Money Service Business (MSB)

In 2011, FinCEN issued a final rule that defined a money services business (MSB) as the following:

  • a person doing business, whether or not on a regular basis or as an organized or licensed business;
  • the business is wholly or in substantial part within the United States;
  • the business functions as a “money transmitter”;
  • it does not matter if the business operates directly, or through an agent, agency, branch, or office.

A “money transmitter” is defined as:

  • a person that provides money transmission services, or
  • any other person engaged in the transfer of funds.

FinCEN defines money transmission services as “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”  The term “other value that substitutes for currency” does encompass cryptocurrencies or Convertible Virtual Currencies  (CVCs) per FinCEN’s vernacular. This includes crypto-to-fiat and crypto-to-crypto transfers. This would categorize Virtual Asset Service Providers such as Cryptocurrency Exchanges, certain P2P Exchangers, and hosted-wallet providers as money service businesses.

Money services businesses do not include:

  • Banks
  • A person registered with, and regulated or examined by, the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC)

Under the Bank Secrecy Actin in the US, MSBs are required to develop, implement, and maintain an effective written anti-money laundering (AML) program to prevent the facilitation of money laundering and the financing of terrorism.

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