[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27890-27900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13304]
[[Page 27889]]
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Part V
Department of the Treasury
_______________________________________________________________________
31 CFR Part 103
Financial Crimes Enforcement Network; Bank Secrecy Act Regulations;
Proposed Rules
Federal Register / Vol. 62, No. 98 / Wednesday, May 21, 1997 /
Proposed Rules
[[Page 27890]]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA09
Financial Crimes Enforcement Network; Proposed Amendment to the
Bank Secrecy Act Regulations--Definition and Registration of Money
Services Businesses
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing to amend the regulations implementing the statute generally
referred to as the Bank Secrecy Act to require certain money services
businesses to register with the Department of the Treasury and to
maintain a current list of their agents for examination, on request, by
any appropriate law enforcement agency. As a corollary to the proposed
registration requirement, FinCEN is also proposing to amend the Bank
Secrecy Act regulations to revise, and group together in a separate
category called ``money services businesses,'' the definitions of
certain non-bank financial institutions. The revised definitions would
also modify the treatment of the United States Postal Service under the
regulations. The proposed rule regarding registration and maintenance
of an agent list reflects changes to the law made by the Money
Laundering Suppression Act of 1994.
DATES: Written comments on all aspects of the proposal are welcome and
must be received on or before August 19, 1997.
ADDRESSES: Written comments should be submitted to: Office of Legal
Counsel, Financial Crimes Enforcement Network, Department of the
Treasury, 2070 Chain Bridge Road, Vienna, VA 22182, Attention: NPRM--
MSB Registration. Comments also may be submitted by electronic mail to
the following Internet address: regcomments@fincen.treas.gov'' with
the caption, in the body of the text, ``Attention: NPRM--MSB
Registration.'' For additional instructions on the submission of
comments, see SUPPLEMENTARY INFORMATION under the heading ``Submission
of Comments.''
Inspection of comments: Comments may be inspected at the Department
of the Treasury between 10 a.m. and 4 p.m., in the FinCEN reading room,
on the third floor of the Treasury Annex, 1500 Pennsylvania Avenue,
NW., Washington, DC 20220. Persons wishing to inspect the comments
submitted should request an appointment by telephoning (202) 622-0400.
FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director, and
Charles Klingman, Financial Institutions Policy Specialist, FinCEN, at
(703) 905-3920; Stephen R. Kroll, Legal Counsel, Joseph M. Myers,
Deputy Legal Counsel, Cynthia L. Clark, on detail to the Office of
Legal Counsel, Albert R. Zarate, Attorney-Advisor, and Eileen P. Dolan,
Legal Assistant, Office of Legal Counsel, FinCEN, at (703) 905-3590.
SUPPLEMENTARY INFORMATION:
I. Introduction
This document proposes a rule that would amend 31 CFR part 103 to
require money services businesses to register with the Department of
the Treasury and, as part of the registration requirement, to maintain
a current list of their agents in a central location for examination by
appropriate law enforcement agencies. Money services businesses
generally include businesses that provide check cashing, currency
exchange, or money transmitting services, or that issue or redeem money
orders, traveler's checks, or other similar instruments. The proposed
rule would implement the terms of 31 U.S.C. 5330, which was added to
the Bank Secrecy Act by section 408 of the Money Laundering Suppression
Act of 1994 (the ``Money Laundering Suppression Act''), Title IV of the
Riegle Community Development and Regulatory Improvement Act of 1994,
Public Law 103-325 (September 23, 1994).
In addition, this document proposes to amend 31 CFR part 103 by
revising the definition of financial institution in 31 CFR 103.11. The
revised definition would make changes to the term ``United States
Postal Service'' and would add a new term, ``money services business,''
under which would be grouped the types of businesses required to
register under the proposed rule (replacing and revising the present
definitions of those businesses in 31 CFR 103.11(n)).
Finally, this document proposes to revise the structure of 31 CFR
part 103. Under the new structure, subparts D through F would be
redesignated as subparts E through G, respectively. A new subpart D,
Special Rules for Money Services Businesses, would be added. The
sections in redesignated subparts E through G would also be
redesignated to reflect the addition of new subpart D, and
corresponding changes would be made to the references to such
redesignated sections in other portions of part 103.
II. Background
A. Statutory Provisions
The statute generally referred to as the ``Bank Secrecy Act,''
Titles I and II of Public Law 91-508, as amended, codified at 12 U.S.C.
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330 authorizes the
Secretary of the Treasury, inter alia, to require financial
institutions to keep records and file reports that are determined to
have a high degree of usefulness in criminal, tax, and regulatory
matters, and to implement counter-money laundering programs and
compliance procedures. Regulations implementing Title II of the Bank
Secrecy Act (codified at 31 U.S.C. 5311-5330), appear at 31 CFR part
103. The authority of the Secretary to administer the Bank Secrecy Act
has been delegated to the Director of FinCEN.
Under 31 U.S.C. 5330, any person who owns or controls a money
services business (which the statute refers to as a ``money
transmitting business'' 1), whether or not the business is
licensed as a money services business in any State, must register the
business with the Secretary of the Treasury. 31 U.S.C. 5330(a). (A
money services business required to be registered under 31 U.S.C. 5330
remains subject to any State law requirements relating to the operation
of the business in the State.) The form and manner of registration must
be prescribed by regulations.
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\1\ The statute uses the term ``money transmitting business''
to name those businesses subject to registration. See 31 U.S.C. 5330
(a)(1) and (d)(1). However, FinCEN believes that the statute's use
of this term to refer to all the types of businesses subject to
registration and its later use of the nearly identical term ``money
transmitting service'' to refer to a particular type of business
subject to registration, compare 31 U.S.C. 5330(d)(1)(A) with 31
U.S.C. 5330(d)(2), may lead to confusion. Therefore, FinCEN has
adopted the term ``money services business'' in place of the term
``money transmitting business'' throughout this document and uses
the same terminology in the other rules it is proposing today.
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The purpose of the registration requirement is to assist
supervisory and law enforcement agencies in the enforcement of
criminal, tax, and regulatory laws and to prevent money services
businesses from engaging in illegal activities. See, section 408(a),
Public Law 103-325. In requiring the registration of money services
businesses, Congress recognized that such businesses are largely
unregulated and are frequently used in sophisticated schemes to
transfer large amounts of money that are the proceeds of unlawful
enterprises and to evade the requirements of Title II of the Bank
Secrecy Act, the Internal Revenue Code of 1986, and other laws of the
United
[[Page 27891]]
States. Congress also found that information on the identity of money
services businesses and the names of the persons who own or control, or
are officers or employees of, a money services business would have a
high degree of usefulness in criminal, tax, or regulatory
investigations and proceedings. Id.
The statute defines a money services business 2 as any
business, other than the United States Postal Service, that is required
to file reports under 31 U.S.C. 5313 and that provides check cashing,
currency exchange, or money transmitting or remittance
services,3 or issues or redeems money orders, traveler's
checks or other similar instruments. 31 U.S.C. 5330(d)(1). Depository
institutions (as defined in 31 U.S.C. 5313(g)), however, are not money
services businesses for purposes of the registration requirement. 31
U.S.C. 5330(d)(1)(C).
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\2\ Again, the statutory term is ``money transmitting
business,'' for which the term ``money services business'' is being
substituted by FinCEN. See footnote 1, supra.
\3\ Section 5330(d)(2) provides that the term ``money
transmitting service'' includes accepting currency or funds
denominated in the currency of any country and transmitting the
currency or funds, or the value of the currency or funds, by any
means through a financial agency or institution, a Federal Reserve
Bank or other facility of the Board of Governors of the Federal
Reserve System, or an electronic funds transfer network.
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Section 5330 requires the Secretary of the Treasury to issue
regulations treating certain agents of a money services business as
money services businesses for purposes of section 5330. 31 U.S.C.
5330(c)(2). Those regulations must establish a threshold, based on
criteria the Secretary determines to be appropriate, for treating an
agent as a registrable money services business.
Under section 5330, a money services business must be registered
not later than the end of the 180-day period beginning on the later of
the date of enactment of the Money Laundering Suppression Act of 1994
(September 23, 1994), and the date on which the business is
established. 31 U.S.C. 5330(a). On May 18, 1995, FinCEN issued a notice
explaining that regulations prescribing the form and manner of
registration would not require initial registration of money services
businesses before the 90th day following the effective date of the
implementing regulations. FinCEN Notice 95-1. The notice further
explained that no penalty or other compliance sanction would be imposed
under the provisions of the Bank Secrecy Act on account of the failure
of any money services business to register before the last date for
initial registration specified by regulation.
Section 5330 specifies the information that must be included as
part of the registration. 31 U.S.C. 5330(b). The required information
is--
(1) The name and location of the business;
(2) The name and address of each person who owns or controls the
business, is a director or officer of the business, or otherwise
participates in the conduct of the affairs of the business;
(3) The name and address of any depository institution at which the
business maintains a transaction account (as defined in section
19(b)(1)(C) of the Federal Reserve Act);
(4) An estimate of the volume of business in the coming year, which
shall be reported annually to the Secretary; and
(5) Such other information as the Secretary of the Treasury may
require.
Under section 5330, a money services business must maintain a list
containing the names and addresses of its agents and such other
information about the agents as the Secretary may require. 31 U.S.C.
5330(c). Section 5330 requires a money services business to make the
list available on request to any appropriate law enforcement agency.
Section 5330 prescribes a civil penalty for any person who fails to
comply with any requirement of 31 U.S.C. 5330 or the regulations
thereunder. The penalty is $5,000 for each violation; each day a
violation of 31 U.S.C. 5330 or the regulations thereunder continues
constitutes a separate violation. 31 U.S.C. 5330(e).
A failure to comply with 31 U.S.C. 5330 or the regulations under
section 5330 may also result in a criminal penalty under 18 U.S.C.
1960. See the discussion of proposed 31 CFR 103.41(e), below.
B. Money Services Businesses--General
This is the first of a set of three notices of proposed rulemaking
being published in this separate part of the Federal Register that deal
with the application of the Bank Secrecy Act to money services
businesses. In proposing these rules, FinCEN and the Department of the
Treasury are not only following the mandate of Congress in the Money
Laundering Suppression Act and the Annunzio-Wylie Anti-Money Laundering
Act, Title XV of the Housing and Community Development Act of 1992,
Public Law 102-550, but are more generally responding to the need to
update and more carefully tailor the application of the Bank Secrecy
Act to a major, if little understood, part of the financial sector in
the United States.4
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\4\ The Congress has long-recognized the need generally to
address problems of abuse by money launderers of ``non-bank''
financial institutions. See, e.g., Permanent Subcommittee on
Investigations, Senate Comm. on Governmental Affairs, Current Trends
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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``Money services business'' is a newly-coined term that refers to
five distinctive types of financial services providers: currency
dealers or exchangers; check cashers; issuers of traveler's checks,
money orders, or stored value; sellers or redeemers of traveler's
checks, money orders, or stored value; and money transmitters. (The
five types of financial services are complementary and are often
provided together at a common location.) These businesses are quite
numerous; based on a study performed for FinCEN by Coopers & Lybrand,
L.L.P., they comprise approximately 158,000 5 outlets or
selling locations, and provide financial services involving
approximately $200 billion annually. To a significant extent, the
customer base for such businesses lies in that part of the population
that does not use, either in whole or in part, traditional financial
institutions, primarily banks.
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\5\ The number does not include Post Offices (which sell money
orders), participants in stored value product trials, or sellers of
various stored value or smart cards in use in, e.g., public
transportation systems.
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Money services businesses, like banks, can be large or small. It is
estimated that approximately eight business enterprises account for the
bulk of money service business financial products (that is, money
transmissions, money orders, traveler's checks, and check cashing and
currency exchange availability) sold within the United States, and also
account, through systems of agents, for the bulk of locations at which
these financial products are sold. Members of this first group include
large firms, with significant capitalization, that are publicly traded
on major securities exchanges.
A far larger group of (on average) far smaller enterprises compete
with the eight largest firms in a highly bifurcated market for money
services. In some cases, these small enterprises are based in one
location with two to four employees. Moreover, the members of this
second group may provide both financial services and unrelated products
or services 6 to the same sets of customers. Far less is
known about this
[[Page 27892]]
second tier of firms than about the major providers of money service
products.7
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\6\ E.g., as a travel agency, courier service, convenience
store, grocery or liquor store.
\7\ For example, according to the Coopers & Lybrand study, two
money transmitters and two traveler's check issuers make up
approximately 97 percent of their respective known markets for non-
bank money services. Three enterprises make up approximately 88
percent of the $100 billion in money orders sold annually (through
approximately 146,000 locations). The retail foreign currency
exchange sector is somewhat less concentrated, with the top two non-
bank market participants accounting for 40 percent of a known market
that accounts for $10 billion. Check cashing is the least
concentrated of the business sectors; the two largest non-bank check
cashing businesses make up approximately 20 percent of the market,
with a large number of competitors.
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Because money services businesses primarily serve individuals, they
have grown to provide a set of financial products, albeit in large part
for non-depository customers, that others look to banks to provide. For
example, a money services business customer who receives a paycheck can
take his check to a check casher to have it converted to cash. He can
then purchase money orders to pay his bills. Finally, he may choose to
send funds to relatives abroad, using the services of a money
transmitter.
III. Section-by-Section Analysis
A. Definitions.
1. 31 CFR 103.11(n)(3)--Definition of financial institution to
include ``money services business''. This proposed section adds a new
category called ``money services business'' to the definition of
financial institution. This new category collects, with revisions
discussed below, the financial institutions now defined at 31 CFR
103.11(n) (3), (4), (5), and (9). The change will permit these
institutions to be referred to, when necessary, by one convenient term.
FinCEN believes this restructuring of the definition of financial
institution will clarify, and facilitate flexibility in the
administration of, the Bank Secrecy Act regulations. (As a result of
this restructuring, current 31 CFR 103.11(n) (3), (4), (5), and (9)
will be deleted, and current 31 CFR 103.11(n) (6), (7), and (8) will be
redesignated as 31 CFR 103.11(n) (4), (5), and (6)).
2. 31 CFR 103.11(uu)--Definition of money services business. This
proposed section defines money services business. The term includes
each agent, agency, branch, or office within the United States of any
person doing business, whether or not on a regular basis or as an
organized business concern, in one or more of the capacities listed in
(1)-(6) below. (It should be noted that only one registration form per
money services business is required.)
(1) Currency dealer or exchanger. A currency dealer or exchanger
(other than a person who does not exchange currency in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day).
(2) Check casher. A person engaged in the business of cashing
checks (other than a person who does not cash checks in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day).
Proposed 31 CFR 103.11 (uu)(1) and (uu)(2) would replace the
definition of financial institution in existing 31 CFR 103.11(n)(3);
that section is proposed to be broken into two sections, one dealing
with currency dealers or exchangers 8 and one dealing with
check cashers, for ease of reference. In addition, unlike existing 31
CFR 103.11(n)(3), which contains no dollar floor, proposed 31 CFR
103.11 (uu)(1) and (uu)(2) generally treat currency dealers or
exchangers and check cashers as financial institutions only if they
engage in transactions involving more than $500 for any person any day.
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\8\ This document would retain the definition of currency dealer
or exchanger at 31 CFR 103.11(i). FinCEN specifically invites
comments on whether the definition at 31 CFR 103.11(i) is still
necessary for its carve out of banks from the recordkeeping
requirements of 31 CFR 103.37.
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The addition of explicit floors in the definitions relating to
currency exchange and check cashing businesses is proposed in an
attempt to eliminate from Bank Secrecy Act treatment those businesses,
such as grocery stores and hotels, that cash checks or exchange
currency as an accommodation to customers who are otherwise purchasing
goods, services, or lodging from the businesses involved. (Of course,
exceeding the threshold has other, more immediate consequences if the
amounts involved are sufficiently high to implicate particular Bank
Secrecy Act reporting or recordkeeping thresholds.) Treasury invites
comments on the appropriateness of the proposed $500 floor.
In determining whether the $500 floor is met in the case of a
particular definition, different money services provided by the same
business are not aggregated. Thus, for example, a hotel that limits its
check cashing services to $250 for a customer on any day and limits its
currency exchange services to $300 for a customer on any day does not
meet the $500 floor for check cashers or for currency exchangers.
(3) Issuer of traveler's checks, money orders, or stored value. An
issuer of traveler's checks or money orders or stored value or similar
instruments (other than a person who does not issue such checks or
money orders or stored value or similar instruments in an amount
greater than $500 in currency or monetary or other negotiable
instruments to any person any day).
Proposed 31 CFR 103.11(uu)(3) would replace the treatment of money
order and traveler's check businesses in existing 31 CFR 103.11(n)(4).
The definition of issuer of traveler's checks or money orders has been
separated from the definition of seller or redeemer of traveler's
checks or money orders in the proposed regulations, for ease of
reference. In addition, unlike existing 31 CFR 103.11(n)(4), which
contains no dollar floor for an issuer, the proposed definition
generally treats an issuer of traveler's checks or money orders as a
financial institution only if it engages in transactions involving more
than $500 for any person any day.
(4) Seller or redeemer of traveler's checks, money orders, or
stored value. A seller or redeemer of traveler's checks or money orders
or stored value or similar instruments (other than a person who does
not sell or redeem such checks or money orders or stored value or
similar instruments in an amount greater than $500 in currency or
monetary or other negotiable instruments to (or in the case of
redemption, for) any person any day).
The $500 floor in proposed 31 CFR 103.11(uu)(4) is designed to
replace the definitional floor (of $150,000 sold in instruments per 30-
day period) for selling agents in present 31 CFR 103.11(n)(4). The
$150,000 limitation produces a great deal of unnecessary complexity
(dealing with the movement of particular businesses into or out of the
scope of the Bank Secrecy Act) and does not, in FinCEN's view, any
longer provide a meaningful threshold for distinguishing between
businesses that ought to, and that need not, incorporate appropriate
Bank Secrecy Act rules into their operations (or the operations they
undertake on behalf of their principals). The definition in proposed 31
CFR 103.11(uu)(4) extends to ``redeemers'' of money orders and
traveler's checks only insofar as the instruments involved are redeemed
for monetary value--that is, for currency or monetary or other
negotiable instruments. The taking of the instruments in exchange for
goods or services is not a redemption for purposes of these rules.
(See, however, 26 CFR 1.6050I-1(c)(1)(ii)(B) for situations in which
certain traveler's checks or money orders (among other instruments) may
be treated as currency, if taken in exchange for certain goods or
services, for purposes of the requirement that non-financial
[[Page 27893]]
businesses report transactions in currency in excess of $10,000.)
(5) Money transmitter. (i) Any person, whether or not licensed or
required to be licensed, who accepts currency, or funds denominated in
currency, and transmits the currency or funds, or the value of the
currency or funds, by any means through a financial agency or
institution, a Federal Reserve Bank or other facility of the Board of
Governors of the Federal Reserve System, or an electronic funds
transfer network, or
(ii) Any other person engaged as a business in the transfer of
funds.
Proposed 31 CFR 103.11(uu)(5) revises the definition in existing 31
CFR 103.11(n)(5), which simply treats as a financial institution ``a
licensed transmitter of funds, or other person engaged in the business
of transmitting funds.'' The substitute definition proposed is that of
the registration statute for a ``money transmitting service,'' expanded
to include ``any other person engaged as a business in the transfer of
funds.'' See 31 U.S.C. 5330(d)(2).9 Particular classes or
subclasses of money transmitters can be excluded from the operation of
the definition for particular substantive rules (as for example the
rule proposed today relating to the reporting of suspicious activities
by money transmitters excludes from its coverage sellers or
transmitters of stored value or other advanced electronic payment
system products).
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\9\ The term ``money transmitter'' in proposed 31 CFR
103.11(uu)(5) is not necessarily synonymous with the term
``transmittor's financial institution'' in existing 31 CFR
103.11(mm). As explained above, the term money transmitter follows
the statutory definition of money transmitter in 31 U.S.C.
5330(d)(2), with one change, designed to flesh out the statutory
phrase ``money transmitting or remittance services.'' The term
``transmittor's financial institution'' in existing 31 CFR
103.11(mm) was designed with a narrower purpose in mind--``to
preserve as much uniformity as possible'' between the special rules
for recordkeeping for wire transfers and the language of Article 4A
of the Uniform Commercial Code. See 60 FR 220 (January 3, 1995).
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FinCEN recognizes that the statutory definition is very broad and
can encompass activities far beyond the traditional enterprises thought
of popularly as money transmitters. For example, financial and other
professionals that control the management of funds for their principals
may in certain cases be money transmitters under the definition. Thus,
Treasury specifically invites comments about whether it is necessary or
appropriate specifically to exclude certain activities from the scope
of registration of money services businesses (and perhaps as well from
the definition of money transmitter for purposes of the Bank Secrecy
Act regulations generally).
(6) United States Postal Service. The United States Postal Service,
except with respect to the sale of postage or philatelic products.
This proposed parargraph revises the part of the definition of
financial institution concerning the United States Postal Service,
currently at 31 CFR 103.11(n)(9). Unlike the current regulation, which
treats the United States Postal Service as a financial institution only
with respect to the sale of money orders, the proposed rule would treat
the Postal Service as a financial institution with respect to its
provision of any money services products.
3. 31 CFR 103.11(vv)--Definition of stored value. This proposed
section defines stored value as funds or monetary value represented in
digital electronics format (whether or not specially encrypted) and
stored or capable of storage on electronic media in such a way as to be
retrievable and transferable electronically.
The inclusion in the rule of a specific definition of ``stored
value'' and the cross-references to the stored value definition in the
language of the definition of ``money services business'' is the first
step in the characterization of stored value and other advanced
electronic payment system products for purposes of the Bank Secrecy
Act. The Department of the Treasury believes that stored value products
are generally comprehended within the statutory reference to other
instruments ``similar'' to money orders and traveler's checks and that
businesses that operate systems that permit the transmission of stored
value or other electronic representations of funds are comprehended
within the statutory definition of money transmitting services, see 31
U.S.C. 5330(d)(2), which is carried over into the regulatory definition
of money transmitter in proposed 31 CFR 103.11(uu)(5).10
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\10\ It should be clearly understood that the treatment of
stored value and similar products as instruments ``similar'' to
money orders and traveler's checks for purposes of the operation of
31 U.S.C. 5330 is solely a matter of federal law and cannot be taken
as the expression of any view by the Department of the Treasury on
the issue whether particular money services businesses are (or,
indeed, should be) within the scope of state laws requiring the
registration of money transmitters, check cashers, currency exchange
businesses, or issuers, sellers, or redeemers of money orders or
traveler's checks.
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Thus, under the proposed rule, most offerors of stored value
products and operators of other advanced electronic payment systems
would be treated as ``money services businesses'' for purposes of the
Bank Secrecy Act. To fail to deal in any manner with stored value
products and other such systems, in the context of a rule designed to
implement 31 U.S.C. 5330, would belie the importance of such systems,
would run contrary to the Congressional intent that the statutory term
``money transmitter'' be construed broadly, and would adopt yesterday's
concepts to tomorrow's issues.
The other proposed rules being published today dealing with money
services businesses do not affect advanced electronic payment systems.
The proposed suspicious activity reporting rules for money transmitters
and issuers, sellers, and redeemers of money orders and traveler's
checks specifically exclude stored value and similar products from the
scope of the reporting obligation at present; the difference in
treatment reflects the fact that the treatment of stored value and
similar systems in the money services business registration rule is
intended to constitute for the most part the beginning of the policy
cycle for determining the most effective way to deal with advanced
electronic payment systems under the Bank Secrecy Act.
Of course, the definitions in proposed 31 CFR 103.11(uu) apply for
all purposes under the Bank Secrecy Act, and thus the proposed language
would eliminate any lingering doubt that offerors and operators of
advanced electronic payments systems are subject to the Bank Secrecy
Act. That treatment could cause such persons to become subject to
existing Bank Secrecy Act requirements if, for example, they engaged in
transactions in currency in excess of $10,000, or initiated funds
transmittals of at least $3,000.
The Department of the Treasury naturally recognizes that as
mechanisms for the issuance or transmission of stored value or other
electronic representations of funds develop, the appropriateness of any
particular characterization for Bank Secrecy Act purposes may change.
It also recognizes that the characteristics of advanced electronic
payment systems may present special issues that need to be considered
as specific Bank Secrecy Act recordkeeping and reporting requirements
for such systems are formulated. Comments are specifically invited on:
1. The manner in which the rules of the Bank Secrecy Act should be
applied to advanced electronic payment systems;
2. The potential impact of Bank Secrecy Act compliance on the
design and operation of such systems
[[Page 27894]]
(including, if possible, estimates of costs); and
3. Whether products such as telephone cards (``closed system''
products), or products that are limited to facilitating very small
transactions (so-called ``micro'' transactions) should be treated
differently than other stored value products for purposes of the
registration requirements of the proposed rule.11
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\11\ Stored value systems may be loosely characterized as
``closed'' or ``open'' systems. In a purely closed system, the
stored value card is accepted only by a single merchant or entity
and operates as prepayment for specific goods and services, such as
public transportation or telephone calls. In contrast, an open
system permits stored value cards (issued by one or more issuers of
such cards) to be accepted by multiple merchants, or other
consumers, and operates as a general payment and value transfer
system. Certain arrangements--for example a university or stadium
card system that permits payments to multiple merchants within a set
geographic area--may contain aspects of both ``closed'' and ``open''
systems.
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B. Registration of Money Services Businesses
1. 31 CFR 103.41(a)(1)--Registration requirement; In general.
Proposed paragraph (a)(1) contains the requirement that a money
services business (whether or not licensed as a money services business
by any State) must register with the Department of the Treasury and, as
part of that registration, must maintain a list of its agents.
Proposed paragraph (a)(1) excludes from the registration and list
requirement the following persons: the United States Postal Service; a
depository institution (as defined in 31 U.S.C. 5313(g)); the United
States, any State or political subdivision of a State; or a broker or
dealer in securities or commodities (to the extent of such activities)
registered with, and regulated or examined by, the Securities and
Exchange Commission (SEC) or the Commodity Futures Trading Commission
(CFTC). Thus, for example, even though the United States Postal Service
is a money services business as defined in 31 CFR 103.11(uu), it is not
required to register as a money services business. Similarly, banks,
and brokers registered with the SEC under the Securities and Exchange
Act of 1934, are not required to register as such. However, if a bank
has a non-bank subsidiary or affiliate (e.g., a brother-sister
subsidiary owned by the bank's holding company) that itself engages in
a money services business (or a broker-dealer has a non-broker-dealer
affiliate that engages in a money services business), the affiliate
must register even though the bank (or broker-dealer) is not required
to register. FinCEN specifically invites comments on whether there are
other persons who should be excluded from the registration
requirements.
The information required to be included on the registration form
for a money services business and the agent list maintained by the
business may include privileged and confidential trade secrets,
commercial, and financial information. Congress has affirmed that
confidential proprietary or trade secret information provided by
registrants may be disclosed only subject to applicable law. H. R.
Conf. Rep. No. 652, 103d Cong., 2d Sess. 192-93 (1994). At the same
time, however, Congress recognized that some of the registration data
will have legitimate uses outside of law enforcement. Thus, Congress
has indicated that it intends that such latter information will be made
available to the public in a manner that balances the need to protect
confidential business information and the need of the public to have
access to information about businesses on which it relies. Id. at 193.
FinCEN specifically invites comments on how to make such information
available to the public in as much detail as possible without revealing
confidential business information.
2. 31 CFR 103.41(a)(2)--Agents treated as registrable money
services businesses. Proposed paragraph (a)(2) sets forth the threshold
(registration threshold) an agent must meet before it is itself treated
as a money services business that must independently register with the
Department of the Treasury and maintain a list of its own agents. The
registration threshold focuses on both the extent and the dollar amount
of the agent's money services business activities. An agent meets the
registration threshold if the agent satisfies any of the following four
paragraphs--
(i) The agent's primary business is a business described in 31 CFR
103.11(uu), and the agent's money services gross transaction amount is
more than $50,000 for any month;
(ii) The agent engages in more than one of the businesses described
in 31 CFR 103.11(uu) as an agent for one money services business, and
the agent's money services gross transaction amount is more than
$50,000 for any month;
(iii) The agent is an agent for more than one money services
business, and the agent's money services gross transaction amount is
more than $50,000 for any month; or
(iv) The agent has subagents, and the agent's money services gross
transaction amount is more than $50,000 for any month.
The money services gross transaction amount is the agent's combined
gross amount (excluding fees and commissions) received from
transactions in all its businesses described in 31 CFR 103.11(uu).
Thus, for example, if an agent sells a $600 money order, charging an
$18 fee and receiving a $6 commission on the sale, the agent's gross
transaction amount is $600. An agent is not required to compute a gross
transaction amount for any month beginning before the effective date of
the final regulations to which this notice of proposed rulemaking
relates are published in the Federal Register.
FinCEN realizes that the registration threshold, as proposed, may
require registration by certain agents, for example, grocery or retail
food stores, that have a high volume of transactions, none of which
individually exceeds the $500 floor in 31 CFR 103.11 (uu)(1)-(uu)(4)
that would cause the agent to be a money services business in its own
right under 31 CFR 103.11 (uu)(1)-(uu)(4). FinCEN specifically invites
comments on whether the registration threshold should include a floor
for individual transactions by these agents like the floor in 31 CFR
103.11 (uu)(1)-(uu)(4).
3. 31 CFR 103.41(b)(1)--Registration procedures in general.
Proposed paragraph (b)(1) provides that a money services business must
be registered by filing such form as FinCEN may specify with the
Detroit Computing Center of the Internal Revenue Service. The
information required by 31 U.S.C. 5330(b) and any other information
required by the form must be reported in the manner required by the
form.
A branch office or location or an agent of a money services
business is not required to file a registration form for the business,
except for agents treated as a money services business because they
meet the registration threshold. A money services business must,
however, report information about its branch locations or offices as
provided by the instructions to the registration form.
A money services business must retain a copy of any registration
form it files (and any registration number that the Detroit Computing
Center may assign to the business) at a central location in the United
States reported on the form and for the 5-year period specified in
Sec. 103.38(d).
4. 31 CFR 103.41(b)(2)--Registration period. Proposed paragraph
(b)(2) provides that after an initial registration period of two
calendar years (initial registration period), the registration must be
renewed every two years (renewal period). The initial registration
[[Page 27895]]
period is the two-calendar-year period beginning with the calendar year
in which the money services business is first required to be
registered. Each two-calendar-year period following the initial
registration period is a renewal period.
5. 31 CFR 103.41(b)(3)--Due date. Proposed paragraph (b)(3) sets
forth the due date for filing the registration form for the initial
registration period and each renewal period. For the initial
registration period, the registration form must be filed by the end of
the 180-day period beginning on the later of (i) the date on which the
final regulations to which this notice of proposed rulemaking relates
are published in the Federal Register, and (ii) the date the business
is established. In the case of an agent required to be registered under
this section, the registration form for the initial registration period
must be filed not later than the end of the 180-day period beginning on
the date the agent meets the registration threshold. The registration
form for a renewal period must be filed on or before the last day of
the calendar year preceding the renewal period.
6. 31 CFR 103.41(b)(4)--Special rule for agents treated as money
services businesses. Proposed paragraph (b)(4) clarifies that once an
agent meets the registration threshold, it must be registered for the
initial registration period and each renewal period, even if its money
services gross transaction amount later falls below $50,000.
7. 31 CFR 103.41(b)(5)--Events requiring re-registration. Proposed
paragraph (b)(5) requires a money services business to be re-registered
before the end of a registration period upon the occurrence of certain
events. Re-registration is required if the money services business
experiences a change in ownership or control that requires re-
registration under a State law registration program for money services
businesses, more than 10 per cent of its voting power or equity
interests is transferred, or the number of its agents increases by more
than 50 per cent during any registration period. The form for the re-
registration must be filed not later than 180 days after such change in
ownership, transfer of voting power or equity interests, or increase in
agents. The calendar year in which the change, transfer, or increase
occurs is treated as the first year of a new two-year registration
period.
8. 31 CFR 103.41(c)--Persons required to file registration form.
Proposed paragraph (c) provides that, as required by 31 U.S.C. 5330(a),
any person who owns or controls a money services business shares the
responsibility for seeing that the business is registered as required
by this rule. Only one registration form, however, is required to be
filed for each registration period. Proposed paragraph (c) further
provides that if more than one person owns or controls a money services
business, the owning or controlling persons may enter into an agreement
designating one of them to register the business. The failure of the
designated person to register the money services business does not,
however, relieve any of the other persons who own or control the
business of liability for the failure to register the business.
9. 31 CFR 103.41(d)(1)--List of agents; In general. Proposed
paragraph (d)(1) provides that a money services business must prepare
and maintain a list of its agents. Proposed paragraph (d)(1) then
explains the time and manner of preparing and maintaining the agent
list. The initial list of agents must be prepared by the time the
initial registration form is filed and must be revised each calendar
quarter to contain current information. The list is not filed with the
registration form but is maintained at the location in the United
States reported on the registration form. Upon request, a money
services business must make its list of agents available to FinCEN and
any other appropriate law enforcement agency (including, without
limitation, the examination function of the Internal Revenue Service in
its capacity as delegee of Bank Secrecy Act examination authority). The
original list of agents and any revised list must be retained for five
years, as specified in 31 CFR 103.38(d).
The proposed rule does not contain a specific definition of the
term ``agent'' for purposes of the money services business registration
rules, including the requirement that a list of agents be maintained by
each money services business as part of its registration requirement.
Instead the proposed rule speaks simply of a list of ``agents.''
Treasury understands that the relationships between money services
businesses and their outlets may take many forms, some of which reflect
traditional agency agreements while others are styled by the parties as
creating independent contractor or similar relationships for state law
purposes. Treasury intends that the concept of ``agent'' for the list
requirement should be as broad as the common law of agency would allow,
that is, it would extend to any relationship that would be deemed to
create obligations of principal and agent at common law. Thus, for
example, it is likely that virtually all independent contractor
arrangements for money services business--whatever their
characterization for employment law or income tax purposes--would be
treated as creating principal-agent relationships to define the
parameters of the rights, obligations, and direct and derivative
liabilities of the parties. See Restatement (Second) of Agency,
Sections 2(c) and 14N.
Distribution mechanism involving outlets other than agents. 31
U.S.C. 5330 speaks only of money services businesses and ``agents'' of
those businesses. Congress intended that the registration requirement
of the Money Laundering Suppression Act should be implemented in a
manner that eliminated the need for direct registration of all the
businesses--in many cases small businesses--through which money
services products created and backed by others are offered to the
public.12 Thus, FinCEN specifically invites comments on
whether, and how, the language of the proposed rule could be altered to
treat money services businesses in the distribution chain for financial
services products that are not technically agents within the meaning of
31 U.S.C. 5330 and the proposed regulations in the same manner as
agents for purposes of the registration requirements.
---------------------------------------------------------------------------
\12\``The intent of the Conferees is to eliminate the need for
all agents of money transmitting businesses to register with the
Secretary. Such massive registration of thousands of agents would
only create another needless and costly administrative burden.''
H.R. Conf. Rep. No. 652, 103 Cong., 2d Sess. 193 (1994).
---------------------------------------------------------------------------
10. 31 CFR 103.41(d)(2)--Information included on the list of
agents. Proposed paragraph (d)(2) sets forth the information with
respect to each agent that must be included on the list (including any
revised list) of agents. This information is--
(i) The name of the agent, including any trade names or doing-
business-as names,
(ii) The address of the agent, including street address, city,
state, and ZIP code,
(iii) The telephone number of the agent,
(iv) The type of service or services (sale or redemption of money
orders, traveler's checks, stored value, check sales, check cashing,
currency exchange, and money transmitting) the agent provides,
(v) The year in which the agent first became an agent of the money
services business,
(vi) The number of branches or subagents the agent has, and
(vii) The name and address of any depository institution at which
the
[[Page 27896]]
agent maintains a transaction account (as defined in 12 U.S.C.
461(b)(1)(C)) for all or part of the funds received in or for its money
services business whether in the agent's or principal's name.
11. 31 CFR 103.41(e)--Consequences of failing to comply with 31
U.S.C. 5330 or the regulations thereunder. Proposed paragraph (e)
explains that it is unlawful to do business without complying with 31
U.S.C. 5330 and the regulations thereunder, and that under 31 U.S.C.
5320, the Secretary of the Treasury may bring a civil action to enjoin
the violation. Proposed paragraph (e) also explains the penalties that
may be imposed for failing to comply with 31 U.S.C. 5330 or the
regulations thereunder. Any person who fails to comply with any
requirement of 31 U.S.C. 5330 or the regulations thereunder is liable
for a civil penalty. Such a failure includes the filing of false or
materially incomplete information in connection with the registration
of a money services business. The penalty is $5,000 for each violation;
each day a violation of 31 U.S.C. 5330 or the regulations thereunder
continues constitutes a separate violation.
A person may also be liable for a criminal penalty under 18 U.S.C.
1960 for operating a money services business without complying with the
registration requirements of 31 U.S.C. 5330 and regulations issued
thereunder. 18 U.S.C. 1960 provides in part that any person who
conducts, controls, manages, supervises, directs, or owns all or part
of a money transmitting business 13 knowing that the
business affects interstate or foreign commerce in any manner or degree
and that the business has failed to comply with the registration
requirements of 31 U.S.C. 5330 or the regulations thereunder is subject
to a fine, imprisonment for not more than five years, or both.
---------------------------------------------------------------------------
\13\ As indicated above, this document, and the rules proposed
herein and in the related notices of proposed rulemaking published
today, generally use the phrase ``money services business'' as the
equivalent of the definition of ``money transmitting business,'' in
31 U.S.C. 5330(d)(1)(A), in order to avoid confusion between the
latter phrase and the statutory definition of ``money transmitting
service,'' in 31 U.S.C. 5330(d)(2). In quoting the terms of 18
U.S.C. 1960(b)(1)(B), however, the text naturally uses the statutory
language.
---------------------------------------------------------------------------
18 U.S.C. 1960 imposes penalties not only upon operating a money
transmitting business without compliance with the registration
requirements of 31 U.S.C. 5330 (and its implementing regulations), see
18 U.S.C. 1960(b)(1)(B), but also upon the knowing operation of such a
business without an appropriate money transmitting license in any state
in which operation without a license is a crime, see 18 U.S.C.
1960(b)(1)(A). References to 18 U.S.C. 1960 in this preamble, and in
proposed 31 CFR 103.41(e), naturally concern exclusively the
relationship of 31 U.S.C. 5330 to 18 U.S.C. 1960. That relationship,
and the meaning of the relevant terms of 31 U.S.C. 5330, of 18 U.S.C.
1960(b)(1)(B), and of the rules proposed by this document, are solely
matters of federal law. As also specifically noted in the discussion
above of stored value products and other advanced electronic payment
systems, the rules proposed by this document should not be taken as the
expression of any view by the Department of the Treasury on the issue
whether particular money services businesses are (or, indeed, should
be) within the scope of state laws requiring the registration of money
transmitters, check cashers, currency exchange businesses, or issuers,
sellers, or redeemers of money orders or traveler's checks.
12. 31 CFR 103.41(f)--Effective date. Proposed paragraph (f) would
make the regulations effective on [the date on which the final
regulations to which this notice of proposed rulemaking relates are
published in the Federal Register]. That publication date would start
the running of the 180-day period for filing the form for the initial
registration of a money services business.
IV. Submission of Comments
An original and four copies of any comment (other than one sent
electronically) must be submitted. All comments will be available for
public inspection and copying, and no material in any such comments,
including the name of any person submitting comments, will be
recognized as confidential. Accordingly, material not intended to be
disclosed to the public should not be submitted.
V. Regulatory Flexibility Act
FinCEN certifies that this proposed regulation will not have a
significant economic impact on a substantial number of small entities.
FinCEN anticipates that the provisions of the proposed rule generally
excluding agents of money services businesses from registration will
limit the impact of the proposed registration rule on small businesses.
Further, most of the recordkeeping and reporting requirements that
would be imposed by this proposed regulation concern information
already found in routine business records. For example, as part of
their business records, money services businesses (to the extent such
businesses are small entities) will generally have information needed
for the required agent list, such as the name and address of their
agents and agent transaction account information, because such
information is necessary to establish and maintain the relationship
between the businesses and their agents. In addition to recordkeeping
and reporting requirements, other requirements of the proposed
regulation may also be satisfied with information that is currently
available. For example, many businesses currently have policies in
place regarding the maximum dollar amount of a money service
transaction they will perform for a customer, such as the maximum check
the business will cash, which may help (assuming the policy is
observed) them determine whether they have exceeded the $500 floor in
several of the definitions in the proposed regulation. Further, agents
will generally have information currently available to help them
determine whether they meet the $50,000 element of the registration
threshold, for example, the monthly statement for the bank account they
maintain pursuant to agreement with the money services business for
which they are an agent.
VI. Paperwork Reduction Act Notices
Registration for Money Services Businesses
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information on the Registration for Money Services Businesses form is
presented to assist those persons wishing to comment on the information
collection.
FinCEN anticipates that this proposed rule, if enacted as proposed,
would result in a total of 25,000 Registration for Money Services
Businesses forms to be filed annually. This result is an estimate,
based on a projection of the size and volume of the industry.
Title: Registration for Money Services Businesses.
OMB Number: to be determined.
Description of Respondents: Money Services Businesses.
Estimated Number of Respondents: 25,000.
Frequency: Once every two years, or as required to be updated.
Estimate of Burden: Reporting average of 45 minutes per response;
recordkeeping average of 3 hours per response.
Estimate of Total Annual Burden on Respondents: 25,000 responses.
[[Page 27897]]
Reporting burden estimate = 18,750 hours; recordkeeping burden estimate
= 75,000 hours. Estimated combined total of 93,750 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$1,875,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: New.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
Recordkeeping Requirements of 31 CFR 103.41
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information as required by 31 CFR 103.41 is presented to assist those
persons wishing to comment on the information collection.
Title: Registration of Money Services Businesses.
OMB Number: 1506-0006.
Description of Respondents: Money Services Businesses.
Estimated Number of Respondents: 25,000.
Frequency: Once every two years, or as required.
Estimate of Burden: Recordkeeping average of 100 hours per Money
Service Business.
Estimate of Total Annual Burden on Respondents: Recordkeeping
burden estimate = 2,500,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$50,000,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: Extension.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
VII. Executive Order 12866
The Department of the Treasury has determined that this proposed
rule is not a significant regulatory action under Executive Order
12866.
VIII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act), March 22, 1995, requires that an agency
prepare a budgetary impact statement before promulgating a rule that
includes a federal mandate that may result in expenditure by state,
local and tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year. If a budgetary impact
statement is required, section 202 of the Unfunded Mandates Act also
requires an agency to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule. FinCEN has
determined that it is not required to prepare a written statement under
section 202 and has concluded that on balance this proposal provides
the most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Investigations, Law enforcement, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
Accordingly, 31 CFR part 103 is proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. Section 103.11 is amended by--
a. Removing paragraphs (n)(3), (n)(4), (n)(5), and (n)(9),
b. Adding a new paragraph (n)(3),
c. Redesignating paragraphs (n)(6), (n)(7), and (n)(8) as
paragraphs (n)(4), (n)(5), and (n)(6), respectively,
d. In newly redesignated paragraph (n)(6), removing ``;.'' and
adding a period in its place, and
e. Adding new paragraphs (uu) and (vv).
The added paragraphs read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(n) Financial institution. * * *
(3) A money services business as defined in paragraph (uu) of this
section.
* * * * *
(uu) Money services business. Each agent, agency, branch, or office
within the United States of any person doing business, whether or not
on a regular basis or as an organized business concern, in one or more
of the capacities listed as follows--
(1) Currency dealer or exchanger. A currency dealer or exchanger
(other than a person who does not exchange currency in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day);
(2) Check casher. A person engaged in the business of a check
casher (other than a person who does not cash checks in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day);
(3) Issuer of traveler's checks, money orders, or stored value. An
issuer of traveler's checks, money orders, stored value, or similar
instruments (other than a person who does not issue such checks or
money orders or stored value or similar instruments in an amount
greater than $500 in currency or monetary or other negotiable
instruments to any person any day);
(4) Seller or redeemer of traveler's checks, money orders, or
stored value. A
[[Page 27898]]
seller or redeemer of traveler's checks or money orders or stored value
or similar instruments (other than a person who does not sell or redeem
such checks or money orders or stored value or similar instruments in
an amount greater than $500 in currency or monetary or other negotiable
instruments to (or in the case of redemption, for) any person any day);
(5) Money transmitter. (i) Any person, whether or not licensed or
required to be licensed, who accepts currency, or funds denominated in
currency, and transmits the currency or funds, or the value of the
currency or funds, by any means through a financial agency or
institution, a Federal Reserve Bank or other facility of the Board of
Governors of the Federal Reserve System, or an electronic funds
transfer network; or
(ii) Any other person engaged as a business in the transfer of
funds; or
(6) United States Postal Service. The United States Postal Service,
except with respect to the sale of postage or philatelic products.
(vv) Stored value. Funds or monetary value represented in digital
electronics format (whether or not specially encrypted) and stored or
capable of storage on electronic media in such a way as to be
retrievable and transferable electronically.
3. Part 103 is further amended by redesignating the following
subparts and sections as follows--
Old Subparts and Sections
Subpart D
103.41
103.42
103.43
103.44
103.45
103.46
103.47
103.48
103.49
103.50
103.51
103.52
103.53
103.54
Subpart E
103.61
103.62
103.63
103.64
103.65
103.66
103.67
Subpart F
103.70
103.71
103.72
103.73
103.74
103.75
103.76
103.77
New Subparts and Sections
Subpart E
103.51
103.52
103.53
103.54
103.55
103.56
103.57
103.58
103.59
103.60
103.61
103.62
103.63
103.64
Subpart F
103.71
103.72
103.73
103.74
103.75
103.76
103.77
Subpart G
103.80
103.81
103.82
103.83
103.84
103.85
103.86
103.87
4. Add a new subpart D to Part 103 to read as follows:
Subpart D--Special Rules for Money Services Businesses
Sec.
103.41 Registration of money services businesses.
Subpart D--Special Rules for Money Services Businesses
Sec. 103.41 Registration of money services businesses.
(a) Registration requirement--(1) In general. Except as provided in
paragraph (a)(2) of this section, relating to agents, each money
services business (whether or not licensed as a money services business
by any State) must register with the Department of the Treasury and, as
part of that registration, maintain a list of its agents as required by
31 U.S.C. 5330 and this section. This section does not apply to the
United States Postal Service, to a depository institution as defined in
31 U.S.C. 5313(g), to the United States, any State or political
subdivision of a State, or to a person registered with, and regulated
or examined by, the Securities and Exchange Commission or the Commodity
Futures Trading Commission.
(2) Agents treated as money services businesses--(i) Registration
threshold. For purposes of this section, an agent of a money services
business is itself a money services business and is required to
register with the Department of the Treasury and maintain a list of its
agents only if the agent meets the registration threshold in this
paragraph (a)(2)(i). (See, however, Sec. 103.11(uu), which, for other
purposes of the Bank Secrecy Act, provides that an agent of a money
services business is a money services business whether or not the agent
meets the registration threshold.) An agent meets the registration
threshold if--
(A) The agent's primary business is a business described in
Sec. 103.11(uu), and the agent's money services gross transaction
amount is more than $50,000 for any month;
(B) The agent engages in more than one of the businesses described
in Sec. 103.11(uu) as an agent for one money services business, and the
agent's money services gross transaction amount is more than $50,000
for any month;
(C) The agent is an agent for more than one money services
business, and the agent's money services gross transaction amount is
more than $50,000 for any month; or
(D) The agent has subagents, and the agent's money services gross
transaction amount is more than $50,000 for any month.
(ii) Money services gross transaction amount. The money services
gross transaction amount is the agent's gross amount (excluding fees
and commissions) received from transactions by all its businesses
described in Sec. 103.11(uu). Thus, for example, if an agent sells a
$600 money order, charging an $18 fee and receiving a $6 commission on
the sale, the agent's gross transaction amount is $600.
(iii) Transition rule. An agent is not required to compute a money
services gross transaction amount for any month beginning before the
effective date in paragraph (f) of this section.
(b) Registration procedures--(1) In general. (i) A money services
business must be registered by filing such form as FinCEN may specify
with the Detroit Computing Center of the Internal Revenue Service. The
information required by 31 U.S.C. 5330(b) and any other information
required by the form must be reported in the manner required by the
form.
[[Page 27899]]
(ii) A branch office or location or an agent of a money services
business is not required to file a registration form for the business,
except for agents treated as a money services business under paragraph
(a)(2) of this section. A money services business must, however, report
information about its branch locations or offices as provided by the
instructions to the registration form.
(iii) A money services business must retain a copy of any
registration form filed under this section and any registration number
that the Detroit Computing Center may assign to the business at a
central location in the United States reported on the form and for the
period specified in Sec. 103.38(d).
(2) Registration period. A money services business must be
registered for the initial registration period and each renewal period.
The initial registration period is the two-calendar-year period
beginning with the calendar year in which the money services business
is first required to be registered. Each two-calendar-year period
following the initial registration period is a renewal period.
(3) Due date. The registration form for the initial registration
period must be filed not later than the end of the 180-day period
beginning on the later of [the date on which the final regulations to
which this notice of proposed rulemaking relates are published in the
Federal Register], or the date the business is established. In the case
of an agent required to be registered under this section, the
registration form for the initial registration period must be filed not
later than the end of the 180-day period beginning on the date the
agent meets the registration threshold. The registration form for a
renewal period must be filed on or before the last day of the calendar
year preceding the renewal period.
(4) Special rule for agents treated as money services businesses.
An agent treated as a money services business under paragraph (a)(2) of
this section must be registered during each renewal period, even though
its money services gross transaction amount falls below the
registration threshold after the agent's initial registration.
(5) Events requiring re-registration. If a money services business
registered as such under the laws of any State experiences a change in
ownership or control that requires the business to be re-registered
under State law, the money services business must also be re-registered
under this section. In addition, if more than 10 percent of the voting
power or equity interests of a money services business is transferred,
the money services business must be re-registered under this section.
Finally, if a money services business experiences a more than 50
percent increase in the number of its agents during any registration
period, the money services business must be re-registered under this
section. The registration form must be filed not later than 180 days
after such change in ownership, transfer of voting power or equity
interests, or increase in agents. The calendar year in which the
change, transfer, or increase occurs is treated as the first year of a
new two-year registration period.
(c) Persons required to file the registration form. Under 31 U.S.C.
5330(a), any person who owns or controls a money services business is
responsible for registering the business; however, only one
registration form is required to be filed for each registration period.
If more than one person owns or controls a money services business, the
owning or controlling persons may enter into an agreement designating
one of them to register the business. The failure of the designated
person to register the money services business does not, however,
relieve any of the other persons who own or control the business of
liability for the failure to register the business. See paragraph (e)
of this section, relating to consequences of the failure to comply with
31 U.S.C. 5330 or this section.
(d) List of agents--(1) In general. A money services business must
prepare and maintain a list of its agents. The initial list of agents
must be prepared by the time the initial registration form is filed and
must be revised each calendar quarter to contain current information.
The list is not filed with the registration form but must be maintained
at the location in the United States reported on the registration form
under paragraph (b)(1) of this section. Upon request, a money services
business must make its list of agents available to FinCEN and any other
appropriate law enforcement agency (including, without limitation, the
examination function of the Internal Revenue Service in its capacity as
delegee of Bank Secrecy Act examination authority). The original list
of agents and any revised list must be retained for the period
specified in Sec. 103.38(d).
(2) Information included on the list of agents. A money services
business must include the following information with respect to each
agent on the list (including any revised list) of its agents--
(i) The name of the agent, including any trade names or doing-
business-as names;
(ii) The address of the agent, including street address, city,
state, and ZIP code;
(iii) The telephone number of the agent;
(iv) The type of service or services (money orders, traveler's
checks, stored value, check sales, check cashing, currency exchange,
and money transmitting) the agent provides;
(v) The year in which the agent first became an agent of the money
services business;
(vi) The number of branches or subagents the agent has; and
(vii) The name and address of any depository institution at which
the agent maintains a transaction account (as defined in 12 U.S.C.
461(b)(1)(C)) for all or part of the funds received in or for its money
services business whether in the agent's or principal's name.
(e) Consequences of failing to comply with 31 U.S.C. 5330 or the
regulations thereunder. It is unlawful to do business without complying
with 31 U.S.C. 5330 and this section. A failure to comply with the
requirements of 31 U.S.C 5330 or this section includes the filing of
false or materially incomplete information in connection with the
registration of a money services business. Any person who fails to
comply with any requirement of 31 U.S.C. 5330 or this section shall be
liable for a civil penalty of $5,000 for each violation. Each day a
violation of 31 U.S.C. 5330 or this section continues constitutes a
separate violation. In addition, under 31 U.S.C. 5320, the Secretary of
the Treasury may bring a civil action to enjoin the violation. See 18
U.S.C. 1960 for a criminal penalty for failure to comply with the
registration requirements of 31 U.S.C. 5330 or this section.
(f) Effective date. This section is effective on [the date on which
the final regulations to which this notice of proposed rulemaking
relates are published in the Federal Register].
Sec. 103.36 [Amended]
5. Paragraph (b)(10) of Sec. 103.36 is amended by removing the
language ``Sec. 103.54(a)'' and adding the language ``Sec. 103.64(a)''
in its place.
Sec. 103.56 [Amended]
6. Paragraph (b)(7) of newly redesignated Sec. 103.56 is amended by
removing the language ``Sec. 103.48'' and adding the language
``Sec. 103.58'' in its place.
Sec. 103.57 [Amended]
7. Newly redesignated Sec. 103.57 is amended by:
[[Page 27900]]
a. In paragraph (d) removing the language ``Sec. 103.48'' and
adding the language ``Sec. 103.58'' in its place.
b. In the first sentence of paragraph (e) removing the language
``Sec. 103.53'' and adding the language ``Sec. 103.63'' in its place.
Sec. 103.72 [Amended]
8. Newly redesignated Sec. 103.72 is amended by removing the
language ``Sec. 103.61'' from the introductory text and adding the
language ``Sec. 103.71'' in its place.
Sec. 103.73 [Amended]
9. Newly redesignated Sec. 103.73 is amended by:
a. In paragraph (a) introductory text removing the language
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
b. In paragraph (a)(1) removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
c. In paragraph (b) introductory text removing the language
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
d. In paragraph (b)(1) removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
Sec. 103.74 [Amended]
10. Newly redesignated Sec. 103.74 is amended by removing the
language ``Sec. 103.62'' from paragraph (a) and adding the language
``Sec. 103.72'' in its place.
Sec. 103.75 [Amended]
11. Newly redesignated Sec. 103.75 is amended by:
a. In the first sentence of paragraph (a) removing the language
``Sec. 103.62'' and adding the language ``Sec. 103.72'' in its place.
b. In paragraph (c) introductory text removing the language
``103.62(a)'' and adding the language ``103.72(a)'' in its place and
removing the language ``Sec. 103.62 (b) or (c)'' and adding the
language ``Sec. 103.72 (b) or (c)'' in its place.
Sec. 103.76 [Amended]
12. Newly redesignated Sec. 103.76 is amended by:
a. In the first sentence removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
b. In the second sentence removing the language ``Sec. 103.62(a)''
and adding the language ``Sec. 103.72(a)'' in its place.
Sec. 103.82 [Amended]
13. Newly redesignated Sec. 103.82 is amended by removing the
language ``Sec. 103.71'' from the first sentence and adding the
language ``Sec. 103.81'' in its place.
Sec. 103.83 [Amended]
14. Paragraph (b) of newly redesignated Sec. 103.83 is amended by:
a. In the first sentence removing the language ``Sec. 103.71'' and
adding the language ``Sec. 103.81'' in its place.
b. In the last sentence removing the language ``Sec. 103.71'' and
adding the language ``Sec. 103.81'' in its place.
Sec. 103.85 [Amended]
15. Newly redesignated Sec. 103.85 is amended by removing the
language ``Sec. 103.71'' from the first sentence and adding the
language ``Sec. 103.81'' in its place.
Sec. 103.86 [Amended]
16. Newly redesignated Sec. 103.86 is amended by:
a. In paragraph (a) introductory text removing the language
``Sec. 103.75'' and adding the language ``Sec. 103.85'' in its place.
b. In the second sentence of paragraph (b) removing the language
``Sec. 103.71'' and adding the language ``Sec. 103.81'' in its place.
Dated: May 16, 1997.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 97-13304 Filed 5-16-97; 4:32 pm]
BILLING CODE 4820-03-P
