Federal Headlines FinCEN Revises Bank Secrecy Act Regulations on Money Services Businesses (RIN 1506-AA97)

The Financial Crimes Enforcement Network (FinCEN) has revised regulations implementing the Bank Secrecy Act (BSA) regarding money services businesses (MSBs) to clarify which entities are covered by the definitions. The BSA authorizes the Treasury Department to issue regulations requiring financial institutions to keep records and file reports that are useful in criminal, tax or regulatory proceedings to protect against international terrorism. The Treasury Department can also impose anti-money laundering (AML) program requirements on financial institutions. FinCEN has issued regulations applying to a type of financial institution known as money services businesses (MSBs), which includes currency exchanges; issuers, redeemers, or cashiers of travelers checks or similar instruments; the U.S. Postal Service; anyone who engages as the business of the transmission of funds; and any business that engages in an activity similar to these activities. MSBs must establish certain programs, file reports, maintain records and comply with various requirements, including, in most cases, registration with FinCEN. All MSBs are subject to examination for BSA compliance by the IRS.

After holding hearings and receiving public comments on proposed regulations, FinCEN issued final regulations. First, these regulations refined the definition of MSBs doing business to encompass those whose business is not conducted on a regular basis, as well as those whose business is unlicensed, in order to emphasize that “doing business” refers to activities, not status. Second, foreign-located MSBs will have the same reporting and recordkeeping requirements, and will be subject to the same civil and criminal penalties, as U.S.-based MSBs, with respect to their activities in the United States. Further, such MSBs must designate an agent who resides in the United States to accept service of legal process. Third, the definition of MSB has been clarified, with some language moved and rearranged in the regulation. Fourth, references to “currency dealer or exchanger” in the regulations have been changed to “dealer in foreign exchange,” as such persons exchange other instruments besides currency, and the regulations apply to any exchange that occurs in the United States, even if the exchange consists of instruments denominated in foreign currencies. Other related terminology has also been updated, including “check cashier,” “issuer or seller of traveler’s checks or money orders,” “stored value,” and “money transmitter.” The compliance date for the regulations is January 23, 2012.

FinCEN Final Rule RIN 1506-AA97, 2011FED ¶47,032

Other References:

31 USC Chapter X

CCH Reference – 2011FED ¶36,551A

CCH Reference – 2011FED ¶36,551FT

CCH Reference – 2011FED ¶36,551RP

CCH Reference – 2011FED ¶36,551VK

CCH Reference – 2011FED ¶36,551X

CCH Reference – 2011FED ¶36,551XH

Tax Research Consultant

CCH Reference – TRC FILEBUS: 9,316


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