Links to just about everything in fintech
We have advised hundreds of clients across almost all business models new and old. This site is not legal advice; it is information only. You should obtain qualified legal advice prior to operating any money services business (MSB) or virtual currency business (VCB).
In addition to compliance information, we also want to jog your payments innovation creativity through our www.paymentsbusinessideas.com site.
We are proud to lead the preeminent open-source payments law practice where sharing information related to payments regulation is one of our core principles. By way of example, here is what we learned at the most recent Emerging Payments conference in Washington, D.C.
The Atlas Payments Data Vault, a treasure trove of information on regulators, laws, banks, lawyers, consultants, MSBs, VCBs, surety bonders and everything else you are likely to need in getting your payments business going. Adam was perhaps the first lawyer to accept Bitcoin as a form of payment.
Visite también nuestro latinoamericano blog de empresa de servicios financieros aquí: Centros Cambiarios y Transmisores de Dinero.
U.S. Federal Registration of Money Services Businesses (MSB) with FinCEN
With few exceptions, each money services business (MSB) must register with the Department of the Treasury. Virtual currency businesses (VCB) may also be MSBs requiring registration. Note that failure to register when required to do so or obtain necessary state licensed, can lead to jail time. A person that is an MSB solely because that person serves as an agent of another MSB is not required to register. US Federal registration is done through the Financial Crimes Enforcement Network of the United States Department of the Treasury (FinCEN). Registering with FinCEN is very easy, takes about 20 minutes and can be done through the BSA E-Filing System, described below.Here is the contact information for FinCEN:
FinCEN BSA E-Filing System
Entities that are registered with FinCEN are required to maintain and AML program and make filings with FincEN under the US Bank Secrecy Act. Such filings must be electronic and made through the BSA E-Filing System. If you are an MSB, you must register with FinCEN.
New to FinCEN?
If you are an MSB (to be confirmed by advice from a lawyer) after registering a supervisory user, through BSA E-Filing System, you will have to complete a Form RMSB – Form 107. Its hard to find that form on the FinCEN website, so we have provided one here so you can actually read it before completing it online.
The online version of FinCEN’s Form 107 is not the same as the one cited above. Here are instructions on how to complete the ‘real’ online version of Form 107.
Other reports that must be filed through this system include, but are not limited to:
- Currency Transaction Report (FinCEN Form 104) (CTR)
- Designation of Exempt Person (FinCEN Form 110)
- Suspicious Activity Report (Form TD F 90-22.47) (SAR)
- Suspicious Activity Report by the Securities and Futures Industries (FinCEN Form 101)
- Suspicious Activity Report by Money Services Business (FinCEN Form 109, formerly 90-22.56)
- Suspicious Activity Report by Casinos and Card Clubs (FinCEN Form 102)
- Currency Transaction Report by Casinos (FinCEN Form 103, formerly 8362)
- Registration of Money Services Business (FinCEN Form 107)
- Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1)
Bank Secrecy Act (BSA)
Money services businesses (MSBs) and other financial institutions serving the United States are regulated, in part, by the Federal Bank Secrecy Act (BSA) and its regulations, Chapter X–Financial Crimes Enforcement Network of the United States Department of the Treasury. The Federal Deposit Insurance Corporation (FDIC), maintains a useful set of links to 31 CFR Chapter X. Here is another set of the same US Federal regulations.
FinCEN Rulings and Guidance
FinCEN has a collection of published administrative rulings that give us an understanding of some of the rules concerning which kinds of businesses should and which need not register as MSBs with FinCEN.
Our firm has published a summary of most of FinCEN’s guidance if you are interested.
Bureau of Consumer Financial Protection (BCFP)
The BCFPis a U.S. government agency that makes sure banks, lenders, and other financial companies treats consumers fairly.
The BCFP requires that as of February 7, 2013, all providers of international remittances issue to the senders thereof receipts that contain certain prescribed information.
Payments businesses should monitor BCFP regulation as it may creep into areas of payments that were previously unregulated.
State MSB Licensing
Most states require money services businesses operating within their territory to be licensed with the state banking department. Note that many states also require registration of foreign MSBs that transact with their residents. For example, money transmitters with no physical presence in New York that transact with residents of New York must be licensed in the State of New York.
The Nationwide Mortgage Licensing System (NMLS) offers a portal through which many states are cooperating to provide a single portal through which applications for money services businesses may be made. Here is the way to find which states participate in the NMLS system for money transmitter applications.
Adam Atlas Attorney at Law maintains a 50-state database on the rules applicable in each state related to MSBs. State regulators remain the arbiters of which entities may be licensed within the state. Below are links to the various state regulators:
State Regulators and other useful state information
California: Great memo on current CA issues, CA Licensees or Atlas List, there are only about 86. Note that the California DBO site invites potential applicants to arrange for a pre-filing interview. The site is silent on the fact that prior to that interview, the proposed applicant must first submit answers for certain pre-file questions, that are not posted on the site. So, as a first step in California, remember to ask for the latest version of the ‘pre-file questions’ otherwise it will not likely be possible to schedule the pre-filing meeting.
Florida, FL Licensees
Idaho – Apply through NMLSVirtual currency interpretation in Idaho
Illinois, IL Licensees
Kansas – Apply through NMLS (soon, not live as of April 2014)
Kentucky – Apply through NMLS
Maryland – Apply through NMLS, MD Licensees
Massachusetts, Memo Re Foreign Correspondents
New Hampshire – Apply through NMLS
New Jersey, NJ Licensees
New York, NY Regs, NY Licensees (DFS) or Atlas List, there are only about 86
North Dakota Apply through NMLS
Oklahoma – Apply through NMLS
Oregon – OR Licensees
PennsylvaniaPA Guidance Letters – Apply through NMLS
Rhode Island – Apply through NMLS
South Carolina – yes you need a license here now.
Tennessee, TN Licensees
Texas, TX Licensees, TX Law and Guidance, TX DOB on Bitcoin
Vermont – Apply through NMLS
Washington – Apply through NMLS
MSBStatus.com is the best source for comprehensive MSB status of any U.S. entity. Alternatively, you can search NMLS and about 25 other sites one by one to fetch the MSB licensure status of an entity.
MSBStatus.com reports include data from:
- US Safe Harbor
- FINTRAC and other sources.
Payment Processor Exemption to MSB Status. If you are wondering about the difference between a payment processor and a money transmitter, please see this chart we did to help explain, The payment processor exemption does not work in all states and does not work for all processor models.
MSB and AML Compliance Associations
Conference of State Bank Supervisors (CSBS) – founded in 1902Money Transmitter Regulators Association (MTRA)
Multi-State MSB Examination Taskforce (MMET)
The National Money Transmitters Association (NMTA)
Digital Asset Transfer Authority (DATA)
The Association of Money Services Compliance Officers (AMSCO)
Association of Certified Anti-Money-Laundering Specialists (ACAMS)
The Association of Certified Financial Crime Specialists (ACFCS)
Money Services Business Association (MSBA) – founded in 2015
European Payments Council
Association of UK Payment Institutions
International Payments Framework Association
Global Payments Forum, a NACHA International Payment Forum
International Compliance Association
International Association of Money Transmitter Networks
Canadian MSB Association
International Fund for Agricultural Development (IFAD) – UN
Your MSB status or VCB status is a matter of Federal and State law, and should be ascertained by advice from a qualified lawyer.
We maintain www.paymentsbusinessideas.com that we hope will jog your creativity and see some models that are MSBs and some that are not.
Marketplaces (many of which we list here), being more the norm and less disruptive, are asking themselves if they are MSBs or not on account of their handling money for their participants. Depending on how they are structured, the result will be MSB status or not.
Is an E-Wallet a Money Transmitter?
Most likely, yes.
This is the single most frequently asked question in MSB compliance today. Some e-wallets are categorized as providers of prepaid access within the meaning of the FinCEN Prepaid Access Final Rule, which is summarized here, while others are registered with FinCEN as money transmitters. The definitive answer to this question lies in the applicable federal and state law in each of the states in which you propose to operate your e-wallet. That said, the ability to: (i) load real currency into an e-wallet; (ii) maintain a balance; (iii) transfer e-currency between users; and (iv) unload e-currency and convert it to real currency, together, would most often fall within what state regulators would characterize as a prepaid access provider or money transmitter. Given that the definition of a prepaid access provider is relatively new (2011), we have only seen a handful of entities claim that that is their primary activity, most of which are classic prepaid branded card issuers or sellers.
We recently published an article on the MSB status of e-wallets in the E-Finance and e-Payments Law and Policy.
Lists of MSBs, VCBs and Other Payments Businesses
Entities Registered with FinCEN
Atlas list of money transmitters licensed in New York and California, there are only about 87 in each of those two states.
There are about 38,859 MSBs registered with FinCEN, but that number includes many duplicate registrations for multiple entities each with common ownership or a common brand. Below are examples of entities that have had multiple money transmitter licenses. For fun, we provide links to the MSB license disclosure for each entity:
- Facebook Payments Inc, Money Transmitter Licenses
- Square Money Transmitter Licenses
- Google Wallet Money Transmitter Licenses (hard to find in one place). Held by Google Payments Corp.
- Skrill Money Transmitter Licenses
- Microsoft Payments Money Transmitter Licenses
- Amazon Payments Money Transmitter Licenses
- PayPal Money Transmitter Licenses
- Money Network / Integrated Payment Services (IPS) / First Data Money Transmitter Licenses
- Xoom Money Transmitter Licenses
P2P Payment Platforms
Here are a sampling of some of the many P2P payment platforms:
Payfacs / PSPs / TPPs That Became MSBs
The Payment Facilitator or Payment Services Provider were created by the payment networks, like Visa and MasterCard, to expedite the boarding of smaller merchants. Payfacs contract with the merchant (payee) not so much with the customer (payer). The model, however, proves to be of limited value to some who want to offer customers more flexibility. We have therefore seen an evolution of payfacs into MSBs in the following examples:
- Square Cash
- ApplePay ? (not yet, but with a P2P payments patent, it can’t be long). Technically ApplePay is just a data gateway for the moment.
The best place for a survey of new payments ideas is www.paymentsbusinessideas.com. A lot of models have already been thought of. That said, payments businesses usually succeed on sales and marketing, not on the idea alone. Of a hundred people with the same idea, perhaps only one will make it profitable.Crypto / Virtual Currencies / Digital Currencies
Virtual currency business (VCB) is the term used way back in July of 2014 by the NY DFS to describe businesses operating in the virtual currency space, and it is a term that we believe is likely to stick. A VCB may or may not be an MSB, depending on which law you are interpreting.
Banks, investors and consumers are not wasting their time in learning about virtual currencies. Some believe that virtual currency will completely displace traditional ‘real currency’ issued by sovereign states. While that scenario is far flung for now, it is not hard to imagine a near future where a substantial portion of world economic activity takes place through virtual currency. Communication and commerce are international and instantaneous, banking is not. The contemporary disconnect between the reality of peoples personal and consumer lives, that are essentially instantaneous, and their banking activity that is subject to delays and fees that bear no connection to the cost of the underling service (transfer of digital value) sets the scene for virtual currency to now take deep root in the economy of the world.
Virtual Currency Toolbox
Everything you wanted to know but couldn’t didn’t want to waste time finding:
Our firm also has a subscription service through which clients can obtain an MSB risk assessment of various crypto models in all 50 states, updated monthly.
Note that virtual currencies, such as Bitcoin have also been associated with substantial and very serious criminal activity, as in the case of SilkRoad, accessible through the anonymous browser Tor, as reported in the New York Times. The most popular virtual currency is Bitcoin.
Bitcoin (比特币) is the leading virtual currency and is thought to be invented by a mysterious Japanese mathematician by the name of Satoshi Nakamoto. Bitcoin is a virtual currency that is more or less anonymous and de-coupled from traditional banking. Bitcoin is created by using CPU time and energy. The algorithm by which it exists dictates that there shall be no more than 21 million Bitcoin when all mining is complete – which has not yet occurred. This makes some believe that it is destined for a monumental and colossal leap in value as the supply comes to a definite halt. Bitcoin operates, de facto, largely in the unlicensed arena. Here is a site that helps explain Bitcoin. The Bitcoin marketplace is interesting from an academic perspective, because it serves as a nexus for interesting debates between libertarians, anti-statists, statists, privacy advocates and others. The efficiency of Bitcoin, being a means for the free and secure exchange of value, poses challenging questions for (a) traditional banking that offers the same service, but at enormously higher costs; and (b) law enforcement that has a legitimate right to oversee suspicious activity in the financial system. There are competing visions for the future of Bitcoin. Some see it replacing ordinary currency, others see it as simply another currency destined to be mined for fees interest etc… like existing currencies. Like all forms of exchange, Bitcoin has value only because people believe that it does.
Bitcoin Investment Vehicles
Bitcoin Payment Processors
A Bitcoin payment processor often allows a merchant’s customer to make payment in Bitcoin and then settles to the merchant in Bitcoin or real currency, such as USD.
Bitcoin Vending Machines
Bitcoin Charts and current exchange rate
Bitcoin ‘Malls’ and Directories
- Bitcoin Map
- The DigitalBankingClub
- FT Fintech Blog
- Virtual Commodities Association (NEW 2018)
- Fellowship of Ethereum Magicians
- Bitcoin Foundation
- Chamber of Digital Commerce
- Digital Currency Council
- Digital Asset Transfer Authority (DATA)
- Bitcoin Association
- Digital Finance Institute
- The Crypto Private Investor Group (CPIG)
- Coalition of Automated Legal Applications (COALA)
- Blockchain & Crypto Mining Association (BCMA)
- Two parts wishful thinking, one part fact: www.banksthattakebitcoin.com.
- Digital Certificates Representing Gold are like virtual currency and the operator of such business is an MSB, FinCEN-2015-R001, August 14, 2015. Related reading, E-Gold Case.
- Bitcoin payment processor is an MSB, FinCEN FIN-2014-R012, October 27, 2014.
- Virtual currency trading platform is an MSB, FinCEN FIN-2014-R011, October 27, 2014.
- Being the lessor of virtual currency mining equipment is not MSB, FinCEN, April 29, 2014.
- Bitcoin mining is not MSB activity, FinCEN, January 30, 2014.
- Investing in Bitcoin is not MSB activity, FinCEN, January 30, 2014.
- Virtual currency exchangers and administrators are MSBs, but users are not, FinCEN, March 18, 2013.
- July 6, 2015 California amends a proposed draft virtual currency business licensing law.
- April 2014 What you should know about virtual currencies by California DBO.
Initial Coin Offering (ICO), Initial Token Offering (OTP) are like an IPO, but without the regulatory compliance of securities laws. It’s very easy to raise money with an ICO and there are hundreds of ICOs. The legality of a given ICO depends on a number of factors including whether the buyers expect a return on their investment.
Is an ICO legal? Check our our ICO legal hit or miss list here to see how some of them are doing.
Many ICOs are either securities or MSBs providing prepaid access. In order to escape one of those two classifications, quite a lot of legal thought needs to go into the piece.
Neobanks are small banks, bank-like services or resellers of limited bank services which present an alternative to traditional big-bank banking with annoying fees, like overdraft fees etc… Some examples of neobanking players include:
Is a neo-bank a regular bank with a better UI or something else entirely? Time will tell. Note that use of the term ‘bank’ or ‘banking’ is legally restricted to entities that are actually banks, so tread lightly with those terms.
Office of the Comptroller of Currency (OCC)
The OCC charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC is an independent bureau of the U.S. Department of the Treasury.
Banks that open bank accounts for MSBs have to prove to the OCC that they have adequate AML / CIP / KYC and risk mitigation programs in place to provide banking services to MSBs. The OCC’s Bank Supervision Process Comptroller’s
OCC Special Purpose National Bank Charters for Fintech Companies
Why become an MSB with the need to be licensed in 49 states when you can get a single special purpose national bank charter? This is the opportunity presented by the Office of the Comptroller of Currency on December 2, 2106.
For full instructions on how to get one of these charters, see the Comptroller’s Licensing Manual.
The basic requirements for a special purpose national bank charter for a fintech company are:
- National Bank Act Charter
- Robust, well-developed business plan
- Good governance structure
- Capital commensurate with the risk and complexity of the proposed activities (including on- and off-balance sheet activities). Because these banks do not make loans or rely on deposit funding, the OCC typically requires them to hold a specific minimum amount of capital, which often exceeds the capital requirements for other types of banks.
- Liquidity. In assessing the liquidity position of a proposed bank, the OCC considers a proposed bank’s access to funds as well as its cost of funding. Some key areas of consideration include projected funding sources, needs, and costs; net cash flow and liquid asset positions; projected borrowing capacity; highly liquid asset and collateral positions (including the eligibility and marketability of such assets under a variety of market environments); requirements for unfunded commitments; and the adequacy of contingency funding plans.
- Compliance Risk Management.
- Financial Inclusion. These principles include “encouraging” the national bank “to provide fair access to financial services by helping to meet the credit needs of its entire community” and “promoting fair treatment of customers including efficiency and better service.”
- Revery and exit strategies.
- Internal audit systems.
The OCC is welcoming comments on the proposal until January 15, 2017 at email@example.com.
As financial institutions and gateways to the financial infrastructure, MSBs are expected to make appropriate provisions for cyber security. Most U.S. states will wish to see an MSB taking security seriously, but some have gone further and mandated that the MSB have a Cyber Security Program that meets certain prescribed criteria.
New York DFS on Cyber Security Program
New York is the first state in the U.S. to adopt an explicit requirement for MSBs to have a Cyber Security Program:
March 1, 2017: New York MSBs must have a Cyber Security Program.
Getting a Bank Account for an MSB
Once licensed, the hardest task for a new MSB is to obtain a commercial bank account.
If a bank refuses to bank you because you are an MSB, show them this guidance from FinCEN saying that banks are not supposed to reject clients just because they are MSBs.
We believe that the following banks have, on some occasions, provided banking services to MSBs, you’ll have to ask them to find out for sure.
- Key Bank
- Mellon Trust of New England
- Sterling Savings Bank
- US Bank
- Wells Fargo Bank
- TwinStar Credit Union
- Bank of America
- Mountain Pacific Bank
- West Coast Bank
- South Sound Bank
These banks have attended the National Money Transmitters Association events and they are familiar with transmitters:
We do not have any referral relationships with any banks, but if you call the above banks, please mention where you learned about them.
Marijuana Payments Law
It is a U.S. federal crime to process payments in the U.S. related to marijuana because marijuana is restricted under the U.S. Federal Controlled Substances Act, at Schedule I. Our firm does not advise on marijuana payments law.
FinCEN has published guidance setting out the specific kinds of due diligence and risk assessments required of financial institutions that wish to service marijuana businesses. This is just the beginning of an evolving body of law that navigates between Federal and state law related to marijuana.
Marijuana Payments in the News
- January 13, 2016: The Fourth Corner Credit Union banned from US banking system.
- January 15, 2015: Colorado Fourth Corner Credit Union specializes in servicing the cannabis industry.
- December 18, 2014: Congress passes bill to prevent government spending on MMJ prosecutions in states where it is legal.
US State Sales Tax for Online Sales
It has become common for US merchants and marketplaces that service US buyers and sellers to collect US state sales tax and remit it to US state departments of revenue. There have been various efforts in the U.S. Congress to adopt national legislation on this topic, but none are yet in effect. Retailers and marketplaces, however, are not waiting as the penalties for non-compliance can be very substantial.
A leading, automatic and free solution for this issue is TaxCloud.
International Money Services Business Regulations
Some of the key national regulators are listed here.
Mexico and Latin America
Visite también nuestro latinoamericano blog de empresa de servicios financieros aquí: Centros Cambiarios y Transmisores de Dinero.
Handbook sets out these requirements. All OCC enforcement actions can be obtained here.
The regulatory framework for MSBs (money services businesses) in Canada is much simpler than in the United States. With some exceptions, there are few provincial licensing requirements. There is, however, a Federal agency called Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) that requires registration of certain MSBs.
Financial Consumer Agency of Canada
The FCAC (like its US counterpart, the CFPB) was created to bolster regulation of consumer financial services, but its mandate has gone further into merchant-facing credit card payment processing, in part through the Code of Conduct for the Credit and Debit Card Industry in Canada.
Payments businesses operating in Canada, should monitor CFPB regulations as they may creep into previously unregulated payments markets.
Canadian Provincial MSB Licensing
In Canada, government has effectively outsourced protection of the financial system to banks. It is relatively easy to become registered with FINTRAC and licensed in the one Canadian province that requires MSB licensing, Quebec. Opening a bank account for an MSB, which is necessary for its operation, is however, very difficult. Be weary of Canadian banks that put MSBs through long account-opening procedures, sometimes lasting as much as a year, only to close the account because it is for an MSB.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the Canadian equivalent of U.S. FinCEN.
Quebec has become the first the ten Canadian provinces to enact MSB licensing requirements. As of January 1, 2013, all Quebec MSBs will require a license from the L’Autorité des marchés financiers – Quebec MSB Regulator to operate an MSB in Quebec. Other Canadian provinces have yet to enact similar legislation.
Virtual Currency in Canada
For the moment, it appears that FINTRAC has decided that Bitcoin is not real currency, but don’t that this as legal advice, get a written confirmation from FINTRAC before operating in Canada. Note that operating a Bitcoin exchange in Canada that services US residents would require compliance with US law.
- April 1, 2014: Bank of Montreal, BMO, is open to banking Bitcoin subject to greater regulation.
- March 27, 2014: Canadian Senate Standing Committee on Banking, Trade and Commerce start to discuss virtual currency.
- February 2014 Quebec MSB regulator, the AMF, issues a warning about Bitcoin scams.
- February 2014: First Bitcoin vending machine in Montreal launched.
- January 16, 2014: WSJ says Canadian Department of Finance official says that only real currency is currency for Canadian purposes.
- November 5, 2013: Government of Canada says Bitcoin income should be reported as income, like barter.
- August 2013: Robocoin launches first Bitcoin vending machine in Canada and attracts worldwide press.
In order to increase efficiency in the licensing of financial services in the European Union, the European Commission has enacted directives concerning financial services within the EU. For example, the EU E-Money Directive (2009/110/EV) (EMD) provides for the licensing of electronic money institutions and issuers which licenses are recognized throughout the EU.
SEPA B2B Mandate Forms. These are the EU equivalent of a business ACH consent. They aren’t specific to payment institutions, but they are new in 2014 and frequently asked for.
The Financial Conduct Authority (FCA) is the competent authority for most aspects of money services businesses in the UK under the Payment Services Regulations (PSR) of the Payment Services Directive (PSD). The UK implemented the PSD through the Payment Services Regulations 2009 (PSRs), which came into effect on 1 November 2009.
The FCA is creating the Professional Body Anti-Money Laundering Supervision (OPBAS) to bring coherence to AML rules.
The following are some key categories of entities of particular interest in the UK:
- Small Payment Institution (Small PI): < €3million in payment transaction volume;
- Authorised Payment Institution (Authorised PI): > €3million in payment transaction volume and/or entity wishes to passport into other EU States.
Rather than a surety bond (as required in US states) the FSA requires that the payments business have a certain minimum capitalization:
- €20,000: capital required for authorization as a money transmitter;
- €50,000: capital required for authorization as a paperless money transmitter; and
- €125,000: capital required for authorization as another payment service.
Application for registration in the U.K. is pursuant to the The Payment Services Regulations 2009.
Singapore must be included in any serious discussion of international payments. As Southeast Asia’s banking and commercial hub, Singapore has specifically catered to FinTech.
The Singapore Stored Value Facility (SVF) regulated by the Monetary Authority of Singapore, can be used as the banking host for an international e-wallet. Here are some examples of Singapore Stored Value Facilities:
Paypal Singapore Stored Value Facility
Ripple Singapore Stored Value Facility
Citibank Singapore Stored Value Facility
SmoovPay Singapore Stored Value Facility
Paylink Singapore Stored Value Facility
The Singapore SVF is astonishingly easy to setup thanks to the efficacy of the MAS. That said, if you have an SVF and take on customers in the US, EU, Canada or other countries that license MSBs, make sure the entity is compliant with the local MSB / payment institution licensing and registration requirements. Getting ewallet banking in one jurisdiction does not make compliance with AML laws in other jurisdictions disappear.
(p.s. As an alumnus of the National University of Singapore, it’s nice to see Singapore leading in supporting Fintech innovation.)
Money transmission in Brazil is regulated by Conselho de Controle de Atividades Financeiras – Council for Financial Activities Control (COAF) which has promulgated an interesting COAF – RESOLUTION Nº 006, OF JULY 2, 1999, requiring independent sales organizations to comply with record-keeping and reporting requirements of MSBs within Brazil. (Ironically, the COAF site does not have a trusted internet security certificate.)
China (中国汇款，支付服务) (Money Transfer, Payment Service in China)
On 18 March 2018, China’s lawmaker, the National People’s Congress approved a reform plan for
the institutional organizations of the State Council. According to the Reform, the regulator of banking industries and the regulator of insurance industry will be merged into China Banking and Insurance Regulatory Commission (CBIRC).
Key financial regulators in China are:
Financial Stability and Development Commission (FSDC) – reform and development
Peoples Bank of China (PBOC) – monetary policy, regulation of financial industry
China Banking and Insurance Regulatory Commission (CBIRC) – market supervision, risk
China Securities Regulatory Commission (CSRC) – securities regulation
The China Banking Regulatory Commission (CBRC) 中国银监会 used to regulate banks in China.
One of the challenges in dealing with money transmission in and out of China (中国) are the strict
restrictions on remittances (汇款) in and out of China.
One popular provider of international remittance from China is ICBC (工商银行) . 欢迎中国的汇款 / 支付公司向 Adam Atlas 进行法律咨询。(Welcome Chinese MSB / Payment companies to Adam Atlas Attorney at Law firm site.)
Rest of the World
Payments Business Modelling
When planning a payments business, it’s important to have a clear understanding of the flow of funds and who is taking risk on the loss of funds at each moment. Here is a sample 3D model to jog your imagination. You can also check out our www.paymentsbusinessideas.com.
MSB Compliance and Civil Cases: Notable U.S. Cases
Payments business operators should make no mistake about the seriousness of U.S. law enforcement of MSB laws, such as the Bank Secrecy Act or state MSB licensing laws. Whether or not your payments business is an MSB, you should be aware of recent enforcement actions against MSB and non-MSB entities alike to see that you are not the target of this kind of case. Here is the language of the Federal law that makes it a crime to transmit money in the U.S. without the necessary Federal registration and state licenses. Anyone who is new to the payments industry should read this section:
Title 18 U.S.C. ß 1960
(a) Whoever conducts, controls, manages, supervises, directs, or owns all or part of a business, knowing the business is an illegal money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.
(b) As used in this section –
(1) the term “illegal money transmitting business” means a money transmitting business which affects interstate or foreign commerce in any manner or degree and –
(A) is intentionally operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law; or
(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or
(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity;
(2) the term “money transmitting” includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and
(3) the term “State” means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States.
With the benefit of the above bit of law, you can now read the following civil, criminal or other regulatory enforcement cases of interest.
- Selling Bitcoin under Federal law, two early 2019 conflicting cases:
- Coinflux CEO to be extradited from Romania to US on money laundering and other charges, January 5, 2019.
- Bitcoin Exchange not Registered with FinCEN, guilty, USDOJ, October 28, 2018.
- Payza Obopay NYDFS Cease and Desist, October 24, 2018.
- Ukyo.Loan / BitFunder / WeExchange securities fraud DOJ, July 23, 2018.
- Payza and Two Canadian Brothers Accused of Operating an Unlicensed Money Service Business and Money Laundering, March 21, 2018.
- Western Union fined $60 million by NYDFS for money laundering rule violations, January 4, 2018. Consent order text.
- Woman jailed for buying and selling Bitcoin in Southern California, June 11, 2018.
- Munchee, Inc. ICO MUN deemed investment contract by SEC, December 11, 2017
- SEC concludes DOA ICO Tokens are securities, July 25, 2017. See FinCEN Notice.
- BTC-e, Russian Bitcoin Exchange shut down for money laundering, July 26, 2017.
- AlphaBay, largest online ‘Dark Market’ shut down by US DOJ, July 20, 2017.
- Coin.mx principal gets 5 years in jail for illegal unlicensed MSB, June 28, 2017.
- FinCEN and SDNY settle claim against MoneyGram Chief Compliance officer for $250,000, May 4, 2017. This is an important case because it sets a new precent in the personal liability of CCOs.
- Merchants Bank of California, N.A. assessment of civil money penalty by FinCEN for $7,000,000, February 16, 2017.
- Wells Fargo Bank, N.A. fined $100 million by CFPB for opening 1,500,000 bank accounts that may not have been authorized and other infractions.
- Liberty Reserve founder, Arthur Budovsky, sentenced to 20 years in prison for illegal money laundering, May 6, 2016.
- Gibraltar Private Bank fined $4 million by FinCEN for intentional AML BSA violations, Feb 2016.
- Transferwise could not rely on authorized delegate status in New Hampshire, February 22, 2016.
- Bill.com Consent Order in Pennsylvania for transmitting without a license, June 2015
- Ripple Labs / XRP II, LLC fined $700,000 by FinCEN for violating BSA, May 2015
- The Bancorp Bank FDIC Consent Order Re Third Party Programs, December 2015
- NYDFS bans Promontory Financial Group,LLC from access to key reports, August 2015
- US DOJ Speech on Prosecution of Bitcoin and Other Virtual Currency Cases, June 26, 2015
- Discover FDIC Federal Reserve Bank of Chicago Consent Order, May 2015
- No criminal charges for Ripple Labs in BSA compliance case, May 5, 2015
- Ripple Labs Inc. faces civil enforcement $700,00 penalty from FinCEN, May 5, 2015
- Paypal settles for $7 million with U.S. Department of the Treasury for OFAC violations.
- FinCEN $1M Personal Liability for CCO of MoneyGram, December 2014
- BitInstant CEO Charlie Shrem Arrested for Alleged Money Laundering. The case was settled with a guilty plea.
- Bill.com transmitting money in Texas without a license, consent order.
- ToucPay Consent Order in New Hampshire for transmitting without a license, July 2013
- SilkRoad, the largely Bitcoin-based marketplace used largely for illegal products has its site and assets, including Bitoin, seized by U.S. Federal authorities, as reported in the New York Times.
- Square fined $500,000 by Florida for operating without a money transmitter license.
- Bitcion Foundation: June 23, 2013: California’s Department of Financial Institutions ceases and desist.
- (Sources Business Insider and New York Times)
- These domains were seized as part of the crackdown on the criminal bazaar at SilkRoad (via Tor)
May 28, 2013. Liberty Reserve is reported in the New York times as being accused of being responsible for laundering billions of dollars, conducting 55 million transactions that involved millions of customers around the world, including about 200,000 in the United States. Principals were charged with conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and operating an unlicensed money-transmitting business. The money laundering count carries a maximum sentence of 20 years in prison, and the other two charges carry a maximum of 5 years each.
2013 was a big year in virtual currency law enforcement. You might say, VCBs earned their stripes in that year. On May 15, 2013, the U.S. Department of Homeland Security seized some assets of Dwolla, a popular payment processor for Mt.Gox, the world’s largest Bitcoin exchange which is based in Japan. The amount of this seizure is reported to be $2,900,000. Here is the seizure affidavit: Mt Gox Dwolla Warrant 5-14-13.
Here are some notes from a recent payments regulation conference.
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