Money Service Businesses

Overview

Money service businesses ("MSBs") are regulated under both federal law and state law (although the specifics of what defines an MSB may differ in different states and as between any state and federal law).

For federal law purposes, MSBs are defined to include six distinct types of financial services providers: (1) dealers in foreign exchange; (2) check cashers; (3) issuers and sellers of traveler’s checks or money orders; (4) providers of prepaid access; (5) money transmitters; or (6) sellers of prepaid access. The primary purpose of federal regulation of MSBs is in connection to their AML obligations. The "Bank Secrecy Act" ("BSA" requires U.S. financial institutions (defined to include MSBs) to assist U.S. government agencies in detecting and preventing money laundering. Pursuant to this affirmative obligation, an MSB must establish and maintain an effective written AML program reasonably designed to prevent the financial institution from being used to facilitate money laundering and the financing of terrorist activities. This topic page primarily focuses on material that is very specific to MSBs, including the registration issues. See also the topic page on Anti-Money-Laundering for comprehensive material on the AML obligations of financial institutions more generally.

In many respects, the States are actually the primary regulators of MSBs. State regulators are concerned not only with AML issues, but also with consumer protection.