The Treasury Department announced the publication of a final regulation that requires the money services business (MSB) industry to register with Treasurys Financial Crimes Enforcement Network (FinCEN) in an effort to strengthen anti-money laundering controls within these businesses.
MSBs, which in 1996 accounted for $200 billion in financial transactions, include money transmitters, issuers, redeemers and sellers of money orders and travelers checks, check cashers and currency retail exchangers.
In requiring the registration of money services businesses in the Money Laundering Suppression Act of 1994, Congress found that such businesses are largely unregulated. Some of these businesses have been found to have been used in sophisticated schemes to transfer large amounts of money that are the proceeds of unlawful enterprises and to evade the requirements of the Bank Secrecy Act (BSA).
Enhancing anti-money laundering requirements for MSBs demonstrates Treasury's firm commitment to close off all avenues used by money launderers to move their illicit funds into the economy," said Treasury Secretary Lawrence H. Summers.
The registration requirement reflects the lessons learned from the New York Geographic Targeting Orders (GTO). The first GTO was initiated after evidence was developed that certain New York area money remitters and their agents were engaged in a scheme to move drug money to Colombia by breaking up large cash transactions to avoid the reporting requirements of the BSA. A second GTO was put into effect against certain New York area and Puerto Rico money remitters wiring illicit funds to the Dominican Republic.
We've learned through the GTOs that some of these businesses are susceptible to money laundering, we view this measure as the start of a very important process to strengthen Bank Secrecy Act enforcement within the industry," said Under Secretary for Enforcement James E. Johnson.
The proposal to require registration was first announced in May 1997. Since then FinCEN has been engaged in extensive discussions with the MSB industry to craft a final rule that strikes an appropriate balance between law enforcements need for accurate information about the owners and locations of MSBs, and the concern that small businesses be spared unnecessary and intrusive regulation.
For example, unlike the proposed rule, the final rule generally does not require any agents of MSBs to register independently. In addition, a significant period of implementation was built into the final registration rule to permit government outreach through an on-going working relationship with the industry. MSBs will be required to register with Treasury by December 31, 2001. Registration procedures and the form MSBs will use for the registration process will be forthcoming.
MSBs are currently required to report to Treasury large currency transactions exceeding $10,000. The information reported on Currency Transaction Reports (CTRs) preserves a financial trail for law enforcement investigators to follow. With this new regulation, failure to register by 2002 can result in substantial criminal and civil penalties.
A third proposal issued in May 1997 that would have lowered the $10,000 threshold for reporting currency transactions at MSBs is being deferred at this time.
Treasury is also announcing its intention that suspicious activity reporting (SAR) requirements for money transmitting and the traveler's checks and money order segments of the industry will be forthcoming. In the coming months, Treasury and FinCEN will be working with the industry to develop guidance to assist in identifying suspicious activity.