US FinCEN MSB Registration: Requirements, Cost and Process

The MSB categories

The definition at 31 C.F.R. 1010.100(ff) captures a person doing business in one or more of the following capacities, whether or not on a regular basis and whether or not as an organised business concern.

• - Dealer in foreign exchange
• - Cheque casher
• - Issuer or seller of traveller's cheques or money orders
• - Provider of prepaid access
• - Money transmitter
• - Seller of prepaid access
• - The US Postal Service, which is treated separately

The de minimis threshold and why it does not help money transmitters

For several MSB categories, a person is captured only where the activity exceeds USD 1,000 for any person on any day in one or more transactions. That threshold applies to categories such as dealing in foreign exchange, cheque cashing and issuing or selling traveller's cheques or money orders.

It does not apply to money transmission. A person who accepts and transmits funds is a money transmitter regardless of the amount, which means a single low-value transmission can bring the business within the definition. This is the point most commonly misunderstood by non-US firms testing the market.

FinCEN registration is not a money transmitter licence

FinCEN administers the Bank Secrecy Act. It supervises for anti-money laundering purposes and does not authorise the underlying business activity.

Authority to transmit money comes from state regulators. A money transmitter must obtain a licence in each state where it does business, subject to each state's own exemptions and interpretations. Operating without those licences can constitute an unlicensed money transmitting business under 18 U.S.C. 1960, which carries criminal penalties including imprisonment.

Filing Form 107

• - The registration is filed electronically through the BSA E-Filing System
• - It must be filed no later than 180 days after the date on which the MSB is established
• - It requires information about the business, its ownership and control, its MSB activities, its agents and the states in which it operates
• - A list of agents must be maintained and made available to FinCEN on request
• - There is no filing fee
• - Registration information must be re-filed on renewal and updated where the registration information changes

Renewal every two calendar years

MSB registration must be renewed every two calendar years, by 31 December of the second calendar year of the registration period. Missing the renewal means the business is unregistered, not merely late.

Because the cycle is calendar-based rather than anniversary-based, firms that register mid-cycle sometimes assume they have longer than they do. The renewal date should be diarised at the point of first registration.

The anti-money laundering programme

An MSB must develop, implement and maintain an effective written anti-money laundering programme reasonably designed to prevent the MSB from being used to facilitate money laundering and terrorist financing, as required by 31 C.F.R. 1022.210.

• - Policies, procedures and internal controls reasonably designed to assure compliance with the Bank Secrecy Act
• - A designated compliance officer responsible for day to day compliance
• - Education and training of appropriate personnel, including training of agents where applicable
• - Independent review to monitor and maintain an adequate programme, with scope and frequency commensurate with the risk
• - Risk-based procedures for verifying customer identification information where required

Reporting and recordkeeping

• - Suspicious activity reports for transactions conducted or attempted by, at or through the MSB involving or aggregating at least USD 2,000 where the MSB knows, suspects or has reason to suspect the transaction meets the reporting criteria
• - Currency transaction reports for transactions in currency of more than USD 10,000 in one business day, including aggregated transactions
• - Recordkeeping for transmittals of funds of USD 3,000 or more, and compliance with the travel rule requiring specified information to be transmitted to the next financial institution in the chain
• - Monetary instrument logs for cash purchases of monetary instruments between USD 3,000 and USD 10,000
• - Retention of required records for the period prescribed by the Bank Secrecy Act regulations

Foreign-located MSBs

A person outside the United States doing business wholly or in substantial part within the United States as an MSB is subject to the registration requirement, the anti-money laundering programme requirement and the reporting and recordkeeping obligations.

FinCEN has issued guidance to this effect, and the practical consequence is that a foreign platform onboarding US customers cannot rely on the absence of a US entity. A foreign-located MSB must also designate a person in the United States authorised to accept service of legal process.

Penalties for getting it wrong

Failure to register as required can attract civil money penalties and criminal liability. Separately, 18 U.S.C. 1960 makes it an offence to conduct, control, manage, supervise, direct or own an unlicensed money transmitting business, including a business that fails to comply with the federal registration requirement or operates without a required state licence.

The provision does not require proof that the defendant knew the operation was unlawful in the same way many financial offences do, which is why perimeter analysis in the United States should be completed before any customer is onboarded.