FinCEN: Overseas MSBs not off the hook

In February 2012, the Financial Crimes Enforcement Network (FinCEN) clarified that, even if money services businesses (MSBs) are domiciled beyond U.S. borders, they still must comply with U.S. anti-money laundering (AML) regulations if they do business in the United States. FinCEN said its new definition of MSB, now including prepaid card providers, recognizes that technology allows businesses to conduct business from anywhere in the world and still reach the U.S. market.

"FinCEN seeks to ensure that the BSA [Bank Secrecy Act] rules apply to all persons engaging in covered activities within the United States, regardless of the person's physical location," the agency said.

The new MSB definition is contained in FinCEN's Final Rule published July 2011. The Final Rule, which updated the AML provisions of the BSA, went into effect in September 2011. FinCEN said MSBs are subject to the BSA regulations "based on its activities within the United States, even if none of its agents, agencies, branches or offices are physically located in the United States."

FinCEN stated that foreign-located MSBs are also subject to the same civil and criminal penalties as MSBs with a physical presence in the United States. FinCEN listed the BSA requirements for foreign-located MSBs. They must:

• Comply with recordkeeping, reporting and AML program requirements under the BSA
• Register as MSBs with FinCEN
• Appoint a person residing in the United States as an agent for legal purposes relating to the BSA and AML regulations

FinCEN advises financial institutions (FIs) to update AML programs if they provide financial services to foreign-located MSBs or engage in financial transactions with these entities. FIs are also obliged to file suspicious activity reports (SARs) if they know, suspect, or have reason to suspect, that transactions are derived from funds generated as a consequence of criminal activity, such as money laundering and terrorist financing.

Additionally, FIs should file SARs if partner MSBs are operating as unregistered or unlicensed MSBs, FinCEN noted.

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