September 9, 2009 Financial Crimes Enforcement Network P.O. Box 39 Vienna, VA 22183 Re: RIN 1506-AA97 Definitions and Other Regulations Relating to Money Services Businesses Dear Sir or Madam: 1The Independent Community Bankers of America (ICBA) welcomes the opportunity to comment on the notice of proposed rulemaking to clarify which entities are covered by the definitions regarding money services businesses (MSBs). ICBA also appreciates the opportunity to provide feedback and input to FinCEN on the stored value industry as it applies to the Bank Secrecy Act (BSA) regulations to assist in the upcoming proposed rulemaking. Background The Financial Crimes Enforcement Network (FinCEN) is proposing amendments to the MSB definitions so that determining which entities are obligated to comply with the BSA regulations regarding MSBs will be more straightforward. The definition of MSB is based on six distinct categories of financial service providers, including check cashers, money transmitters and issuers and sellers of stored value products. While each category is separately defined, advances in technology, services and products obfuscate the application of the regulations to particular businesses. As a result, FinCEN has issued guidance and administrative rulings over the last decade to assist the industry on how to interpret and apply the regulations. 1 The ...
September 9, 2009
Financial Crimes Enforcement Network
P.O. Box 39
Vienna, VA 22183
Re: RIN 1506-AA97 Definitions and Other Regulations Relating to Money
Services Businesses
Dear Sir or Madam:
1The Independent Community Bankers of America (ICBA) welcomes the
opportunity to comment on the notice of proposed rulemaking to clarify which
entities are covered by the definitions regarding money services businesses
(MSBs). ICBA also appreciates the opportunity to provide feedback and input to
FinCEN on the stored value industry as it applies to the Bank Secrecy Act (BSA)
regulations to assist in the upcoming proposed rulemaking.
Background
The Financial Crimes Enforcement Network (FinCEN) is proposing amendments
to the MSB definitions so that determining which entities are obligated to comply
with the BSA regulations regarding MSBs will be more straightforward. The
definition of MSB is based on six distinct categories of financial service providers,
including check cashers, money transmitters and issuers and sellers of stored
value products.
While each category is separately defined, advances in technology, services and
products obfuscate the application of the regulations to particular businesses. As
a result, FinCEN has issued guidance and administrative rulings over the last
decade to assist the industry on how to interpret and apply the regulations.
1 The Independent Community Bankers of America represents nearly 5,000 community banks of all sizes and charter
types throughout the United States and is dedicated exclusively to representing the interests of the community banking
industry and the communities and customers we serve. ICBA aggregates the power of its members to provide a voice
for community banking interests in Washington, resources to enhance community bank education and marketability,
and profitability options to help community banks compete in an everchanging marketplace.
With nearly 5,000 members, representing more than 20,000 locations nationwide and employing nearly
300,000 Americans, ICBA members hold $1 trillion in assets, $800 billion in deposits, and $700 billion in
loans to consumers, small businesses and the agricultural community. For more information, visit ICBA’s
website at www.icba.org.
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FinCEN is now seeking comment on its proposal to update the MSB regulations
and incorporate these interpretations into the rules.
ICBA Position
The current definition of an MSB includes entities “doing business” in one or
more of six specified activities enumerated in the BSA regulations. While the
term “doing business” is used in the MSB definition, FinCEN has not relied on
whether a person is engaged in a “business” in any formal sense to determine
whether it is subject to the MSB definition. Rather, the facts, circumstances and
context of the activity in which a person engages determine its MSB status.
Therefore, FinCEN is proposing to replace in the definition of MSB, the term,
“doing business” with “engaged in activities” to clarify that the activity in which an
entity is engaged, rather than its status as a formal business, determines
whether it is subject to the MSB definitions. We support this change as it is
consistent with FinCEN’s long standing application of MSB definitions and will
avoid confusing entities regarding the type of business it is in with the functions it
performs.
The regulations also include an activity threshold of $1,000.00 for any person in
any one day. Although FinCEN is not proposing amendments to this, it is
seeking comment on whether the threshold should be revised. In our view, the
threshold is currently sufficient to balance the amount of information gathered for
law enforcement with the costs associated with compliance. However, the
threshold has not been amended for over a decade or adjusted for inflation.
FinCEN should consider routinely adjusting the threshold for inflation.
Check Casher
A “check casher” is one of the specified distinct categories of financial service
providers included in an MSB definition. It is currently defined as “a person
engaged in the business of a check casher,” and includes a threshold of
$1,000.00 for any person on any day. FinCEN is proposing to clarify the
meaning of the term “check cashing” by having two subsections – one defining
check cashing activity and one excluding certain activity from that definition. The
definition would be revised to state, in part, a person who accepts checks or
monetary instruments in return for currency or a combination of currency and
other monetary instruments. The proposed definition would include the
redeeming of monetary instruments, such as traveler’s checks and money
orders, and would require currency to be exchanged. ICBA agrees with the
proposed definition. Cashing monetary instruments provides similar risks to
cashing checks and combining these into the check cashing definition simplifies
the regulations. Additionally, including the requirement that currency be
exchanged omits the activity of simply exchanging one monetary instrument for
another, which is not a check cashing activity. Furthermore, this revision would
more accurately describe the activities that would subject an entity to the check
cashing definition and enable it to more easily decipher its activities.
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ICBA also suggests that FinCEN exempt from its definition of check cashing low-
risk checks, such as government issued checks and payroll checks. Often times,
small, local businesses will cash low-risk checks incidental to their primary
business as a courtesy to their regular customers and inadvertently be subject to
the check casher definition. Government and payroll checks have little money
laundering risk yet enable local businesses to reach out to unbanked individuals.
Check cashers should, however, be subject to suspicious activity reporting (SAR)
requirements as is currently required for redeemers of traveler’s checks and
money orders. Check cashers are in the forefront of conducting transactions for
customers and would be better able to detect unusual activity that may reveal a
known or suspected violation of a law or regulation. ICBA also expects that
while many check cashers may have fraud detection mechanisms in place that
help detect instances of fraud or suspicious activity, it would be very helpful if
FinCEN provided guidance about the kinds of activities or transactions that would
indicate a suspicious activity report should be filed.
Stored Value
At this time, FinCEN is not proposing new rulemaking regarding issuers, sellers
or redeemers of stored value, but is reviewing the current regulatory regime and
is seeking comment in this area.
FinCEN is seeking comment on whether issuers, sellers and redeemers should
be similarly regulated and whether a threshold should be set for triggering these
definitions. The stored value industry consists of a wide variety and broad range
of products that include an equally broad range of money laundering risks. For
example, certain stored value card programs offer an effective and convenient
way for customers to purchase goods and services in limited and contained
environments, posing minimal risk. Other programs enable an anonymous
bearer to load monetary value on a card using currency, physically transport the
card to a third person who remains undetected and can redeem the card for
cash, which can be used as conduits for financial crimes.
ICBA agrees that maintaining certain records to constitute a financial trail and
reporting certain transactions are useful in criminal or regulatory investigations.
However, FinCEN should be mindful to balance the benefits of applying across-
the-board BSA requirements to issuers and redeemers with the unintended
consequences of thwarting technological developments and advances in this
growing industry. Similar to other financial products and services, FinCEN
should apply a risk-based approach to regulating issuers and redeemers of
stored value products, applying appropriate regulations to higher risk products
and transactions. For example, stored value products that do not store personal
information (anonymous cards) and are able to be redeemed for cash provide an
effective method of transferring funds without detection. The customer
purchasing the device from the issuer may not be the same person redeeming
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funds, and in this limited situation, BSA regulations should apply throughout the
transaction process from issuer to redeemer to document the financial trail.
The threshold for stored value players also should be consistent with the
requirements that apply to other MSBs, which is $1,000.00 for any person in any
day. Uniform threshold requirements would help facilitate compliance and
reduce potential confusion between MSB activities.
FinCEN is proposing to revise the definition of a money transmitter to include a
provision exempting from its definition a closed loop stored value provider. A
closed loop system refers to a stored value card that is limited to a defined
merchant or a set of locations. ICBA agrees that a closed loop stored value
provider should be exempt from the definition of a money transmitter. Typically,
a closed loop card is offered by a retailer or group of retailers and cannot be
reloaded or redeemed for cash, which makes the transmission of money
improbable. This type of system poses minimal risk of money laundering and
terrorist financing and should be regulated accordingly.
Thank you for the opportunity to comment. If you have any questions or need
additional information, please feel free to contact me by telephone at 202-659-
8111 or by e-mail at lilly.thomas@icba.org.
Sincerely,