Money Services Business Registration and De-Registration

This section of The SAR Activity Review discusses current issues raised with regard to the preparation and filing of SARs. This section is intended to identify suspicious activity reporting-related issues and provide meaningful guidance to filers. In addition, it reflects the collective positions of the government agencies that require organizations to file SARs.

MSBs provide valuable financial services, especially to those who may not have ready access to the banking sector. The MSB industry is quite diverse, ranging from large Fortune 500 companies with global presence to small ?mom-and-pop? convenience stores in ethnic neighborhoods where English may rarely be spoken. Moreover, given the types of the products and services provided and the distribution channels, some participants in this industry sector may be at greater risk for misuse by terrorist financiers, money launderers, and other criminals. Consequently, we believe that it is vital to identify and reduce the number of unregistered MSBs in order to better focus resources to encourage increased compliance with the BSA?s programmatic, recordkeeping, and reporting requirements.

With the above background in mind, we recommend that financial institutions take time to familiarize themselves with guidance we released this past February in connection with registration and de-registration of MSBs.31 This guidance (FIN-2006-G006) is intended to clarify BSA requirements regarding initial registration, renewal, and de-registration of MSBs.

Important elements of the guidance include the following points:

The failure to renew registration results in removal from our registration list. As of February 3, 2006, we have started omitting from the posted MSB Registration List any entities that have not renewed their registrations by their respective renewal deadlines. If these entities were required to renew their registrations and failed to do so, we will deem those businesses to be unregistered MSBs. Additionally, we indicated that failure to register (or renew registration), could lead to civil and criminal penalties for violation of BSA regulations.
Registration is prospective. If an MSB previously failed to register as required, but has since implemented written policies and procedures such that it is no longer providing services that require registration as a MSB, it should not register for its past activity as an MSB.
If an entity is currently registered but no longer meets the definition of an MSB, it no longer needs to be treated as an MSB customer.
If an entity crosses the $1,000 MSB definitional threshold on a one-time basis, that one-time action if not repeated, does not cause the entity to become an MSB.

In light of the above guidance, qualifying MSBs should be aware that there is now an even greater expectation that they will properly acquaint themselves with and comply with the registration requirement.

Initial Registration and Registration Renewal
BSA regulations require certain MSBs to register with FinCEN whether or not they are licensed as MSBs by any state or other relevant domestic jurisdiction. The applicable definition of an MSB includes each agent, agency, branch, or office within the United States doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities: (1) currency dealer or exchanger; (2) check casher; (3) issuer of traveler?s checks, money orders, or stored value; (4) seller of traveler?s checks, money orders, or stored value; (5) money transmitter, regardless of the amount of money transfer services offered; and (6) the U.S. Postal Service, except with respect to the sale of postage or philatelic products. A person who does not offer one or more of the financial services specified in (1) through (4) above in an amount greater than $1,000 in currency or monetary or other instruments for any one person on any one day in one or more transactions is not covered by the definition of an MSB, and therefore is not required to register.

At the present time, the following MSBs are excepted from the registration requirement:

A business that is an MSB solely because it serves as an agent of another MSB;
A business that is an MSB solely as an issuer, seller, or redeemer of stored value; and
The U.S. Postal Service and agencies of the United States, or any State, or of any political subdivision of any State.

Additionally, branch offices of an MSB are not required to file their own registration forms.

Depository institutions and persons registered with and regulated or examined by, the Securities and Exchange Commission or the Commodity Futures Trading Commission for BSA compliance that offer otherwise qualifying money services are not defined as MSBs and, therefore, are not required to register. Likewise, casinos and card clubs are not required to comply with rules specific to MSBs.

Initial registration of MSBs in existence 180 days or more before December 31, 2001 was required on or before December 31, 2001. These MSBs were then required to renew their registrations by December 31, 2003 if they continued to qualify as MSBs. Thereafter, for these entities, the requirement is to continue to renew registrations every two years (by December 31, 2005, 2007, 2009, etc.) for as long as the business continues to operate as a qualifying MSBs.

Initial registration of MSBs established after December 31, 2001 is required before or by the end of 180 days after the date of establishment as MSBs. An initial registration period begins January 1 of the year in which a business is required to register and ends December 31 of the second calendar year. These MSBs are required to renew their registrations for the first time at the end of their initial registration periods. Thereafter, registration renewal is required every two years by December 31 for as long as the entities continue to operate as qualifying MSBs.

Re-registration
Re-registration is required if there is:

A change in the ownership or control that requires the business to reregister under state law;
A transfer of more than 10 percent of the voting power or equity interests of the MSB (other than one that must be reported to the Securities and Exchange Commission);
A greater than 50 percent increase in the number of agents.

The calendar year in which the ownership change, equity transfer, or agent increase occurs is treated as the first year of a new (initial) two-calendar year registration period. Such re-registration initiates a new calculation for determining renewal deadlines, just as an initial registration period does for calculating subsequent renewal deadlines.

De-registration and Ceasing to be a Money Services Business
There is currently no provision in the BSA regulations or procedures to allow an MSB to de-register even if the business is no longer providing services that require registration as an MSB. At the present time, the only option for an entity that has ceased to operate as an MSB, or that has registered incorrectly, is to refrain from renewing its registration. If the entity does not renew its registration, after the two-year renewal deadline has passed and we determine that the business is no longer currently registered we will omit the business from the posted MSB Registration List.

The date upon which an entity implements (not merely adopts) written policies and procedures that would exclude it from the definition of MSB is the effective date upon which the business ceases to be an MSB. For example, a check casher that registered as an MSB because it cashed checks at a level that met the regulatory definition (i.e., 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), but has subsequently implemented written policies and procedures to no longer offer check cashing services that reach the $1,000 definitional threshold for a check casher, has ceased to be an MSB. This is the case even if the business continued to cash checks, provided that it does not cash checks in an amount that triggers the definitional threshold for an MSB. (See FinCEN Ruling 2005-3.) Such a business should not renew its registration when it expires. Moreover, other entities are no longer required to continue treating an entity that has ceased to meet the definition of an MSB as an MSB customer.

For additional guidance on MSB registration requirements, please call FinCEN?s Regulatory Helpline at (800) 949-2732 or visit FinCEN?s website at www.msb.gov.

Excerpted from SAR Activity Review Issue 10, page 39