By Mehmet Munur
The Financial Crimes Enforcement Network of the Department of Treasury released
final regulations relating to money services businesses
and stored value
that amend Bank Secrecy Act regulations. The final regulations provide clarity, incorporate previous administrative rulings, and create exclusions from the definition of MSBs for activities that pose low risk for money laundering.
FinCEN’s final rules regarding MSBs is more of a clarification in nature than a broadening of the existing regulations. For example, the final rules specifically incorporate previous FinCEN rulings and guidance relating to exceptions to MSBs for payment processors, armored cars, and gift cards. The regulations also provide some clarification regarding agents, the meaning of “doing business,” and MSBs located outside of the US.
The final rules regarding stored value redefine that term as prepaid access. The regulations also retain a facts-and-circumstances test, but introduce helpful criteria that may help determine whether an entity is a provider or seller of prepaid access. In addition, FinCEN has chosen to create a $2,000 threshold for closed loop stored value that will be excluded from stored value programs. As a result, those excluded entities will not be subject to the AML program obligations that go along with stored value programs. Other exclusions to stored value programs relate to flexible spending and dependent care funds and payroll programs that do not (i) allow international transfers, (ii) transfers among users, and (iii) loading additional sources from non-depository sources.
As a result of the various comments by the industry and law enforcement, FinCEN has created a regulatory scheme that focuses on the risks of money laundering while leaving many of the schemes that are unlikely to result in money laundering risk unregulated.