Fintechs spend a lot of time trying to understand their US MSB risk. Our firm believes in open source legal information. So, we created the first and only regtech AI MSB risk assessment bot tool. Give it a try and tell us what you think:
Money services businesses (such as money transmitters, prepaid card program managers, currency exchangers and providers of virtual currency) (“MSBs”) that operate outsider of the United States are likely familiar with the laws applicable to them in their home jurisdictions. Given the electronic nature of many MSB businesses, it is altogether likely that a non-U.S. MSB will wish to provide services to residents of the U.S. without having accounts, offices or any other presence in the U.S. Doing so requires compliance with U.S. law. Whether a given MSB is an MSB for the purposes of U.S. federal or state law is a matter of U.S. law. At the federal level, MSB status in the U.S. is determined pursuant to the Bank Secrecy Act (“BSA”), its regulations (“Regulations”) and the Financial Crimes Enforcement Network, of the United States Department of the Treasury (“FinCEN”). FinCEN is the U.S. equivalent of, for example, the FCA in the U.K. or FINTRAC in Canada.
An entity that is deemed an MSB under the BSA has to register with FinCEN, for AML and transaction reporting purposes and may also be required to obtain money transmitter licenses from each individual state in which the MSB has customers.
Being entirely foreign to the U.S. and having no accounts, office or employees in the U.S. does not diminish the application of the BSA to an MSB that services U.S. residents. This information often comes as a surprise to the many thousands of non-U.S. MSBs that, de facto, service U.S. residents.
By way of example, the UK money transmitter in the flow of funds described below that takes funds from a U.S. resident and forwards those funds, as a money transmitter, to a payee or recipient in Germany, is required to be registered with FinCEN and licensed as a money transmitter in the state where the US payer is located: