A money services business (MSB) is a legal term used by financial regulators to describe non-bank businesses that transmit or convert money. The definition was created to encompass non-bank financial institutions that provide these services and is generally distinct from banks, which are regulated under separate banking frameworks.
An MSB has specific meanings in different jurisdictions, but generally includes any business that transmits money or representatives of money, provides foreign currency exchange such as Bureaux de change, or cashes cheques or other money related instruments. It is often used in the context of Anti Money Laundering (AML) legislation and rules. [1] [2] Money services businesses are regulated in different countries differently. They governed by their local regulators and have to adhere with record-keeping requirements to conduct customer due diligence if customers request for an amount of foreign currency that exceeds a certain threshold set to detect money laundering. [3]
An MSB often provides an essential financial service to underdeveloped regions with limited or no banking services and may be a small organisation with outlets like grocery stores, drugstores, pharmacies or convenience stores. It may include regional networks of post offices, banks or agents. [4]
Money services businesses (MSBs) have been affected by broader trends in digitisation, including the growth of online and mobile payment channels, automated customer due diligence tools, and the use of data analytics in compliance. In many jurisdictions, these developments have generally been treated as changes in how MSBs deliver services, rather than as a separate regulatory category, so digitally focused providers are usually supervised under the same basic MSB definitions and licensing requirements as more traditional firms. [5] [6]
Historically, MSBs relied heavily on physical retail locations and manual, paper-based processes for activities such as cheque cashing, money orders and money transmission. These models were typically constrained by opening hours and local presence, and supervisory attention focused on customer identification, basic recordkeeping, and anti-money laundering (AML) controls for cash-intensive services. [7] [8]
In the United States, many MSBs continue to operate under the same statutory framework, including registration with the Financial Crimes Enforcement Network (FinCEN) and compliance with Bank Secrecy Act (BSA)/AML obligations, but offer services primarily through remote onboarding, web platforms and application programming interfaces (APIs). This allows MSBs to reach customers across state or national borders and to process payments on a near real-time basis, while at the same time raising questions about how to monitor, attribute and trace large volumes of electronic value transfers. [7] [9]
Outside the United States, comparable business models are often regulated under broader payment services or remittance regimes rather than under an MSB label. In the European Union, non-bank firms that execute payment transactions or remittances are typically authorised as "payment institutions" or "electronic money institutions" under the Payment Services Directive and the E-Money Directive. [10] [11] [12] In the United Kingdom, "money service business" is defined for the purposes of the Money Laundering Regulations and covers undertakings that operate a currency exchange office, transmit money or cash cheques payable to customers. [13] In several Asia–Pacific jurisdictions, money-changing, remittance and certain digital-asset payment services are brought under consolidated frameworks, which license both traditional and digitally focused providers on a similar basis. [14] [15] [16]
At the international level, the Financial Action Task Force (FATF) uses the broader term "money or value transfer services" (MVTS) for many of these activities and applies a common set of risk-based AML/CFT standards across both cash-based and digital channels. [17]
A significant regulatory development for digital-era MSBs occurred in 2013, when FinCEN issued interpretive guidance on "convertible virtual currency". The guidance clarified that administrators and exchangers of such virtual currencies may be treated as money transmitters, and therefore MSBs, when they accept and transmit value that substitutes for currency, bringing certain virtual-currency activities within the scope of MSB regulation. [18] Subsequent statements and guidance have applied these principles to a variety of business models involving digital assets and online platforms, while maintaining the core approach that such activities are regulated within the existing MSB framework. [19] Internationally, similar questions about the treatment of virtual assets and related service providers have been addressed through FATF standards on virtual assets and virtual asset service providers (VASPs), which many jurisdictions have transposed into their domestic regimes. [20]
Some industry trade associations such as the Federal Money Services Business Association (FedMSB) in the United States have described digitally focused, API-driven MSB models as "MSB 2.0", emphasising integrated compliance controls and real-time processing within the existing MSB regulatory framework. [21] In 2025, an analysis by a mainstream industry news outlet of the U.S. Treasury's request for comment on digital asset risks highlighted proposals for standardized compliance APIs and privacy-preserving data sharing, illustrating how MSBs and related intermediaries are positioning themselves as key technical partners in digital-asset supervision. [22]
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