FinCEN Issues Advisory To U.S. Financial Institutions Regarding Providing Financial Services to Foreign-Located MSBs

Feb 22, 2012   

On February 15, 2012, the Financial Crimes Enforcement Network (“FinCEN”) issued an Advisory to U.S. financial institutions advising them of their obligations under the Bank Secrecy Act (“BSA”) when dealing with foreign-located money services businesses (“MSBs”). A copy of FinCENs advisory can be read here.

The advisory comes several months after FinCEN implemented new rules defining which businesses qualify as MSBs subject to the anti-money laundering regulations of the BSA. As we previously reported, on July 21, 2011, FinCEN published a final rule which amended the definition of “money services business” under 31 C.F.R. § 1010.100(ff) to clarify that it is the activities performed within the U.S. by a business which will cause it to be classified as a MSB regardless of the businesss physical location. The rule change arose out of the recognition that the Internet and other technological advances make it increasingly possible for businesses to offer MSB services in the U.S. from foreign locations.

The definition of MSB has been rephrased to state: “[a] person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States” as a currency dealer, currency exchanger, check casher, money transmitter, and/or a seller, issuer, and redeemer of travelers checks, money orders, or prepaid access cards. As a result of this change, foreign-located businesses engaging in MSB activities within the U.S. are subject to the rigorous requirements of the BSA, even if the foreign based MSB has no physical presence in the U.S. The final rule also required each foreign-located MSB to appoint a person residing in the U.S. as an agent for service of legal process.

In its Advisory, FinCEN advises U.S. financial institutions to reevaluate their own anti-money laundering (“AML”) programs if they provide financial services or engage in financial transactions with foreign-located MSBs. FinCEN further suggests that U.S. financial institutions look to its earlier guidances, such as FinCENs 2005 Intra-agency Interpretive Guidance on Providing Banking Services to MSBs Operating in the U.S. and FinCENs 2010 Advisory on Informal Value Transfer Systems, in order to ensure that the foreign-located businesses they are dealing with are not operating as unregistered or unlicensed MSBs. FinCEN also reminded financial institutions that provide services to foreign-based MSBs of their obligations to file Suspicious Activity Reports (“SARs”) should they become aware that their customers are operating as unregistered or unlicensed MSBs.

If you have questions pertaining to the BSA, anti-money laundering compliance or how to ensure that your business maintains regulatory compliance at both the state and federal levels, contact Fuerst Ittleman PL at contact@fidjlaw.com.