On the basis on a current legal framework regulating financial sector, all money services businesses in the USA are obliged to get registered with the US treasury and finance department and obtain a US MSB license, unless the service provider acts solely as a middle person of a MSB. In this regard, governmental agencies and the US Postal Service are also exempt from mandatory registering as an MSB.
By the Banking Secrecy Act (BSA, the first law to fight illicit funds circulation in the US), institutions conducting services with finances i.e. MSBs must regularly submit reports with the FinCEN via the e-filing mechanism established by the BSA.
Overview of a legal and regulative framework
The FinCEN is under the remit of the US national treasury and finance department that gathers and checks data related to financial operations. The primary purpose of this organization is counteracting to both local and cross-border illicit funds circulation, as well as terroristic groups funding and other crimes associated with finances.
Under the conditions established by a legal and regulative framework, all MSBs in the US must renew their license with FinCEN as often as once a biannual basis. If the owners of the company were changed or voting power or equity interest of over 10% was transferred, the MSB will be obliged to re-file a registration application. Also, if the number of its intermediaries is increased by more than 50%, a business will need to get registered again.
Conditions that require getting a USA MSB License
All MSBs in the USA must operate as licensed and completely law-abiding entities. As per FinCEN, an organization that provides the below-mentioned goods or services will be considered an MSB:
- Money Orders or Traveller’s Cheque: For operating as providers or sellers of funds orders or traveler’s cheques, the institution is considered a money service business in the USA. As long as it deals with traveller’s cheques or money orders that exceed the amount of 1,000 USD, it will be treated as MSB.
- Money Transfer Service: Institutions that transfer currencies, or other monetary units from one individual to another are regarded as those conducting the type of the business activities that is required to be licensed.
- Cheque Casher: A natural person or legal entity that takes a cheque or similar monetary tools in exchange for currency worth at least 1,000 USD on behalf of another individual is to be treated to perform MSB activities that necessitate a license. But this does not refer to companies that provide prepaid access in return for a cheque or monetary tool; those businesses take monetary tools as a form of payment for any goods or services; and organizations that hold customers’ cheques as security for repayment of a loan.
- Currency Exchange: A natural person or legal entity that takes currencies of other countries, an amount of which exceeds 1,000 USD on behalf of another individual is considered to be a Forex broker.
- Prepaid Access Seller: This point refers to providers and sellers of prepaid access. Generally, this category of service providers presents an organization that receives money from clients. This money can be further redeemed by clients via an e-device or similar means.
In line with the law, all MSBs must draw up, implement, and update on a constant basis an effective AML policy to prevent and counteract illegal money turnover and the funding of terrorist operations. The scale of the program is subject to the nature and size of the MSB.
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