[Federal Register Volume 71, Number 47 (Friday, March 10, 2006)]
[Proposed Rules]
[Pages 12308-12310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-3373]



[[Page 12308]]

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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA85


Financial Crimes Enforcement Network; Provision of Banking 
Services to Money Services Businesses

AGENCY: Financial Crimes Enforcement Network, Department of the 
Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: We are issuing this advance notice of proposed rulemaking 
(``Advance Notice'') as a part of our ongoing effort to address, in the 
context of the Bank Secrecy Act, the issue of access to banking 
services by money services businesses. Both the banking industry and 
the money services business industry have expressed concerns with 
regard to the impact of Bank Secrecy Act regulations on the ability of 
money services businesses to open and maintain accounts and obtain 
other banking services at banks and other depository institutions. Due 
to the concerns about the effect of regulatory requirements on the 
provision of banking services to money services businesses, we, through 
the Non-bank Financial Institutions and the Examinations subcommittees 
of the Bank Secrecy Act Advisory Group, held a fact-finding meeting on 
March 8, 2005, to hear directly from banks, other depository 
institutions, and money services businesses concerning the challenges 
that they face on this issue.
    Subsequent to the fact-finding meeting, we took a number of steps 
to address the concerns raised by these industries, including working 
together with the Board of Governors of the Federal Reserve System, the 
Federal Deposit Insurance Corporation, the National Credit Union 
Administration, the Office of the Comptroller of the Currency, and the 
Office of Thrift Supervision (collectively, the ``Federal Banking 
Agencies'') to issue guidance, which was incorporated into the June 
2005 Federal Financial Institutions Examination Council Bank Secrecy 
Act/Anti-Money Laundering Examination Manual. We understand that many 
banks and other depository institutions (collectively, ``banking 
institutions'') remain wary of dealing with money services businesses, 
and that money services businesses continue to experience difficulties 
in obtaining and maintaining bank accounts and other banking services.
    This Advance Notice solicits updated facts and recommendations 
regarding the extent to which ongoing concerns are based in the Bank 
Secrecy Act, and regarding what additional guidance or regulatory 
action under the Bank Secrecy Act, if any, would be appropriate to 
address these concerns.


DATES: Written comments may be submitted on or before May 9, 2006.


ADDRESSES: You may submit comments, identified by RIN 1506-AA85, by any 
of the following methods:
     Federal E-rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include RIN 1506-
AA85 in the subject line of the message.
     Mail: Financial Crimes Enforcement Network, P.O. Box 39, 
Vienna, VA 22183. Include RIN 1506-AA85 in the body of the text.
    Instructions: It is preferable for comments to be submitted by 
electronic mail because paper mail in the Washington, DC area may be 
delayed. Please submit comments by one method only. All submissions 
received must include the agency name and the Regulatory Information 
Number (RIN) for this rulemaking. All comments received will be posted 
without change to http://www.fincen.gov, including any personal 
information provided. Comments may be inspected at the Financial Crimes 
Enforcement Network between 10 a.m. and 4 p.m. in the reading room in 
Washington, DC. Persons wishing to inspect the comments submitted must 
request an appointment by telephone at (202) 354-6400 (not a toll-free 
number).

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, Financial Crimes Enforcement Network at (800) 949-2732 (toll-
free number).

SUPPLEMENTARY INFORMATION:

I. Background

    The Bank Secrecy Act authorizes the Secretary of the Treasury to 
issue regulations requiring all financial institutions (as defined 
therein) to maintain records or file reports that are determined to 
have a high degree of usefulness in criminal, tax, or regulatory 
investigations, or in the conduct of intelligence or counter-
intelligence activities, including analysis, to protect against 
international terrorism, or to implement counter-money laundering 
programs and compliance procedures. The Secretary's authority to 
administer the Bank Secrecy Act has been delegated to the Director of 
the Financial Crimes Enforcement Network. The Bank Secrecy Act defines 
currency exchangers; issuers, redeemers, or cashiers of travelers' 
checks, checks, money orders, or similar instruments; the United States 
Postal Service; and persons involved in the transmission of funds 
(collectively, ``money services businesses'') as financial institutions 
for purposes of the Act.\1\ Regulations issued by the Financial Crimes 
Enforcement Network further define the universe of money services 
businesses.\2\
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    \1\ 31 U.S.C. 5312(a)(2)(J), (K), (R), and (V).
    \2\ 31 CFR 103.11(uu).
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    Like other financial institutions under the Bank Secrecy Act, money 
services businesses are required to: establish written anti-money 
laundering programs pursuant to section 352 of the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub. L. No. 
107-56 (the PATRIOT Act); \3\ file Currency Transaction Reports \4\ and 
Suspicious Activity Reports (for certain money services businesses); 
\5\ maintain certain records with regard to customers who purchase 
monetary instruments with cash; \6\ maintain certain records with 
regard to currency dealing or exchange; \7\ and record and retain 
certain information about funds transfers and include certain 
information in the transmittals of orders for such funds transfers.\8\ 
Money services businesses also are required to register with the 
Department of the Treasury \9\ and are examined for Bank Secrecy Act 
compliance by the Internal Revenue Service.\10\
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    \3\ 67 FR 21114 (Apr. 29, 2002); 31 CFR 103.125.
    \4\ 31 CFR 103.22.
    \5\ 65 FR 13683 (Mar. 14, 2000); 31 CFR 103.20.
    \6\ 31 CFR 103.29.
    \7\ 31 CFR 103.37.
    \8\ 31 CFR 103.33(f)-(g).
    \9\ 64 FR 45438 (Aug. 20, 1999); 31 CFR 103.41.
    \10\ 31 CFR 103.56(b)(8).
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    In response to concerns expressed by both money services businesses 
and banking institutions, on March 8, 2005, we, through the Non-bank 
Financial Institutions and the Examinations subcommittees of the Bank 
Secrecy Act Advisory Group, held a fact-finding meeting on the 
following issues: (1) Specific challenges and issues encountered by 
money services businesses in obtaining banking services; (2) specific 
challenges and issues encountered by banking institutions seeking to 
provide banking services to money services businesses; (3) the 
understanding at that time by banking institutions of the various 
activities undertaken by money services businesses and how they may 
present different levels of risk; and (4) the

[[Page 12309]]

understanding at that time by banking institutions of what they were 
required to do to comply with regulatory obligations in providing 
banking services to money services businesses.
    We received written statements from 60 banking institutions, money 
services businesses, and trade associations prior to the meeting, and 
43 such entities made oral statements at the meeting. Many money 
services businesses addressed the fact that banking institutions were 
closing money services businesses' demand deposit accounts on the 
grounds that the accounts were owned by money services businesses, 
rather than on the basis of some specific concern with the accounts. 
Money services businesses further commented on the fact that, in order 
to be licensed by many state governments, a money services business has 
to submit to a rigorous review, including providing financial 
statements and internal audit reports and permitting background checks 
of the owners and managers. Further, they noted that the licensing 
process requires annual training, current Bank Secrecy Act compliance 
programs, and the submission of a surety bond. They also stated that 
money services businesses provide a valuable service that many banking 
institutions are not fulfilling in catering to immigrant communities, 
and that, if the money services business industry is not able to obtain 
banking services, immigrant communities might suffer and might be 
compelled to use informal and unregulated money transfer systems that 
the government cannot supervise.
    Written and oral statements from banking institutions discussed, 
among other things, the expense and difficulty of identifying and 
monitoring money services businesses and the increased regulatory and 
reputational risk involved in serving the money services business 
community. They also expressed concern about the perceived lack of 
regulatory guidance in this area, the disparate interpretations of the 
applicable regulations, and the inconsistent application of regulatory 
requirements by the Federal Banking Agencies and their examiners. 
Banking institutions also noted that it was their perception that some 
money services businesses, even those that were licensed by a state and 
were appropriately registered with the Financial Crimes Enforcement 
Network, were not sufficiently familiar with the Bank Secrecy Act and 
its requirements, and, furthermore, that many small money services 
businesses did not have the resources with which to adequately comply 
with Bank Secrecy Act regulations.
    Subsequent to the fact-finding meeting, on March 8, 2005, we issued 
the following statement:

    The Financial Crimes Enforcement Network has long recognized 
that the money services business industry provides valuable 
financial services, especially to groups and individuals that may 
not have ready access to the formal banking sector. Moreover, we 
believe it is imperative that money services businesses remain 
within the formal financial sector, and not be driven underground. 
Accordingly, the Financial Crimes Enforcement Network is committed 
to ensuring their continued access to banking services. At the same 
time, we believe it essential that the money services business 
industry maintain the same level of transparency, and implement the 
full range of anti-money laundering controls, as banking 
institutions.\11\
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    \11\ Statement from the Financial Crimes Enforcement Network, 
http://www.fincen.gov. (Mar. 8, 2005).

    On March 30, 2005, together with the Federal Banking Agencies, we 
issued a Joint Statement to address expectations regarding banking 
institutions' obligations under the Bank Secrecy Act with respect to 
money services businesses.\12\ The Joint Statement acknowledged that 
the money services business industry ``provides valuable financial 
services, especially to individuals who may not have ready access to 
the formal banking sector'' and that it is important that money 
services businesses ``that comply with the requirements of the Bank 
Secrecy Act and applicable state laws remain within the formal 
financial sector, subject to appropriate anti-money laundering 
controls.'' The statement also noted that ``it is essential that the 
M[oney] S[ervices] B[usiness] industry maintain the same level of 
transparency, including the implementation of a full range of anti-
money laundering controls as required by law, as do banking 
organizations.'' The statement went on to emphasize that the ``Bank 
Secrecy Act does not require, and neither [the Financial Crimes 
Enforcement Network] nor the Federal Banking Agencies expect, banking 
institutions to serve as the de facto regulator of the money services 
business industry. Banking organizations that open or maintain accounts 
for money services businesses should apply the requirements of the Bank 
Secrecy Act on a risk-assessed basis, as they do for all customers, 
taking into account the products and services offered and the 
individual circumstances.''
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    \12\ Joint Statement on Providing Banking Services to Money 
Services Businesses, issued by the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation, the 
Financial Crimes Enforcement Network, the National Credit Union 
Administration, the Office of the Comptroller of the Currency, and 
the Office of Thrift Supervision (Mar. 30, 2005).
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    On April 26, 2005, together with the Federal Banking Agencies, we 
issued more detailed joint guidance to the banking industry.\13\ The 
intent of the guidance to the banking industry was ``to clarify further 
the requirements of the Bank Secrecy Act'' and to set ``forth the 
minimum steps that banking organizations should take when providing 
banking services to money services businesses.'' The guidance set forth 
the basic information that a banking institution should obtain from a 
money services business when preparing to open an account, including 
the money services business' types of products and services, its 
locations and markets served, the anticipated account activity, and the 
purpose of the account. The guidance also explained the concept of a 
risk assessment that should be performed by a banking institution when 
evaluating whether or not to establish or maintain an account 
relationship with a money services business. Further, the guidance set 
forth a checklist of various risk factors with which to analyze and 
differentiate the various kinds of money services businesses, and 
discussed the nature of enhanced due diligence that banking 
institutions might perform on money services business customers that 
are identified as higher risk, and the circumstances under which such 
enhanced due diligence might be needed.
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    \13\ Interagency Interpretive Guidance on Providing Banking 
Services to Money Services Businesses Operating in the United 
States, issued by the Board of Governors of the Federal Reserve 
System, the Federal Deposit Insurance Corporation, the Financial 
Crimes Enforcement Network, the National Credit Union 
Administration, the Office of the Comptroller of the Currency, and 
the Office of Thrift Supervision [Apr. 26, 2005).
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    On the same date, we issued an Advisory containing guidance to the 
money services business industry on obtaining and maintaining banking 
services.\14\ The guidance to the money services business industry was 
designed to ``identify and explain to money services businesses the 
types of information and documentation they are expected to have and to 
provide to banking organizations'' under the Bank Secrecy Act. The 
guidance to money services businesses set forth a checklist with which 
to organize and explain the types of products and services offered by a 
given money services business, its locations and markets, its 
anticipated account activity, and the purpose of the

[[Page 12310]]

account. The guidance also set forth the circumstances when a banking 
institution might want or need to perform enhanced due diligence with 
regard to a money services business account and the nature of such 
enhanced due diligence.
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    \14\ Financial Crimes Enforcement Network Advisory: Guidance to 
Money Services Businesses on Obtaining and Maintaining Banking 
Services (Apr. 26, 2005).
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    Together with the Federal Banking Agencies, we have also provided 
additional support and training to bank examiners with regard to the 
variety of products and services offered by money services businesses 
and the range of risks posed. For instance, in June 2005, the Federal 
Banking Agencies, in consultation with us, developed and issued, 
through the Federal Financial Institutions Examination Council, uniform 
Bank Secrecy Act/Anti-Money Laundering examination procedures to be 
used by all Federal Banking Agency examiners. The new examination 
procedures include a section focused specifically on non-bank financial 
institutions, including money services businesses.
    Notwithstanding these efforts, providing banking and other 
financial services to money services businesses continues to be an 
issue of concern. As a part of our continuing effort to address this 
matter in the context of the Bank Secrecy Act, issuing this Advance 
Notice to solicit updated facts and recommendations regarding what 
additional measures with regard to the Bank Secrecy Act, if any, would 
be appropriate.

II. Issues for Comment

    In issuing this Advance Notice, we solicit comments on the 
following issues:
    1. What requirements have banking institutions imposed on money 
services businesses to open or maintain account relationships since the 
issuance of the joint guidance by us and the Federal Banking Agencies 
in April 2005?
    2. Describe any circumstances under which money services businesses 
have provided or have been willing to provide the information specified 
in the guidance issued by us to money services businesses in April 
2005, concerning their obligations under the Bank Secrecy Act, and yet 
have had banking institutions decline to open or continue account 
relationships for the money services businesses.
    3. Have Bank Secrecy Act-related grounds been cited for why banking 
institutions have decided not to open, or have decided not to continue 
to maintain, account relationships for money services businesses since 
the issuance of the guidance to money services businesses and to 
banking institutions in April 2005?
    4. Would additional guidance (including, if applicable, 
clarification of existing guidance) to the banking industry regarding 
the opening and maintenance of accounts for money services businesses 
within the Bank Secrecy Act regulatory framework be beneficial? If so, 
what specifically should such guidance address?
    5. Would additional guidance (including, if applicable, 
clarification of existing guidance) to money services businesses 
regarding their responsibilities under the Bank Secrecy Act as it 
pertains to obtaining banking services be beneficial? If so, what 
specifically should such guidance address?
    6. Are there steps that could be taken with regard to regulation 
and oversight under the Bank Secrecy Act that could operate to reduce 
perceived risks presented by money services businesses?
    7. Since the March, 2005, hearing and the issuance of guidance in 
April, 2005, to banks and to money services businesses, has there been 
an overall increase or decrease in the provision of banking services to 
money services businesses? Please offer any thoughts as to why this has 
occurred.

III. Conclusion

    We are seeking input to assist in our efforts to ensure that money 
services businesses that comply with the law have reasonable access to 
banking services and, specifically, to avoid any unintended 
misinterpretation of Bank Secrecy Act requirements that could adversely 
affect the issue of the establishment and maintenance of account 
relationships and other banking services for money services businesses 
by banking institutions. We welcome comments on all aspects of this 
Advance Notice and encourage all interested parties to provide their 
views.

IV. Executive Order 12866

    This Advance Notice is not a ``significant regulatory action'' for 
purposes of Executive Order 12866. It neither establishes nor proposes 
any regulatory requirements. Instead, it seeks public comment on a 
number of issues concerning the establishment and maintenance of 
account relationships at banking institutions by money services 
businesses within the Bank Secrecy Act regulatory framework.

    Dated: March 3, 2006.
William F. Baity,
Acting Director, Financial Crimes Enforcement Network.
 [FR Doc. E6-3373 Filed 3-9-06; 8:45 am]
BILLING CODE 4810-02-P