Final rule: BSA regulations; definitions and other regulations relating to MSBs ('other value that substitutes for currency') (76 FR 43585) (Part 1 of 2)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations 43585
PART 870—CARDIOVASCULAR operations, evolving technologies, and person who engages as a business in the
DEVICES merging lines of business; and transmission of funds; and any business
separating the provisions dealing with or agency which engages in any activity
■ 1. The authority citation for 21 CFR stored value from those dealing with determined by regulation to be an
part 870 continues to read as follows: issuers, sellers, and redeemers of activity similar to, related to, or a
Authority: 21 U.S.C. 351, 360, 360c, 360e, traveler’s checks and money orders. substitute for these activities.5
360j, 371. DATES: Effective Date: This rule is FinCEN has issued regulations under
effective September 19, 2011. the BSA implementing the
■ 2. Revise paragraph (b) in § 870.2360
Compliance Date: The compliance date recordkeeping, reporting, and other
to read as follows: requirements of the BSA with respect to
for the amendments to 31 CFR 1022.380
§ 870.2360 Electrocardiograph electrode. is January 23, 2012. these types of financial institutions.
* * * * * These regulations refer to these types of
FOR FURTHER INFORMATION CONTACT: The
(b) Classification. Class II (special financial institutions as ‘‘money
FinCEN regulatory helpline at (800)
controls). The device is exempt from the services businesses’’ (‘‘MSBs’’).6 Like
949–2732 and select Option 1.
premarket notification procedures in other financial institutions under the
SUPPLEMENTARY INFORMATION: BSA, MSBs must implement AML
subpart E of part 807 of this chapter
subject to the limitations in § 870.9. The I. Background programs, make certain reports to
special control for this device is the FinCEN, and maintain certain records to
A. Statutory and Regulatory Background facilitate financial transparency. MSBs
FDA guidance document entitled ‘‘Class
II Special Controls Guidance Document: The BSA, Titles I and II of Public Law are generally required to: (1) Establish
Electrocardiograph Electrodes.’’ See 91–508, as amended, codified at 12 written AML programs that are
§ 870.1(e) for availability information of U.S.C. 1829b, 12 U.S.C. 1951–1959, and reasonably designed to prevent the MSB
guidance documents. 31 U.S.C. 5311–5314 and 5316–5332, from being used to facilitate money
authorizes the Secretary of the Treasury laundering and the financing of terrorist
Dated: July 18, 2011. (the ‘‘Secretary’’) to issue regulations activities; 7 (2) file Currency Transaction
Nancy K. Stade, requiring financial institutions to keep Reports (‘‘CTRs’’) 8 and Suspicious
Deputy Director for Policy, Center for Devices records and file reports that the Activity Reports (‘‘SARs’’); 9 and (3)
and Radiological Health. Secretary determines ‘‘have a high maintain certain records, including
[FR Doc. 2011–18391 Filed 7–20–11; 8:45 am] degree of usefulness in criminal, tax, or those relating to the purchase of certain
BILLING CODE 4160–01–P regulatory investigations or proceedings, monetary instruments with currency,10
or in the conduct of intelligence or transactions by currency dealers or
counterintelligence matters, including exchangers (to be called ‘‘dealers in
DEPARTMENT OF THE TREASURY analysis, to protect against international foreign exchange’’ under this
terrorism.’’ 1 In addition, the Secretary is rulemaking),11 and certain transmittals
Financial Crimes Enforcement Network authorized to impose anti-money of funds.12 Most types of MSBs are
laundering (‘‘AML’’) program required to register with FinCEN 13 and
31 CFR Parts 1010, 1021 and 1022 requirements on financial institutions.2 all are subject to examination for BSA
The Secretary’s authority to administer compliance by the Internal Revenue
RIN 1506–AA97
the BSA has been delegated to the Service (‘‘IRS’’).14
Bank Secrecy Act Regulations; Director of FinCEN.3 FinCEN has B. Past Public MSB Meetings
Definitions and Other Regulations implemented the BSA through
regulations (‘‘BSA regulations,’’ In 1997, FinCEN held public meetings
Relating to Money Services
to give members of the financial services
Businesses ‘‘implementing regulations’’ or ‘‘BSA
industry an opportunity to discuss the
rules’’) that appear at 31 CFR Chapter
AGENCY: Treasury Department, Financial proposed MSB regulations and any
X.4
Crimes Enforcement Network (FinCEN). The BSA defines the term ‘‘financial impact they might have on operations.15
ACTION: Final rule. institution’’ to include, in part: a 5 31 U.S.C. 5312(a)(2)(J), (K), (R), (V), and (Y).
currency exchange; an issuer, redeemer,
SUMMARY: The Financial Crimes 6 See 31 CFR 1010.100(ff) (formerly 31 CFR
or cashier of travelers’ checks, checks, 103.11(uu)).
Enforcement Network (‘‘FinCEN’’), a
money orders, or similar instruments; 7 See 31 CFR 1022.210 (formerly 31 CFR 103.125).
bureau of the Department of the
the United States Postal Service; a 8 See 31 CFR 1010.311 (formerly 31 CFR 103.22).
Treasury (‘‘Treasury’’), is revising the 9 See 31 CFR 1022.320 (formerly 31 CFR 103.20).
regulations implementing the Bank 1 31 U.S.C. 5311. Check cashers and transactions solely involving the
Secrecy Act (‘‘BSA’’) regarding money 2 31 U.S.C. 5318(h). issuance, sale, or redemption of stored value are not
services businesses (‘‘MSBs’’) to clarify 3 See Treasury Order 180–01 (Sept. 26, 2002).
covered by the SAR requirement. See 31 CFR
1022.320(a)(1), (5) (formerly 31 CFR 103.20(a)(1),
which entities are covered by the 4 On October 26, 2010, FinCEN issued a final rule
(5). FinCEN recently proposed imposing a SAR
definitions. creating a new Chapter X in title 31 of the Code of requirement with respect to transactions involving
The changes more clearly delineate Federal Regulations for the BSA regulations. See 75 stored value. See Notice of Proposed Rulemaking,
FR 65806 (October 26, 2010) (Transfer and Amendment to the Bank Secrecy Act Regulations—
the scope of entities regulated as MSBs, Reorganization of Bank Secrecy Act Regulations Definitions and Other Regulations Relating to
so that determining which entities are Final Rule) (referred to herein as the ‘‘Chapter X Prepaid Access, 75 FR 36589 (June 28, 2010).
obligated to comply is more Final Rule’’). The Chapter X Final Rule became 10 See 31 CFR 1010.415 (formerly 31 CFR 103.29).
straightforward and predictable. This effective on March 1, 2011. Because the Notice of
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11 See 31 CFR 1022.410 (formerly 31 CFR 103.37).
Proposed Rulemaking, Definitions and Other
rulemaking amends the current MSB Regulations Relating to Money Services Businesses,
12 See 31 CFR 1010.410(e)–(f) (formerly 31 CFR
regulations by: ensuring that certain 74 FR 22129 (May 12, 2009), was issued before the 103.33(f)–(g)).
13 See 31 CFR 1022.380 (formerly 31 CFR 103.41).
foreign-located persons engaging in Chapter X Final Rule became effective, it was
14 See 31 CFR 1010.810(b) (formerly 31 CFR
MSB activities within the United States proposed in the 31 CFR Part 103 format. In this
Final Rule, for ease of reference and where 103.56(b)(8)).
are subject to the BSA rules; updating appropriate, we have included the former 31 CFR 15 These public meetings were held in Vienna,
the MSB definitions to reflect past Part 103 citation after the 31 CFR Chapter X Virginia, on July 22, 1997; New York, New York,
guidance and rulings, current business regulatory citation. Continued
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43586 Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations
In drafting the final rules defining the industry on how to interpret and apply CFR 1010.100(ff)(4) (formerly 31 CFR
MSB categories,16 FinCEN relied in part the regulations. 103.11(uu)(4)) into one paragraph
on the comments made in these public With respect to check cashers and dealing with both issuers and sellers of
forums. money transmitters in particular, traveler’s checks and money orders
On March 8, 2005, FinCEN held a FinCEN has developed a large body of excluding stored value. The Notice also
fact-finding meeting in Washington, DC guidance in the years since the issuance specifically requested comment on a
on the provision of banking services to of the final MSB regulations in 1999.22 number of aspects of the proposed
MSBs.17 MSBs recounted their Similarly, over the years, FinCEN has changes, particularly with respect to a
challenges in obtaining and maintaining issued guidance and administrative definition of the term ‘‘funds,’’
banking services due to the perception rulings that provide examples of aggregating multiple MSB services for
that their businesses posed a high risk activities that do not meet the regulatory threshold purposes, foreign-located
of money laundering and terrorist definition of a money transmitter, even MSBs, thresholds, and stored value. The
financing. In 2006, FinCEN issued an though entities engaged in such Notice also proposed a number of minor
advance notice of proposed rulemaking activities may be involved in accepting edits to make the regulations more
seeking input on how to address these and transmitting funds.23 Given the readable.
challenges,18 and received 142 nature and scope of these important
III. Comments on the Notice—Overview
comments in response, which have interpretative rulings, FinCEN has
and General Issues
informed this rulemaking.19 updated, streamlined, and clarified the
MSB regulations in this rulemaking by The comment period for the Notice
C. Need for Review and Updates ended on September 9, 2009. FinCEN
incorporating and extending these
More than ten years have passed since interpretations in the regulatory received a total of 25 comment letters.25
FinCEN issued the BSA regulations revisions. Of these, two were submitted by
defining the categories of MSBs.20 Since depository institutions, eight by
that time, FinCEN has received II. Notice of Proposed Rulemaking industry associations, seven by various
numerous requests to apply the MSB The final rule contained in this industry participants, two by
regulations to fact patterns specific to document is based on the Notice of government agencies, and six by
particular businesses. Over one-third of Proposed Rulemaking ‘‘Definitions and individuals. Generally, commenters
these requests came from persons Other Regulations Relating to Money were supportive of the proposals to
inquiring whether or not they were an Services Businesses’’ published in the clarify the MSB definitions. FinCEN
MSB.21 Some of these requests for Federal Register on May 12, 2009 (the requested comment on a number of
guidance were prompted by significant ‘‘Notice’’).24 With the intent of more issues for informational purposes that
technological advances such as stored clearly delineating the scope of entities are not addressed by this final rule, such
value products and the online provision regulated as MSBs, the Notice proposed as stored value-related issues, whether
of financial services. These and other a number of changes to the MSB check cashers should have SAR filing
developments have changed the nature definitions, in particular: (1) requirements and whether additional
of the MSB industry. Where possible, Emphasizing that the MSB definition is recordkeeping requirements for MSBs
FinCEN has provided guidance to the based on a person’s activities; (2) should be implemented. Although these
ensuring that certain foreign-located requests for comment were not tied to
on July 28, 1997; San Jose, California, on August 1, persons engaged in MSB activities any specific regulatory changes FinCEN
1997; Chicago, Illinois, on August 15, 1997; and within the United States, such as having was proposing in the Notice, the
Vienna, Virginia, on September 3, 1997. The
discussions focused on how businesses operate and customers located in the United States, information provided by commenters
how best to regulate them. are subject to the BSA rules; (3) can be useful to FinCEN in formulating
16 Definitions Relating to, and Registration of, separating the provisions dealing with policy decisions in the future. FinCEN
Money Services Businesses, 64 FR 45438 (Aug. 20, stored value from those dealing with values and appreciates the comments
1999) (‘‘1999 Rulemaking’’).
17 FinCEN conducted the meeting in conjunction
issuers, sellers, and redeemers of received on these questions.
with the Non-bank Financial Institutions and traveler’s checks and money orders; (4)
Stored Value-Related Issues 26
Examination Subcommittees of the Bank Secrecy deferring the proposal of a new
Act Advisory Group (‘‘BSAAG’’). BSAAG is an definition of stored value to a separate Approximately half of the comments
advisory group created by the Annunzio-Wylie rulemaking; and (5) combining the received in response to the Notice
Anti-Money Laundering Act, consisting of industry,
regulatory, and law enforcement participants for the definitions in 31 CFR 1010.100(ff)(3) addressed stored value-related issues
purpose of engaging in open dialogue related to the (formerly 31 CFR 103.11(uu)(3)) and 31 that responded to questions and
protection of the U.S. financial system from money requests for comment posed in the
laundering, terrorist financing, and other abuses. 22 See FinCEN Ruling 2002–2 (Definition of Notice. The questions were intended to
BSAAG uses a variety of permanent and ad hoc Check Casher (Payday Lenders)) (Feb. 5, 2002) and
subcommittees to identify and analyze relevant
elicit responses that would assist
FinCEN Guidance 2006–G005 (Frequently Asked
issues. Public Law 102–550, Title XV, sec. 1564 Questions—Businesses Cashing Their Own Checks)
FinCEN’s effort to regulate stored value.
(Oct. 28, 1992), 106 Stat. 4073. (March 31, 2006). For a discussion of this guidance,
18 Provision of Banking Services to Money
see Notice, 74 FR at 22131. 25 All comments to the Notice are available for
Services Businesses, 71 FR 12308 (March 10, 2006). 23 See FinCEN Rulings: 2003–8 (Definition of public viewing at http://www.regulations.gov.
19 These comments are available in files dated
Money Transmitter (Merchant Payment Processor)) 26 In June 2010 FinCEN proposed replacing the
March 10 and May 15, 2006 at http:// (Nov. 19, 2003); 2004–4 (Definition of Money term ‘‘stored value’’ with ‘‘prepaid access’’ without
www.fincen.gov/statutes_regs/bsa/regs_proposal Services Businesses (Debt Management Company)) intending to broaden or narrow the scope of the
_comment.html. (Nov. 24, 2004); 2008–R005 (Whether Certain term, but instead to use terminology commonly
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20 See 1999 Rulemaking, 64 FR 45438 (Aug. 20, Reloadable Card Operations are Money Services used by the industry. See Notice of Proposed Rule
1999). For a discussion of this history, see also the Businesses) (March 10, 2008) (Merchants and ATMs Making, Amendment to the Bank Secrecy Act
Notice of Proposed Rulemaking FinCEN; associated with a network of banks were not Regulations—Definitions and Other Regulations
Amendment to the Bank Secrecy Act Regulations— deemed money transmitters); and 2008–R006 Relating to Prepaid Access, 75 FR 36589 (June 28,
Definitions and Other Regulations Relating to (Whether an Authorized Agent for the Receipt of 2010). At the time the Notice was issued, FinCEN
Money Services Businesses, 74 FR 22129, 22131 Utility Payments is a Money Transmitter) (May 21, had not yet proposed changing the terminology.
(May 12, 2009). 2008). For a discussion of these rulings, see Notice, This final rule uses the term ‘‘stored value.’’ Any
21 This statistic comes from a review of requests 74 FR at 22131–2. changes in defined terms will be addressed in a
for guidance from FinCEN’s Regulatory Helpline. 24 See 74 FR 22129 (May 12, 2009). subsequent rulemaking regarding prepaid access.
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Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations 43587
On May 22, 2009, shortly after the transmitter’’ for intermediaries and to the status that an entity has taken on
Notice was published, the Credit Card certain bill payment services. The itself or been assigned, such as a
Accountability, Responsibility and suggestions regarding intermediaries business licensed by a state. Based on
Disclosure Act of 2009 (‘‘Credit CARD and certain bill payment services are such a misunderstanding, some have
Act’’) 27 was signed into law. Section discussed further in the Section-by- wrongly concluded that an unlicensed
503 of the Credit CARD Act requires the Section Analysis. business is not subject to regulation as
Secretary to ‘‘issue regulations in final an MSB, even if it is engaged in one or
form implementing the Bank Secrecy Definition of ‘‘Currency Dealer or more of the activities listed in 31 CFR
Act, regarding the sale, issuance, Exchanger’’ 1010.100(ff)(1)–(5). Most of the
redemption, or international transport of In the Notice, FinCEN proposed to comments received regarding the
stored value, including stored value make several changes to the definition proposed change were supportive.
cards.’’ The congressional mandate of of ‘‘currency dealer or exchanger’’ (to be However, although FinCEN emphasized
Section 503 of the Credit CARD Act is called ‘‘dealers in foreign exchange’’ in the Notice that the proposed change
broader in scope than the stored value- under this rulemaking) to more would not expand the definition of MSB
related questions posed in the Notice. accurately reflect the actual underlying beyond its present scope, two
In furtherance of that mandate, activity of the industry. Eight commenters expressed concerns about
FinCEN has separately published a commenters addressed various issues this proposed change.
notice of proposed rulemaking specific related to this definition. Most One commenter argued that removing
to stored value, which FinCEN has commenters supported the proposed the phrase ‘‘doing business’’ from the
proposed to rename ‘‘prepaid access’’ changes. As a result, the proposal was regulations would cause the definition
(the ‘‘Prepaid Access NPRM’’).28 adopted without change. These of MSB to include persons who were
FinCEN believes that to address stored comments are further discussed in the not in fact doing business as MSBs, and
value-related issues in this MSB rule Section-by-Section Analysis below. asserted that expanding the category to
could cause confusion among the FinCEN received a comment letter this extent would be beyond FinCEN’s
public. Accordingly, FinCEN has from the Commodity Futures Trading powers under the BSA, which
decided to comprehensively address Commission (‘‘CFTC’’) regarding certain specifically refers to several types of
stored value-related issues in the amendments recently made to the financial institutions as ‘‘businesses’’ in
pending Prepaid Access rulemaking, Commodity Exchange Act (‘‘CEA’’), several places.32
generally including those stored value- which, among other things, adds a new FinCEN will not remove the phrase
related issues raised in the Notice. The registration category for dealers in off- ‘‘doing business’’ from the definition of
comments received in response to the exchange retail foreign exchange known MSB in this final rule. Instead, the
Notice provided valuable insights and as ‘‘retail foreign exchange dealers’’ definition will be rephrased to state that
were considered in drafting the Prepaid (‘‘RFEDs’’).30 MSBs, including dealers an MSB is ‘‘[a] person wherever located
Access NPRM. in foreign exchange, do not include doing business, whether or not on a
persons registered with, and regulated regular basis or as an organized or
Definition of ‘‘Money Transmitter’’
or examined by, the CFTC. FinCEN is licensed business concern, wholly or in
In the Notice, FinCEN proposed to considering the CFTC’s comments and substantial part within the United
revise several portions of the current has decided that it would not be States, in one or more of the capacities
definition of ‘‘money transmitter’’ to appropriate to address the issue of listed in paragraphs (ff)(1) through (ff)(6)
clarify which activities are covered by RFEDs in this rulemaking. of this section.’’ We moved the
or excluded from the definition. Most qualifying phrase ‘‘whether or not on a
commenters generally supported the IV. Section-by-Section Analysis regular basis or as an organized business
proposed changes. All commenters concern’’ from the end of the sentence
A. Refining the General Definition of
supported excluding from the definition to immediately follow ‘‘doing business’’
‘‘Money Services Business’’ Doing
of ‘‘money transmitter’’ persons that in an effort to emphasize our concern
Business
have only a ‘‘custodial interest’’ in that ‘‘doing business’’ can be
currency they are transporting.29 One Prior to this rulemaking, the
misinterpreted to refer to status, not
commenter construed the definition of regulatory definition of MSB covered
activity. To that end, the words ‘‘or
‘‘money transmitter’’ to exclude the ‘‘[e]ach agent, agency, branch or office
licensed’’ have been added before
agents of a principal money transmitter. within the United States of any person
‘‘business concern’’ to further clarify the
FinCEN wishes to clarify that any doing business, whether or not on a
issue.
person that satisfies the definition of a regular basis or as an organized business FinCEN wishes to emphasize that
‘‘money services business,’’ including concern, in one or more of the capacities whether a person is subject to regulation
an agent, is an MSB. Whether it is the listed in paragraphs (ff)(1) through (ff)(6) as an MSB does not depend on factors
agent of another MSB is relevant only of this section.’’ 31 In the Notice, FinCEN such as whether the person is licensed
for registration purposes. Two proposed to amend 31 CFR 1010.100(ff) as a business by any state; whether the
commenters suggested additional (formerly 31 CFR 103.11(uu)) by person has employees; or whether the
exclusions to the definition of ‘‘money removing the phrase ‘‘doing business,’’ person is engaged in a for-profit venture.
and replacing it with the phrase Although the final rule continues to use
27 The Credit CARD Act, Public Law 111–24, ‘‘engaged in activities.’’ FinCEN the phrase ‘‘doing business,’’ it is a
codified at 5 U.S.C. 57, Chapter 57; 11 U.S.C. 111; proposed this amendment because the
15 U.S.C. 1601, 1602, 1632, 1637, 1640, 1650, 1661, person’s activities, rather than formal
phrase ‘‘doing business’’ has been
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1666, 1666b, 1666c, 1681b, 1681j, 1693, 41 and 632; business status, that would cause the
20 U.S.C. 1001 and 1002; 31 U.S.C. 5316 (May 22, misunderstood as an implied reference person to be categorized as an MSB.
2009). Another commenter suggested that
28 See 75 FR 36589 (June 28, 2010). 30 See Food, Conservation, and Energy Act of
29 The ‘‘custodial’’ exclusion relates to a person 2008, Public Law No. 110–246, Sec. 13101, 122
the change proposed by the Notice
engaged in physical transportation, such as an Stat. 1651, 2189–94 (2008) (amending section might expand the definition of MSB to
armored car. For a more comprehensive discussion, 2(c)(2) of the CEA, 7 U.S.C. 2(c)(2)).
see Section IV.F. of this rule. See also Notice at 74 31 31 CFR 1010.100(ff) (formerly 31 CFR 32 31 U.S.C. 5312(a)(2)(R), (T), (W), (Y), (Z); 31
FR 22138. 103.11(uu)) (emphasis added). U.S.C 5330(d).
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43588 Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations
include, for example, an individual who supported the proposition that the and would also undermine FinCEN’s
cashed a check as an accommodation for threshold should be reviewed, but efforts to protect the U.S. financial
a family member. Despite not moving expressed no opinion as to whether it system from abuse.
forward with the change proposed in should be increased, decreased, Of the seven comments received on
the Notice, FinCEN remains concerned eliminated, or maintained at current the issue of extending the BSA
that the definition might be levels. One commenter supported the regulations to cover foreign-located
misunderstood to include such an elimination of all thresholds to create MSBs conducting activities in the
individual. In response to this concern, uniformity among different types of United States, five commenters
the final rule includes a provision that MSBs, and argued that the thresholds supported it, including two government
excludes ‘‘a natural person who engages are ineffective insofar as one can operate and three industry commenters. The
in an activity identified in paragraphs under those levels without decreasing two commenters opposed were from
(ff)(1) through (ff)(5) of this section on the risk of money laundering. Another industry.
an infrequent basis and not for gain or commenter supported raising the Two commenters argued that a
profit’’ from the MSB definition. By thresholds, and argued that the current foreign-located person’s mere
using the phrase ‘‘a natural person’’ in levels place an undue burden on small maintenance of a bank account in the
the limitation, FinCEN excludes only businesses. Several commenters United States should not cause that
individuals; not business entities, non- supported adjusting the thresholds to person to be defined as an MSB. FinCEN
profits, or other legal persons from the take into account disparate thresholds agrees with that position.35 Under the
MSB definition. By ‘‘infrequent’’ imposed by various state authorities, final rule, a foreign-located person will
activities, FinCEN intends to limit the inflation, or the transaction volume of be subject to the BSA as an MSB to the
exclusion to activity that is rare.33 By each individual MSB. Finally, several extent that it does business in one or
‘‘gain or profit,’’ FinCEN intends this commenters supported maintaining the more of the capacities listed in
exclusion not to be available to persons current thresholds. 1010.100(ff)(1) through 1010.100(ff)(5)
engaging in these activities for the FinCEN also sought specific wholly or in substantial part within the
purpose of monetary gain or other comments from the public regarding United States.36 Whether or not a
economic benefit, such as an exchange whether transactions involving multiple foreign-located person’s MSB activities
of valuable favors. This exclusion MSB services should be aggregated occur within the United States depends
forestalls any interpretation of the together for purposes of determining on all of the facts and circumstances of
definition of MSB to include persons whether the activity threshold has been each case, including whether persons in
solely providing accommodation met. The comments received on this the United States are obtaining MSB
services to family members, as in the proposal stressed the logistical services from the foreign-located person,
commenter’s hypothetical. Nevertheless, complications of compliance with an such as sending money to or receiving
whether a person engages in MSB aggregation requirement on the part of money from third parties through the
activities depends on all of the facts and retailers that sell multiple MSB foreign-located person.
circumstances of each case. products and act as agents for multiple A commenter also noted that foreign
MSBs. All comments received regarding banks, broker dealers, and possibly
Activity Threshold this proposal were opposed to it. other financial institutions might be
Currently, the MSB regulations apply FinCEN will continue to study these
subject to the MSB regulations. FinCEN
to persons engaged in specified issues and consider the need for a
activities that exceed $1,000 for any does not intend to include these
separate rulemaking to adjust the MSB
person in any day (‘‘activity threshold’’). institutions in the MSB definition.
activity thresholds.
The activity threshold applies to all FinCEN, therefore, has expanded the
Foreign-Located MSBs limitations to the MSB definition to
MSB categories 34 except money
transmitters, which do not have an FinCEN proposed to amend 31 CFR cover foreign banks, as well as other
activity threshold. FinCEN proposed no 1010.100(ff) to provide that foreign- foreign financial agencies that engage in
changes to the activity thresholds in this located persons engaging in MSB financial activities that, if conducted in
rulemaking. However, FinCEN sought activities in the United States are the United States, would require the
comments from the public regarding subject to the BSA rules. Specifically, foreign financial agency to be registered
whether possible adjustments to the FinCEN proposed to revise 31 CFR with the Securities and Exchange
activity threshold should be made in a 1010.100(ff) so that an entity qualifies as Commission (‘‘SEC’’) or CFTC. These
future rulemaking. More than one-third an MSB based on its activity within the provisions parallel the existing
of all comment letters received in United States, not the physical presence limitations covering domestic banks and
response to the Notice expressed an of one or more of its agents, agencies, entities registered with the SEC or
opinion regarding the current activity branches, or offices in the United States. CFTC.
thresholds. Several commenters This proposal arose out of the Two commenters expressed general
recognition that the Internet and other concerns regarding the practicality of
33 This limitation should be interpreted to mean technological advances make it
35 See FinCEN Ruling 2004–1 (Definition of
activities that are not frequent as that term is used increasingly possible for persons to offer
in FinCEN’s Guidance On Interpreting ‘‘Frequently’’ Money Services Business) (Foreign-Located
Found In The Criteria For Exempting A ‘‘Non-
MSB services in the United States from Currency Exchanger With U.S. Bank Account) (A
Listed Business’’ Under 31 CFR 103.22(d)(2)(vi)(B), foreign locations. FinCEN seeks to foreign-located currency exchanger whose only
(November 2002), http://www.fincen.gov/statutes ensure that the BSA rules apply to all presence in the United States was a bank account
_regs/guidance/html/ persons engaging in covered activities was not deemed an MSB when the currency
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final_definition_of_frequent.html. exchange transactions occurred solely in a foreign
34 FinCEN has proposed a modified application of
within the United States, regardless of country for foreign-located customers and the use
the $1,000 activity threshold with respect to each person’s physical location. To of the U.S. bank account was limited to issuing and
prepaid access, such that providers of prepaid permit foreign-located persons to engage clearing dollar-denominated monetary
access clearly marked with a value not exceeding in MSB activities within the United instruments.) (March 29, 2004).
$1,000 would not be subject to regulation as an 36 For an expanded discussion of the nature of
MSB. See Definitions and Other Regulations
States and not subject such persons to activities that will subject a foreign-located person
Relating to Prepaid Access, 75 FR 36589 (June 28, the BSA would be unfair to MSBs to the BSA as an MSB, please refer to the Notice,
2010). physically located in the United States 74 FR at 22133.
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Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations 43589
regulating foreign-located MSBs. Both but merely clarify the scope of 31 CFR By inserting the phrase ‘‘currency, or
commenters also argued that the 1010.100(ff). other monetary instruments, funds or
proposed change could create a other instruments’’ the final rule
B. Changes to the Definition of
misperception that foreign-located clarifies that dealing in foreign exchange
‘‘Currency Dealer or Exchanger’’
MSBs are too risky for financial is not limited to the physical exchange
institutions to provide them with FinCEN proposed several changes to of the currency of one country for the
financial services. Consequently, 31 CFR 1010.100(ff)(1) (formerly 31 CFR currency of another country. This
foreign-located MSBs would find it 103.11(uu)(1)), which defines ‘‘currency language sets forth the media of
increasingly difficult to open accounts dealer or exchanger’’ as a category of exchange that trigger the definition
with banks unwilling to assume such MSB. Comments regarding proposed more clearly than in the previous
potential risks. Although FinCEN changes, while noting a few concerns version of the rule. FinCEN’s current
acknowledges that regulating foreign- (discussed below), were largely rules and existing body of
located MSBs may present challenges, supportive, and the final rule adopts all administrative rulings establish that a
FinCEN believes that there are of the proposed changes. person who converts funds
meaningful benefits to be derived from The final rule replaces the phrase denominated in the currency of one
such regulation. ‘‘currency dealer or exchanger’’ with country into funds denominated in the
‘‘dealer in foreign exchange.’’ Removal currency of another country is an MSB
Under the final rule, foreign-located by virtue of that activity.38 Additionally,
MSBs will have the same reporting and of the term ‘‘currency’’ from the
category’s name is designed to clarify the phrase ‘‘other instruments’’ is
recordkeeping and other requirements intended to capture those types of
as MSBs with a physical presence in the that persons meet the definition by not
only exchanging currency, but also by payment instruments that do not fall
United States, with respect to their precisely into one of the other
activities in the United States. Foreign- exchanging other monetary instruments,
funds, or other instruments categories, but nevertheless are readily
located MSBs will be subject to the recognizable as payment instruments.
same civil and criminal penalties as denominated in currency. Although the
BSA uses the term ‘‘currency One commenter expressed concern
MSBs with a physical presence in the that the inclusion of ‘‘other instruments
United States, with respect to their exchange,’’ FinCEN interprets this
language as having been intended to denominated in currency’’ in addition
failure to comply with regulatory to ‘‘currency’’ would cover persons
requirements.37 Foreign-located MSBs capture the underlying activity involved
in foreign exchange services, which offering foreign exchange transactions
will also be required to designate a that involve stored value or other
person who resides in the United States includes the exchange of instruments
other than currency. The proposed products in a manner that would
to function as an agent to accept service implicate a wide range of retailers and
of legal process, including with respect change is consistent with current
industry practice, which commonly other entities not generally understood
to BSA compliance. to be dealers in foreign exchange.
involves exchanging instruments other
Limitations than currency. FinCEN does not consider this to be the
case however, because payment devices
The final rule inserts the term
For clarity, FinCEN proposed to add such as debit cards, credit cards, and
‘‘foreign’’ into the category’s name to
31 CFR 1010.100(ff)(8) to create a new stored value do not involve currency
clarify FinCEN’s longstanding policy
section providing limitations to the exchanges at a point of sale. The point
that any exchange that occurs in the
definition of MSB. FinCEN proposed to of sale transaction, from the perspective
United States is covered by the
move the first two limitations, of the buyer and the seller (including
definition, even if the exchange consists
excluding (1) Banks and (2) persons the U.S.-located merchant hypothesized
of currency, other monetary
registered or required to register with, by the commenter), is only denominated
instruments, funds, or other instruments
and functionally regulated or examined in U.S. dollars. Any exchange of
denominated exclusively in non-U.S.
by, the SEC or the CFTC, from the currency involved in such a transaction
currencies. Therefore, if all other
definition of MSB at 31 CFR occurs in the back office processing of
requirements are fulfilled, and a person
1010.100(ff) for clarity. Also, as noted the financial institution issuing the
exchanges currency, other monetary
above, foreign banks and certain foreign device. A merchant’s acceptance of
instruments, funds, or other instruments
financial agencies have been included foreign issued stored value to purchase
denominated in one non-U.S. currency
in the limitations in the final rule to U.S. issued stored value or U.S.
for those in another non-U.S. currency,
address issues raised by commenters currency, other monetary instruments,
the person is a dealer in foreign
with regard to foreign-located MSBs. funds, or other instruments does not
exchange for BSA purposes. Though
The third limitation, as discussed above, make that merchant a dealer in foreign
such transactions may not involve U.S.
clarifies the scope of the definition of exchange. On the other hand, there are
dollars, the potential use of a dealer in
MSB, excluding individuals engaging in transactions involving stored value that
foreign exchange in this manner to
infrequent activity as an FinCEN would deem foreign exchange,
launder money, finance terrorism, or
accommodation. There were no including scenarios where a merchant
carry out other illicit activity
comments on moving the first two either accepts or pays out foreign
nevertheless would impact the U.S.
limitations to a separate section. The currency in exchange for stored value.
financial system and should be subject
addition of the third limitation For example, a person is a dealer in
to regulation. Failure to capture
regarding natural persons and the foreign exchange if the person:
exchanges within the United States of
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extension of the first two limitations to
two foreign currencies (or of payment
include foreign institutions, while not 38 See FinCEN Ruling 2008–R003 (Whether a
instruments denominated in two foreign Person That is Engaged in the Business of Foreign
proposed, do not alter any obligations
currencies) would leave a significant Exchange Risk Management is a Currency Dealer or
and unnecessary gap in the BSA rules. Exchanger or Money Transmitter) (May 9, 2008);
37 See 31 CFR 1022.380(e) (formerly 31 FinCEN Ruling 2008–R002 (Whether a Foreign
CFR103.41(e)), 31 CFR 1010.810–1010.820
This change also underscores the Exchange Dealer is a Currency Dealer or Exchanger
(formerly 31 CFR 103.56–103.57), and 31 CFR international nature of money or Money Transmitter) (May 9, 2008); and 31 CFR
1010.840 (formerly 31 CFR 103.59). laundering and terrorist financing. 1022.410(b)(6) (formerly 31 CFR 103.37(b)(6)).
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43590 Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations
(1) Accepts foreign currency, or other person is not a dealer in foreign C. Meaning of the Term ‘‘Check Casher’’
monetary instruments, funds, or other exchange to the extent the person
FinCEN proposed to amend 31 CFR
instruments (other than stored value) exchanges their own money on their 1010.100(ff)(2) (formerly 31 CFR
denominated in foreign currency, and own behalf.40 103.11(uu)(2)) to clarify the meaning of
provides a stored value product in
The final rule includes the phrase the term ‘‘check cashing’’ by splitting
return; or (2) accepts stored value and
‘‘whether or not for same-day delivery’’ the existing regulatory definition into
provides in return foreign currency, or
to account for the potential time two paragraphs: one paragraph to define
other monetary instruments, funds, or
other instruments (other than stored difference between the date on which check cashing activity; another
value) denominated in foreign currency. the exchange rate is agreed and the date paragraph to exclude certain activity
The final rule includes the phrase ‘‘of of the exchange. Common settlement from that definition.
one or more other countries’’ 39 in the terms in foreign exchange markets In the Notice, FinCEN proposed
definition, underscoring FinCEN’s include: (1) Same-day or cash—where several changes to the definition of
policy that a person is not a dealer in the parties both agree to an exchange of ‘‘check casher’’ to more accurately
foreign exchange based on exchanges currency and conclude the exchange on describe which activities are covered by
that involve currency or instruments the same working day; (2) spot—where or excluded from the definition. Nine
denominated exclusively in the the parties agree to an exchange of commenters addressed various issues
currency of one country. Assuming all currency on one date, with the exchange related to the definition of ‘‘check
other conditions under the BSA rules taking place two working days casher.’’ Most commenters generally
are met, a dealer in foreign exchange is thereafter; (3) cash forward—where the supported the proposed changes. As a
a person that converts the currency, parties agree to an exchange of currency result, the final rule adopts most of
other monetary instruments, funds, or on one date, with the exchange of them without change with one
other instruments denominated in one currency deferred until an agreed-upon exception, related to stored value,
currency for the currency, other date in the future; and (4) future—where discussed below regarding activities not
monetary instruments, funds, or other the parties agree to an exchange of subject to the ‘‘check casher’’ definition.
instruments denominated in a different currency on one date, with settlement to ‘‘In return’’ was added to the
currency. occur in an agreed upon delivery period definition to more accurately describe
FinCEN received one comment in in the future, typically by payment of an the activity that occurs when cashing a
support of this proposal, and two check or redeeming a monetary
amount reflecting the change in the
comments in opposition. One instrument. The Uniform Commercial
foreign currency rate between the time
commenter argued that when a person Code references were added to provide
of the agreement and delivery. A
accepts instruments denominated in the a clear definition of ‘‘check.’’ A
contract for future delivery of currency reference to the definition of ‘‘monetary
currency of one country in exchange for
may also be settled with the delivery of instruments’’ was also provided. ‘‘Other
currency of the same country, where the
currency, resulting in the exchange of instruments’’ is intended to capture
currency is not U.S. dollars, the
the currencies underlying the futures those types of payment instruments that
exchange may technically require an
intermediate transaction involving U.S. contract. do not fall precisely into one of the
dollars. FinCEN, however, is concerned One commenter expressed concern other categories. The term ‘‘other
with the customer transaction and what that this change will create confusion instruments’’ is meant to capture those
currency the customer begins with and regarding the $1,000 threshold where instruments that are readily
ends with, not any exchanges or the dealer in foreign exchange is recognizable as payment instruments
recording that take place in the back instructed to make multiple without capturing goods or services that
office of the merchant. The other disbursements of exchanged currency may be purchased with a check or
commenter opposing the proposal over time. The use of the phrase monetary instrument.
argued that the activity of exchanging ‘‘whether or not for same day delivery’’ The definition incorporates the
bills within the same currency should is intended to capture such activity and redeeming of monetary instruments into
be covered under the MSB rules because to make clear that the date of the the definition of ‘‘check casher.’’ Given
certain criminals convert denominations payment by the customer to the dealer its similarity to check cashing, it is
of cash exclusively within the currency in foreign exchange, not the date of any unnecessary to treat this activity
of one country. Both of these comments, subsequent disbursements, is the date separately from check cashing.42
however, in essence propose to include relevant to the calculation of the $1,000 Accordingly, a person engaged in
activities within the category that are threshold. redeeming monetary instruments
not commonly understood to be (including traveler’s checks and money
Persons registered with and
‘‘foreign exchange.’’ Therefore, FinCEN orders) is a check casher if it redeems
functionally regulated or examined by checks for currency or a combination of
believes the proposed change better
comports with the common the CFTC including retail foreign currency and monetary or other
understanding of the foreign exchange exchange dealers are excluded from the instruments. This revision does not
business. definition of dealer in foreign exchange. capture activity that is tantamount to
The final rule includes the phrase ‘‘for As noted above, FinCEN is consulting merely exchanging one monetary
any other person’’ to explicitly reflect with the CFTC regarding retail foreign instrument for another monetary or
FinCEN’s longstanding position that a exchange dealers.41 other instrument and accordingly
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requires currency to be included in the
40 See, e.g., FinCEN Ruling 2003–9, (Definition of
39 The addition of ‘‘one or more other countries’’
redeeming. All of the commenters that
is intended to capture the fact that some foreign Money Services Business (Money Transmitter/
Currency Dealer or Exchanger)) (October 20, 2003).
addressed this proposal were
currencies are used by multiple countries. For
instance, the Euro is used by member states of the See also, FinCEN Ruling 2004–3, (Definition of
European Union. Accordingly, a dealer in foreign Money Services Business (Money Transmitter/ 42 FinCEN does not interpret ‘‘redeem’’ to include
exchange may accept funds of one or more other Currency Dealer or Exchanger)) (Aug. 17, 2004). taking payment instruments or mechanisms in
countries in exchange for funds of one or more 41 31 CFR 1010.100(ff) (formerly 31 CFR exchange for goods or services. See 1999
other countries. 103.11(uu)). Rulemaking, 64 FR at 45441–45443.
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Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations 43591
supportive. As a result, the final rule but two commenters disagreed, noting redeemed by their issuers, making a
adopts this proposal without change. that fraud exists in such low risk checks separate redemption category redundant
One commenter requested as well and that such exemptions in such circumstances. Moreover,
clarification regarding the cashing of unnecessarily complicate due diligence. redeeming a traveler’s check or money
checks or other instruments in exchange FinCEN may address other types of low order by a non-issuer has been
for both goods and services and risk check cashing in a future incorporated into the definition of a
currency. Entities that accept payment rulemaking after further study. check casher.46 All of the commenters
for goods or services with a check and Finally, under the previous who addressed this proposal were
return more than $1,000 in currency or regulations, redeemers of traveler’s supportive. As a result, the final rule
a combination of currency and other checks and money orders had SAR adopts this proposal without change.
monetary instruments fall under the obligations while check cashers did not. The rule defines an ‘‘issuer’’ by virtue
definition of ‘‘check casher’’ regardless As these two categories of MSB have of the amount at which its monetary
of the value of the goods or services.43 been combined, we will seek comment instruments or traveler’s checks are
The revision also clarifies what in a future rulemaking on whether or sold, as opposed to the amounts at
activities are not subject to the ‘‘check not to require check cashers to report which they are issued. For example, the
casher’’ definition. The definition, as suspicious activity to FinCEN under the amount of the sale includes the face
proposed, exempted purchases of closed BSA. Commenters to this rulemaking value of the monetary instruments plus
loop stored value with a check, were largely in favor of a SAR any fees. Because money orders are not
monetary instrument, or other requirement for check cashers, though issued in round dollar increments like
instrument. One commenter objected to two commenters disagreed, noting the traveler’s checks, but are rather sold
this limitation, expressing concerns that high number of reports that would be either directly by the issuer or by its
it was too narrow and that sellers of generated and the burden on check agent to a customer who specifies the
open loop stored value in exchange for cashing businesses. Issuers of traveler’s exact amount, a business must look at
checks would be ‘‘check cashers’’ for checks and money orders will continue this activity to determine whether its
purposes of this rule. As a result, this to have SAR reporting requirements transactions exceed the activity
final rule exempts the purchase of any with respect to the instruments that they threshold per person per day. Similarly,
type of stored value with a check, issue. although traveler’s checks are usually
monetary instrument, or other D. Meaning of the Term ‘‘Issuer or Seller issued in large round amounts (e.g., $20,
instrument from being an activity of Traveler’s Checks or Money Orders’’ $50, or $100), the definition is linked to
subject to the check casher definition. the aggregate amount at which those
This rule combines prior sections
Stored value related issues generally 1010.100(ff)(3) (formerly 103.11(uu)(3)), checks are sold, either directly by the
will be dealt with in a separate ‘‘issuer of traveler’s checks, money issuer or at the agent level, to a
rulemaking, as will be discussed orders, or stored value,’’ and customer in a single day. All of the
subsequently.44 1010.100(ff)(4) (formerly 103.11(uu)(4)), commenters who addressed this
The definition also exempts persons ‘‘seller or redeemer of traveler’s checks, proposal were supportive, though one
who cash checks for the verified maker money orders, or stored value,’’ into commenter argued that issuers and
of a check otherwise buying goods and new section 1010.100(ff)(3), ‘‘issuer or sellers should only be responsible for
services. One commenter was in favor of seller of traveler’s checks or money aggregation based on the amount for
this proposal and one opposed. The orders.’’ Issuance and sale of traveler’s which the instrument is sold to the
commenter opposed to this proposal checks and money orders are similar extent that they have actual knowledge
was concerned that retailers would not activities in that they can be covered by that the transactions involve the same
be able to verify the maker of a check. a single definition. A new, separate person and exceed the threshold.
FinCEN does not believe that this will category relating to stored value, However, changing the requirement
be a problem, however, because retailers renamed ‘‘Issuer, seller, or redeemer of from the face value of the instrument to
can verify the identity of the maker of stored value,’’ replaces 1010.100(ff)(4) the amount for which the instrument is
the check in any manner that comports and is discussed subsequently.45 sold does not change the aggregation
with their internal policies. Retailers In the Notice, FinCEN proposed to requirement. Businesses have the same
can verify the maker of a check by, for clarify the definitions regarding aggregation requirements as under the
example, checking a driver’s license or activities related to traveler’s checks and prior rule, only the determination of the
other form of identification at the time money orders by removing redundant amount has changed. The final rule
of purchase against the name of the language and specifying how to adopts this proposal without change.
maker of the check, already a common calculate the activity threshold for such E. Meaning of the Term ‘‘Stored Value’’
practice of some retailers who accept activities. Five commenters addressed
personal checks. The Notice asked for various issues related to the definition Under the prior rules, FinCEN
comment on other types of low risk of ‘‘issuer or seller of traveler’s checks addressed traveler’s checks, money
check cashing that should be exempt, or money orders.’’ orders, and stored value under two
such as government or payroll checks. The rule eliminates the ‘‘redeemer’’ separate definitions of providers of
Several commenters agreed that cashing language that is contained in the those products: (1) Issuers and (2)
such low risk checks should be exempt, previous definitions. Although the sellers or redeemers. The Notice
previous rules included those who proposed to group providers of stored
43 See Guidance—Definition of Check Casher and
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BSA Requirements (Jan. 2003), http://
‘‘redeem’’ traveler’s checks and money 46 FinCEN has never held that a business that
www.fincen.gov/statutes_regs/guidance/html/ orders, traveler’s checks typically are provides goods or services in exchange for payment
definition_of_check_casher.html. in the form of money orders or traveler’s checks is
44 See the discussion below under ‘‘Meaning of 45 See the discussion below under ‘‘Meaning of an MSB. See 1999 Rulemaking, 64 FR at 45447.
the Term ‘Stored Value’’’ for a discussion of the the Term ‘Stored Value’’’ for a discussion of the Accordingly, only a business that redeems these
relationship of this final rule to the recent Notice relationship of this final rule to the recent Notice instruments for currency, or exchanges them for a
of Proposed Rulemaking ‘‘Definitions and Other of Proposed Rulemaking ‘‘Definitions and Other combination of currency and monetary or other
Regulations Relating to Prepaid Access,’’ 75 FR Regulations Relating to Prepaid Access,’’ 75 FR instruments, is considered an MSB, specifically a
36589 (June 28, 2010). 36589 (June 28, 2010). check casher, under the rule.
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43592 Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations
value together, separately from issuers language in the BSA.48 The definition money transmission, and the persons
or sellers of traveler’s checks and money removes the phrase ‘‘engages as a engaged in that activity are money
orders. All of the commenters who business’’ as FinCEN continues to transmitters subject to the requirements
addressed this proposal were regulate an MSB by its activity and the of the BSA.51 To further emphasize the
supportive. The final rule adopts this context in which the activity occurs and rule’s applicability to these money
proposal without change. not by its status. The removal of transmitters, FinCEN has modified the
Several commenters noted that stored ‘‘engages as a business’’ does not final rule to include a specific reference
value is empirically similar to activity broaden the regulation beyond its to informal value transfer systems as a
engaged in by persons defined as present scope.49 The commenters were means of money transmission.
generally supportive regarding this The regulatory definition of ‘‘money
‘‘money transmitters,’’ but the
change, though one commenter argued transmission services’’ also adds the
mechanisms for directing that the
that because the statute used the phrase phrase ‘‘to another location or person.’’
money be transmitted are different.
‘‘engages as a business’’ the regulation Although this phrase is not in the
Most commenters on this issue
also must use the same phrase. The statutory definition of money
recommended treating stored value as a
change to the regulation, however, does transmitting service, it is implicit in the
separate category of MSB. FinCEN
not alter the scope or meaning of the statutory definition’s use of the word
agrees, and is therefore treating stored
rule; the change only clarifies the rule’s ‘‘transmitting.’’ Transactions involving
value as a distinct MSB activity, keeping
application. As a result, it is the acceptance of currency from one
it separate from the category established
unnecessary to replicate the phrase and person at one location and the return of
for money transmitters, while at the that currency to that same person at the
same time acknowledging that stored the final rule adopts this proposal
without change. same location would not be considered
value should have more comprehensive a money transmission service. The
anti-money laundering regulation. The definition also removes the
phrase ‘‘whether or not licensed or addition of the phrase ‘‘to another
In 1999, FinCEN issued a final required to be licensed.’’ While this location or person,’’ explicitly conveys
rulemaking deferring certain phrase reflects language in 31 U.S.C. this interpretation.
requirements for the stored value 5312, FinCEN finds the phrase to be One commenter suggested that the
industry based on the complexity of the unnecessary because it does not add phrase ‘‘the acceptance of currency
industry and the desire to avoid substantive value to the meaning of * * * from one person AND the
unintended consequences with respect money transmitter. transmission * * * to another location
to an industry then in its infancy. In The regulatory definition of ‘‘money or person,’’ indicated that acceptance by
2009, Congress passed the Credit CARD transmission services’’ includes the the money transmitter of funds had to
Act, which required FinCEN to issue phrase ‘‘or other value that substitutes precede any transmission to satisfy the
regulations relating to stored value. On for currency’’ to state that businesses definition. If this were the case,
June 28, 2010, FinCEN issued Notice of that accept stored value or currency however, it would be easy—particularly
Proposed Rule Making, Amendment to equivalents as a funding source and in an electronic environment—to
the Bank Secrecy Act Regulations— transmit that value are providing money circumvent this definition by the simple
Definitions and Other Regulations transmission services. FinCEN has expedient of transmitting funds a
Relating to Prepaid Access.47 The modified the final rule so that both fraction of a second before accepting
proposed changes to stored value are references to ‘‘value’’ in the regulation them. The activity of money
generally not reflected in this transmitting, for the purposes of FinCEN
are expressed as ‘‘value that substitutes
rulemaking, but will be addressed in a regulations, involves both acceptance
for currency’’ to maintain consistency in
separate Prepaid Access rule. and transmission, but not necessarily in
the rule’s language. The word ‘‘such’’
that order. FinCEN is concerned about
F. Meaning of the Term ‘‘Money has also been removed from the final
the ability to circumvent regulation if it
Transmitter’’ rule to eliminate the possibility of any
were to require that the acceptance of
misinterpretation that a person must
This rule revises the regulation currency must always precede
receive and transmit the exact same
interpreting 31 U.S.C. 5312(a)(2)(R), transmission. The final rule adopts the
currency, funds, or other value to be
which includes money transmitters phrase without change.
covered under the definition of ‘‘money The phrase ‘‘any means’’ is defined in
within the definition of ‘‘financial transmitter.’’ the prior rule to include transmission
institution’’ under the BSA. The prior By including the transmission of ‘‘through a financial agency or
regulation contained a facts and value, the prior and current regulatory institution; a Federal Reserve Bank or
circumstances limitation that excluded definitions of ‘‘money transmitter’’ are other facility of one or more Federal
from the ‘‘money transmitter’’ definition worded to include persons engaged in Reserve Banks, the Board of Governors
persons that are engaged in the business informal value transfer systems, of the Federal Reserve System, or both;
of money transmission as an integral including hawalas.50 Such activity is or an electronic funds transfer
part of the execution and settlement of network.’’ The final rule moves the
the transaction. The ‘‘integral’’ 48 31 U.S.C. 5330 uses the language ‘‘any business
phrase ‘‘any means’’ to a different part
exception includes entities that could that provides * * * money transmitting or
remittance services.’’ of the definition only to increase reader
not engage in their businesses without 49 FinCEN notes that ‘‘money services business’’ comprehension, and the change in
engaging in the transmission of funds. is defined as ‘‘[a] person wherever located doing placement of the phrase has no
This rule clarifies the language of these business. * * *’’ (emphasis added). 31 CFR substantive effect on the meaning of the
wreier-aviles on DSKDVH8Z91PROD with RULES
limitations. 1010.100(ff).
definition. The definition of ‘‘any
50 ‘‘An ‘informal value transfer system’ refers to
This rule’s definition of ‘‘money any system, mechanism, or network of people that
transmitter’’ is ‘‘a person who provides receives money for the purpose of making the funds system that operates outside of, or parallel to,
money transmission services.’’ This or an equivalent value payable to a third party in ‘‘traditional’’ banking or financial channels. See
another geographic location, whether or not in the generally FinCEN Advisory FIN–2010–A011
language is consistent with existing (Informal Value Transfer Systems) (September
same form.’’ FinCEN Advisory Issue 33 (Informal
Value Transfer Systems) (March 2003). ‘‘Hawala’’ is 2010).
47 See 75 FR 36589. one name for a type of informal value transfer 51 Id.
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Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations 43593
means’’ in the final rule also includes a primary business of coordinating other commercial papers, or other value
specific reference to informal value payments either from a debtor to a at any point during the transportation.’’
transfer systems. One commenter creditor or, if operating at the point of This limitation encompasses past
suggested adding the phrase ‘‘but is not sale, from a purchaser to a merchant.54 armored car rulings. The final rule
limited to’’ following ‘‘‘Any means’ A payment processor could not provide slightly modifies the proposed language
includes.’’ While FinCEN believes that the primary service of coordination to make this connection explicit, by
this clarification is not technically without providing ancillary money including a specific reference to
necessary, as ‘‘any means,’’ by its own transmission services, but because the armored cars, and by limiting the
meaning, encompasses more than the money transmission services are applicability of the limitation to persons
listed examples in the regulation, we ancillary, and because they are generally that, like the armored car companies
will adopt the change to avoid possible low risk, it is appropriate for entities that requested rulings from FinCEN,
confusion. engaged in this activity to be excluded were primarily engaged in providing
The prior regulations also include in from the definition. Note, however, that armored car services. FinCEN
the definition, ‘‘(B) Any other person this limitation only applies to previously ruled that although armored
engaged as a business in the transfer of transmission services by payment car services may fall within the
funds.’’ 52 This phrase was removed processors on behalf of the creditor or definition of a ‘‘money transmitter,’’ to
from the definition in the Notice. The seller and not the debtor or buyer. A the extent that they transport currency
final rule, however, includes this phrase contractual agreement for transmission on behalf of BSA regulated institutions,
to minimize any possible confusion services between the creditor or seller they should not be treated as money
regarding whether there has been a and the money transmitter is a relatively transmitters.55 FinCEN additionally
change to the scope of the definition of controlled flow of money that poses determined that an armored car is not a
‘‘money transmitter.’’ The scope of the little money laundering risk, provided money transmitter when it moves
definition of ‘‘money transmitter’’ in that the funds are transmitted only to currency on behalf of a private party to
this final rule is the same as that of the the creditor or seller with whom the an account or another location of the
prior regulatory definition. payment processor has contracted and same party without taking a financial
As mentioned above, the prior not to another location or person. The stake in the transaction.56
regulation contained limitations final rule adopts this proposal with only To take advantage of this limitation,
regarding the definition of a ‘‘money a change of punctuation needed for the person engaged in physical
transmitter.’’ 53 The Notice also clarity. transportation cannot have more than a
contained additional limitations that ‘‘(C) Operates a clearance and custodial interest in what is being
incorporate existing interpretations of settlement system or otherwise acts as moved at any point during the
the prior limitation by adding explicit an intermediary solely between BSA transportation.57 The exclusion does not
language reflecting policy developed regulated institutions. This includes but apply to such a person if it deposits
through administrative ruling letters would not be limited to the Fedwire currency or monetary instruments that it
and guidance. The limitation language system, electronic funds transfer is transporting into its own operating
reads, ‘‘whether a person is a money networks, certain registered clearing account at a bank, regardless of the
transmitter as described in this section agencies regulated by the SEC, and identity of the ultimate recipient of the
is a matter of facts and circumstances. derivatives clearing organizations, or funds represented by the currency or
The term ‘money transmitter’ shall not other clearinghouse arrangements monetary instruments.
established by a financial agency or One commenter suggested adding ‘‘a
include a person that only * * *’’
institution. * * *’’ Persons who solely bailment’’ as an example of ‘‘no more
engages in the following activity:
‘‘(A) Provides the delivery, provide a clearance and settlement than a custodial interest.’’ FinCEN does
communication, or network access system or act as intermediaries between not believe that it is necessary to add
services used by a money transmitter to BSA regulated institutions and do not this example in the text of the
provide other types of money regulation, but does agree that such a
support money transmission services.
transmission services are mere status may not confer more than a
* * *’’ Institutions that are used by
instrumentalities that the financial custodial interest. Another commenter
money transmitters solely for the
institutions use to process their suggested clarifying ‘‘custodial interest’’
purpose of providing a medium of
transfers. Therefore, these by adding the phrase ‘‘without
communication or transportation of
instrumentalities, such as the credit beneficial ownership.’’ While the
information between money services
card networks, are not included in the addition of ‘‘without beneficial
businesses and their agents, financial
definition of ‘‘money transmitter.’’ The ownership’’ might clarify some cases,
institutions, or service providers are not
final rule adopts this proposal without FinCEN believes that it could lead to
deemed ‘‘money transmitters.’’ No
change. confusion given its meaning and use in
commenters addressed this issue, and other money laundering contexts. Our
the final rule adopts this proposal ‘‘(D) Physically transports currency,
other monetary instruments, other intent with ‘‘custodial interest’’ is to
without change. convey that such an entity has no
‘‘(B) Acts as a payment processor to commercial paper, or other value that
substitutes for currency as a person economic stake (beyond payment for its
facilitate the purchase or payment of a
bill for a good or service through a engaged in such business from one
55 FinCEN Ruling 2004–R003 (Definition of
clearance and settlement system by person to the same person at another
Money Services Business) (Aug. 17, 2004). See also
agreement with the creditor or seller. location or to an account belonging to FinCEN 2003–R007 (Definition of Money
wreier-aviles on DSKDVH8Z91PROD with RULES
* * *’’ Although payment processors the same person at a financial Transmitter) (Oct. 28, 2003).
may provide a money transmission institution, provided that the person 56 Id. In such instance, the armored car is merely
engaged in physical transportation has a conduit or vehicle and has no control over the
service, the service is ancillary to their financial transaction.
no more than a custodial interest in the 57 Our rulings referred to the lack of a ‘‘stake in
52 31 CFR 1010.100(ff)(5)(i)(b) (formerly 31 CFR currency, other monetary instruments, the transaction’’ in establishing the standard for the
103.11(uu)(5)(i)(b)). armored car exclusion; we have clarified our
53 31 CFR 1010.100(ff)(5)(ii) (formerly 31 CFR 54 FinCEN Ruling 2003–R008 (Definition of wording to ‘‘no more than a custodial interest’’ to
103.11(uu)(5)(ii)). Money Transmitter) (Nov. 19, 2003). qualify for the exclusion.
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43594 Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations
transportation services) in any In light of the Prepaid Access NPRM, be provided without transmitting funds.
transaction involving currency, value which addresses stored value issues as No commenters addressed this issue
that substitutes for currency, or other a separate category of MSB, FinCEN is and the final rule adopts this proposal
monetary instruments being excluding stored value in any form from without change.
transported. Based on that interpretation being considered a form of money
G. Registration and Service of Legal
of the phrase, FinCEN adopts the transmission.
Many of the commenters to the Notice Process
proposed language.
This exclusion applies to transport regarding stored value were in favor of There currently is no provision within
initiated by any person other than treating open and closed loop stored 31 CFR Chapter X that requires foreign-
certain BSA-regulated institutions. value differently under the regulations. located MSBs to designate an agent to
Specifically, when transport is initiated While FinCEN agrees that the two forms accept service of legal process in the
by a bank, a broker-dealer or other SEC- of stored value have different risks and United States. To enhance the ability of
regulated financial institution, or a vulnerabilities, we believe it is U.S. law enforcement and regulatory
futures commission merchant or other appropriate to exclude both forms from agencies to reach these MSB registrants,
CFTC-regulated institution, a transport the definition of ‘‘money transmission.’’ FinCEN proposed to add the following
business such as an armored car is not These issues are further addressed by language to 31 CFR 1022.380 (formerly
a money transmitter, regardless of the Prepaid Access NPRM. 31 CFR 103.41): ‘‘(a)(2) Foreign-located
whether the transport is to another Additionally, one commenter noted that Money Services Business. Each foreign-
location or person. the distinctions between open and located person engaged in activities in
Except as indicated above, the final closed loop stored value are being the United States as a money services
rule adopts this proposal without removed as some closed loop systems business shall designate the name and
change. can now be international, involve address of a person who resides in the
‘‘(E) Provides stored value.’’ A person multiple retailers, and be reloadable. United States and is authorized, and has
who provides stored value is also The commenter argued that the agreed, to be an agent to accept service
excluded from the definition of ‘‘money distinction should be based on whether of legal process with respect to
transmitter,’’ whether the stored value is the stored value product has cash access compliance with this part and shall
open or closed loop. Furthermore, by or not. FinCEN agrees that cash access identify the address of the location
‘‘provides’’ FinCEN intends that both is one aspect of a stored value product within the United States for records
entities involved in the sale and that is significant in assessing the pertaining to paragraph (b)(1)(iii) of this
management of stored value programs product’s risk, along with reloadability, section.’’ FinCEN received three
be excluded. For example, a department the breadth of retailer acceptance of the supportive comments on this issue.
store that offers gift cards that only may product, and whether the product can Accordingly, FinCEN adopts the
be used at that department store, a be used internationally. These issues proposal without change, except insofar
convenience store that sells network were addressed in the Prepaid Access as the language was changed slightly to
branded cards that may be used NPRM.60 The final rule adopts the above reflect the corresponding language in
anywhere like a credit card, or a described expanded limitation to the the definition of MSB, which was
program manager who organizes a definition of ‘‘money transmitter.’’ changed from the Notice, discussed
stored value program and facilitates ‘‘(F) Accepts and transmits funds only above.
loading the stored value device are not integral to the sale of goods or the Compliance with the designation of
subject to the MSB rules as money provision of services, other than money an agent for service of process
transmitters. transmission services, by the person provision, however, will require a
FinCEN previously determined that a who is accepting and transmitting the change to FinCEN Form 107,
person solely issuing, selling, or funds.’’ Registration of Money Services
redeeming closed loop stored value is Similar to circumstance (B), persons Business. The current form does not
not an ‘‘issuer, seller or redeemer of that sell goods or provide services other contain a field in which such an agent
stored value’’ and was therefore not than money transmission services, and can be designated. FinCEN will soon
subject to BSA regulation as an MSB only transmit funds as an integral part publish a new proposed form for notice
under that MSB category.58 This limited of that sale of goods or provision of and comment which makes a number of
exclusion, however, did not imply that services, are not money transmitters. For conforming changes to reflect this final
all persons who provided open loop example, brokering the sale of rule, including adding a checkbox to
stored value were money transmitters. securities, commodity contracts, or indicate whether an MSB is foreign
In part, this is because a significant similar instruments is not money located and allowing for designation of
amount of the open loop stored value transmission notwithstanding the fact an agent for service of process.
issued within the United States is that the person brokering the sale may Accordingly, this rule provides that
issued by or through a depository move funds back and forth between the compliance with 31 CFR 1022.380 is not
institution, a category of financial buyer and seller to effect the required until six months after the date
institution that expressly is excluded transaction. Similarly, this limitation of publication of this final rule in the
from the definition of MSB by statute would apply to a debt management Federal Register, by which time the
and regulation.59 The Notice proposed company that made payments to revised FinCEN Form 107, Registration
only excluding ‘‘providers of closed creditors as the conduit for a negotiated of Money Services Business, will be
loop stored value’’ from the definition. schedule of payments from the debtor to final and available.
wreier-aviles on DSKDVH8Z91PROD with RULES
its creditors.61 The person who is V. Regulatory Flexibility Act
58 See FinCEN Ruling 2003–R004 (Definition of
accepting and transmitting the funds is
Money Transmitter/Stored Value (Gift Certificates/ offering a service other than money Pursuant to the Regulatory Flexibility
Gift Cards)) (Aug. 15, 2003) (FinCEN does not
transmission services which could not Act (RFA) (5 U.S.C. 601 et seq.), FinCEN
currently interpret the definition of stored value to certifies that these regulation revisions
include closed system products such as a mall-wide
gift card program). 60 See 75 FR 36589, 36599. will not have a significant economic
59 See 31 U.S.C. 5330(d)(1)(C); 31 CFR 61 See FinCEN Ruling 2004–R004 (Definition of impact on a substantial number of small
1010.100(ff) (formerly 31 CFR 103.11(uu)). Money Services Business) (Nov. 24, 2004). entities. Because most MSBs are small
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Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations 43595
entities, this rule will affect a MSB. With the exception of foreign- VII. Executive Order 12866 and
substantial number of small entities. located MSBs, this rulemaking does not Executive Order 13563
Although a substantial number of small impose any new reporting or Executive Orders 12866 and 13563
entities are affected, the economic recordkeeping requirements. Instead, it direct agencies to assess all costs and
impact of this rulemaking is not merely clarifies the current scope of the benefits of available regulatory
significant. This rulemaking imposes no existing MSB definitions and related alternatives and, if regulation is
new recordkeeping or reporting rules. To the extent that we have necessary, to select regulatory
requirements on MSBs, with the eliminated any uncertainty or approaches that maximize net benefits
possible exception of foreign-located ambiguities with this rule and to the (including potential economic,
MSBs. In fact, some commenters noted extent that we have narrowed the scope environmental, public health and safety
that this rule will have a modest of businesses subject to reporting or effects, distributive impacts, and
reduction in reporting burden. recordkeeping requirements, we have equity). Executive Order 13563
In large part, the rule updates the not in the aggregate expanded, and may emphasizes the importance of
MSB definitions to integrate past in fact have in the aggregate reduced, quantifying both costs and benefits, of
guidance and rulings into the regulatory regulatory obligations.62 reducing costs, of harmonizing rules,
text. Incorporating existing Description of Affected Financial and of promoting flexibility. This rule
interpretations into the regulatory text Institutions: Money Services Businesses has been designated a ‘‘significant
would have no impact on small entities as defined in 31 CFR 1010.100(ff) regulatory action’’ although not
that have been aware of these (formerly 31 CFR 103.11(uu)). economically significant, under section
interpretations for years. Even if an MSB 3(f) of Executive Order 12866.
was unfamiliar with the existing Estimated Number of Affected
Financial Institutions: 42,000. Accordingly, the rule has been reviewed
guidance and rulings, these regulatory by the Office of Management and
changes will not impose a significant Estimated Average Annual Burden
Hours per Affected Financial Budget.
economic impact. First, this final rule is
limited to revising the MSB definitions Institution: The estimated average VIII. Unfunded Mandates Act of 1995
to make clearer what activities subject a decrease in burden associated with the Statement
person to the BSA rules pertaining to recordkeeping requirements in this final Section 202 of the Unfunded
MSBs. This change provides additional rule is one hour per affected financial Mandates Reform Act of 1995
certainty without adding additional institution. (‘‘Unfunded Mandates Act’’), Public
burden. Second, as previously stated, Estimated Total Annual Burden: Law 104–4 (March 22, 1995), requires
the rule clarifies that certain foreign- Minus 42,000 hours from OMB control that an agency prepare a budgetary
located MSBs with a U.S. presence, number 1506–0052. impact statement before promulgating a
such as having U.S. customers or In the Notice, FinCEN invited rule that may result in expenditure by
recipients, are subject to the BSA rules. comment on: Whether the proposed state, local, and tribal governments, in
Finally, the rule makes minimal collection of information was necessary the aggregate, or by the private sector, of
nomenclature changes with respect to for the proper performance of FinCEN’s $100 million or more in any one year.
certain MSB categories to help clarify mission; the accuracy of the estimated If a budgetary impact statement is
distinctions. burden associated with the proposed required, section 202 of the Unfunded
In addition, the rulemaking combines collection of information; how the Mandates Act also requires an agency to
all of stored value into one category, quality, utility, and clarity of the identify and consider a reasonable
without substantively changing the information to be collected may be number of regulatory alternatives before
existing definition. This structural enhanced; and how the burden of promulgating a rule. FinCEN has
change will not affect small entities. complying with the proposed collection determined that it is not required to
Accordingly, a regulatory flexibility of information may be minimized, prepare a written statement under
analysis is not required. including through the application of section 202 and has concluded that on
VI. Paperwork Reduction Act Notices automated collection techniques or balance this rulemaking provides the
The collection of information other forms of information technology.63 most cost-effective and least
contained in this final rule has been Commenters did not address these burdensome alternative to achieve the
approved by the Office of Management issues specifically. However, objectives of the rule.
and Budget in accordance with the commenters stated that clarifying the
definitions will reduce the reporting List of Subjects in 31 CFR Parts 1010,
Paperwork Reduction Act of 1995 (44 1021 and 1022
U.S.C. 3507(d)) under control numbers burden on MSBs.
Under the Paperwork Reduction Act, Authority delegations (Government
1506–0004, 1506–0013, 1506–0015,
an agency may not conduct or sponsor agencies), Banks and banking, Currency,
1506–0020, 1506–0052. Based on
a collection of information, and a person Investigations, Law enforcement,
comments received, the clarification of
is not required to respond to a collection Reporting and recordkeeping
the definitions in 31 CFR 1010.100(ff)
of information, unless it displays a valid requirements.
(formerly 31 CFR 103.11(uu)) will likely
reduce the reporting burden for most OMB control number. Authority and Issuance
MSBs. Certain foreign-located MSBs For the reasons set forth above,
conducting business in the United 62 This amendment to 31 CFR 1010.100 (formerly
FinCEN is amending 31 CFR Parts 1010,
States may see an increase in their 31 CFR 103.11) and 31 CFR 1022.380 (formerly 31
wreier-aviles on DSKDVH8Z91PROD with RULES
CFR 103.41) makes explicit that certain foreign- 1021 and 1022 as follows:
obligation to collect and report located persons that conduct MSB operations in the
information. However, any such United States must register with FinCEN as an MSB PART 1010—GENERAL PROVISIONS
potential must be weighed against the and will be subject to certain BSA recordkeeping
reduction in burden to be achieved by and reporting requirements. ■ 1. The authority citation for part 1010
63 Amendment to Bank Secrecy Act Regulations;
clarifying the exceptions we have made continues to read as follows:
Definitions and Other Regulations Relating to
explicit regarding the type of business Money Services Businesses, 74 FR 22129 (May 12, Authority: 12 U.S.C. 1829b and 1951–
activity that would make a business an 2009). 1959; 31 U.S.C. 5311–5314, 5316–5332; title
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43596 Federal Register / Vol. 76, No. 140 / Thursday, July 21, 2011 / Rules and Regulations
III, secs. 311, 312, 313, 314, 319, 326, 352, (D) A person that redeems its own certain registered clearing agencies
Pub. L. 107–56, 115 Stat. 307. checks; or regulated by the Securities and
■ 2. Section 1010.100 is amended by:
(E) A person that only holds a Exchange Commission (‘‘SEC’’), and
■ a. Revising paragraph (ff) introductory customer’s check as collateral for derivatives clearing organizations, or
text; repayment by the customer of a loan. other clearinghouse arrangements
■ b. Revising paragraph (ff)(1); (3) Issuer or seller of traveler’s checks established by a financial agency or
■ c. Revising paragraph (ff)(2); or money orders. A person that institution;
■ d. Revising paragraph (ff)(3); (i) Issues traveler’s checks or money (D) Physically transports currency,
■ e. Revising paragraph (ff)(4); orders that are sold in an amount greater other monetary instruments, other
■ f. Revising paragraph (ff)(5); than $1,000 to any person on any day commercial paper, or other value that
■ g. Adding and reserving paragraph in one or more transactions; or substitutes for currency as a person
(ff)(7); and (ii) Sells traveler’s checks or money primarily engaged in such business,
■ h. Adding paragraph (ff)(8) as follows. orders in an amount greater than $1,000 such as an armored car, from one person
to any person on any day in one or more to the same person at another location
§ 1010.100 General definitions. transactions. or to an account belonging to the same
* * * * * (4) Issuer, seller, or redeemer of stored person at a financial institution,
(ff) Money services business. A person value. A person that provided that the person engaged in
wherever located doing business, (i) Issues stored value (other than a physical transportation has no more
whether or not on a regular basis or as person that does not issue such stored than a custodial interest in the currency,
an organized or licensed business value in an amount greater than $1,000 other monetary instruments, other
concern, wholly or in substantial part to any person on any day in one or more commercial paper, or other value at any
within the United States, in one or more transactions); or point during the transportation;
of the capacities listed in paragraphs (ii) Sells or redeems stored value (E) Provides stored value; or
(ff)(1) through (ff)(6) of this section. This (other than a person that does not sell (F) Accepts and transmits funds only
includes but is not limited to or redeem stored value for an amount integral to the sale of goods or the
maintenance of any agent, agency, greater than $1,000 from any person on provision of services, other than money
branch, or office within the United any day in one or more transactions). transmission services, by the person
States. (5) Money transmitter—(i) In general. who is accepting and transmitting the
(1) Dealer in foreign exchange. A (A) A person that provides money funds.
person that accepts the currency, or transmission services. The term ‘‘money
other monetary instruments, funds, or transmission services’’ means the * * * * *
acceptance of currency, funds, or other (7) [Reserved].
other instruments denominated in the
(8) Limitation. For the purposes of
currency, of one or more countries in value that substitutes for currency from