Money transmitter

Last updated

In the legal code of the United States, a money transmitter or money transfer service is a business entity that provides money transfer services or payment instruments. [1] Money transmitters in the US are part of a larger group of entities called money service businesses, or MSBs. [2] Under federal law, 18 USC § 1960, businesses are required to register for a money transmitter license where their activity falls within the state definition of a money transmitter. [3]

Contents

Regulation

Forty-nine US states (sans Montana [4] [5] ) regulate (i.e., require licensure for) money transmitters, although the laws vary from one state to the other. [6] Most of the states require a money transmitter surety bond with widely ranging amounts from as little as $25,000 to over $1 million and maintain a minimum capital requirement. There is an association of state regulators, the Money Transfer Regulators Association (MTRA) [7] that seeks to create uniformity, common practices, and efficient and effective regulation of the money transmission industry in the United States of America. The MTRA membership consists of state regulatory authorities in charge of regulating money transmitters and sellers of traveler’s checks, money orders, drafts, and other money instruments. In the Spring of 2019, the MTRA created the Industry Advisory Council (“IAC”) in order to consult, advise, and assist the MTRA Board of Directors on issues relating to money services business regulation. [8]

Through their Vision 2020 program, US state regulators, as the primary regulators of non-bank and fintech firms committed to fostering innovation, are transforming the licensing process, harmonizing supervision, engaging fintech companies, assisting state banking departments, making it easier for banks to provide services to non-banks, and making supervision more efficient for third parties. [9]

Money transmitters created an association with other MSBs, the Money Services Business Association (MSBA) which was launched in October 2015 as an industry led organization that supports the non-bank financial services industry in the United States and encourages the continued innovation and development in the payments industry while promoting the education and communication with US federal and state regulators. [10] As of September 5, 2018, the MSBA integrated into its operation the services and capabilities of the National Money Transmitters Association (NMTA). [11] Together with the MSBA and other industry associations, the International Money Transfer Conferences (IMTC), [12] brings together the global money transfer industry once a year for the IMTC WORLD conference, in Miami, Florida. In 2017, the IMTC brought together more than 450 participants, 67% from the US. [13]

The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department requires MSBs to register. [14] It is also a felony to engage in money transmission without a license in any state that requires a license to operate. [15] Internet and mobile-based payment services are also required to seek a state money transmitter license to offer services to individuals residing in the state.

FINCEN has also ruled that Informal Value Transfer Systems (IVTS) are considered money transmitters for the purposes of registration and licensing. [16] FINCEN defines an IVTS as "any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form". These are known as Hawala in the Middle East, Afghanistan, and Pakistan; "hundi" in India; and '"fei ch’ien" in China.

In regulations enacted in 2012 under the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) [17] extended its regulation under a "Remittance Rule" that added some additional protection for US consumers who send money electronically to foreign countries. [18] The rule targets any remittance institution defined as consumer-to-consumer transfers of low monetary value, made via money transmitters, banks, or credit unions, through wire transfers or Automated Clearing House (ACH) transactions, to businesses as well as to individuals in foreign countries.

See also

Related Research Articles

<span class="mw-page-title-main">Financial Crimes Enforcement Network</span> Bureau of the US Department of the Treasury

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes.

<span class="mw-page-title-main">Bank Secrecy Act</span> 1970 act of the United States Congress

The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law requiring financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports if the daily aggregate exceeds $10,000, and report suspicious activity that may signify money laundering, tax evasion, or other criminal activities.

The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:

<span class="mw-page-title-main">Currency transaction report</span>

A currency transaction report (CTR) is a report that U.S. financial institutions are required to file with FinCEN for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency valued at more than $10,000. Used in this context, currency means the coin and/or paper money of any country that is designated as legal tender by the country of issuance. Currency also includes U.S. silver certificates, U.S. notes, Federal Reserve notes, and official foreign bank notes. Contrary to popular misunderstanding, these reports do not apply to, and are not used for, non-currency transactions such as checks, nor for electronic transfers such as wire and ACH/EFT.

The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11, 2001 attacks. It has ten titles, each containing numerous sections. Title III: International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 is actually an act of Congress in its own right as well as being a title of the USA PATRIOT Act, and is intended to facilitate the prevention, detection and prosecution of international money laundering and the financing of terrorism. The title's sections primarily amend portions of the Money Laundering Control Act of 1986 and the Bank Secrecy Act of 1970.

Virtual currency, or virtual money, is a digital currency that is largely unregulated, issued and usually controlled by its developers, and used and accepted electronically among the members of a specific virtual community. In 2014, the European Banking Authority defined virtual currency as "a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically." A digital currency issued by a central bank is referred to as a central bank digital currency.

Financial intelligence (FININT) is the gathering of information about the financial affairs of entities of interest, to understand their nature and capabilities, and predict their intentions. Generally the term applies in the context of law enforcement and related activities. One of the main purposes of financial intelligence is to identify financial transactions that may involve tax evasion, money laundering or some other criminal activity. FININT may also be involved in identifying financing of criminal and terrorist organisations. Financial intelligence can be broken down into two main areas, collection and analysis. Collection is normally done by a government agency, known as a financial intelligence organisation or Financial Intelligence Unit (FIU). The agency will collect raw transactional information and Suspicious activity reports (SAR) usually provided by banks and other entities as part of regulatory requirements. Data may be shared with other countries through intergovernmental networks. Analysis, may consist of scrutinizing a large volume of transactional data using data mining or data-matching techniques to identify persons potentially engaged in a particular activity. SARs can also be scrutinized and linked with other data to try to identify specific activity.

An identity verification service is used by businesses to ensure that users or customers provide information that is associated with the identity of a real person. The service may verify the authenticity of physical identity documents such as a driver's license, passport, or a nationally issued identity document through documentary verification. Additionally, also involve the verification of identity information (fields) against independent and authoritative sources, such as a credit bureau or proprietary government data.

<span class="mw-page-title-main">Consumer Financial Protection Bureau</span> United States government agency

The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector. CFPB's jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, for-profit colleges, and other financial companies operating in the United States. Since its founding, the CFPB has used technology tools to monitor how financial entities used social media and algorithms to target consumers.

A money services business (MSB) is a legal term used by financial regulators to describe businesses that transmit or convert money. The definition was created to encompass more than just banks which normally provide these services to include non-bank financial institutions.

<span class="mw-page-title-main">Bitcoin ATM</span> Kiosks facilitating the purchase of Bitcoin

A Bitcoin ATM is a kiosk that allows a person to purchase Bitcoin and other cryptocurrencies by using cash or debit card. Some Bitcoin ATMs offer bidirectional functionality, enabling both the purchase of Bitcoin and the sale of Bitcoin for cash. In some cases, Bitcoin ATM providers require users to have an existing account to transact on the machine.

<span class="mw-page-title-main">California Department of Financial Protection and Innovation</span> California state department

The California Department of Financial Protection and Innovation regulates a variety of financial services, businesses, products, and professionals. The department operates under the California Business, Consumer Services and Housing Agency.

WorldRemit is a digital cross border remittance business that provides international money transfer and remittance services in more than 130 countries and over 70 currencies. It was founded in 2010 by Ismail Ahmed, Catherine Wines, and Richard Igoe.

United States virtual currency law is financial regulation as applied to transactions in virtual currency in the U.S. The Commodity Futures Trading Commission has regulated and may continue to regulate virtual currencies as commodities. The Securities and Exchange Commission also requires registration of any virtual currency traded in the U.S. if it is classified as a security and of any trading platform that meets its definition of an exchange.

A BitLicense is the common term used for a business license for virtual currency activities, issued by the New York State Department of Financial Services (NYSDFS) under regulations designed for companies. The regulations are limited to activities involving the state of New York or a New York resident. People residing in, located in, having a place of business in, or conducting business in the State of New York count as New York Residents under these regulations. The license was introduced and designed by Benjamin Lawsky, New York's first Superintendent of Financial Services, in July 2014. Chartered entities do not require an explicit BitLicense, but may instead proceed with virtual currency activities via limited purpose trust charters approved by the NYDFS.

Keith A. Noreika is an American lawyer who specializes in the regulation of financial institutions. He served as Acting Comptroller of the Currency from May 5, 2017, to November 27, 2017, following the 30th Comptroller of the Currency, Thomas J. Curry, and preceding the 31st Comptroller of the Currency, Joseph Otting. Noreika rejoined the law firm of Simpson Thacher on January 8, 2018. He joined Patomak Global Partners as Executive Vice President and Chairman of its Banking Supervision and Regulation Group on July 5, 2022.

The Nationwide Multi-State Licensing System and Registry(NMLS) (originally the Nationwide Mortgage Licensing System) is the system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam. In these jurisdictions, NMLS is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through NMLS by 64 state or territorial governmental agencies. NMLS itself does not grant or deny license authority.

Blockchain analysis is the process of inspecting, identifying, clustering, modeling and visually representing data on a cryptographic distributed-ledger known as a blockchain. The goal of blockchain analysis is to discover useful information about different actors transacting in cryptocurrency. Analysis of public blockchains such as Bitcoin and Ethereum is typically conducted by private companies like Chainalysis, TRM Labs, Elliptic, Nansen, CipherTrace, Elementus, Dune Analytics, CryptoQuant, and Ormi Labs.

<span class="mw-page-title-main">James Freis</span> American businessman

James H. Freis Jr. is an American lawyer and financial industry executive who from 2007 to 2012 served as the United States Department of the Treasury's 6th Director of the Financial Crimes Enforcement Network (FinCEN), where he expanded the scope of the anti-money laundering regulations and became known for spearheading efforts to combat fraud and implementing modern data analysis. He was an attorney and central banker at the Federal Reserve Bank of New York and the Bank for International Settlements.

<span class="mw-page-title-main">Anti-Money Laundering Improvement Act</span> United States antimony laundering law

The Anti-Money Laundering Improvement Act (AML) is a collection of regulations and laws in the United States aimed at combating money laundering and terrorist financing. The act builds upon the Bank Secrecy Act (BSA), the first anti-money laundering enforcement law.

References

  1. ↑ "Illinois Compiled Statutes -FINANCIAL REGULATION Transmitters of Money Act". January 1, 1995.
  2. ↑ "FinCEN - Am I an MSB" . Retrieved June 3, 2013.
  3. ↑ "18 UCS § 1960" . Retrieved May 20, 2014.
  4. ↑ https://banking.mt.gov/moneytransmitters [ bare URL ]
  5. ↑ https://www.moderntreasury.com/learn/what-is-money-transmission [ bare URL ]
  6. ↑ Atlas, Adam (2010-01-28). "Money Transmitter Licensing". Moneytransmitterlicense.blogspot.com. Retrieved 2013-06-03.
  7. ↑ "MTRA – Money Transmitter Regulators Association;". Mtraweb.org. 2012-10-23. Retrieved 2013-06-03.
  8. ↑ "Industry Advisory Council IAC". MTRA. 10 July 2019. Retrieved 2019-11-08.
  9. ↑ "VISION2020". CSBS. Retrieved 2019-11-08.
  10. ↑ "MSBA - The Money Services Business Association". msbassociation. Retrieved 2019-11-08.
  11. ↑ "NMTA". msbassociation. Retrieved 2019-11-08.
  12. ↑ "International Money Transfers and Cross-Border Conferences IMTC". Imtconferences.com. Retrieved 2019-11-08.
  13. ↑ "IMTC". Imtconferences.com. Retrieved 2019-11-08.
  14. ↑ "Money Services Business (MSB) Registration". FinCEN. Retrieved 2013-06-03.
  15. ↑ Andrew Schout (2008). "Unlicensed Money Transmitting Businesses and Mens Rea under the USA PATRIOT Act" (PDF). 39. McGeorge Law Review. Retrieved 2013-06-03.{{cite journal}}: Cite journal requires |journal= (help)
  16. ↑ "FinCEN Advisory - Informal Value Transfer Systems (IVTS)" (PDF). March 2003. Archived from the original (PDF) on 2014-06-30.
  17. ↑ "CFPB > Consumer Financial Protection Bureau". Consumerfinance.gov. Retrieved 2013-06-03.
  18. ↑ "Remittance transfer rule (amendment to Regulation E)". Consumer Financial Protection Bureau. Retrieved 2013-06-03.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.