A Comprehensive Guide
In the evolving landscape of financial services, the term “money services business” (MSB) plays a crucial role in defining a broad spectrum of activities that facilitate the movement, access, and management of money. An MSB encompasses a variety of entities that, regardless of the regularity or organizational structure of their operations, offer essential financial services to the public. This article seeks to demystify the concept of MSBs, outlining their classifications, regulatory thresholds, and exclusions as defined under current financial regulations.
What Qualifies as a Money Services Business?
A money services business includes any individual or entity engaged in one or more of the following capacities:
- Currency Dealer or Exchanger: Entities involved in the exchange of currencies.
- Check Casher: Services cashing checks for a fee.
- Issuer of Traveler’s Checks, Money Orders, or Stored Value: Entities issuing financial instruments for the purpose of making payments.
- Seller or Redeemer of Traveler’s Checks, Money Orders, or Stored Value: Those engaged in the sale or redemption of these financial instruments.
- Money Transmitter: Businesses transferring money by any means including electronically or through wire transfer services.
- U.S. Postal Service: Recognized specifically as an MSB due to its financial services.
Regulatory Thresholds and Exemptions
To further clarify the scope of MSBs, certain regulatory thresholds and exemptions have been established. For the majority of the activities listed above, an activity threshold of more than $1,000 per person per day in one or more transactions is applied. This threshold is crucial for determining whether an entity qualifies as an MSB based on its involvement in activities such as currency exchange, check cashing, and the issuance or redemption of money orders, traveler’s checks, or stored value cards. If the activities under each category do not exceed this threshold, the entity is not considered an MSB based on that specific activity.
Notably, there is no activity threshold for money transmitters. This means any person or entity that engages in the business of transferring funds is considered an MSB as a money transmitter, regardless of the transaction volume.
Exclusions from the MSB Definition
Despite the broad definition, certain entities are explicitly excluded from being classified as MSBs. These exclusions include banks (as defined in 31 CFR 1010.100(d)) and persons registered with, and regulated or examined by, the Securities and Exchange Commission or the Commodity Futures Trading Commission. This distinction ensures that traditional banking institutions and certain regulated financial entities are not subjected to the same regulatory framework as MSBs.
Regulatory Background and Compliance
For a comprehensive understanding of what constitutes a money services business, reference is made to 31 CFR 1010.100(ff), which provides the complete regulatory definition. It’s important to note that every MSB is considered a financial institution under regulatory definitions, further emphasizing the importance of compliance and regulatory oversight in the operation of these entities.
Conclusion
Money services businesses play a pivotal role in the financial services sector, offering accessible financial services to a wide range of customers. Understanding the definitions, thresholds, and exclusions that apply to MSBs is essential for compliance and effective operation within the regulatory framework. As the financial landscape continues to evolve, so too will the definitions and regulations surrounding MSBs, underscoring the importance of staying informed and compliant.
Source: https://www.fincen.gov/money-services-business-definition
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This page was last updated on February 7, 2024.
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