We noticed recently that two business customers started making larger cash deposits than they used to. After looking at the history I noticed ACH debits on both customer's accounts to two companies that are money transmitters. I researched both money transmitters and both are registered with FinCEN. Both of our customers are listed as agents of Transmitter #1 and that transmitter is registered to do business in our state. Transmitter #2 is not registered in our state according to the "States of MSB Activities" found on the FInCEN website. I am sending a letter to our customers requesting a copy of the contracts with both transmitters, as well as proof Transmitter #2 is registered in Arkansas and that they are a registered agent of the transmitter. Is there anything I can do to stop the transactions with the transmitter that isn't registered in our state? Any other steps recommended? This is our first run in with an agent of an MSB.

Thanks

I would not be quite that proactive. Focus on your end of the pipeline and 1) report them to the state as an unregistered money transmitter and 2) deal with your customer in a meaningful way.

Great. Thanks Ken!

It's been a while since I looked at this sort of problem, but I seem to recall that an MSB's failure to register with FinCEN or with a state when required is a SAR-reportable event.

From FinCen's April 26, 2005 Guidance :

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. 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.

Thanks, Brian, for confirming my synapses are still (mostly) working.

John may have a screw loose, but I am happy to keep tightening it as needed.

Hmm, youngster! Have you heard of "thumbscrews"?

I confess, I had to look it up.

If it turns out that both the transmitter and the customer are both unregistered and neither "repents" in a timely fashion, it would be appropriate to list both as subjects on the same SAR.

We have a customer that is a grocery store and is registered as an agent for Western Union. They offer bill payment and money transmission services through Western Union. The customer also cashes checks over $1,000 frequently. Does their Western Union agent agreement cover the check cashing threshold of $1,000 per person per day also? The agreement with Western Union only talks about funds transfers. The grocery store did not renew their FinCEN registration because Western Union told them their agent agreement covered them as an MSB (I’m not sure it was disclosed that they cash checks over $1,000 per person per day). Does anyone know if this is covered by the agreement or not? I have emailed FinCEN for an interpretation, but my initial thoughts are they are not covered under the agreement, and should register separately.

No, they are not covered under the Western Union, they have to register as an MSB if they meet the definition of an MSB. I had that come up before also and FinCEN said they had to register even though they are an agent for Western Union.

I agree with Sunshine Lady and this is a good question that has caused quite a bit of confusion over the years.

Keep in mind that they are actually an MSB for two reasons: 1) They are an agent of Western Union (i.e. money transmitter in any amount) and 2) they cash checks over $1,000. Being an agent doesn't require registration but cashing checks over $1,000 does. Said another way: if they were an MSB solely because they were an agent of Western Union, they would not be required to register. Since they also cash checks over $1,000, this activity triggers registration.

Take a look at this FinCEN page which discusses exceptions to MSB registration: https://www.fincen.gov/msb-exceptions

Specifically, look at this explanation:
"Solely an agent. - A person that is an MSB solely because that person serves as an agent of another MSB is not required to register. However, a person that is an MSB both because it engages in MSB activities on its own behalf and as an agent of another MSB, must register."

Thank you both for confirming my thoughts.

This seems like a misunderstanding on the grocery stores part. They were previously registered for 4 of the 7 MSB activities (https://www.fincen.gov/am-i-msb) and now are only covered under the agent agreement for being a money transmitter. Since they are technically an unregistered MSB, should I be filing a SAR until they register and provide documentation? I am leaning heavily towards yes, just would like to confirm my thoughts.

Yes, I was told to file a SAR by FinCEN. In our policy if it is and existing customer and we find the activity, they have 30 days to get us the documents needed or we close the account. In the SAR, I did mention that we found the activity and when they actually got us the documentation.