals of currency, deposits of checks,

or funds transfers. The mere existence of variances does not necessarily mean that a

problem exists, but may be an indication that additional review is necessary.

Furthermore, risk-based monitoring generally does not include “real-time” monitoring of

all transactions flowing through the account of a money services business, such as a

review of the payee or drawer of every deposited check.

7

or funds transfers. The mere existence of variances does not necessarily mean that a

problem exists, but may be an indication that additional review is necessary.

Furthermore, risk-based monitoring generally does not include “real-time” monitoring of

all transactions flowing through the account of a money services business, such as a

review of the payee or drawer of every deposited check.

7

Examples of potential suspicious activity within money services business accounts,

generally involving significant unexplained variations in transaction size, nature, or

frequency through the account, include:

•

A check casher deposits checks from financial institutions in jurisdictions posing

heightened risk for money laundering or the financing of terrorism or from countries

identified as having weak anti-money laundering controls when the money services

business does not overtly market to individuals related to the particular jurisdiction;[See Footnote 8]

•

A check casher deposits currency in small denomination bills or unusually large or

frequent amounts. Given that a check casher would typically deposit checks and

withdraw currency to meet its business needs, any recurring deposits of currency may

be an indicator of suspicious activity;

•

A check casher deposits checks with unusual symbols, stamps, or written annotations

either on the face or on the back of the negotiable instruments;

•

A money transmitter transfers funds to a different jurisdiction than expected, based on

the due diligence information that the banking organization had assessed for the

particular money services business

an indicator of suspicious activity;

•

A check casher deposits checks with unusual symbols, stamps, or written annotations

either on the face or on the back of the negotiable instruments;

•

A money transmitter transfers funds to a different jurisdiction than expected, based on

the due diligence information that the banking organization had assessed for the

particular money services business. For example, if the money transmitter

represented to the banking organization or in its business plan that it specializes in

remittances to Latin America and starts transmitting funds on a regular basis to

another part of the world, the unexplained change in business practices may be

indicative of suspicious activity; or

•

A money transmitter or seller/issuer of money orders deposits currency significantly

in excess of expected amounts, based on the due diligence information that the

banking organization had assessed for the particular money services business, without

any justifiable explanation, such as an expansion of business activity, new locations,

etc.

One recurring question has been the obligation of a banking organization to file a

suspicious activity report on a money services business that has failed to register with

FinCEN or failed to obtain a license under applicable state law. Given the importance of

the licensing and registration requirement, a banking organization should file a suspicious

activity report if it becomes aware that a customer is operating in violation of the

registration or state licensing requirement.[See Footnote 9] This approach is consistent with long

standing practices of FinCEN and the Federal Banking Agencies under which banking

organizations file suspicious activity reports on known or suspected violations of law or

regulation

ion should file a suspicious

activity report if it becomes aware that a customer is operating in violation of the

registration or state licensing requirement.[See Footnote 9] This approach is consistent with long

standing practices of FinCEN and the Federal Banking Agencies under which banking

organizations file suspicious activity reports on known or suspected violations of law or

regulation.

Finally, banking organizations are not expected to terminate existing accounts of money

services businesses based solely on the discovery that the customer is a money services

business that has failed to comply with licensing and registration requirements (although

continuing non-compliance by the money services business may be an indicator of

heightened risk). There is no requirement in the Bank Secrecy Act regulations that a

Footnote 8 -- Supra, note 3.[End of Footnote 8]

Footnote 9 -- See U.S. v. Uddin, supra, note 4.[End of Footnote 9]

8

banking organization must close an account that is the subject of a suspicious activity

report. The decision to maintain or close an account should be made by a banking

organization’s management under standards and guidelines approved by its board of

directors. However, if an account is involved in a suspicious or potentially illegal

transaction, the banking organization should examine the status and history of the

account thoroughly and should determine whether or not the institution is comfortable

maintaining the account. If the banking organization is aware that the reported activity is

under investigation, it is strongly recommended that the banking organization notify law

enforcement before making any decision regarding the status of the account.

IV.

Existing Accounts for Known Money Services Businesses

This guidance is not a directive to banking organizations to conduct immediately a

review of existing accounts for known money services businesses for the sole purpose of

determining licensing or registration status

ded that the banking organization notify law

enforcement before making any decision regarding the status of the account.

IV.

Existing Accounts for Known Money Services Businesses

This guidance is not a directive to banking organizations to conduct immediately a

review of existing accounts for known money services businesses for the sole purpose of

determining licensing or registration status. However, the guidance does not affect a

banking organization’s existing anti-money laundering compliance program obligations

to assess risk, including periodic risk assessments of existing money services business

accounts to update risk factors such as licensing and registration status.

V.

314(b) Voluntary Information Sharing

Section 314(b) of the USA PATRIOT Act of 2001 allows certain financial institutions,

after providing notice to FinCEN, to voluntarily share information with each other for the

purpose of identifying and, where appropriate, reporting possible money laundering or

terrorist financing under protection of legal safe harbor.[See Footnote 10]

Banks and money services businesses can utilize Section 314(b) information sharing to

work together to identify money laundering and terrorist financing. While participation

in the 314(b) information sharing program is voluntary, FinCEN and the Federal Banking

Agencies encourage banking organizations and their money services business customers

to consider how voluntary information sharing could enable each institution to more

effectively discharge its anti-money laundering and suspicious activity monitoring

obligation.

Any banking organizations that have questions on this guidance are encouraged to

contact FinCEN or their primary federal regulator

Agencies encourage banking organizations and their money services business customers

to consider how voluntary information sharing could enable each institution to more

effectively discharge its anti-money laundering and suspicious activity monitoring

obligation.

Any banking organizations that have questions on this guidance are encouraged to

contact FinCEN or their primary federal regulator.

Footnote 10 -- Section 314(b) of the USA PATRIOT Act, as implemented by 31 CFR 103.110, establishes a safe harbor

from liability for a financial institution or association of financial institutions that voluntarily chooses to

share information with other financial institutions for the purpose of identifying and, where appropriate,

reporting money laundering or terrorist activity. To avail itself of the 314(b) safe harbor, a financial

institution must comply with the requirements of the implementing regulation, 31 CFR 103.110, including

notice to FinCEN, verification that the other financial institution has submitted the requisite notice, and

restrictions on the use and security of information shared. The safe harbor afforded by Section 314(b) is

only available to financial institutions that are required to implement an anti-money laundering program,

which includes banks regulated by a federal functional regulator (see 31 CFR 103.120) and money services

businesses (see 31 CFR 103.125). For additional information on the 314(b) voluntary information sharing

program, or to submit a notice to FinCEN to share information voluntarily, please refer to www.fincen.gov.[End of Footnote 10]

9

e required to implement an anti-money laundering program,

which includes banks regulated by a federal functional regulator (see 31 CFR 103.120) and money services

businesses (see 31 CFR 103.125). For additional information on the 314(b) voluntary information sharing

program, or to submit a notice to FinCEN to share information voluntarily, please refer to www.fincen.gov.[End of Footnote 10]

9

Additional Resources

•

www.msb.gov – FinCEN website dedicated to money services business regulations

and guidance, such as FinCEN rulings and answers to frequently asked questions.

This website also contains a list of registered money services businesses.

•

Free, easy-to-understand educational materials to help inform money services

businesses about their obligations under the Bank Secrecy Act, available at

www.msb.gov, including:

-

“Quick Reference Guide to Bank Secrecy Act Requirements for Money Services

Businesses;”

-

“Guide to Money Laundering Prevention;”

-

Posters and “Take One” cards, available in multiple languages and bilingual

versions, to inform money services business customers about Bank Secrecy Act

requirements and help customers understand why the business must ask for

personal information; and

-

Videos and CD-ROMs, in English and Spanish, with case studies designed to

educate money services business employees about the Bank Secrecy Act

requirements.

•

FinCEN Regulatory Helpline – 800-949-2732 – for questions concerning Bank

Secrecy Act requirements.

•

FinCEN Financial Institutions Hotline – 866-556-3974 – to report suspicious activity

that may be related to terrorist financing or ongoing money laundering schemes.

•

FinCEN Advisory 33, “Informal Value Transfer Systems” (November 2003)

(available on the www.fincen.gov website).

•

“Report to Congress in Accordance with Section 359” of the USA PATRIOT Act

concerning Informal Value Transfer Systems, March 2003 (available on the

www.fincen.gov website)

ort suspicious activity

that may be related to terrorist financing or ongoing money laundering schemes.

•

FinCEN Advisory 33, “Informal Value Transfer Systems” (November 2003)

(available on the www.fincen.gov website).

•

“Report to Congress in Accordance with Section 359” of the USA PATRIOT Act

concerning Informal Value Transfer Systems, March 2003 (available on the

www.fincen.gov website).

•

Money Transmitter Regulators Association (www.mtra.web) - the association of state

regulators of the money transmitter industry.

•

Board of Governors of the Federal Reserve System (www.federalreserve.gov).

•

Federal Deposit Insurance Corporation (www.fdic.gov) and

(www.fdic.gov/regulations/examinations/bsa).

•

National Credit Union Administration (www.ncua.gov).

•

Office of the Comptroller of the Currency (www.occ.treas.gov).

•

Office of Thrift Supervision (www.ots.treas.gov) and (www.ots.treas.gov/bsa).

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APPENDIX

Frequently Asked Questions on Providing Banking Services to Money Services

Businesses

Registration and Licensing

1.

What are the FinCEN registration requirements for Money Services Businesses?

As set forth in 31 CFR 103.41, all money services business must register with FinCEN

(whether or not licensed as a money services business by any state) except:

•

A business that is a money services business solely because it serves as an agent of

another money services business;

•

A business that is a money services business solely as an issuer, seller, or redeemer of

stored value;

•

The U.S. Postal Service; and

•

Agencies of the United States, of any state, or of any political subdivision of any

state.

A branch office of a money services business is not required to file its own registration

form

because it serves as an agent of

another money services business;

•

A business that is a money services business solely as an issuer, seller, or redeemer of

stored value;

•

The U.S. Postal Service; and

•

Agencies of the United States, of any state, or of any political subdivision of any

state.

A branch office of a money services business is not required to file its own registration

form. Those money services businesses required to register must complete and submit to

the Internal Revenue Service – Detroit Computer Center a form

[www.msb.gov/pdf/msbregform01102004.pdf] that identifies the following: (1) the

name, location, and taxpayer identification number of the business; (2) information

concerning the owners of the business; (3) the location(s) of operation and the number of

branch locations and number of agents; (4) the products and services offered; (5)

information about the primary transaction account; and (6) the location of supporting

documentation.

Additionally, under existing FinCEN regulations, a money services business has 180 days

in which to register from the time that it begins performing the functions that subject it to

the money services business regulations.[See Footnote 11] Therefore, it is possible that a money services

business will appropriately seek banking services before completing the registration

process with FinCEN, but still be in full compliance with the law.

2.

What resources are available for banking organizations to use to confirm

registration or licensing status of a money services business?

Regarding FinCEN registration, a banking organization may rely on the correspondence

received by the money services business from the Internal Revenue Service – Detroit

Computing Center as confirmation that the money services business has registered with

FinCEN. All registered money services businesses will have such correspondence and

should be prepared to provide it to the banking organization

garding FinCEN registration, a banking organization may rely on the correspondence

received by the money services business from the Internal Revenue Service – Detroit

Computing Center as confirmation that the money services business has registered with

FinCEN. All registered money services businesses will have such correspondence and

should be prepared to provide it to the banking organization. Note that it may take 60

Footnote 11 -- See 31 CFR 103.41(b)(3).[End of Footnote 11]

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days or more after a money services business files its registration form for the business to

receive an acknowledgment letter from the Internal Revenue Service. The

acknowledgment letter from the Internal Revenue Service will be the only confirmation

received by the money services business. As an alternative, if the money services

business has filed its registration but has not yet received its acknowledgement letter, the

banking organization may rely on a copy of the registration form submitted by the money

services business until such time as the money services business either receives its

acknowledgement letter or appears on the money services business registration list

published by FinCEN (accessible at www.msb.gov). FinCEN seeks to assist banking

organizations by assembling, preparing and forwarding information on the money

services business industry and applicable Bank Secrecy Act requirements on FinCEN’s

website dedicated to the money services business industry, www.msb.gov.

Regarding state licensing requirements, individual state regulatory authorities offer a

variety of information. Also, FinCEN is working with state regulators on a variety of

information-sharing initiatives that will enhance cooperation with respect to anti-money

laundering regulatory issues

cy Act requirements on FinCEN’s

website dedicated to the money services business industry, www.msb.gov.

Regarding state licensing requirements, individual state regulatory authorities offer a

variety of information. Also, FinCEN is working with state regulators on a variety of

information-sharing initiatives that will enhance cooperation with respect to anti-money

laundering regulatory issues. One initiative will be to identify and promote resources

where banking organizations and others can go to learn about state anti-money laundering

requirements applicable to money services businesses as well as the status of individual

money services businesses.

3.

How can a banking organization confirm that a money services business is an

agent that is not required to register with FinCEN?

A money services business that is an agent of a principal money services business will

generally have contracts and agreements with the principal money services business, and

agents should be expected to provide these documents to a banking organization upon

request. Additionally, many large money services businesses list information about their

agents on their public web sites.

4.

How should a banking organization document its review of registration,

licensing, or agent status of a money services business?

Banking organizations should document their review of the applicable registration,

licensing, or agent status of a money services business customer, but are not required to

maintain copies of actual documentation received from a money services business.

Banking organizations should also consider the availability of public information

regarding licensing, registration, or agent status for money services businesses. For

example, many states make licensing information publicly available, and many large

money services businesses list their agents on their public web sites.

2

opies of actual documentation received from a money services business.

Banking organizations should also consider the availability of public information

regarding licensing, registration, or agent status for money services businesses. For

example, many states make licensing information publicly available, and many large

money services businesses list their agents on their public web sites.

2

Due Diligence

5.

After applying the Customer Identification Program, and confirming registration,

licensing, and agent status, as applicable, and when a banking organization’s risk

assessment of a money services business customer indicates a low risk of money

laundering or other illicit activity for the particular customer, is a banking

organization required to perform further due diligence?

No. After assessing basic information of a particular money services business customer,

including: (1) the products and services offered by the money services business; (2) the

locations and markets served by the money services business; (3) anticipated account

activity; and (4) purpose of the account, if a banking organization determines that its

relationship with the particular money services business constitutes a low risk of money

laundering or other illicit activity, a banking organization is not routinely expected to

perform further due diligence. Banking organizations should consider and perform

further due diligence, such as a review of a money services business’s anti-money

laundering program, if the banking organization’s risk assessment of a relationship with a

particular money services business indicates heightened risks.

However, banking organizations are reminded that risk-based monitoring of all accounts,

regardless of the amount of due diligence performed for a particular customer, is a key

element of an effective system to identify, and where appropriate, report suspicious

activity

anking organization’s risk assessment of a relationship with a

particular money services business indicates heightened risks.

However, banking organizations are reminded that risk-based monitoring of all accounts,

regardless of the amount of due diligence performed for a particular customer, is a key

element of an effective system to identify, and where appropriate, report suspicious

activity. Discovery of suspicious activity in transactions with a money services business

initially deemed to represent low risk may necessitate further due diligence.

6.

Can a banking organization open or maintain an account for a money services

business that has not registered or obtained a state license because the customer

was unaware of applicable requirements? Should a banking organization file a

suspicious activity report in such instances?

Yes. Banking organizations are not required to refuse to open new accounts for money

services businesses that have failed to comply with registration or licensing requirements.

Similarly, there is no requirement in the Bank Secrecy Act regulations that a banking

organization terminate existing accounts of customers based solely on the discovery that

the customer is a money services business that has failed to comply with licensing and

registration requirements. The decision to maintain or close an account should be made

by a banking organization’s management under standards and guidelines approved by its

board of directors.

However, continued noncompliance by a customer with applicable licensing, registration

or other regulatory requirements after learning of such requirements would likely be an

indicator of heightened risk. Banking organizations should file suspicious activity reports

if they become aware that customers are operating in violation of the registration or state

licensing requirements.

3

rectors.

However, continued noncompliance by a customer with applicable licensing, registration

or other regulatory requirements after learning of such requirements would likely be an

indicator of heightened risk. Banking organizations should file suspicious activity reports

if they become aware that customers are operating in violation of the registration or state

licensing requirements.

3

7.

Do FinCEN and the Federal Banking Agencies have an expectation that

banking organizations should educate money services businesses about any

requirements of the Bank Secrecy Act?

No. The Bank Secrecy Act does not require, and neither FinCEN nor the Federal

Banking Agencies expect, banking organizations to serve as the de facto regulators of the

money services businesses for which they maintain accounts. Accordingly, banking

organizations are not expected to educate money services businesses about the Bank

Secrecy Act requirements that apply to the industry. However, when a banking

organization is conducting due diligence with respect to its money services business

customers, questions will inevitably arise. In such cases, banking organizations can

direct inquiries by money services businesses about applicable Bank Secrecy Act

requirements to existing regulatory resources such as www.msb.gov or FinCEN’s

Regulatory Helpline at 1-800-949-2732.

In addition, there are several ways for banking organizations to obtain free educational

materials produced by FinCEN for money services businesses:

•

Submit an online order form through www.msb.gov (fastest option)

•

Print an order form from www.msb.gov and fax to 1-800-773-8356 or mail to:

Money Services Business Program Office

P.O. Box 39

Vienna, VA 22183

•

Phone an order to 1-800-386-6329

4