The U.S. Treasury has enacted a final rule that significantly impacts non-bank financial entities known as “money services businesses” (MSBs), under the Bank Secrecy Act (BSA). This rule, stemming from proposals dating back to 1997, mandates MSBs to officially register with the Treasury Department. This move is aimed at enhancing regulatory oversight and combating money laundering activities.
Key Highlights of the Final Rule:
Revised Definitions: The rule updates the definitions of businesses considered MSBs for regulatory purposes. It specifically targets currency dealers, check cashers, issuers and redeemers of traveler’s checks and money orders, and money transmitters.
Registration Requirement: MSBs are now required to register with the Department of the Treasury, with a renewal needed every two years. Unlike in the proposed rule, agents of MSBs, unless acting on their behalf in money service activities, are exempt from this registration.
Agent List Maintenance: MSBs must keep an updated list of their agents annually, which will be accessible to regulators and law enforcement agencies. This list is crucial for the transparency and monitoring of MSB operations.
Initial Compliance Deadlines: The rule sets the deadline for the first registration by December 31, 2001, and for preparing the initial agent list by January 1, 2002.
Exemptions and Clarifications: Banks and entities regulated by the SEC or CFTC are not classified as MSBs. Moreover, the rule clarifies the scope of activities that define a money transmitter, sparing certain transactional activities from this designation.
Future Provisions: While issuers and sellers of stored value are recognized as MSBs, they are temporarily exempt from the registration requirement. Additionally, the Treasury anticipates introducing suspicious activity reporting obligations for certain MSB segments in the future.
Implementation and Impact:
This rule is a critical step towards tightening the regulatory framework around financial transactions that fall outside traditional banking systems. It aims to prevent money laundering by ensuring that MSBs operate with greater transparency and under closer scrutiny from regulatory bodies. By defining clear registration and agent listing requirements, the Treasury seeks to create a more secure financial environment that can better support criminal, tax, and regulatory investigations.
MSBs have specific deadlines to comply with these new requirements, marking a significant shift in how these businesses will operate and be regulated moving forward. With penalties in place for non-compliance, the rule underscores the importance of adherence to these regulatory standards for maintaining the integrity of the financial system.
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This page was last updated on February 15, 2024.
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