Money Services Business (MSB)
A money services business is a category in US federal law under the Bank Secrecy Act, covering seven capacities: dealer in foreign exchange, check casher, issuer or seller of money orders or traveler’s checks, provider of prepaid access, seller of prepaid access, money transmitter, and the US Postal Service.
Also called: money service business · MSBs
A firm becomes a money services business by what it does, not by applying to be one. The federal definition catches a person, wherever located, doing business wholly or in substantial part within the United States in any of seven capacities: dealer in foreign exchange; check casher; issuer or seller of traveler’s checks or money orders; provider of prepaid access; seller of prepaid access; money transmitter; and the US Postal Service. FinCEN treats dealing in convertible virtual currency as money transmission for these purposes.
Size matters for some of those capacities and not for others. A USD 1,000 per person per day threshold applies to dealers in foreign exchange, check cashers and issuers or sellers of traveler’s checks and money orders. There is no dollar threshold at all for money transmitters — any amount counts, and that is the point practitioners most often get wrong. Banks and foreign banks sit outside the definition, as do persons registered with and functionally regulated or examined by the SEC or the CFTC, and a natural person who does any of this infrequently and not for gain.
The consequences are federal and administrative. An MSB registers with FinCEN and renews that registration, maintains an AML program with a designated compliance officer, independent testing and staff training, keeps prescribed records, and files currency transaction reports and suspicious activity reports. Those duties begin with the activity, not with a regulator’s approval.
In practice
Being an MSB triggers federal registration with FinCEN and federal AML obligations. It is not a license and it authorizes nothing: FinCEN does not license money services businesses to operate in the United States, and a registered MSB still needs a state license, with very limited exception, in every state where it operates. Note too that money transmission carries no dollar threshold at all — the USD 1,000 a day test applies to foreign exchange dealers, check cashers and money order or traveler’s check issuers, not to transmitters.
Commonly confused with
| Term | How it differs |
|---|---|
| Money Transmitter License | MSB status is federal and follows automatically from the activity; a money transmitter license is granted by an individual state after it reviews and approves an application. |
| FinCEN Registration | Registration is the filing an MSB makes with FinCEN; MSB is the status that requires the filing in the first place. |
See also
- Money Transmitter LicenseA money transmitter license is permission granted by a US state for a company to receive money from the public in that state and pay it, or its value, to someone else. Each state licenses separately.
- FinCEN RegistrationThe federal filing a money services business makes with FinCEN, on Form 107, to put itself on the Treasury’s MSB register. It must be renewed every two years. It is a notification that the business exists, not an approval of it.
- Bank Secrecy ActThe Bank Secrecy Act is the 1970 United States statute, heavily amended since, that requires banks, money services businesses and other financial institutions to keep records, register where applicable, report large cash transactions and suspicious activity, and maintain an anti-money-laundering program.
- Foreign Money Services BusinessA foreign MSB is a money services business located outside the United States that does business wholly or in substantial part within the United States, and must therefore register with FinCEN. Canada uses the same term for a separate status of its own.
- Principal MSBA principal MSB is the licensed entity whose authority an authorized delegate operates under. The principal remains answerable to regulators for the delegate’s transactions, AML program and reporting, and for keeping the delegate inside the scope it was appointed to work in.