Did you know that if you are a money transfer company or a bank or even a fintech operating OUTSIDE the United States and you sign-up a US Customer, you are violating a serious US law?
The US Government makes no distinction between companies outside the US border to those that operate within the US border when it comes to signing us US customers.
That is this FinCEN ruling that treats all MSBs / Financial Institutions that are outside of United States, yet doing business in the US, as no different from MSBs / Financial Institutions that are in the US and hence requires them to obtain MTLs (Money Transmitter Licenses) in all the US States they operate in: https://faisalkhan.com/services/money…
The original FinCEN ruling: https://www.fincen.gov/resources/advi…
Hello. My name is Faisal Khan. I am a banking and a payment consultant. A question I get a lot in the money transfer world is, ‘We are licensed outside the United States, why do we need to be licensed inside the U.S.?’
Very interesting question. The U.S. is the only country that requires you to be licensed in the United States, if you are going to be signing up a United States customer, a U.S. resident or a U.S. citizen etc.
You could be licensed in let’s say the United Kingdom and you can take customers from all over the world, but not from the U.S. And why is that? Well. The U.S. has something, the FINCEN which is the Financial Crime Enforcement Network has a ruling and that ruling, I will put that ruling in the links below, has a ruling which says the following. So FINCEN says the following. If you are a financial institution that is licensed outside the U.S. and you are signing up a U.S. customer, we will make no differenciation to you as if you were no different than operating inside the United States. So that means we will classify you as a money services business and hence you would need to go get money transmitter licenses from all the states that you pick up U.S. customers from. So if you are a bank or a financial institution outside the United States, and you are signing up customers from inside, FINCEN says, it doesn’t matter to us if you’re outside the U.S. We are now treating you as if you were in the U.S. Hence you have to abide by U.S. laws and we will have to go get U.S. money transmitter licenses.
Now you may say well I dont care what FINCEN will do. Well the long arm of the United States government will then come after you. FINCEN being part of the Department of Treasury will go after you. They will come after your bank. They will say shut this guy down because he is picking up U.S. customers, and the banks says I’m sorry I’m not going to do that. Well guess what. They will go after your bank. They will cut off the U.S. dollar clearing from your bank. And if your bank decides to be so bold to say yes to I don’t care. They will then tear down all the other banks. Any other bank that does business with this bank, we will go out of their U.S. dollar clearing. What do you think is going to happen? What is going to happen is that they will pick you up, they will pick your sorry ass up and hand you over to the authorities as soon as they can because they do not want anything happening with their banking.
So if you have a money transmitter license inside the U.S., you’re good. But if you’re operating outside the United States and you don’t have money transmitting licenses you can be in deep trouble and hence it is always advisable to seek obviously a legal opinion on the kind of coverage that you may be doing. But in many cases if you feel you are a MSB or are doing or are doing money services business activity, chances are you will require money transmitter licenses in the U.S. even though you may physically be outside the United States.
I hope I was able to answer the question. If you have any more, feel free to ask in the comments below I’ll be happy to answer. Till next time, take care.
This page was last updated on December 10, 2019.