[Federal Register Volume 64, Number 161 (Friday, August 20, 1999)]
[Rules and Regulations]
[Pages 45438-45453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21667]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 103

RIN 1506-AA09


Amendment to the Bank Secrecy Act Regulations--Definitions 
Relating to, and Registration of, Money Services Businesses

AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.

ACTION: Final rule.

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SUMMARY: This document contains amendments to the regulations 
implementing the statute generally referred to as the Bank Secrecy Act. 
The amendments revise the definitions of certain non-bank financial 
institutions for purposes of the Bank Secrecy Act and group the revised 
definitions together in a separate category called ``money services 
businesses.'' The amendments also require certain money services 
businesses to register with the Department of the Treasury and to 
maintain a current list of their agents for examination, on request, by 
any appropriate law enforcement agency. The amendments regarding 
registration and maintenance of agent lists by money services 
businesses reflect changes to the law made by the Money Laundering 
Suppression Act of 1994.

DATES: Effective Date: September 20, 1999.
    Applicability Date: Registration of money services businesses will 
not be required prior to December 31, 2001, and maintenance of the 
agent list will not be required prior to January 1, 2002. See 
Sec. 103.41(f) of the final rule contained in this document.

FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director, 
FinCEN, (703) 905-3930; Charles Klingman, Financial Institutions Policy 
Specialist, FinCEN, (703) 905-3602; Stephen R. Kroll, Chief Counsel, 
Cynthia L. Clark, Deputy Chief Counsel, and Albert R. Zarate and 
Christine L. Schuetz, Attorney-Advisors, Office of Chief Counsel, 
FinCEN, (703) 905-3590.

SUPPLEMENTARY INFORMATION:

I. Statutory Provisions--General

    The Bank Secrecy Act, Titles I and II of Public Law 91-508, as 
amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 
U.S.C. 5311-5330, authorizes the Secretary of the Treasury, inter alia, 
to issue regulations requiring financial institutions to keep records 
and file reports that are determined to have a high degree of 
usefulness in criminal, tax, and regulatory matters, and to implement 
counter-money laundering programs and compliance procedures. 
Regulations implementing Title II of the Bank Secrecy Act (codified at 
31 U.S.C. 5311-5330) appear at 31 CFR Part 103. The authority of the 
Secretary to administer Title II of the Bank Secrecy Act has been 
delegated to the Director of FinCEN.
    31 U.S.C. 5312. The Bank Secrecy Act generally applies to financial 
institutions, a term broadly defined in 31 U.S.C. 5312(a)(2)(A-Z). The 
statutory definition includes, inter alia:
* * * * *
    (J) a currency exchange;
    (K) an issuer, redeemer, or cashier of travelers' checks, 
checks, money orders, or similar instruments;
* * * * *
    (R) a licensed sender of money;
* * * * *
    (Y) any business or agency which engages in any activity which 
the Secretary of the Treasury determines, by regulation, to be an 
activity which is similar to, related to, or a substitute for any 
activity in which any business described in this paragraph is 
authorized to engage; or
    (Z) any other business designated by the Secretary whose cash 
transactions have a high degree of usefulness in criminal, tax, or 
regulatory matters.

    31 U.S.C. 5330. 31 U.S.C. 5330 was added to the Bank Secrecy Act by 
section 408 of the Money Laundering Suppression Act of 1994 (the 
``Money Laundering Suppression Act''), Title IV of the Riegle Community 
Development and Regulatory Improvement Act of 1994, Public Law 103-325 
(September 23, 1994). Under that section, any person who owns or 
controls a money services business (which the statute refers to as a 
``money transmitting business'' 1), whether or not the 
business is licensed as a money services business in any State, must 
register the business with the Secretary of the Treasury. 31 U.S.C. 
5330(a). (A money services business required to be registered under 31 
U.S.C. 5330 remains subject to any State law requirements relating to 
the operation of the business in the State. 31 U.S.C. 5330(a)(3).) The 
form and manner of registration must be prescribed by regulations.
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    \1\ The statute uses the term ``money transmitting business'' to 
name those businesses subject to registration. See 31 U.S.C. 
5330(a)(1) and (d)(1). However, FinCEN believes that the statute's 
use of this term to refer to all the types of businesses subject to 
registration and its later use of the nearly identical term ``money 
transmitting service'' to refer to a particular type of business 
subject to registration, compare 31 U.S.C. 5330(d)(1)(A) with 31 
U.S.C. 5330(d)(2), may lead to confusion. Therefore, FinCEN has 
adopted the term ``money services business'' in place of the term 
``money transmitting business'' throughout this document and under 
the final rule.
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    The purpose of the registration requirement is to assist 
supervisory and law enforcement agencies in the enforcement of 
criminal, tax, and regulatory laws and to prevent money services 
businesses from engaging in illegal activities. See, section 408(a), of 
the Money Laundering Suppression Act. 31 U.S.C. 5311 (Note). In 
requiring the registration of money services businesses, Congress found 
that such businesses are largely unregulated and are frequently used in 
sophisticated schemes to transfer large amounts of money that are the 
proceeds of unlawful enterprises and to evade the

[[Page 45439]]

requirements of Title II of the Bank Secrecy Act, the Internal Revenue 
Code of 1986, and other laws of the United States. Congress also found 
that information on the identity of each money services business and 
the names of the persons who own or control, or are officers or 
employees of, a money services business would have a high degree of 
usefulness in criminal, tax, or regulatory investigations and 
proceedings. Id.
    The statute defines a ``money transmitting business'' 2 
as any business, other than the United States Postal Service, that is 
required to file reports under 31 U.S.C. 5313 and that provides check 
cashing, currency exchange, or money transmitting or remittance 
services,3, or issues or redeems money orders, traveler's 
checks or other similar instruments. 31 U.S.C. 5330(d)(1). Depository 
institutions (as defined in 31 U.S.C. 5313(g)), however, are not within 
the classes of institutions required to register under the statute. 31 
U.S.C. 5330(d)(1)(C).
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    \2\ Although the statutory term is ``money transmitting 
business,'' FinCEN has decided to use the term ``money services 
business'' in this rule. See footnote 1, supra.
    \3\ The term ``money transmitting service'' includes accepting 
currency or funds denominated in the currency of any country and 
transmitting the currency or funds, or the value of the currency or 
funds, by any means through a financial agency or institution, a 
Federal Reserve Bank or other facility of the Board of Governors of 
the Federal Reserve System, or an electronic funds transfer network. 
31 U.S.C. 5330(d)(2).
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    Section 5330 specifies the information that must be included as 
part of the registration. 31 U.S.C. 5330(b). The required information 
is--
    (1) The name and location of the business;
    (2) The name and address of each person who owns or controls the 
business, is a director or officer of the business, or otherwise 
participates in the conduct of the affairs of the business;
    (3) The name and address of any depository institution at which the 
business maintains a transaction account (as defined in section 
19(b)(1)(C) of the Federal Reserve Act);
    (4) An estimate of the volume of business in the coming year, which 
shall be reported annually to the Secretary; and
    (5) Such other information as the Secretary of the Treasury may 
require.
    Section 5330 contains two provisions directed explicitly at agents 
of money services businesses. First, a money services business must 
maintain a list containing the names and addresses of its agents and 
such other information about the agents as the Secretary may require, 
and the list must be made available on request to any appropriate law 
enforcement agency. See 31 U.S.C. 5330(c)(1). Second, the Secretary is 
to establish by regulation, on the basis of such criteria as the 
Secretary deems appropriate, a threshold point for treating an agent of 
a money services business as itself a money services business for 
purposes of section 5330.
    Section 5330 prescribes a civil penalty for any person who fails to 
comply with any requirement of 31 U.S.C. 5330 or the regulations 
thereunder. The penalty is $5,000 for each violation; each day a 
violation of 31 U.S.C. 5330 or the regulations thereunder continues 
constitutes a separate violation. 31 U.S.C. 5330(e). A failure to 
comply with 31 U.S.C. 5330 or the regulations under section 5330 may 
also result in a criminal penalty under 18 U.S.C. 1960.
    Under section 5330, a money services business must be registered 
not later than the end of the 180-day period beginning on the later of 
the date of enactment of the Money Laundering Suppression Act of 1994 
(September 23, 1994), and the date on which the business is 
established. 31 U.S.C. 5330(a). On May 18, 1995, FinCEN issued a notice 
explaining that regulations prescribing the form and manner of 
registration would not require initial registration of money services 
businesses before the 90th day following the effective date of the 
implementing regulations. FinCEN Notice 95-1. The notice further 
explained that no penalty or other compliance sanction would be imposed 
under the provisions of the Bank Secrecy Act on account of the failure 
of any money services business to register before the last date for 
initial registration specified by the implementing regulation.

II. Money Services Businesses--General

    The rulemaking of which this final rule is a part deals with a 
number of aspects of the application of the Bank Secrecy Act to money 
services businesses. In conducting the rulemaking, FinCEN and the 
Department of the Treasury are not only following the mandate of 
Congress in the Money Laundering Suppression Act and the Annunzio-Wylie 
Anti-Money Laundering Act, Title XV of the Housing and Community 
Development Act of 1992, Public Law 102-550, but are more generally 
responding to the need to update and more carefully tailor the 
application of the Bank Secrecy Act to a major, if little understood, 
part of the financial sector in the United States.4
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    \4\ The Congress has long-recognized the need generally to 
address problems of abuse by money launderers of ``non-bank'' 
financial institutions. See, e.g., Permanent Subcommittee on 
Investigations, Senate Comm. on Governmental Affairs, Current Trends 
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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    The term ``money services business'' refers to five distinctive 
types of financial services providers: currency dealers or exchangers; 
check cashers; issuers of traveler's checks, money orders, or stored 
value; sellers or redeemers of traveler's checks, money orders, or 
stored value; and money transmitters. (The five types of financial 
services are complementary and are often provided together at a common 
location.) These businesses are quite numerous; based on a study 
performed for FinCEN by Coopers & Lybrand LLP (now a part of 
PriceWaterhouse Coopers LLP), they comprise approximately 158,000 
5 outlets or selling locations, and provide financial 
services involving approximately $200 billion annually. To some 
significant extent, the customer base for such businesses lies in that 
part of the population that does not use traditional financial 
institutions, primarily banks.
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    \5\ The number does not include Post Offices (which sell money 
orders and other money services business financial products), 
participants in stored value product trials, or sellers of various 
stored value or smart cards in use in, e.g., public transportation 
systems.
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    Money services businesses, like banks, can be large or small. It is 
estimated that approximately eight business enterprises account for the 
bulk of money services business financial products (that is, money 
transmissions, money orders, traveler's checks, and check cashing and 
currency exchange availability) sold within the United States, and also 
account, through systems of agents, for the bulk of locations at which 
these financial products are sold. Members of this first group include 
large firms, with significant capitalization, that are publicly traded 
on major securities exchanges.
    A far larger group of (on average) far smaller enterprises competes 
with the eight largest firms in a highly bifurcated market for money 
services. In some cases, these small enterprises are based in one 
location with two to four employees. Moreover, the members of this 
second group may provide both financial services and unrelated products 
or services to the same sets of customers.6 Far less is 
known about this

[[Page 45440]]

second tier of firms than about the major providers of money service 
products.7
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    \6\ Members of the second group may include, for example, a 
travel agency, courier service, convenience store, grocery or liquor 
store.
    \7\ For example, according to the Coopers & Lybrand study, at 
the time of that study, two money transmitters and two traveler's 
check issuers made up approximately 97 per cent of their respective 
known markets for non-bank money services. Three enterprises made up 
approximately 88 per cent of the $100 billion in money orders sold 
annually (through approximately 146,000 locations). The retail 
foreign currency exchange sector was found by Coopers & Lybrand to 
be somewhat less concentrated, with the top two non-bank market 
participants accounting for 40 per cent of a known market that 
accounts for $10 billion. Check cashing is the least concentrated of 
the business sectors; the two largest non-bank check cashing 
businesses make up approximately 20 per cent of the market, with a 
large number of competitors.
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    Because money services businesses primarily serve individuals, they 
have grown to provide a set of financial products, albeit in large part 
for non-depository customers, that others look to banks to provide. For 
example, a money services business customer who receives a paycheck can 
take his or her check to a check casher to have it converted to cash. 
He or she can then purchase money orders to pay his or her bills. 
Finally, he or she may choose to send funds to relatives abroad, using 
the services of a money transmitter.

III. Notice of Proposed Rulemaking

    On May 21, 1997, FinCEN published a notice of proposed rulemaking, 
62 FR 27890--27900 (the ``Notice''), that described several proposed 
changes to the Bank Secrecy Act rules of the Department of the 
Treasury. First, the Notice proposed amendment of 31 CFR 103.11 to 
revise definitions of certain non-bank financial services businesses 
that had been treated as financial institutions for purposes of the 
Bank Secrecy Act (or in the case of stored value, to add a definition 
of a product whose issuers, sellers, and redeemers would be so treated) 
and to group the revised and new definitions together under the heading 
money services business; the businesses involved generally provide 
check cashing, currency exchange, or money transmitting services, or 
issue, sell, or redeem money orders, traveler's checks, or other 
similar instruments. Second, the Notice proposed the addition to 31 CFR 
part 103 of a set of new rules to require certain money services 
businesses to register with the Department of the Treasury and, as part 
of the registration requirement, to maintain a current list of their 
agents in a central location for examination by appropriate law 
enforcement agencies.8 The rules proposed in this portion of 
the Notice were designed to implement the terms of 31 U.S.C. 5330.
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    \8\ The Notice proposed to place section 103.41 in a new subpart 
D, Special Rules for Money Services Businesses, of Part 103, and to 
redesignate existing subparts D through F as subparts E through G of 
Part 103. The sections in redesignated subparts E through G were to 
be redesignated to reflect the addition of new subpart D, and 
corresponding changes were to be made to the references to such 
redesignated sections in other portions of part 103.
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    The Notice was one of three notices of proposed rulemaking dealing 
with money services businesses issued on May 21, 1997. The second 
notice, 62 FR 27900--27909, proposed to amend the Bank Secrecy Act 
rules to require money transmitters, and issuers, sellers, and 
redeemers of money orders and traveler's checks, to report suspicious 
transactions to the Department of the Treasury. The third notice, 62 FR 
27909-27917, proposed to add a special currency transaction reporting 
requirement--and related customer verification requirements--for money 
transmitters involved in the transmission or other transfer of funds to 
persons outside of the United States.
    The proposed rules were designed as part of a coordinated approach 
to dealing with abuse of money services businesses by criminals and to 
strengthening the application of general Bank Secrecy Act concepts to 
this part of the nation's payment system. The decision to deal with 
each rule separately, rather than finalizing the rules as a group, 
reflects a number of practical and policy considerations, most 
importantly the desire to allow time for the construction of the 
necessary administrative and compliance structures by both the 
Department of the Treasury and the money services businesses subject to 
the rules. As indicated in greater detail below, following the Section-
by-Section Analysis, the Department of the Treasury is planning next to 
issue the rule relating to the reporting of suspicious transactions, 
and will be working with interested parties, independently of the 
rulemaking itself, to advance the preparation of guidance about 
particular patterns of suspicious activity of which money services 
businesses must be aware.
    FinCEN held five public meetings during the summer of 1997, in 
order to provide interested parties with the opportunity to present 
their views about the potential effects of the three proposed 
regulations, as well as to provide FinCEN with additional information 
useful in preparing the final rule.9 Transcripts of these 
meetings were then made available by FinCEN to requesting parties.
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    \9\ These public meetings were held in Vienna, Virginia, on July 
22, 1997; New York, New York, on July 28, 1997; San Jose, 
California, on August 1, 1997; Chicago, Illinois, on August 15, 
1997; and Vienna, Virginia, on September 3, 1997.
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    The first of the five meetings, which was held in Vienna, Virginia, 
dealt particularly with issues raised by the Notice, and the San Jose, 
California, meeting dealt with the Notice's treatment of stored value. 
The final meeting, also held in Vienna, Virginia, dealt with the 
details of the various prototype compliance forms designed in 
connection with the issuance of both the Notice and the two related 
notices of proposed rulemaking and produced further discussion of the 
money services business registration requirements.
    The comment period for the three notices of proposed rulemaking 
originally ended on August 19, 1997, but it was extended to September 
30, 1997, by a notice published on July 30, 1997 (62 FR 40779). FinCEN 
received a total of 82 comment letters on the three notices of proposed 
rulemaking; 60 comment letters dealt in whole or in part with issues 
raised by the Notice. Of these, 17 were submitted by money services 
businesses and their affiliates, 11 by banks or bank holding companies, 
17 by financial institution trade associations, 5 by law firms, 5 by 
agencies of the United States government, 2 by credit unions, and 3 by 
private individuals.

IV. Summary of Comments and Revisions

A. Introduction

    The format of the final rule is generally consistent with the 
Notice. The terms of the final rule, however, differ from the terms of 
the Notice in the following significant respects:
Definitions
     The definition of money services business has been revised 
to exclude from treatment as money services businesses for any purpose 
banks and persons registered with, and regulated or examined by, the 
Securities and Exchange Commission or the Commodity Futures Trading 
Commission.
     The definition of money transmitter has been revised to 
make plain that the activity that makes one a money transmitter must be 
carried on as a business and to provide a general limitation to the 
definition.
     The dollar thresholds for treatment of persons as money 
services businesses on account of activities related to check cashing, 
currency exchange, and money order, traveler's checks, and stored value 
transactions has been raised from $500 to $1,000.

[[Page 45441]]

Registration
     Registration will not be required prior to December 31, 
2001.
     Persons are excluded from the registration requirements to 
the extent that they are issuers, sellers, or redeemers of stored value 
products.10
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    \10\ Although the final rule expressly excludes redeemers of 
stored value products, it should be noted that as with redeemers of 
traveler's checks and money orders, FinCEN did not intend that the 
Notice would apply to redeemers of stored value products to the 
extent the products are taken in exchange for goods or general 
services.
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     The requirement that agents whose gross transaction amount 
exceeds $50,000 for any month must register has been eliminated; 
registration by a person that is a money services business solely 
because that person serves as an agent of another money services 
business is indefinitely deferred.
     The agent list maintained by each money services business 
that offers its products or services through agents must include an 
indication of each month in the preceding 12 months in which the gross 
transaction amount of an agent exceeded $100,000.
     A money services business is not required to keep records 
required by section 103.41 in a centralized location so long as the 
records are maintained in the United States and are readily available 
at the request of FinCEN or any appropriate law enforcement agency; the 
agent list, however, must be maintained in a central location in the 
United States.
     Certain publicly traded businesses are not required to re-
register before the end of their renewal period when there is a 10-per 
cent or more change in the ownership of such businesses.
     Agent lists must be updated annually, as of January 1 of 
each year, rather than quarterly.
     For any agent that is an agent of the money services 
business maintaining the list before the first day of the month 
beginning after February 16, 2000, the agent list need not include 
information about the year in which the agent first became an agent and 
the agent's branches or subagents, but such information must be readily 
available at the request of FinCEN or any appropriate law enforcement 
agency.
     The effective date of the registration rule is September 
20, 1999; the initial registration must be filed, by December 31, 2001, 
and the initial agent list must be prepared by January 1, 2002.

B. Comments on the Notice--Overview and General Issues

Definitions
    Comments on the proposed changes to the Bank Secrecy Act 
definitions relating to money services businesses concentrated on five 
matters: (i) The relationship between the general Bank Secrecy Act 
definitions and the language of 31 U.S.C. 5330(d)(1) and (2), defining 
the businesses required to register as money services businesses; (ii) 
whether the Notice properly invoked the authority required for a change 
in the general Bank Secrecy Act definitions; (iii) the proposed 
inclusion of businesses issuing, selling, or redeeming stored value 
within the definition of ``financial institution'' for Bank Secrecy Act 
purposes; (iv) the treatment under the Notice of financial businesses 
subject to other federal regulatory systems; and (v) the application of 
the money services business definition to various kinds of businesses 
whose activities include the transmission of funds.11
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    \11\ A related issue, whether and the extent to which it was 
necessary to define the term ``agent'' as used both in the 
definition of money services business and the registration 
provisions, is discussed below.
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    1. Relationship between 31 U.S.C. 5312 and 31 U.S.C. 5330. Several 
commenters argued that the Department of the Treasury mistakenly relied 
upon the terms of 31 U.S.C. 5330, in seeking to revise the definition 
of financial institution, as part of proposed 31 CFR 103.11(uu). These 
commenters asserted that the Notice reflected a misunderstanding of the 
relationship of the general Bank Secrecy Act definitional provision, 31 
U.S.C. 5312, and the registration provisions. In their view, the 
definition of the sorts of businesses required to be registered under 
31 U.S.C. 5330 bore no relationship to the definition of the 
``financial institutions'' covered by the remainder of the Bank Secrecy 
Act, and the designation of registrable businesses in 31 U.S.C. 5330 
provides no independent authority for making such businesses otherwise 
subject to the Bank Secrecy Act. In support of this argument, the 
commenters cited the language at the beginning of 31 U.S.C. 5330(d) 
that the definitions of a money transmitting business and money 
transmitting service apply ``[f]or purposes of this section.'' In 
addition, they cited the requirement that the definition be limited 
only to a business that ``is required to file reports under [31 U.S.C.] 
section 5313.'' Thus, according to the commenters, the broad 
definitional language in section 5330 cannot be used to define a 
financial institution for a Bank Secrecy Act purpose other than 
registration. This language further suggests, according to the 
commenters, that the class of registrable money services businesses is 
necessarily larger than the class of money services businesses that 
were both registrable and otherwise subject to the Bank Secrecy Act's 
reporting and recordkeeping rules.
    FinCEN believes that this argument misperceives both the 
relationship of the registration provisions to the remainder of the 
Bank Secrecy Act and the basis for the redefinition of money services 
business proposed in the Notice. In enacting 31 U.S.C. 5330, Congress 
made a direct finding that:

    Money transmitting businesses are subject to the recordkeeping 
and reporting requirements of subchapter II of chapter 53 of title 
31. * * * Section 408(a)(1)(A) of the Money Laundering Suppression 
Act, 31 U.S.C. 5330 (Note).

Thus, Congress assumed that the sorts of businesses for which it was 
requiring registration were precisely the sorts that would be (and 
indeed that were already) subject to the Bank Secrecy Act's rules. 
FinCEN therefore believes that Congress intended the definition of 
money transmitting business to describe that class of enterprises that 
were both financial institutions and required to register as money 
transmitting services (or money services businesses) and that the 
harmonized definitions could not be read to include any businesses that 
were not otherwise eligible for treatment as financial institutions 
under 31 U.S.C. 5311. The purpose of the changes to the definitions of 
financial institution was, in accordance with this understanding of 
Congress' intent and as stated in the Notice (62 FR 27890 and 27891), 
to harmonize the two sets of rules by modernizing the definitions of 
money transmitter and the other terms included as components in the new 
money services business subcategory of the general definition of 
``financial institution.''
    While the final definition of money transmitter tracks to some 
extent the language used in 31 U.S.C. 5330, this in no way indicates a 
reliance upon that section for authority, but instead indicates the 
Department of the Treasury's desire to follow Congress' lead in 
construing the term ``money transmitter'' in a way that reflects 
technological advances, and the need to adapt the application of the 
Bank Secrecy Act to the continually evolving nature of the industry 
that comprehends ``financial institutions.''
    31 U.S.C. 5312 does provide such authority, there is every reason 
for the definitions to be the same, and the language of the preamble to 
the Notice, although not perhaps ideal, was sufficient to put the 
public on notice

[[Page 45442]]

that both matters were at issue in the rulemaking.
    2. Authority for Revisions to the Definition of Financial 
Institution. Commenters argued that the Notice gave insufficient 
indication that a general exercise of Treasury's authority to define 
financial institution for purposes of the Bank Secrecy Act in proposing 
31 CFR 103.11(uu) was a subject of the rulemaking. They also argued 
that no findings had been made, or suggested by the Notice, that the 
changes were required to fight money laundering, and that there was no 
basis in the record in any event for such findings.
    Combining the new registration requirements with the rewriting of 
provisions of the financial institution definition in a single document 
may have led to a misunderstanding of the reasons or basis for the 
definitional changes. However, as indicated above, FinCEN believes that 
the Notice made it clear that the revision of existing Bank Secrecy Act 
definitions involved in the components of money services business was 
proposed under the authority of 31 U.S.C. 5312 and for all purposes of 
the Bank Secrecy Act. See 62 FR 27890, 27893, and 27897.
    In addition, the changes made to the definitions, with the 
exception of the addition of ``stored value,'' discussed separately 
below, merely clarified the scope of the coverage already inherent in 
the existing language of the Bank Secrecy Act definitions. For example, 
the definition of money transmitter contained in 31 CFR 103.11(n)(5) 
(revised as of July 1, 1999), which section 103.11(uu)(5) of the final 
rule will replace, stated that the term financial institution included:

    (5) A licensed transmitter of funds, or other person engaged in 
the business of transmitting funds.

In adopting the revised definition, FinCEN is clarifying the meaning of 
the term ``person engaged in the business of transmitting funds'' 
within the scope of the interpretive range of the existing language of 
the rule; in that context, adoption of the language provided by the 
Congress in the registration provisions is appropriate--if not 
mandated--in light of the Congress' view that it was itself simply 
explicating the scope of the existing regulatory language in requiring 
registration of certain types of financial institutions. Treasury, 
indeed, explicitly sought (and received) comments on whether ``it is 
necessary or appropriate specifically to exclude certain activities 
from the scope of registration of money services businesses (and 
perhaps as well from the definition of money transmitter for purposes 
of the Bank Secrecy Act regulations generally).'' 62 FR 27893.
    Other commenters argued that the definitional changes could not be 
made in any event without specific findings showing that the changes 
were required to fight money laundering. The purposes of the Bank 
Secrecy Act are not so narrowly set. The statute is aimed at assuring 
the maintenance of records constituting a financial trail, and the 
reporting of certain transactions, in each case because the records and 
reports ``have a high degree of usefulness in criminal, tax, or 
regulatory investigations and proceedings.'' The Congressional findings 
underlying the money services business registration rules adopt the 
same objective.12
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    \12\ Information about the identity and ownership of money 
services businesses ``would have a high degree of usefulness in 
criminal, tax, or regulatory investigations or proceedings''; the 
registration requirement will assist federal and other law 
enforcement and supervisory authorities ``to effectively enforce the 
criminal tax, [sic] and regulatory laws and prevent such money 
services businesses from engaging in illegal activities.'' See 
section 408(a)(1)(C) and (a)(2) of the Money Laundering Suppression 
Act, 31 U.S.C. 5330 (Note).
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    3. Stored Value. The final rule continues to treat ``stored value'' 
as a financial instrument whose issuers and sellers are financial 
institutions for purposes of the Bank Secrecy Act. However, the final 
rule revises the Notice to exempt stored value issuers and sellers from 
any money services business registration obligation. Under the 
circumstances, the only immediate consequence of the rule will be to 
make clear that currency transactions in excess of $10,000 by stored 
value issuers and sellers require reporting under the Bank Secrecy Act 
(rather than under section 6050I of the Internal Revenue Code) and that 
businesses that participate as financial intermediaries in transactions 
in which stored value is transferred electronically may, if otherwise 
covered, be subject to the rules requiring the maintenance of records 
for funds transfers of $3,000 or more.
    This limited treatment of stored value--which frees the industry 
from registration requirements to which issuers and sellers of money 
orders and traveler's checks will be subject--eliminates the ``chilling 
effect'' on the technology industry to which commenters objected. The 
limited step that is being taken should create certainty as to the 
outlines of the Bank Secrecy Act's application to electronic funds 
equivalents, while allowing further development prior to any rulemaking 
that deals with more specific issues such as, for example, exemptions 
for ``closed system'' or small denomination stored value devices or the 
terms for possible tailored application of the registration or other 
Bank Secrecy Act requirements to aspects of these emerging payment 
products.
    4. Other Regulated Financial Businesses. A number of commenters 
argued that the final rule should eliminate any possible application to 
other classes of financial institutions, of rules aimed at money 
services businesses; the argument was made by banks, securities 
businesses subject to the jurisdiction of the Securities and Exchange 
Commission, and futures commission merchants and other businesses 
regulated by the Commodity Futures Trading Commission. (Banks and 
brokers and dealers in securities are, of course, already subject to 
the Bank Secrecy Act.)
    Congress characterized money services businesses as ``largely 
unregulated,'' and FinCEN believes that Congress generally did not find 
a need for the money services business regime under the Bank Secrecy 
Act to extend to other federally regulated financial services 
providers. Accordingly, under the final rule, depository institutions, 
or securities brokers and dealer, futures commission merchants, or 
other persons registered with and regulated or examined by, the 
Securities and Exchange Commission or the Commodity Futures Trading 
Commission are explicitly excluded from the money services business 
definition. (For further discussion, see ``Section-by-Section 
Analysis,'' below.)
    5. Application of Money Transmitter Definition to Other Businesses 
Whose Activities Include Transmission of Funds. A number of commenters 
sought clarification of the definition of money transmitter and 
objected to any interpretation of the definition that would cause to be 
classed as money transmitters particular businesses that simply 
transmit funds as part of their other business activities. Commenters 
raising such issues included, for example, operators of hedge funds and 
public and private investment companies, representatives of financial 
professionals, persons involved in real estate closing activities, bank 
credit card systems, clearing corporations and associations, insurance 
companies, and bank holding companies and subsidiaries. All of these 
commenters sought assurance that their businesses could not fall within 
the definition of money transmitter in the Notice.
    FinCEN agrees that the breadth of the definition of money 
transmitter proposed in the Notice requires limitation to avoid both 
unnecessary

[[Page 45443]]

burden and the extension of the Bank Secrecy Act to businesses whose 
money transmission activities either do not involve significant 
intermediation or are ancillary to the completion of other 
transactions. But the varieties of methods by which funds are 
transmitted and remitted by persons performing the function of 
financial intermediary for that purpose, as well as the pace of 
financial change, make any rigid definition both impossible and 
inadvisable. Ultimately, the question of whether a particular person is 
in the ``business'' of transmitting funds is a question of facts and 
circumstances. The final rule attempts to respond to the comments, as 
described in more detail below, by providing a limitation on the scope 
of the definition to make clear that the acceptance and transmission of 
funds as an integral part of the execution and settlement of a 
transaction other than the funds transmission or transfer, for example, 
a bona fide sale of securities or other property, will not cause a 
person to be a money transmitter for purposes of the Bank Secrecy Act.
Registration
    Comments on the proposed registration requirements concentrated on 
four matters: (i) exclusions from those requirements, (ii) agent 
registration, (iii) registration procedures, and (iv) the content and 
terms of the agent list.
    1. Exclusions from the Registration Requirements. The Notice 
excluded the following persons from the registration requirements: the 
United States Postal Service, depository institutions (as defined in 31 
U.S.C. 5313(g)), the United States, a State or political subdivision of 
a State, or a person registered with, and regulated or examined by, the 
Securities and Exchange Commission or the Commodity Futures Trading 
Commission. In response to a specific request for comment in the 
preamble to the Notice, FinCEN received comments suggesting that other 
persons should be excluded from the registration requirements.
    A number of commenters asked that issuers, sellers, or redeemers of 
stored value products be so excluded. Those commenters were concerned 
that the application of the registration requirements to issuers of 
stored value products would cause the issuers to defer the development 
of such products, or limit their design in commercially undesirable 
ways simply in order to avoid the registration requirements. They were 
also concerned that businesses that might otherwise wish to sell or 
redeem stored value products would not do so if they might be required 
to comply with the registration requirements, and that the manner in 
which the new products would be marketed was not sufficiently settled 
to permit the design of a reasonable registration system.
    Some commenters, however, agreed with the inclusion of businesses 
engaged in issuing or selling stored value products within the scope of 
the registration requirements. In general, these commenters believed it 
was appropriate to subject non-bank providers of electronic payment 
systems to Bank Secrecy Act requirements in order to treat purveyors of 
competing financial services in the same manner.
    The final rule excludes issuers, sellers, or redeemers of stored 
value products from the registration requirements. Although the final 
rule expressly excludes redeemers of stored value products, it should 
be noted that as with redeemers of traveler's checks and money orders, 
FinCEN did not intend that the Notice would apply to redeemers of 
stored value products to the extent the products are taken in exchange 
for goods or general services.
    One commenter recommended that a money services business should not 
be required to register if it would qualify as an exempt person under 
the currency transaction reporting rules (31 CFR 103.22(d)). The final 
rule does not adopt this suggestion. The suggestion would exclude from 
registration, and consequently the agent list requirement, publicly 
traded money services businesses that could qualify as exempt persons 
under 31 CFR 103.22(d). Because these publicly traded money services 
businesses operate through extensive networks of agents, which may not 
be exempt from currency transaction reporting, the suggestion would 
seriously limit information about agents of money services businesses.
    Several commenters were concerned that because some credit unions 
provide money transmitting services to their customers, and some banks 
might be acting as agents of a money services business, these 
depository institutions could be subject to the registration rules in 
Sec. 103.41. The commenters asked for clarification that banks and 
credit unions are not required to be registered. Paragraph (a)(1) of 
Sec. 103.41 of the Notice provided that the section did not apply to 
depository institutions. The final rule goes further and expressly 
excepts banks from the definition of money services business so that 
the sentence in proposed paragraph (a)(1) relating to depository 
institutions is no longer necessary. Under the final rule, all of 
section 103.41 is inapplicable to depository institutions such as banks 
and credit unions.
    Several commenters asked that non-bank affiliates and subsidiaries 
of banks be excluded from the registration requirements.13 
One commenter argued that because these companies are subject to 
regulation by the Federal Reserve Board under the Bank Holding Company 
Act, they should be excluded. Another commenter recommended excluding a 
bank's non-bank affiliates and subsidiaries if they can demonstrate 
that they have some type of Bank Secrecy Act compliance program in 
place.
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    \13\ The preamble to the Notice clarified that if a bank has a 
non-bank subsidiary or affiliate (e.g. a brother-sister subsidiary 
owned by the bank's holding company) that itself engages in a money 
services business (or a broker-dealer has a non-broker-dealer 
affiliate that engages in a money services business), the affiliate 
must register even though the bank (or broker-dealer) is not 
required to register.
---------------------------------------------------------------------------

    The Bank Secrecy Act rules, in general, do not adopt a consolidated 
group approach to determining whether a company is or is not subject to 
particular Bank Secrecy Act provisions. That is, the Bank Secrecy Act 
rules do not look to the status of a parent company in a bank holding 
company group for the purpose of determining what rules a company owned 
by the parent must apply. For example, the Bank Secrecy Act regulations 
do not generally treat non-bank subsidiaries as falling within the 
definition of bank for purposes of the Bank Secrecy Act regulations. 
Thus, the final rule continues to require non-bank affiliates and 
subsidiaries to register and maintain a list of their agents.
    One commenter suggested that issuers of monetary instruments that 
are sold only through banks should be excluded from the registration 
requirements. In light of 31 CFR 103.29, which requires banks to keep 
records of certain transactions, the commenter believed there would be 
little informational value gained by requiring such issuers to 
register. The final rule does not adopt this suggestion. The 
registration requirements are designed to create a comprehensive 
picture of money services businesses, which will provide law 
enforcement agencies with information either currently not available or 
not available in an accessible format. Excluding an issuer whose 
products are sold exclusively through banks would eliminate information 
about a segment of this industry.
    One commenter questioned the sufficiency of the rulemaking record

[[Page 45444]]

with respect to the registration of check cashers. According to the 
commenter, nothing in the record, including the New York enforcement 
operations and geographic targeting orders discussed in the May 21, 
1997 notices of proposed rulemaking, supports the proposition that the 
check cashing function has been or is being abused by the illicit drug 
industry and criminal money laundering. The comment fails to take into 
account the fact that Congress specifically included check cashers 
among those businesses that are required to register with the 
Department of the Treasury when it enacted 31 U.S.C. 5330.
    A commenter also recommended that check cashers should not be 
required to register if they engage in other money services business 
activities, for example, money transmitting, as an agent for others. 
The commenter indicated that approximately 90 per cent of check cashers 
are also agents for money transmitters and would be included on the 
agent lists of the transmitters. The final rule does not adopt this 
recommendation. Section 5330 does not contemplate that businesses that 
conduct money services activities on their own behalf will be excluded 
from registration simply because they also act as agents for other 
money services businesses.
    One commenter suggested that, in the future, ``wire transmitters'' 
should be exempt from state registration requirements if the 
transmitters comply with federal registration requirements. FinCEN is 
interested in sharing information, and otherwise coordinating with, 
state regulators to reduce administrative burden, but 31 U.S.C. 
5330(a)(3) states that the federal registration requirements ``shall 
not be construed as superseding any requirement of State law relating 
to money [services] businesses operating in such State.''
    2. Agent Registration. Commenters raised a number of issues about 
agent registration. Most of the comments sought a clarification of the 
meaning of the term ``agent,'' sought an increase in the dollar amount 
of the registration threshold, and questioned the need for agent 
registration.
    The Notice did not contain a specific definition of the term 
``agent'' for purposes of the money services business registration 
rules, including the requirement that a list of agents be maintained by 
each money services business as part of its registration requirement. 
Instead the Notice spoke simply of ``agents.'' Commenters recommended 
that the term ``agent'' be defined or that the term be replaced with a 
more neutral term such as selling outlet. A number of commenters argued 
that they did not believe that the terms of the contracts under which 
they authorize persons to sell their money services products should be 
read to treat those persons as agents.
    FinCEN believes that the relationship between issuers or service 
providers and persons at the point of sale for particular products is 
governed by the law of agency, and that in most (if not all) cases the 
businesses at which these products or services are sold to the public 
are non-servant agents of the issuers or service providers 
14; thus, such businesses must be included on the agent 
lists required to be maintained with respect to ``agents'' by 31 U.S.C. 
5330(c)(1)(A). As indicated elsewhere in this preamble, Congress's use 
of the term ``agent'' in 31 U.S.C. 5330 indicates a similar 
understanding. Thus, it is expected that a money services business will 
include on the agent list any businesses it authorizes to sell its 
money services or money products.
---------------------------------------------------------------------------

    \14\ Of course, in cases in which the products or services are 
offered at branches of the issuers or providers, the individuals 
involved are likely servants of the issuers or providers. (It has 
long been clear that an ``agent'' of a financial institution is 
itself a financial institution. See, 31 CFR 103.11(n).) FinCEN is 
aware of few, if any, claims prior to the issuance of the Notice, 
that the language in section 103.11(n) does not fully comprehend 
businesses at which money services products were sold to the public.
---------------------------------------------------------------------------

    The bulk of the comments on the registration requirement concerned 
the registration of businesses whose status as money services 
businesses derived solely from the fact that they sold products or 
services issued or performed by others. The Notice had required 
independent registration of such agent businesses if the volume of 
money services products or services sold or performed through such 
businesses was $50,000 in any month.
    Commenters questioned the level of the proposed registration 
threshold. Most of these commenters believed that the threshold was too 
low and recommended increasing the threshold to at least $100,000 a 
month or preferably $500,000 a month (or $500,000 a month, annualized). 
One commenter, however, recommended lowering the threshold to $25,000 a 
month or even zero. Another commenter suggested that a threshold based 
on an annual rather than a monthly amount would be less likely to cause 
agents to meet the threshold because of seasonal or holiday sales. As 
explained below, the final rule defers agent registration and thus 
eliminates the registration threshold.
    Commenters argued that because a money services business includes 
information about its agents on its agent list, no agent should be 
required to register independently with Treasury. Instead, several of 
these commenters argued, a money services business should register its 
agents with Treasury, or as one commenter suggested, should simply 
submit its agent lists to the Treasury Department.
    This registration requirement for agents reflected the terms of 31 
U.S.C. 5330(c)(2). That paragraph states that:

    The Secretary of the Treasury shall prescribe regulations 
establishing, on the basis of such criteria as the Secretary 
determines to be appropriate, a threshold point for treating an 
agent of a money transmitting business as a money transmitting 
business for purposes of [section 5330].

The mandate to require registration of ``large agents'' was tempered 
both by the grant to the Secretary of discretion to fix the criteria 
defining registrable agents, and by a Congressional statement, in the 
Conference Report accompanying the bill, that:

    The intent of the Conferees is to eliminate the need for all 
agents of money transmitting businesses to register with the 
Secretary. Such massive registration of thousands of agents would 
only create another needless and costly administrative burden. This 
legislation is designed to reduce unnecessary paperwork, not create 
additional administrative burdens for law enforcement.

    The statute's agent registration requirement permits the 
identification of significant points for the movement of funds into the 
financial system, especially points at which one or more money services 
business products or services are grouped together (as, for example, in 
so-called ``giro houses''). But selecting criteria that will further 
that objective in a cost efficient manner is difficult at best. Money 
services business volume levels are unlikely to be uniform throughout 
the nation, and even within particular areas variations can reflect the 
size of an agent's other business rather than any absolute variation 
from a theoretical norm.
    Rather than attempting to set criteria on the basis of imperfect 
knowledge, the Department of the Treasury has decided to defer any 
implementation of the agent registration provisions. Instead, money 
services businesses are asked simply to note on the agent lists they 
are required to maintain the months in the preceding twelve month 
period in which every agent generated a volume of money services 
business products of more than $100,000.
    Thus, under the final rule, a firm that is a money services 
business solely

[[Page 45445]]

because it offers products or services on behalf of another money 
services business need not now register with the Department of the 
Treasury. It should be noted that a firm that both offers products or 
services on behalf of another money services business and in addition 
offers its own money services products or services (that is, exchanges 
currency, cashes checks, or transmits funds for customers through 
channels or mechanisms of its own) is required independently to 
register under this rule (and, to the extent that it is an agent, must 
be carried on the agent list of another money services business as 
well).
    3. Registration Procedures. The Notice set forth the general 
requirement to register a money services business and to report on the 
registration form the information required by section 5330(b) and any 
other information required by the form. In the preamble to the Notice, 
FinCEN noted its understanding that information required to be included 
on the registration form (and on the agent list) might include 
privileged and confidential trade secrets, commercial, and financial 
information. FinCEN also explained that while Congress affirmed in the 
legislative history that confidential proprietary or trade secret 
information provided by registrants may be disclosed only subject to 
applicable law, Congress anticipated that certain information derived 
from the registration material would be made available to the public, 
but in a manner that balances the need to protect confidential business 
information and the need for the public to have access to information 
about businesses on which the public relies. H.R. Conf. Rep. No. 652, 
103 Cong., 2d Sess. 192-93 (1994). FinCEN specifically invited comment 
on how to make certain information provided by registrants available to 
the public without revealing confidential business information.
    Several commenters expressed concerns about the need, for 
competitive reasons, to avoid disclosure to the public of confidential 
information on the registration form or agent list, particularly 
information about business volume and the dollar size of transactions. 
FinCEN will not release confidential information on the registration 
form or agent list except as required or permitted by law. Moreover, 
before FinCEN releases any other information that may be included on 
the registration form or agent list, FinCEN will work with money 
services businesses to establish specific procedures for release of 
such information to the public. FinCEN anticipates that such procedures 
would exclude the release of information (other than perhaps limited 
statistical information) about agents of money services businesses.
    4. Agent List. Most of the commenters addressing the agent list 
requirement recommended that a money services business be permitted to 
provide less information than the Notice required. The commenters 
argued that information not now on agent lists prepared for state 
licensing purposes--especially information about the year in which an 
agent first became an agent and about the agent's transaction 
accounts--would be difficult to provide. The commenters indicated they 
would either have to compile the rest of the information from other 
records (which might not be in electronic format, or in a format, 
electronic or otherwise, that was easily retrievable) or request the 
necessary information from their agents. Some commenters suggested that 
money services businesses be permitted to provide all the requested 
information prospectively rather than trying to gather the information 
for existing agents. Alternatively, commenters suggested that the 
information required to be included on the agent list should be limited 
to the same information that a money services business must provide 
about its agents for state licensing purposes. Generally this 
information includes only the name of the agent, the agent's locations, 
and the services the agent provides.15
---------------------------------------------------------------------------

    \15\ More than one commenter argued that requiring the 
information requested on the agent list exceeds FinCEN's authority 
under 31 U.S.C. 5330. According to the commenters, FinCEN may ask 
for the agent's name and address only. Although section 5330 
specifically requires the agent's name and address, the section does 
not constrain FinCEN's authority in the manner suggested by the 
commenters. Section 5330 authorizes FinCEN to request, in addition 
to the name and address, ``such other information about such agents 
as the Secretary may require.'' 31 U.S.C. 5330(c)(1)(A).
---------------------------------------------------------------------------

    The final rule continues generally to require that the information 
requested by the Notice must be included on the agent list. In response 
to the comments, however, the final rule provides that with respect to 
any agent that is an agent of the money services business maintaining 
the list before the first day of the month beginning after February 16, 
2000, the list need not include information about the year in which the 
agent first became an agent and the agent's branches or subagents. Such 
information must be made available, however, upon the request of FinCEN 
or any other appropriate law enforcement agency (including, without 
limitation, the examination function of the Internal Revenue Service in 
its capacity as delegee of Bank Secrecy Act examination authority). 
With respect to any agent that becomes an agent on or after the first 
day of the month beginning after February 16, 2000, the list must 
include all of the requested information, including the date the agent 
first becomes an agent and the agent's branches or subagents.
    As indicated above, one additional element is added to the 
information required to be included in the agent list. That element is 
the notation of each month in the 12-month period immediately preceding 
January 1, 2002, and each January 1 thereafter, in which the gross 
transaction amount of the agent's sale of products or services offered 
by the money services business maintaining the list exceeded $100,000. 
Setting the requirement at $100,000 generally limits it to agents doing 
more than $1 million of money services business transactions annually, 
is an amount suggested in the comments as a threshold for agent 
registration, and gives knowledge about agent volume which can be 
evaluated to determine whether the implementation of agent registration 
should continue to be deferred. That requirement is prospective, does 
not take effect for at least 18 months, and involves a single 
recordkeeping threshold. Moreover, the requirement involves only 
information that must flow to each money services business in the 
performance of its normal business functions, and the addition of this 
element to the agent list derives from the elimination from the rule of 
the most heavily criticized element of the original proposal, the agent 
registration requirement.

V. Section-by-Section Analysis

A. 103.11--Meaning of Terms

1. 31 CFR 103.11(c)(7)--Definition of ``Bank''
    One component of the definition of ``bank'' in 31 CFR 103.11(c) 
speaks of ``[a]ny other organization chartered under the banking laws 
of any State and subject to the supervision of the bank supervisory 
authorities of a State.'' In many states, various money services 
businesses are licensed or examined by state banking departments. In 
order to avoid any confusion about the interaction of the ``bank'' and 
``money services business'' definitions, the phrase ``(except a money 
services business)'' has been added to 31 CFR 103.11(c)(7).
2. 31 CFR 103.11(n)(3)--Definition of Financial Institution to Include 
``Money Services Business''
    The final rule retains the addition of a new category called 
``money services

[[Page 45446]]

business'' to the definition of financial institution. The new category 
includes the financial institutions previously defined at 31 CFR 
103.11(n)(3), (4), (5), and (10), and will permit these institutions to 
be referred to, when necessary, by one convenient term. FinCEN believes 
this restructuring of the definition of financial institution will 
clarify, and facilitate flexibility in the administration of, the Bank 
Secrecy Act regulations. (As a result of this restructuring, 31 CFR 
103.11(n)(4), (5), and (10) will be deleted, and 31 CFR 103.11(n)(6), 
(7), (8) and (9) will be redesignated as 31 CFR 103.11(n)(4), (5), (6) 
and (7)).
3. 31 CFR 103.11(uu)--Definition of Money Services Business
    This section defines money services business. The term includes 
each agent, agency, branch, or office within the United States of any 
person doing business, whether or not on a regular basis or as an 
organized business concern, in one or more of the capacities listed in 
(1)-(6) below. (It should be noted that only one registration form per 
money services business is required.)
    Regulated Businesses. The definition of ``money services business'' 
excludes persons registered with, and regulated or examined by, the 
Securities and Exchange Commission or the Commodity Futures Trading 
Commission. This provision excludes from the new regulatory structure 
for money services businesses the financial services businesses 
regulated by those agencies. The exclusion from the definition does not 
apply to issuers whose securities offerings are registered with the SEC 
under the Securities Act of 1933 or companies whose securities are 
registered with the Commission under the Securities Exchange Act of 
1934. The companies themselves are not registered with the SEC, and 
these entities are not intended to be excluded from the rule's 
definition of money services businesses because the Commission neither 
regulates nor examines the business activities of those companies. 
Instead, it establishes, by regulation, disclosure, accounting, and 
other related standards for them. Accordingly, businesses that engage 
in the activities described in 31 CFR 103.11(uu) are not excluded from 
the definition merely because their shares are publicly held and 
registered with the SEC.
    Several commenters asked that any exemption for depository 
institutions or other regulated businesses be extended to holding 
companies or subsidiaries of those businesses--for example to bank 
holding companies or bank operating subsidiaries. As explained in 
greater detail at ``Exclusion from the Registration Requirement'' 
above, the Bank Secrecy Act rules at present operate on an individual 
entity rather than a consolidated group basis; so long as that is so, 
each corporation in a controlled group must be analyzed separately to 
determine its characterization under the Bank Secrecy Act and its 
rules.
    Thresholds. The Notice contained a threshold of $500 for any person 
any day at or below which a business otherwise included within the 
definition of a currency dealer or exchanger, a check casher, or an 
issuer, seller, or redeemer of money orders, traveler's checks or 
stored value would not be a money services business. In the final rule 
that threshold has been raised in each case to $1,000 for any person 
any day in one or more transactions.
    The addition of explicit floors in the definitions relating to 
currency exchange and check cashing businesses is an attempt to 
eliminate from Bank Secrecy Act treatment those businesses, such as 
grocery stores and hotels, that cash checks or exchange currency as an 
accommodation to customers who are otherwise purchasing goods, 
services, or lodging from the businesses involved. (Of course, currency 
exchange and check cashing businesses that exceed the threshold become 
subject to the general Bank Secrecy Act reporting and recordkeeping 
requirements if the amounts involved are sufficiently high to implicate 
particular reporting or recordkeeping thresholds, for example, the 
$10,000 threshold for currency transaction reporting.)
    In determining whether the $1,000 definitional floor is met in the 
case of a particular definition, different money services provided by 
the same business are not aggregated. Thus, for example, a hotel that 
in fact limits its check cashing services to $650 for a customer on any 
day and in fact limits its currency exchange services to $600 for a 
customer on any day does not meet the $1,000 definitional floor for 
check cashers or for currency exchangers.
    (1) Currency dealer or exchanger. The definition of currency dealer 
or exchanger is unchanged, other than for the increase of the $500 
threshold to $1,000. The Notice invited comment on whether the old 
definition of currency dealer or exchanger appearing at 31 CFR 
103.11(i) was still necessary in light of the carve out of banks from 
the recordkeeping requirements of 31 CFR 103.37. In response to 
comments, that definition is removed from 31 CFR 103.11(i), but the 
language of the recordkeeping rules of 31 CFR 103.37 is being amended 
specifically to exclude banks that offer services in dealing or 
exchanging currency to their customers as an adjunct to their regular 
services.
    (2) Check casher. The definition of check casher is also unchanged, 
other than for the increase of the $500 threshold to $1,000. Several 
commenters suggested that the threshold should be lowered rather than 
raised; however, the registration of businesses that only cash checks, 
especially those that do so as an accommodation for customers and then 
in an amount of $1,000 or less per day, is not necessary at this time 
to accomplish the Congressional intent behind section 5330.
    (3) Issuer of traveler's checks, money orders, or stored value. The 
definition of issuer of traveler's checks or money orders or stored 
value is also unchanged other than for the increase of the $500 
threshold to $1,000.16
---------------------------------------------------------------------------

    \16\ The definition eliminates the phrase ``similar 
instruments'' in response to comments that said the phrase was too 
vague. The phrase has also been eliminated from the definition of 
seller or redeemers.
---------------------------------------------------------------------------

    (4) Seller or redeemer of traveler's checks, money orders, or 
stored value. The definition of seller or redeemer of traveler's checks 
or money orders or stored value is also unchanged other than for the 
increase of the $500 threshold to $1,000.
    The $1,000 floor in 31 CFR 103.11(uu)(4) replaces the definitional 
floor (of $150,000 sold in instruments per 30-day period) for selling 
agents in 31 CFR 103.11(n)(4). The $150,000 limitation produces a great 
deal of unnecessary complexity (dealing with the movement of particular 
businesses into or out of the scope of the Bank Secrecy Act) and does 
not, in FinCEN's view, any longer provide a meaningful threshold for 
distinguishing between businesses that ought to, or that need not, 
incorporate appropriate Bank Secrecy Act rules into their operations 
(or the operations they undertake on behalf of their principals). 
Moreover, the operation of the $150,000 limitation would exclude from 
Bank Secrecy Act treatment particular transactions (for example 
purchases of money orders of more than $3,000 under the customer 
verification and recordkeeping rules of 31 CFR 103.29, or transactions 
in excess of $10,000 under the currency transaction reporting rules of 
31 CFR 103.22) that ought not be so excluded, regardless of the overall 
volume of sales of a particular business.
    The definition in 31 CFR 103.11(uu)(4) extends to ``redeemers'' of 
money orders and traveler's checks only insofar as the instruments 
involved are

[[Page 45447]]

redeemed for monetary value--that is, for currency or monetary or other 
negotiable or other instruments. The taking of the instruments in 
exchange for goods or general services is not a redemption for purposes 
of these rules. (See, however, 26 CFR 1.6050I-1(c)(1)(ii)(B) for 
situations in which certain traveler's checks or money orders (among 
other instruments) may be treated as currency, if taken in exchange for 
certain goods or services, for purposes of the requirement that 
businesses not subject to the rules in 31 CFR part 103 report 
transactions in currency in excess of $10,000.)
    (5) Money transmitter. The definition of money transmitter 
continues to reflect the determination that the definitions of that 
term for purposes of the general Bank Secrecy Act rules and the 
registration rules should be the same. As noted above, a limitation on 
the definition has been added to clarify insofar as possible the reach 
of the definition, when it is combined with the general limitation on 
the scope of money services business.17 Particular classes 
or subclasses of money transmitters can be excluded from the operation 
of the definition for particular substantive rules (as for example the 
proposed rule relating to the reporting of suspicious activities by 
money transmitters excluded from its coverage sellers or transmitters 
of stored value or other advanced electronic payment system products).
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    \17\ The term ``money transmitter'' in 31 CFR 103.11(uu)(5) is 
not necessarily synonymous with the term ``transmittor's financial 
institution'' in existing 31 CFR 103.11(mm). The term 
``transmittor's financial institution'' in existing 31 CFR 
103.11(mm) was designed with a narrower purpose in mind--''to 
preserve as much uniformity as possible'' between the special rules 
for recordkeeping for wire transfers and the language of Article 4A 
of the Uniform Commercial Code. See 60 FR 220 (January 3, 1995).
---------------------------------------------------------------------------

    (6) United States Postal Service. The definition of United States 
Postal Service has not been changed. Thus, unlike the prior regulation, 
which treated the United States Postal Service as a financial 
institution only with respect to the sale of money orders, the final 
rule treats the Postal Service as a financial institution with respect 
to its provision of any money services products. The Postal Service, in 
its comments, requested clarification of the status of an 
``international postal money order'' under the rules. FinCEN believes 
that that topic is not appropriate for treatment in a general 
rule.18
---------------------------------------------------------------------------

    \18\ This comment, like a number of other comments, concerns the 
application of these rules in specific situations, for example, 
armored car companies. FinCEN does not believe it is appropriate to 
resolve those fact specific situations in the context of a general 
rulemaking, but is willing to consider them in the context of 
specific, fact based inquiries.
---------------------------------------------------------------------------

4. 31 CFR 103.11(vv)--Definition of Stored Value
    The definition of stored value is unchanged. Given the 
determination to exclude stored value from the registration 
requirements, FinCEN does not believe that it is necessary now to 
exclude particular ``closed systems'' from the limited application of 
the Bank Secrecy Act to such instruments, or to issue a threshold 
exclusion based upon the maximum value capable of storage on particular 
media. It agrees that consideration of both such steps would be 
appropriate if the treatment of stored value under the Bank Secrecy Act 
were to be expanded at a future date.

B. 103.41--Registration of Money Services Businesses

1. 31 CFR 103.41(a)(1)--Registration Requirement; In General
    The final rule continues to provide that a money services business 
(whether or not licensed as a money services business by any State) 
must register with the Department of the Treasury and, as part of that 
registration, must maintain a list of its agents. The final rule 
expressly excludes from the registration and list requirements the 
following persons: the United States Postal Service, an agency of the 
United States, of any State, or of any political subdivision of a 
State, and any person to the extent that the person is an issuer, 
seller, or redeemer of stored value. Unlike the Notice, the final rule 
does not expressly exclude from the registration and list requirements 
a depository institution (as defined in 31 U.S.C. 5313(g)) or a person 
registered with, and regulated or examined by, the Securities and 
Exchange Commission (SEC) or the Commodity Futures Trading Commission 
(CFTC). Such an express exclusion in paragraph (a)(1) of section 103.41 
is unnecessary because the final rule revises the definition of money 
services businesses to exclude those persons.
2. 103.41(a)(2)--Agent Registration
    As noted above, the final rule defers indefinitely implementation 
of a requirement that a money services business that offers products or 
services as an agent on behalf of another money services business 
register with the Department of the Treasury if the former firm exceeds 
a ``threshold point'' set by the Secretary. If, however, a firm in 
addition to offering products or services on behalf of another money 
services business, offers its own money services products or services 
(that is, exchanges currency, cashes checks, or transmits funds for 
customers through channels or mechanisms of its own), the firm must 
register independently.
3. 31 CFR 103.41(a)(3)--Agent Status.
    The final rule provides that the determination of whether a person 
is an agent depends on all the facts and circumstances.
4. 31 CFR 103.41(b)(1)--Registration Procedures; In General
    The Notice set forth the general requirement to register a money 
services business and to report on the registration form the 
information required by 31 U.S.C. 5330 and any other information 
required by the form. A draft of the registration form was discussed at 
a public meeting in September 1997. Although this section of the 
preamble discusses comments on the draft form, money services 
businesses should bear in mind that FinCEN expects to continue to work 
with the money services business industry to develop the registration 
form. As part of that process, FinCEN will publish in the Federal 
Register a separate notice regarding the form.
    A commenter pointed out that for certain items, for example, the 
name and address of directors, the instructions to the draft form 
discussed at the September 1997 public meeting request a more limited 
set of information than could be required under section 5330(b). The 
commenter asked that the information requested by the final rule be 
limited in the same manner as in the instructions to the form. 
Accordingly, the final rule continues to set forth the general 
requirement to register and report the information required by 31 
U.S.C. 5330, but the words ``to the extent required by the form'' have 
been added after the words ``the information required by 31 U.S.C. 
5330.'' A similar change has been made regarding the identity of the 
person who is responsible for filing the registration form.
    Section 5330(b) provides that the registration shall include an 
``estimate of the volume of business in the coming year (which shall be 
reported annually to the Secretary).'' The instructions to the draft 
form thus require an estimate of business volume. Several comments 
objected to the business volume requirement, and one commenter asked 
for clarification of how an annual estimate would be made when the form 
is filed only every other year.
    Because section 5330 specifically requires, as part of the 
registration information, that a money services

[[Page 45448]]

business make an estimate of its business volume, FinCEN anticipates 
that the form will continue to require the estimate. Although a money 
services business is required to make an annual estimate of its 
business volume, FinCEN anticipates that the registration form will not 
require the estimate to be reported on the form itself but will permit 
the business to retain the estimate in its records and make it 
available upon request. Thus, the annual estimate requirement may be 
satisfied even though the registration form is required to be filed 
only every other year.
    One commenter urged that money services businesses be permitted to 
file the registration form electronically. FinCEN will consider this 
recommendation as it works to finalize the form and the filing 
procedures for the form.
    The Notice required a money services business to retain, at a 
central location in the United States, a copy of any registration form 
the business files and to report that location on the form. One 
commenter recommended that as an alternative to the requirement to keep 
information in a centralized file, a money services business be 
required only to have access to information within a reasonable period 
of time. One commenter requested that money services businesses be 
permitted to keep records concerning registration outside the United 
States, provided that the information was readily available at the 
request of FinCEN or any appropriate law enforcement agency.
    The final rule continues to require records concerning registration 
to be maintained in the United States. The final rule does not require 
a money services business to keep records in a central location so long 
as information is readily available at the request of FinCEN or any 
appropriate law enforcement agency; however, the agent list must be 
maintained in a central location in the United States.
5. 31 CFR 103.41(b)(2)--Registration Period
    Paragraph (b)(2) of the final rule continues to provide that after 
an initial registration period of two calendar years, the registration 
must be renewed every two years. One commenter asked that the 
registration and renewal periods be increased to five years. Given the 
frequency of change in this segment of the financial industry and law 
enforcement's need for relatively current information about these 
businesses, FinCEN does not believe the registration and renewal 
periods should be increased from two years to five years.
6. 31 CFR 103.41(b)(3)--Due Date
    Paragraph (b)(3) of the final rule sets forth the due date for 
filing the registration form for the initial registration period and 
each renewal period. The Notice would have required the registration 
form for the initial registration period to be filed by the end of the 
180-day period beginning on the later of (i) the date on which the 
final rules are published in the Federal Register, and (ii) the date 
the business is established. Commenters asked for more time to file the 
initial registration form. The final rule does not require the initial 
registration form to be filed until December 31, 2001.
7. 31 CFR 103.41(b)(4)--Events Requiring Reregistration
    Paragraph (b)(4) of the final rule continues to provide that a 
money services business must be re-registered before the end of a 
renewal period upon the occurrence of certain events. That paragraph 
requires re-registration if the money services business experiences a 
change in ownership or control that requires re-registration under a 
State law registration program for money services businesses, more than 
10 per cent of its voting power or equity interests is transferred 
(except in the case of certain publicly-traded businesses, as explained 
below), or the number of its agents increases by more than 50 per cent 
during any registration period.
    One commenter argued that publicly-traded companies should not be 
required to re-register when required by state law or when there is a 
more than 50 per cent increase in the their agents. The final rule 
continues to require publicly-traded companies to register in these 
situations.
    Several commenters suggested that re-registration was unnecessary 
in the case of a 10 per cent change in ownership of publicly-traded 
companies. One of the commenters suggested that because a 10 per cent 
change in ownership of a publicly-traded company would require a filing 
with the Securities and Exchange Commission, law enforcement agencies 
could get information about the ownership change from the filing. The 
final rule provides that a money services business is not required to 
re-register before the end of its regular registration or renewal 
period on account of a 10 per cent ownership change if that change must 
be reported to the Securities and Exchange Commission.
    One commenter suggested that for smaller businesses, a 50 per cent 
change in ownership (rather than 10 per cent) would be a more 
appropriate standard for requiring re-registration. The final rule does 
not adopt this suggestion because it would permit significant changes 
in the ownership of smaller money services businesses, which are 
generally subject to little federal oversight, to take place between 
renewal periods without Treasury's knowledge.
    One commenter recommended that ``wire transmitters'' be exempted 
from the re-registration requirements if the transmitters are required 
to re-register by state law. The final rule does not adopt this 
recommendation. FinCEN believes that it is important to establish 
uniform, national registration requirements for money services 
businesses.
8. 31 CFR 103.41(c)--Persons Required to File Registration Form
    The Notice provided that, as required by 31 U.S.C. 5330(a), any 
person who owns or controls a money services business shares the 
responsibility for seeing that the business is registered. (Only one 
registration form, however, is required to be filed for each 
registration period.) Commenters pointed out that the instructions to 
the draft form take a more limited approach, requiring only certain 
owners or controlling persons to register. Paragraph (c) of the final 
rule addresses this difference by adding the language ``to the extent 
provided by the form'' after the language ``any person who owns or 
controls.''
9. 31 CFR 103.41(d)(1)--List of Agents; In General
    Paragraph (d)(1) of the final rule provides that a money services 
business must prepare and maintain a list of its agents, and must 
revise the agent list to contain current information. The Notice 
required the agent list to be revised each quarter. Several commenters 
objected to the requirement to make quarterly updates of the agent 
list, arguing that annual updates are more reasonable. One commenter, 
however, stated that quarterly updates of internal records of seller 
information could be required without any additional burden. The final 
rule requires annual updates of the agent list.
    The Notice provided that the list of agents is not filed with the 
registration form but is maintained at the location in the United 
States reported on the registration form. Several commenters asked that 
the final rule clarify that an agent list need not be kept in the 
United States so long as the list is readily available. As indicated 
above, the agent list must be maintained in the United States.

[[Page 45449]]

    Upon request, a money services business must make its list of 
agents available to FinCEN and any other appropriate law enforcement 
agency (including, without limitation, the examination function of the 
Internal Revenue Service in its capacity as delegee of Bank Secrecy Act 
examination authority). One commenter stated that the requirement to 
make the agent list available to law enforcement is vague and 
potentially burdensome. This commenter suggested that it would be 
preferable to route all law enforcement requests for the lists through 
FinCEN, which would then evaluate both the appropriateness of the 
requests and the bona fides of the law enforcement agency.
    The maintenance and ready availability of ``agent lists and other 
information'' is a crucial part of the scheme of 31 U.S.C. 5330. But it 
is equally true that a system in which money services businesses are 
overrun by duplicative or otherwise burdensome requests is in no one's 
interest. In response to the comment, and in light of the fact that 31 
U.S.C. 5330(c)(1)(B) authorizes the Secretary of the Treasury to issue 
rules defining the terms of law enforcement access to agent list 
information, the final rule states that requests for agent list 
information shall be coordinated through FinCEN in the manner and to 
the extent determined by FinCEN. Such coordination will (i) avoid the 
imposition of unnecessary burden on money services businesses, (ii) 
ensure the confidentiality of sensitive business information, and (iii) 
facilitate the orderly administration of the agent list requirement.
    The same commenter also suggested that agent lists could 
voluntarily be filed by money services businesses with the Department 
of the Treasury, under a system in which law enforcement agencies 
obtain access through Treasury, rather than by seeking information from 
the money services businesses that chose to file such lists. FinCEN 
believes that such a system has merit, and it intends to work with the 
affected businesses to develop such a system, during the period 
provided for implementation of this rule prior to January 1, 2002.
    The Notice provided that the original list of agents and any 
revised list must be retained for five years, as specified in 31 CFR 
103.38(d). Commenters objected to the requirement to retain lists of 
agents for five years. As indicated above, the requirement to update 
agent lists has been relaxed from quarterly updates to annual updates. 
Further, the Bank Secrecy Act rules generally require Bank Secrecy Act 
information to be retained for five years. Thus, the final rule 
continues to require agent lists to be maintained for five years.
    One commenter recommended that FinCEN allow past lists to be 
substituted, in the discretion of the money services business, with any 
``readily accessible'' records of the information no longer on the 
current list. The final rule does not adopt this recommendation. The 
revisions the final rule makes regarding the information on the agent 
list and the decrease from quarterly to annual revisions to the agent 
list will reduce the amount of information that has to be retained.
10. 31 CFR 103.41(d)(2)--Information Included on the List of Agents
    The final rule provides that the following information must be 
included on the agent list--
    (i) The name of the agent, including any trade names or doing-
business-as names,
    (ii) The address of the agent, including street address, city, 
state, and ZIP code,
    (iii) The telephone number of the agent,
    (iv) The type of service or services (sale or redemption of money 
orders, traveler's checks, check sales, check cashing, currency 
exchange, and money transmitting) the agent provides,
    (v) A listing of the months in the 12 months immediately preceding 
the date of the most recent agent list in which the gross transaction 
amount of the agent with respect to financial products or services 
issued by the money services business maintaining the agent list 
exceeded $100,000. For this purpose, the money services gross 
transaction amount is the agent's gross amount (excluding fees and 
commission) received from transaction of one or more businesses 
described in Sec. 103.11(uu),
    (vi) The name and address of any depository institution at which 
the agent maintains a transaction account (as defined in 12 U.S.C. 
461(b)(1)(C)) for all or part of the funds received in or for its money 
services business whether in the name of the agent or of the money 
services business for which the agent acts or whose products it sells,
    (vii) The year in which the agent first became an agent of the 
money services business, and
    (viii) The number of branches or subagents the agent has.
    As noted above, the final rule requires a money services business 
to include information about the months in the preceding 12-month 
period in which its agent's gross transaction amount exceeded $100,000. 
Again, the $100,000 need reflect only business done for the particular 
``prinicipal''. Thus, money services business are not expected to 
obtain information about the gross transaction amount for business 
their agents may conduct for other principals or to disaggregate 
information about the gross transaction amount of any agent that 
conducts business for more than one principal and provides a principal 
with an aggregate figure reflecting business conducted for both 
principals. To allow time to intregrate information, the final rule 
provides that information about agent volume must be current within 45 
days of the due date of the list.
    For any agent that is an agent of the money services business 
maintaining the list before the first day of the month beginning after 
February 16, 2000, the final rule does not require the following 
information to be included on the list: the year in which the agent 
first became an agent and the agent's branches or subagents. Such 
information must be made available upon the request of FinCEN and any 
other appropriate law enforcement agency (including, without 
limitation, the examination function of the Internal Revenue Service in 
its capacity as delegee of Bank Secrecy Act examination authority).
    Several commenters asked that the final rule clarify that a money 
services business is not required to include on its agent list any 
agent that is a depository institution. The final rule expressly 
excepts banks from the definition of money services business. Thus, a 
money services business is not required to include on its agent list 
any agent that is a depository institution.
    Another commenter suggested that only agents in the United States 
should be included on the agent list. FinCEN agrees that only agents 
doing business in the United States should be included on the agent 
list.
    Commenters indicated that because of the way they currently 
maintain information about their agents and the need to devote computer 
programming resources to the Year 2000 problem in general, they would 
need more time than allowed by the Notice to prepare the initial list 
of their agents. The final rule does not require the preparation of the 
initial agent list to be completed until January 1, 2002. This change 
should provide sufficient time for money services businesses to prepare 
their agent lists.

VI. Other Pending Notices of Proposed Rulemaking Concerning Money 
Services Businesses

    The second rule proposed on May 21, 1997 (the ``Proposed SAR 
Rule''), would require money transmitters, and issuers,

[[Page 45450]]

sellers, and redeemers of money orders and traveler's checks to report 
suspicious transactions to the Department of the Treasury. See 62 FR 
27900-27909. Suspicious activity reporting by all classes of financial 
institutions covered by the Bank Secrecy Act is an essential part of 
the government's counter-money laundering efforts generally and its 
efforts to strengthen counter-money laundering controls at money 
services businesses in particular. The Department of the Treasury is 
committed to producing the most cost-effective reporting regime, for 
both law enforcement and the industries involved. To permit effective 
implementation, suspicious activity reporting by the relevant classes 
of money services businesses will not begin until the initial 
registration process is complete.
    The Department also believes that it is critical to provide written 
guidance about what must be reported, at the time the final rule is 
issued. It intends to work with the money transmission, money order, 
and traveler's check industries to shape that guidance, independent of 
the rulemaking itself. That work should be assisted by the information 
gathered during initial stages of implementation of the registration 
rule.
    The third rule proposed on May 21, 1997 (the ``Proposed Special CTR 
Rule''), would add a special currency transaction reporting 
requirement--and related customer verification requirements--for money 
transmitters involved in the transmission or other transfer of funds to 
persons outside the United States. See 62 FR 27909-27917. Action on the 
Proposed Special CTR Rule is being deferred, but it is not being 
withdrawn at this time.

VII. Executive Order 12866

    The Department of the Treasury has determined that this final rule 
is not a significant regulatory action under Executive Order 12866.

VIII. Unfunded Mandates Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that includes a federal mandate that may result in expenditure by 
state, local and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 202 of the Unfunded Mandates Act 
also requires an agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. FinCEN has 
determined that it is not required to prepare a written statement under 
section 202 and has concluded that on balance this final rule provides 
the most cost-effective and least burdensome alternative to achieve the 
objectives of the rule.

IX. Regulatory Flexibility Act

    FinCEN certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. FinCEN 
anticipates that the provisions of the rule generally excluding agents 
of money services businesses from registration will limit the impact of 
the rule on small businesses. Further, most of the recordkeeping and 
reporting requirements that would be imposed by the rule concern 
information already found in routine business records. For example, as 
part of their business records, money services businesses (to the 
extent such businesses are small entities) will generally have 
information needed for the required agent list, such as the name and 
addresses of their agents and agent transaction account information, 
because such information is necessary to establish and maintain the 
relationship between the businesses and their agents. In addition to 
recordkeeping and reporting requirements, other requirements of the 
rule may also be satisfied with information that is currently 
available. For example, many businesses currently have policies in 
place regarding the maximum dollar amount of a money service 
transaction they will perform for a customer, such as the maximum 
amount for which a business will cash a check, which may help (assuming 
the policy is observed) them determine whether they have exceeded the 
$1,000 floor in several of the definitions in the rule.

X. Paperwork Reduction Act

    The collection of information contained in this final regulation 
has been reviewed and approved by the Office of Management and Budget 
(OMB) in accordance with the requirements of the Paperwork Reduction 
Act (44 U.S.C. 3507(d)) under control number 1506-0013. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a valid control number 
assigned by OMB.
    The collection of information in this final rule is in 31 CFR 
103.41(d). This information is required to be provided pursuant to 31 
U.S.C. 5330. This information will be used to locate agents of money 
services businesses to ensure that they are complying with the 
provisions of the Bank Secrecy Act. The information will also be used 
by law enforcement agencies in the enforcement of criminal, tax, and 
regulatory laws and to prevent money services businesses from engaging 
in illegal activities. The collection of information is mandatory. The 
likely recordkeepers are businesses.
    The estimated average burden associated with the collection of 
information in this final rule is 130 hours per recordkeeper.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the 
Financial Crimes Enforcement Network, Department of the Treasury, 2070 
Chain Bridge Road, Suite 200, Vienna, VA 22187, and to OMB, Attention: 
Desk Officer for the Department of Treasury, FinCEN, Office of 
Information and Regulatory Affairs, Washington, D.C. 20503.

List of Subjects in 31 CFR Part 103

    Administrative practice and procedure, Authority delegations 
(Government agencies), Banks and banking, Currency, Foreign banking, 
Foreign currencies, Gambling, Investigations, Law enforcement, 
Penalties, Reporting and recordkeeping requirements, Securities, Taxes.

Amendment

    For the reasons set forth above in the preamble, 31 CFR part 103 is 
amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FOREIGN TRANSACTIONS

    1. The authority citation for part 103 continues to read as 
follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.

    2. Section 103.11 is amended by--
    a. Revising paragraph (c)(7),
    b. Removing and reserving paragraph (i),
    c. Revising paragraph (n)(3),
    d. Removing paragraphs (n)(4), (n)(5), and (n)(10),
    e. Redesignating paragraphs (n)(6), (n)(7), (n)(8), and (n)(9) as 
paragraphs (n)(4), (n)(5), (n)(6), and (n)(7) respectively,
    f. In newly redesignated paragraphs (n)(5) and (n)(6), removing the 
period at the end of the paragraph and adding a semicolon in its place,
    g. In newly redesignated paragraph (n)(7), removing ``;.'' and 
adding a period in its place, and

[[Page 45451]]

    h. Adding new paragraphs (uu) and (vv).
    The revised and added paragraphs read as follows:


Sec. 103.11  Meaning of terms.

* * * * *
    (c) Bank. * * *
    (7) Any other organization (except a money services business) 
chartered under the banking laws of any state and subject to the 
supervision of the bank supervisory authorities of a State;
* * * * *
    (n) Financial institution. * * *
    (3) A money services business as defined in paragraph (uu) of this 
section;
* * * * *
    (uu) Money services business. Each agent, agency, branch, or office 
within the United States of any person doing business, whether or not 
on a regular basis or as an organized business concern, in one or more 
of the capacities listed in paragraphs (uu)(1) through (uu)(6) of this 
section. Notwithstanding the preceding sentence, the term ``money 
services business'' shall not include a bank, nor shall it include a 
person registered with, and regulated or examined by, the Securities 
and Exchange Commission or the Commodity Futures Trading Commission.
    (1) Currency dealer or exchanger. A currency dealer or exchanger 
(other than a person who does not exchange currency in an amount 
greater than $1,000 in currency or monetary or other instruments for 
any person on any day in one or more transactions).
    (2) Check casher. A person engaged in the business of a check 
casher (other than a person who does not cash checks in an amount 
greater than $1,000 in currency or monetary or other instruments for 
any person on any day in one or more transactions).
    (3) Issuer of traveler's checks, money orders, or stored value. An 
issuer of traveler's checks, money orders, or, stored value (other than 
a person who does not issue such checks or money orders or stored value 
in an amount greater than $1,000 in currency or monetary or other 
instruments to any person on any day in one or more transactions).
    (4) Seller or redeemer of traveler's checks, money orders, or 
stored value. A seller or redeemer of traveler's checks, money orders, 
or stored value (other than a person who does not sell such checks or 
money orders or stored value in an amount greater than $1,000 in 
currency or monetary or other instruments to or redeem such instruments 
for an amount greater than $1,000 in currency or monetary or other 
instruments from, any person on any day in one or more transactions).
    (5) Money transmitter--(i) In general. Money transmitter:
    (A) Any person, whether or not licensed or required to be licensed, 
who engages as a business in accepting currency, or funds denominated 
in currency, and transmits the currency or funds, or the value of the 
currency or funds, by any means through a financial agency or 
institution, a Federal Reserve Bank or other facility of one or more 
Federal Reserve Banks, the Board of Governors of the Federal Reserve 
System, or both, or an electronic funds transfer network; or
    (B) Any other person engaged as a business in the transfer of 
funds.
    (ii) Facts and circumstances; Limitation. Whether a person 
``engages as a business'' in the activities described in paragraph 
(uu)(5)(i) of this section is a matter of facts and circumstances. 
Generally, the acceptance and transmission of funds as an integral part 
of the execution and settlement of a transaction other than the funds 
transmission itself (for example, in connection with a bona fide sale 
of securities or other property), will not cause a person to be a money 
transmitter within the meaning of paragraph (uu)(5)(i) of this section.
    (6) United States Postal Service. The United States Postal Service, 
except with respect to the sale of postage or philatelic products.
    (vv) Stored value. Funds or monetary value represented in digital 
electronics format (whether or not specially encrypted) and stored or 
capable of storage on electronic media in such a way as to be 
retrievable and transferable electronically.
    3. Part 103 is further amended by redesignating the following 
subparts and sections as follows:

------------------------------------------------------------------------
                                                           New subparts
           Old subparts and sections subpart D             and sections
                                                             subpart E
------------------------------------------------------------------------
103.41..................................................          103.51
103.42..................................................          103.52
103.43..................................................          103.53
103.44..................................................          103.54
103.45..................................................          103.55
103.46..................................................          103.56
103.47..................................................          103.57
103.48..................................................          103.58
103.49..................................................          103.59
103.50..................................................          103.60
103.51..................................................          103.61
103.52..................................................          103.62
103.53..................................................          103.63
103.54..................................................          103.64
Subpart E                                                      Subpart F
103.61..................................................          103.71
103.62..................................................          103.72
103.63..................................................          103.73
103.64..................................................          103.74
103.65..................................................          103.75
103.66..................................................          103.76
103.67..................................................          103.77
Subpart F                                                      Subpart G
103.70..................................................          103.80
103.71..................................................          103.81
103.72..................................................          103.82
103.73..................................................          103.83
103.74..................................................          103.84
103.75..................................................          103.85
103.76..................................................          103.86
103.77..................................................          103.87
------------------------------------------------------------------------

    4. Add a new subpart D to part 103 to read as follows:

Subpart D--Special Rules for Money Services Businesses

Sec.
103.41  Registration of money services businesses.

Subpart D--Special Rules for Money Services Businesses


Sec. 103.41  Registration of money services businesses.

    (a) Registration requirement--(1) In general. Except as provided in 
paragraph (a)(2) of this section, relating to agents, each money 
services business (whether or not licensed as a money services business 
by any State) must register with the Department of the Treasury and, as 
part of that registration, maintain a list of its agents as required by 
31 U.S.C. 5330 and this section. This section does not apply to the 
United States Postal Service, to agencies of the United States, of any 
State, or of any political subdivision of a State, or to a person to 
the extent that the person is an issuer, seller, or redeemer of stored 
value.
    (2) Agents. A person that is a money services business solely 
because that person serves as an agent of another money services 
business, see Sec. 103.11(uu), is not required to register under this 
section, but a money services business that engages in activities 
described in Sec. 103.11(uu) both on its own behalf and as an agent for 
others must register under this section. For example, a supermarket 
corporation that acts as an agent for an issuer of money orders and 
performs no other services of a nature and value that would cause the 
corporation to be a money services business, is not required to 
register; the answer would be the same if the supermarket corporation 
served as an agent both of a money order issuer and of a money 
transmitter. However, registration would be required if the

[[Page 45452]]

supermarket corporation, in addition to acting as an agent of an issuer 
of money orders, cashed checks or exchanged currencies (other than as 
an agent for another business) in an amount greater than $1,000 in 
currency or monetary or other instruments for any person on any day, in 
one or more transactions.
    (3) Agency status. The determination whether a person is an agent 
depends on all the facts and circumstances.
    (b) Registration procedures--(1) In general. (i) A money services 
business must be registered by filing such form as FinCEN may specify 
with the Detroit Computing Center of the Internal Revenue Service (or 
such other location as the form may specify). The information required 
by 31 U.S.C. 5330(b) and any other information required by the form 
must be reported in the manner and to the extent required by the form.
    (ii) A branch office of a money services business is not required 
to file its own registration form. A money services business must, 
however, report information about its branch locations or offices as 
provided by the instructions to the registration form.
    (iii) A money services business must retain a copy of any 
registration form filed under this section and any registration number 
that may be assigned to the business at a location in the United States 
and for the period specified in Sec. 103.38(d).
    (2) Registration period. A money services business must be 
registered for the initial registration period and each renewal period. 
The initial registration period is the two-calendar-year period 
beginning with the calendar year in which the money services business 
is first required to be registered. However, the initial registration 
period for a money services business required to register by December 
31, 2001 (see paragraph (b)(3) of this section) is the two-calendar 
year period beginning 2002. Each two-calendar-year period following the 
initial registration period is a renewal period.
    (3) Due date. The registration form for the initial registration 
period must be filed on or before the later of December 31, 2001, and 
the end of the 180-day period beginning on the day following the date 
the business is established. The registration form for a renewal period 
must be filed on or before the last day of the calendar year preceding 
the renewal period.
    (4) Events requiring re-registration. If a money services business 
registered as such under the laws of any State experiences a change in 
ownership or control that requires the business to be re-registered 
under State law, the money services business must also be re-registered 
under this section. In addition, if there is a transfer of more than 10 
percent of the voting power or equity interests of a money services 
business (other than a money services business that must report such 
transfer to the Securities and Exchange Commission), the money services 
business must be re-registered under this section. Finally, if a money 
services business experiences a more than 50-per cent increase in the 
number of its agents during any registration period, the money services 
business must be re-registered under this section. The registration 
form must be filed not later than 180 days after such change in 
ownership, transfer of voting power or equity interests, or increase in 
agents. The calendar year in which the change, transfer, or increase 
occurs is treated as the first year of a new two-year registration 
period.
    (c) Persons required to file the registration form. Under 31 U.S.C. 
5330(a), any person who owns or controls a money services business is 
responsible for registering the business; however, only one 
registration form is required to be filed for each registration period. 
A person is treated as owning or controlling a money services business 
for purposes of filing the registration form only to the extent 
provided by the form. If more than one person owns or controls a money 
services business, the owning or controlling persons may enter into an 
agreement designating one of them to register the business. The failure 
of the designated person to register the money services business does 
not, however, relieve any of the other persons who own or control the 
business of liability for the failure to register the business. See 
paragraph (e) of this section, relating to consequences of the failure 
to comply with 31 U.S.C. 5330 or this section.
    (d) List of agents--(1) In general. A money services business must 
prepare and maintain a list of its agents. The initial list of agents 
must be prepared by January 1, 2002, and must be revised each January 
1, for the immediately preceding 12 month period; for money services 
businesses established after December 31, 2001, the initial agent list 
must be prepared by the due date of the initial registration form and 
must be revised each January 1 for the immediately preceding 12-month 
period. The list is not filed with the registration form but must be 
maintained at the location in the United States reported on the 
registration form under paragraph (b)(1) of this section. Upon request, 
a money services business must make its list of agents available to 
FinCEN and any other appropriate law enforcement agency (including, 
without limitation, the examination function of the Internal Revenue 
Service in its capacity as delegee of Bank Secrecy Act examination 
authority). Requests for information made pursuant to the preceding 
sentence shall be coordinated through FinCEN in the manner and to the 
extent determined by FinCEN. The original list of agents and any 
revised list must be retained for the period specified in 
Sec. 103.38(d).
    (2) Information included on the list of agents--(i) In general. 
Except as provided in paragraph (d)(2)(ii) of this section, a money 
services business must include the following information with respect 
to each agent on the list (including any revised list) of its agents--
    (A) The name of the agent, including any trade names or doing-
business-as names;
    (B) The address of the agent, including street address, city, 
state, and ZIP code;
    (C) The telephone number of the agent;
    (D) The type of service or services (money orders, traveler's 
checks, check sales, check cashing, currency exchange, and money 
transmitting) the agent provides;
    (E) A listing of the months in the 12 months immediately preceding 
the date of the most recent agent list in which the gross transaction 
amount of the agent with respect to financial products or services 
issued by the money services business maintaining the agent list 
exceeded $100,000. For this purpose, the money services gross 
transaction amount is the agent's gross amount (excluding fees and 
commissions) received from transactions of one or more businesses 
described in Sec. 103.11(uu);
    (F) The name and address of any depository institution at which the 
agent maintains a transaction account (as defined in 12 U.S.C. 
461(b)(1)(C)) for all or part of the funds received in or for the 
financial products or services issued by the money services business 
maintaining the list, whether in the agent's or the business 
principal's name;
    (G) The year in which the agent first became an agent of the money 
services business; and
    (H) The number of branches or subagents the agent has.
    (ii) Special rules. Information about agent volume must be current 
within 45 days of the due date of the agent list. The information 
described by paragraphs (d)(2)(i)(G) and (d)(2)(i)(H) of this section 
is not required to be included in an agent list with respect to

[[Page 45453]]

any person that is an agent of the money services business maintaining 
the list before the first day of the month beginning after February 16, 
2000 so long as the information described by paragraphs (d)(2)(i)(G) 
and (d)(2)(i)(H) of this section is made available upon the request of 
FinCEN and any other appropriate law enforcement agency (including, 
without limitation, the examination function of the Internal Revenue 
Service in its capacity as delegee of Bank Secrecy Act examination 
authority).
    (e) Consequences of failing to comply with 31 U.S.C. 5330 or the 
regulations thereunder. It is unlawful to do business without complying 
with 31 U.S.C. 5330 and this section. A failure to comply with the 
requirements of 31 U.S.C 5330 or this section includes the filing of 
false or materially incomplete information in connection with the 
registration of a money services business. Any person who fails to 
comply with any requirement of 31 U.S.C. 5330 or this section shall be 
liable for a civil penalty of $5,000 for each violation. Each day a 
violation of 31 U.S.C. 5330 or this section continues constitutes a 
separate violation. In addition, under 31 U.S.C. 5320, the Secretary of 
the Treasury may bring a civil action to enjoin the violation. See 18 
U.S.C. 1960 for a criminal penalty for failure to comply with the 
registration requirements of 31 U.S.C. 5330 or this section.
    (f) Effective date. This section is effective September 20, 1999. 
Registration of money services businesses under this section will not 
be required prior to December 31, 2001.


Sec. 103.36  [Amended]

    5. Paragraph (b)(10) of Sec. 103.36 is amended by removing the 
language ``Sec. 103.54(a)'' and adding the language ``Sec. 103.64(a)'' 
in its place.
    6. Section 103.37 is amended by adding a new paragraph (c) to read 
as follows:


Sec. 103.37  Additional records to be made and retained by currency 
dealers or exchangers.

* * * * *
    (c) This section does not apply to banks that offer services in 
dealing or changing currency to their customers as an adjunct to their 
regular service.


Sec. 103.56  [Amended]

    7. Paragraph (b)(7) of newly redesignated Sec. 103.56 is amended by 
removing the language ``Sec. 103.48'' and adding the language 
``Sec. 103.58'' in its place.


Sec. 103.57  [Amended]

    8. Newly redesignated Sec. 103.57 is amended by:
    a. In paragraph (d) removing the language ``Sec. 103.48'' and 
adding the language ``Sec. 103.58'' in its place.
    b. In the first sentence of paragraph (e) removing the language 
``Sec. 103.53'' and adding the language ``Sec. 103.63'' in its place.


Sec. 103.72  [Amended]

    9. Newly redesignated Sec. 103.72 is amended by removing the 
language ``Sec. 103.61'' from the introductory text and adding the 
language ``Sec. 103.71'' in its place.


Sec. 103.73  [Amended]

    10. Newly redesignated Sec. 103.73 is amended by:
    a. In paragraph (a) introductory text removing the language 
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
    b. In paragraph (a)(1) removing the language ``Sec. 103.62'' and 
adding the language ``Sec. 103.72'' in its place.
    c. In paragraph (b) introductory text removing the language 
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
    d. In paragraph (b)(1) removing the language ``Sec. 103.62'' and 
adding the language ``Sec. 103.72'' in its place.


Sec. 103.74  [Amended]

    11. Newly redesignated Sec. 103.74 is amended by removing the 
language ``Sec. 103.62'' from paragraph (a) and adding the language 
``Sec. 103.72'' in its place.


Sec. 103.75  [Amended]

    12. Newly redesignated Sec. 103.75 is amended by:
    a. In the first sentence of paragraph (a) removing the language 
``Sec. 103.62'' and adding the language ``Sec. 103.72'' in its place.
    b. In paragraph (c) introductory text removing the language 
``103.62(a)'' and adding the language ``103.72(a)'' in its place and 
removing the language ``Sec. 103.62 (b) or (c)'' and adding the 
language ``Sec. 103.72 (b) or (c)'' in its place.


Sec. 103.76  [Amended]

    13. Newly redesignated Sec. 103.76 is amended by:
    a. In the first sentence removing the language ``Sec. 103.62'' and 
adding the language ``Sec. 103.72'' in its place.
    b. In the second sentence removing the language ``Sec. 103.62(a)'' 
and adding the language ``Sec. 103.72(a)'' in its place.


Sec. 103.82  [Amended]

    14. Newly redesignated Sec. 103.82 is amended by removing the 
language ``Sec. 103.71'' from the first sentence and adding the 
language ``Sec. 103.81'' in its place.


Sec. 103.83  [Amended]

    15. Paragraph (b) of newly redesignated Sec. 103.83 is amended by:
    a. In the first sentence removing the language ``Sec. 103.71'' and 
adding the language ``Sec. 103.81'' in its place.
    b. In the last sentence removing the language ``Sec. 103.71'' and 
adding the language ``Sec. 103.81'' in its place.


Sec. 103.85  [Amended]

    16. Newly redesignated Sec. 103.85 is amended by removing the 
language ``Sec. 103.71'' from the first sentence and adding the 
language ``Sec. 103.81'' in its place.


Sec. 103.86  [Amended]

    17. Newly redesignated Sec. 103.86 is amended by:
    a. In paragraph (a) introductory text removing the language 
``Sec. 103.75'' and adding the language ``Sec. 103.85'' in its place.
    b. In the second sentence of paragraph (b) removing the language 
``Sec. 103.71'' and adding the language ``Sec. 103.81'' in its place.

    Dated: August 17, 1999.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 99-21667 Filed 8-18-99; 8:45 am]
BILLING CODE 4820-03-P