Non-Bank Financial Institutions: What Constitutes Money Service Business Status?

MoneyA non-bank financial institution (NBFI) is one that provides financial services such as check cashing, currency exchanges, or check purchasing for individuals. In order to assist law enforcement in the battle against terrorist financing and money laundering, financial institutions must identify any of its customers that meet specific criteria determined by the Financial Crimes Enforcement Network (FinCEN).

A NBFI is a Money Service Business (MSB) and must register with FinCEN if it provides one or more of the following money transfer services in any amount, or conducts certain transactions greater than $1,000 with one person in the same business day:

  • Issuing money orders.
  • Selling travelers’ checks.
  • Cashing checks.
  • Dealing in foreign exchange.

If a financial institution determines it has an MSB customer, its minimum due-diligence requirements, defined by FinCEN, are to:

  • Obtain basic information about the MSB through its Customer Identification Program (CIP), such as types of products and services it offers, locations and markets served, anticipated account activity, and the purpose of the account.
  • Confirm the MSB has registered with FinCEN and that it is complying with state or local licensing requirements. Exceptions to the registration and compliance requirements are: if the MSB is solely an agent of another MSB, if it is the U.S. Postal Service, or if it is a government agency.
  • Confirm agent status unless it meets the previous exemption criteria.
  • Conduct a basic Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) risk assessment to determine the level of risk associated with the account.

Additionally, FinCEN states that financial institutions are not expected to serve as regulators of MSBs and are not expected to educate MSBs about BSA requirements that apply to the industry.

If your organization has questions about MSBs or our financial institution advisory services, contact the expert listed below at PYA, (800) 270-9629.

Mike Shamblin

Mike Shamblin

Managing Principal of Audit & Assurance Services

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