[Federal Register Volume 76, Number 140 (Thursday, July 21, 2011)]
[Rules and Regulations]
[Pages 43585-43597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18309]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Parts 1010, 1021 and 1022

RIN 1506-AA97


Bank Secrecy Act Regulations; Definitions and Other Regulations 
Relating to Money Services Businesses

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

ACTION: Final rule.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN''), a 
bureau of the Department of the Treasury (``Treasury''), is revising 
the regulations implementing the Bank Secrecy Act (``BSA'') regarding 
money services businesses (``MSBs'') to clarify which entities are 
covered by the definitions.
    The changes more clearly delineate the scope of entities regulated 
as MSBs, so that determining which entities are obligated to comply is 
more straightforward and predictable. This rulemaking amends the 
current MSB regulations by: ensuring that certain foreign-located 
persons engaging in MSB activities within the United States are subject 
to the BSA rules; updating the MSB definitions to reflect past guidance 
and rulings, current business operations, evolving technologies, and 
merging lines of business; and separating the provisions dealing with 
stored value from those dealing with issuers, sellers, and redeemers of 
traveler's checks and money orders.

DATES: Effective Date: This rule is effective September 19, 2011. 
Compliance Date: The compliance date for the amendments to 31 CFR 
1022.380 is January 23, 2012.

FOR FURTHER INFORMATION CONTACT: The FinCEN regulatory helpline at 
(800) 949-2732 and select Option 1.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory and Regulatory Background

    The BSA, 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. 5311-5314 and 
5316-5332, authorizes the Secretary of the Treasury (the ``Secretary'') 
to issue regulations requiring financial institutions to keep records 
and file reports that the Secretary determines ``have a high degree of 
usefulness in criminal, tax, or regulatory investigations or 
proceedings, or in the conduct of intelligence or counterintelligence 
matters, including analysis, to protect against international 
terrorism.'' \1\ In addition, the Secretary is authorized to impose 
anti-money laundering (``AML'') program requirements on financial 
institutions.\2\ The Secretary's authority to administer the BSA has 
been delegated to the Director of FinCEN.\3\ FinCEN has implemented the 
BSA through regulations (``BSA regulations,'' ``implementing 
regulations'' or ``BSA rules'') that appear at 31 CFR Chapter X.\4\
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    \1\ 31 U.S.C. 5311.
    \2\ 31 U.S.C. 5318(h).
    \3\ See Treasury Order 180-01 (Sept. 26, 2002).
    \4\ On October 26, 2010, FinCEN issued a final rule creating a 
new Chapter X in title 31 of the Code of Federal Regulations for the 
BSA regulations. See 75 FR 65806 (October 26, 2010) (Transfer and 
Reorganization of Bank Secrecy Act Regulations Final Rule) (referred 
to herein as the ``Chapter X Final Rule''). The Chapter X Final Rule 
became effective on March 1, 2011. Because the Notice of Proposed 
Rulemaking, Definitions and Other Regulations Relating to Money 
Services Businesses, 74 FR 22129 (May 12, 2009), was issued before 
the Chapter X Final Rule became effective, it was proposed in the 31 
CFR Part 103 format. In this Final Rule, for ease of reference and 
where appropriate, we have included the former 31 CFR Part 103 
citation after the 31 CFR Chapter X regulatory citation.
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    The BSA defines the term ``financial institution'' to include, in 
part: a currency exchange; an issuer, redeemer, or cashier of 
travelers' checks, checks, money orders, or similar instruments; the 
United States Postal Service; a person who engages as a business in the 
transmission of funds; and any business or agency which engages in any 
activity determined by regulation to be an activity similar to, related 
to, or a substitute for these activities.\5\
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    \5\ 31 U.S.C. 5312(a)(2)(J), (K), (R), (V), and (Y).
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    FinCEN has issued regulations under the BSA implementing the 
recordkeeping, reporting, and other requirements of the BSA with 
respect to these types of financial institutions. These regulations 
refer to these types of financial institutions as ``money services 
businesses'' (``MSBs'').\6\ Like other financial institutions under the 
BSA, MSBs must implement AML programs, make certain reports to FinCEN, 
and maintain certain records to facilitate financial transparency. MSBs 
are generally required to: (1) Establish written AML programs that are 
reasonably designed to prevent the MSB from being used to facilitate 
money laundering and the financing of terrorist activities; \7\ (2) 
file Currency Transaction Reports (``CTRs'') \8\ and Suspicious 
Activity Reports (``SARs''); \9\ and (3) maintain certain records, 
including those relating to the purchase of certain monetary 
instruments with currency,\10\ transactions by currency dealers or 
exchangers (to be called ``dealers in foreign exchange'' under this 
rulemaking),\11\ and certain transmittals of funds.\12\ Most types of 
MSBs are required to register with FinCEN \13\ and all are subject to 
examination for BSA compliance by the Internal Revenue Service 
(``IRS'').\14\
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    \6\ See 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)).
    \7\ See 31 CFR 1022.210 (formerly 31 CFR 103.125).
    \8\ See 31 CFR 1010.311 (formerly 31 CFR 103.22).
    \9\ See 31 CFR 1022.320 (formerly 31 CFR 103.20). Check cashers 
and transactions solely involving the issuance, sale, or redemption 
of stored value are not covered by the SAR requirement. See 31 CFR 
1022.320(a)(1), (5) (formerly 31 CFR 103.20(a)(1), (5). FinCEN 
recently proposed imposing a SAR requirement with respect to 
transactions involving stored value. See Notice of Proposed 
Rulemaking, Amendment to the Bank Secrecy Act Regulations--
Definitions and Other Regulations Relating to Prepaid Access, 75 FR 
36589 (June 28, 2010).
    \10\ See 31 CFR 1010.415 (formerly 31 CFR 103.29).
    \11\ See 31 CFR 1022.410 (formerly 31 CFR 103.37).
    \12\ See 31 CFR 1010.410(e)-(f) (formerly 31 CFR 103.33(f)-(g)).
    \13\ See 31 CFR 1022.380 (formerly 31 CFR 103.41).
    \14\ See 31 CFR 1010.810(b) (formerly 31 CFR 103.56(b)(8)).
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B. Past Public MSB Meetings

    In 1997, FinCEN held public meetings to give members of the 
financial services industry an opportunity to discuss the proposed MSB 
regulations and any impact they might have on operations.\15\

[[Page 43586]]

In drafting the final rules defining the MSB categories,\16\ FinCEN 
relied in part on the comments made in these public forums.
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    \15\ 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. The discussions 
focused on how businesses operate and how best to regulate them.
    \16\ Definitions Relating to, and Registration of, Money 
Services Businesses, 64 FR 45438 (Aug. 20, 1999) (``1999 
Rulemaking'').
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    On March 8, 2005, FinCEN held a fact-finding meeting in Washington, 
DC on the provision of banking services to MSBs.\17\ MSBs recounted 
their challenges in obtaining and maintaining banking services due to 
the perception that their businesses posed a high risk of money 
laundering and terrorist financing. In 2006, FinCEN issued an advance 
notice of proposed rulemaking seeking input on how to address these 
challenges,\18\ and received 142 comments in response, which have 
informed this rulemaking.\19\
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    \17\ FinCEN conducted the meeting in conjunction with the Non-
bank Financial Institutions and Examination Subcommittees of the 
Bank Secrecy Act Advisory Group (``BSAAG''). BSAAG is an advisory 
group created by the Annunzio-Wylie Anti-Money Laundering Act, 
consisting of industry, regulatory, and law enforcement participants 
for the purpose of engaging in open dialogue related to the 
protection of the U.S. financial system from money laundering, 
terrorist financing, and other abuses. BSAAG uses a variety of 
permanent and ad hoc subcommittees to identify and analyze relevant 
issues. Public Law 102-550, Title XV, sec. 1564 (Oct. 28, 1992), 106 
Stat. 4073.
    \18\ Provision of Banking Services to Money Services Businesses, 
71 FR 12308 (March 10, 2006).
    \19\ These comments are available in files dated March 10 and 
May 15, 2006 at http://www.fincen.gov/statutes_regs/bsa/regs_proposal_comment.html.
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C. Need for Review and Updates

    More than ten years have passed since FinCEN issued the BSA 
regulations defining the categories of MSBs.\20\ Since that time, 
FinCEN has received numerous requests to apply the MSB regulations to 
fact patterns specific to particular businesses. Over one-third of 
these requests came from persons inquiring whether or not they were an 
MSB.\21\ Some of these requests for guidance were prompted by 
significant technological advances such as stored value products and 
the online provision of financial services. These and other 
developments have changed the nature of the MSB industry. Where 
possible, FinCEN has provided guidance to the industry on how to 
interpret and apply the regulations.
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    \20\ See 1999 Rulemaking, 64 FR 45438 (Aug. 20, 1999). For a 
discussion of this history, see also the Notice of Proposed 
Rulemaking FinCEN; Amendment to the Bank Secrecy Act Regulations--
Definitions and Other Regulations Relating to Money Services 
Businesses, 74 FR 22129, 22131 (May 12, 2009).
    \21\ This statistic comes from a review of requests for guidance 
from FinCEN's Regulatory Helpline.
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    With respect to check cashers and money transmitters in particular, 
FinCEN has developed a large body of guidance in the years since the 
issuance of the final MSB regulations in 1999.\22\ Similarly, over the 
years, FinCEN has issued guidance and administrative rulings that 
provide examples of activities that do not meet the regulatory 
definition of a money transmitter, even though entities engaged in such 
activities may be involved in accepting and transmitting funds.\23\ 
Given the nature and scope of these important interpretative rulings, 
FinCEN has updated, streamlined, and clarified the MSB regulations in 
this rulemaking by incorporating and extending these interpretations in 
the regulatory revisions.
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    \22\ See FinCEN Ruling 2002-2 (Definition of Check Casher 
(Payday Lenders)) (Feb. 5, 2002) and FinCEN Guidance 2006-G005 
(Frequently Asked Questions--Businesses Cashing Their Own Checks) 
(March 31, 2006). For a discussion of this guidance, see Notice, 74 
FR at 22131.
    \23\ See FinCEN Rulings: 2003-8 (Definition of Money Transmitter 
(Merchant Payment Processor)) (Nov. 19, 2003); 2004-4 (Definition of 
Money Services Businesses (Debt Management Company)) (Nov. 24, 
2004); 2008-R005 (Whether Certain Reloadable Card Operations are 
Money Services Businesses) (March 10, 2008) (Merchants and ATMs 
associated with a network of banks were not deemed money 
transmitters); and 2008-R006 (Whether an Authorized Agent for the 
Receipt of Utility Payments is a Money Transmitter) (May 21, 2008). 
For a discussion of these rulings, see Notice, 74 FR at 22131-2.
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II. Notice of Proposed Rulemaking

    The final rule contained in this document is based on the Notice of 
Proposed Rulemaking ``Definitions and Other Regulations Relating to 
Money Services Businesses'' published in the Federal Register on May 
12, 2009 (the ``Notice'').\24\ With the intent of more clearly 
delineating the scope of entities regulated as MSBs, the Notice 
proposed a number of changes to the MSB definitions, in particular: (1) 
Emphasizing that the MSB definition is based on a person's activities; 
(2) ensuring that certain foreign-located persons engaged in MSB 
activities within the United States, such as having customers located 
in the United States, are subject to the BSA rules; (3) separating the 
provisions dealing with stored value from those dealing with issuers, 
sellers, and redeemers of traveler's checks and money orders; (4) 
deferring the proposal of a new definition of stored value to a 
separate rulemaking; and (5) combining the definitions in 31 CFR 
1010.100(ff)(3) (formerly 31 CFR 103.11(uu)(3)) and 31 CFR 
1010.100(ff)(4) (formerly 31 CFR 103.11(uu)(4)) into one paragraph 
dealing with both issuers and sellers of traveler's checks and money 
orders excluding stored value. The Notice also specifically requested 
comment on a number of aspects of the proposed changes, particularly 
with respect to a definition of the term ``funds,'' aggregating 
multiple MSB services for threshold purposes, foreign-located MSBs, 
thresholds, and stored value. The Notice also proposed a number of 
minor edits to make the regulations more readable.
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    \24\ See 74 FR 22129 (May 12, 2009).
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III. Comments on the Notice--Overview and General Issues

    The comment period for the Notice ended on September 9, 2009. 
FinCEN received a total of 25 comment letters.\25\ Of these, two were 
submitted by depository institutions, eight by industry associations, 
seven by various industry participants, two by government agencies, and 
six by individuals. Generally, commenters were supportive of the 
proposals to clarify the MSB definitions. FinCEN requested comment on a 
number of issues for informational purposes that are not addressed by 
this final rule, such as stored value-related issues, whether check 
cashers should have SAR filing requirements and whether additional 
recordkeeping requirements for MSBs should be implemented. Although 
these requests for comment were not tied to any specific regulatory 
changes FinCEN was proposing in the Notice, the information provided by 
commenters can be useful to FinCEN in formulating policy decisions in 
the future. FinCEN values and appreciates the comments received on 
these questions.
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    \25\ All comments to the Notice are available for public viewing 
at http://www.regulations.gov.
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Stored Value-Related Issues \26\
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    \26\ In June 2010 FinCEN proposed replacing the term ``stored 
value'' with ``prepaid access'' without intending to broaden or 
narrow the scope of the term, but instead to use terminology 
commonly used by the industry. See Notice of Proposed Rule Making, 
Amendment to the Bank Secrecy Act Regulations--Definitions and Other 
Regulations Relating to Prepaid Access, 75 FR 36589 (June 28, 2010). 
At the time the Notice was issued, FinCEN had not yet proposed 
changing the terminology. This final rule uses the term ``stored 
value.'' Any changes in defined terms will be addressed in a 
subsequent rulemaking regarding prepaid access.
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    Approximately half of the comments received in response to the 
Notice addressed stored value-related issues that responded to 
questions and requests for comment posed in the Notice. The questions 
were intended to elicit responses that would assist FinCEN's effort to 
regulate stored value.

[[Page 43587]]

    On May 22, 2009, shortly after the Notice was published, the Credit 
Card Accountability, Responsibility and Disclosure Act of 2009 
(``Credit CARD Act'') \27\ was signed into law. Section 503 of the 
Credit CARD Act requires the Secretary to ``issue regulations in final 
form implementing the Bank Secrecy Act, regarding the sale, issuance, 
redemption, or international transport of stored value, including 
stored value cards.'' The congressional mandate of Section 503 of the 
Credit CARD Act is broader in scope than the stored value-related 
questions posed in the Notice.
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    \27\ The Credit CARD Act, Public Law 111-24, codified at 5 
U.S.C. 57, Chapter 57; 11 U.S.C. 111; 15 U.S.C. 1601, 1602, 1632, 
1637, 1640, 1650, 1661, 1666, 1666b, 1666c, 1681b, 1681j, 1693, 41 
and 632; 20 U.S.C. 1001 and 1002; 31 U.S.C. 5316 (May 22, 2009).
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    In furtherance of that mandate, FinCEN has separately published a 
notice of proposed rulemaking specific to stored value, which FinCEN 
has proposed to rename ``prepaid access'' (the ``Prepaid Access 
NPRM'').\28\ FinCEN believes that to address stored value-related 
issues in this MSB rule could cause confusion among the public. 
Accordingly, FinCEN has decided to comprehensively address stored 
value-related issues in the pending Prepaid Access rulemaking, 
generally including those stored value-related issues raised in the 
Notice. The comments received in response to the Notice provided 
valuable insights and were considered in drafting the Prepaid Access 
NPRM.
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    \28\ See 75 FR 36589 (June 28, 2010).
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Definition of ``Money Transmitter''
    In the Notice, FinCEN proposed to revise several portions of the 
current definition of ``money transmitter'' to clarify which activities 
are covered by or excluded from the definition. Most commenters 
generally supported the proposed changes. All commenters supported 
excluding from the definition of ``money transmitter'' persons that 
have only a ``custodial interest'' in currency they are 
transporting.\29\ One commenter construed the definition of ``money 
transmitter'' to exclude the agents of a principal money transmitter. 
FinCEN wishes to clarify that any person that satisfies the definition 
of a ``money services business,'' including an agent, is an MSB. 
Whether it is the agent of another MSB is relevant only for 
registration purposes. Two commenters suggested additional exclusions 
to the definition of ``money transmitter'' for intermediaries and 
certain bill payment services. The suggestions regarding intermediaries 
and certain bill payment services are discussed further in the Section-
by-Section Analysis.
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    \29\ The ``custodial'' exclusion relates to a person engaged in 
physical transportation, such as an armored car. For a more 
comprehensive discussion, see Section IV.F. of this rule. See also 
Notice at 74 FR 22138.
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Definition of ``Currency Dealer or Exchanger''
    In the Notice, FinCEN proposed to make several changes to the 
definition of ``currency dealer or exchanger'' (to be called ``dealers 
in foreign exchange'' under this rulemaking) to more accurately reflect 
the actual underlying activity of the industry. Eight commenters 
addressed various issues related to this definition. Most commenters 
supported the proposed changes. As a result, the proposal was adopted 
without change. These comments are further discussed in the Section-by-
Section Analysis below.
    FinCEN received a comment letter from the Commodity Futures Trading 
Commission (``CFTC'') regarding certain amendments recently made to the 
Commodity Exchange Act (``CEA''), which, among other things, adds a new 
registration category for dealers in off-exchange retail foreign 
exchange known as ``retail foreign exchange dealers'' (``RFEDs'').\30\ 
MSBs, including dealers in foreign exchange, do not include persons 
registered with, and regulated or examined by, the CFTC. FinCEN is 
considering the CFTC's comments and has decided that it would not be 
appropriate to address the issue of RFEDs in this rulemaking.
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    \30\ See Food, Conservation, and Energy Act of 2008, Public Law 
No. 110-246, Sec. 13101, 122 Stat. 1651, 2189-94 (2008) (amending 
section 2(c)(2) of the CEA, 7 U.S.C. 2(c)(2)).
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IV. Section-by-Section Analysis

A. Refining the General Definition of ``Money Services Business'' Doing 
Business

    Prior to this rulemaking, the regulatory definition of MSB covered 
``[e]ach 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 (ff)(1) through (ff)(6) of this section.'' \31\ In the 
Notice, FinCEN proposed to amend 31 CFR 1010.100(ff) (formerly 31 CFR 
103.11(uu)) by removing the phrase ``doing business,'' and replacing it 
with the phrase ``engaged in activities.'' FinCEN proposed this 
amendment because the phrase ``doing business'' has been misunderstood 
as an implied reference to the status that an entity has taken on 
itself or been assigned, such as a business licensed by a state. Based 
on such a misunderstanding, some have wrongly concluded that an 
unlicensed business is not subject to regulation as an MSB, even if it 
is engaged in one or more of the activities listed in 31 CFR 
1010.100(ff)(1)-(5). Most of the comments received regarding the 
proposed change were supportive. However, although FinCEN emphasized in 
the Notice that the proposed change would not expand the definition of 
MSB beyond its present scope, two commenters expressed concerns about 
this proposed change.
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    \31\ 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)) (emphasis 
added).
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    One commenter argued that removing the phrase ``doing business'' 
from the regulations would cause the definition of MSB to include 
persons who were not in fact doing business as MSBs, and asserted that 
expanding the category to this extent would be beyond FinCEN's powers 
under the BSA, which specifically refers to several types of financial 
institutions as ``businesses'' in several places.\32\
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    \32\ 31 U.S.C. 5312(a)(2)(R), (T), (W), (Y), (Z); 31 U.S.C 
5330(d).
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    FinCEN will not remove the phrase ``doing business'' from the 
definition of MSB in this final rule. Instead, the definition will be 
rephrased to state that an MSB is ``[a] person wherever located doing 
business, whether or not on a regular basis or as an organized or 
licensed business concern, wholly or in substantial part within the 
United States, in one or more of the capacities listed in paragraphs 
(ff)(1) through (ff)(6) of this section.'' We moved the qualifying 
phrase ``whether or not on a regular basis or as an organized business 
concern'' from the end of the sentence to immediately follow ``doing 
business'' in an effort to emphasize our concern that ``doing 
business'' can be misinterpreted to refer to status, not activity. To 
that end, the words ``or licensed'' have been added before ``business 
concern'' to further clarify the issue.
    FinCEN wishes to emphasize that whether a person is subject to 
regulation as an MSB does not depend on factors such as whether the 
person is licensed as a business by any state; whether the person has 
employees; or whether the person is engaged in a for-profit venture. 
Although the final rule continues to use the phrase ``doing business,'' 
it is a person's activities, rather than formal business status, that 
would cause the person to be categorized as an MSB.
    Another commenter suggested that the change proposed by the Notice 
might expand the definition of MSB to

[[Page 43588]]

include, for example, an individual who cashed a check as an 
accommodation for a family member. Despite not moving forward with the 
change proposed in the Notice, FinCEN remains concerned that the 
definition might be misunderstood to include such an individual. In 
response to this concern, the final rule includes a provision that 
excludes ``a natural person who engages in an activity identified in 
paragraphs (ff)(1) through (ff)(5) of this section on an infrequent 
basis and not for gain or profit'' from the MSB definition. By using 
the phrase ``a natural person'' in the limitation, FinCEN excludes only 
individuals; not business entities, non-profits, or other legal persons 
from the MSB definition. By ``infrequent'' activities, FinCEN intends 
to limit the exclusion to activity that is rare.\33\ By ``gain or 
profit,'' FinCEN intends this exclusion not to be available to persons 
engaging in these activities for the purpose of monetary gain or other 
economic benefit, such as an exchange of valuable favors. This 
exclusion forestalls any interpretation of the definition of MSB to 
include persons solely providing accommodation services to family 
members, as in the commenter's hypothetical. Nevertheless, whether a 
person engages in MSB activities depends on all of the facts and 
circumstances of each case.
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    \33\ This limitation should be interpreted to mean activities 
that are not frequent as that term is used in FinCEN's Guidance On 
Interpreting ``Frequently'' Found In The Criteria For Exempting A 
``Non-Listed Business'' Under 31 CFR 103.22(d)(2)(vi)(B), (November 
2002), http://www.fincen.gov/statutes_regs/guidance/html/final_definition_of_frequent.html.
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Activity Threshold
    Currently, the MSB regulations apply to persons engaged in 
specified activities that exceed $1,000 for any person in any day 
(``activity threshold''). The activity threshold applies to all MSB 
categories \34\ except money transmitters, which do not have an 
activity threshold. FinCEN proposed no changes to the activity 
thresholds in this rulemaking. However, FinCEN sought comments from the 
public regarding whether possible adjustments to the activity threshold 
should be made in a future rulemaking. More than one-third of all 
comment letters received in response to the Notice expressed an opinion 
regarding the current activity thresholds. Several commenters supported 
the proposition that the threshold should be reviewed, but expressed no 
opinion as to whether it should be increased, decreased, eliminated, or 
maintained at current levels. One commenter supported the elimination 
of all thresholds to create uniformity among different types of MSBs, 
and argued that the thresholds are ineffective insofar as one can 
operate under those levels without decreasing the risk of money 
laundering. Another commenter supported raising the thresholds, and 
argued that the current levels place an undue burden on small 
businesses. Several commenters supported adjusting the thresholds to 
take into account disparate thresholds imposed by various state 
authorities, inflation, or the transaction volume of each individual 
MSB. Finally, several commenters supported maintaining the current 
thresholds.
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    \34\ FinCEN has proposed a modified application of the $1,000 
activity threshold with respect to prepaid access, such that 
providers of prepaid access clearly marked with a value not 
exceeding $1,000 would not be subject to regulation as an MSB. See 
Definitions and Other Regulations Relating to Prepaid Access, 75 FR 
36589 (June 28, 2010).
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    FinCEN also sought specific comments from the public regarding 
whether transactions involving multiple MSB services should be 
aggregated together for purposes of determining whether the activity 
threshold has been met. The comments received on this proposal stressed 
the logistical complications of compliance with an aggregation 
requirement on the part of retailers that sell multiple MSB products 
and act as agents for multiple MSBs. All comments received regarding 
this proposal were opposed to it.
    FinCEN will continue to study these issues and consider the need 
for a separate rulemaking to adjust the MSB activity thresholds.
Foreign-Located MSBs
    FinCEN proposed to amend 31 CFR 1010.100(ff) to provide that 
foreign-located persons engaging in MSB activities in the United States 
are subject to the BSA rules. Specifically, FinCEN proposed to revise 
31 CFR 1010.100(ff) so that an entity qualifies as an MSB based on its 
activity within the United States, not the physical presence of one or 
more of its agents, agencies, branches, or offices in the United 
States. This proposal arose out of the recognition that the Internet 
and other technological advances make it increasingly possible for 
persons to offer MSB services in the United States from foreign 
locations. FinCEN seeks to ensure that the BSA rules apply to all 
persons engaging in covered activities within the United States, 
regardless of each person's physical location. To permit foreign-
located persons to engage in MSB activities within the United States 
and not subject such persons to the BSA would be unfair to MSBs 
physically located in the United States and would also undermine 
FinCEN's efforts to protect the U.S. financial system from abuse.
    Of the seven comments received on the issue of extending the BSA 
regulations to cover foreign-located MSBs conducting activities in the 
United States, five commenters supported it, including two government 
and three industry commenters. The two commenters opposed were from 
industry.
    Two commenters argued that a foreign-located person's mere 
maintenance of a bank account in the United States should not cause 
that person to be defined as an MSB. FinCEN agrees with that 
position.\35\ Under the final rule, a foreign-located person will be 
subject to the BSA as an MSB to the extent that it does business in one 
or more of the capacities listed in 1010.100(ff)(1) through 
1010.100(ff)(5) wholly or in substantial part within the United 
States.\36\ Whether or not a foreign-located person's MSB activities 
occur within the United States depends on all of the facts and 
circumstances of each case, including whether persons in the United 
States are obtaining MSB services from the foreign-located person, such 
as sending money to or receiving money from third parties through the 
foreign-located person.
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    \35\ See FinCEN Ruling 2004-1 (Definition of Money Services 
Business) (Foreign-Located Currency Exchanger With U.S. Bank 
Account) (A foreign-located currency exchanger whose only presence 
in the United States was a bank account was not deemed an MSB when 
the currency exchange transactions occurred solely in a foreign 
country for foreign-located customers and the use of the U.S. bank 
account was limited to issuing and clearing dollar-denominated 
monetary instruments.) (March 29, 2004).
    \36\ For an expanded discussion of the nature of activities that 
will subject a foreign-located person to the BSA as an MSB, please 
refer to the Notice, 74 FR at 22133.
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    A commenter also noted that foreign banks, broker dealers, and 
possibly other financial institutions might be subject to the MSB 
regulations. FinCEN does not intend to include these institutions in 
the MSB definition. FinCEN, therefore, has expanded the limitations to 
the MSB definition to cover foreign banks, as well as other foreign 
financial agencies that engage in financial activities that, if 
conducted in the United States, would require the foreign financial 
agency to be registered with the Securities and Exchange Commission 
(``SEC'') or CFTC. These provisions parallel the existing limitations 
covering domestic banks and entities registered with the SEC or CFTC.
    Two commenters expressed general concerns regarding the 
practicality of

[[Page 43589]]

regulating foreign-located MSBs. Both commenters also argued that the 
proposed change could create a misperception that foreign-located MSBs 
are too risky for financial institutions to provide them with financial 
services. Consequently, foreign-located MSBs would find it increasingly 
difficult to open accounts with banks unwilling to assume such 
potential risks. Although FinCEN acknowledges that regulating foreign-
located MSBs may present challenges, FinCEN believes that there are 
meaningful benefits to be derived from such regulation.
    Under the final rule, foreign-located MSBs will have the same 
reporting and recordkeeping and other requirements as MSBs with a 
physical presence in the United States, with respect to their 
activities in the United States. Foreign-located MSBs will be subject 
to the same civil and criminal penalties as MSBs with a physical 
presence in the United States, with respect to their failure to comply 
with regulatory requirements.\37\ Foreign-located MSBs will also be 
required to designate a person who resides in the United States to 
function as an agent to accept service of legal process, including with 
respect to BSA compliance.
---------------------------------------------------------------------------

    \37\ See 31 CFR 1022.380(e) (formerly 31 CFR103.41(e)), 31 CFR 
1010.810-1010.820 (formerly 31 CFR 103.56-103.57), and 31 CFR 
1010.840 (formerly 31 CFR 103.59).
---------------------------------------------------------------------------

Limitations
    For clarity, FinCEN proposed to add 31 CFR 1010.100(ff)(8) to 
create a new section providing limitations to the definition of MSB. 
FinCEN proposed to move the first two limitations, excluding (1) Banks 
and (2) persons registered or required to register with, and 
functionally regulated or examined by, the SEC or the CFTC, from the 
definition of MSB at 31 CFR 1010.100(ff) for clarity. Also, as noted 
above, foreign banks and certain foreign financial agencies have been 
included in the limitations in the final rule to address issues raised 
by commenters with regard to foreign-located MSBs. The third 
limitation, as discussed above, clarifies the scope of the definition 
of MSB, excluding individuals engaging in infrequent activity as an 
accommodation. There were no comments on moving the first two 
limitations to a separate section. The addition of the third limitation 
regarding natural persons and the extension of the first two 
limitations to include foreign institutions, while not proposed, do not 
alter any obligations but merely clarify the scope of 31 CFR 
1010.100(ff).

B. Changes to the Definition of ``Currency Dealer or Exchanger''

    FinCEN proposed several changes to 31 CFR 1010.100(ff)(1) (formerly 
31 CFR 103.11(uu)(1)), which defines ``currency dealer or exchanger'' 
as a category of MSB. Comments regarding proposed changes, while noting 
a few concerns (discussed below), were largely supportive, and the 
final rule adopts all of the proposed changes.
    The final rule replaces the phrase ``currency dealer or exchanger'' 
with ``dealer in foreign exchange.'' Removal of the term ``currency'' 
from the category's name is designed to clarify that persons meet the 
definition by not only exchanging currency, but also by exchanging 
other monetary instruments, funds, or other instruments denominated in 
currency. Although the BSA uses the term ``currency exchange,'' FinCEN 
interprets this language as having been intended to capture the 
underlying activity involved in foreign exchange services, which 
includes the exchange of instruments other than currency. The proposed 
change is consistent with current industry practice, which commonly 
involves exchanging instruments other than currency.
    The final rule inserts the term ``foreign'' into the category's 
name to clarify FinCEN's longstanding policy that any exchange that 
occurs in the United States is covered by the definition, even if the 
exchange consists of currency, other monetary instruments, funds, or 
other instruments denominated exclusively in non-U.S. currencies. 
Therefore, if all other requirements are fulfilled, and a person 
exchanges currency, other monetary instruments, funds, or other 
instruments denominated in one non-U.S. currency for those in another 
non-U.S. currency, the person is a dealer in foreign exchange for BSA 
purposes. Though such transactions may not involve U.S. dollars, the 
potential use of a dealer in foreign exchange in this manner to launder 
money, finance terrorism, or carry out other illicit activity 
nevertheless would impact the U.S. financial system and should be 
subject to regulation. Failure to capture exchanges within the United 
States of two foreign currencies (or of payment instruments denominated 
in two foreign currencies) would leave a significant and unnecessary 
gap in the BSA rules. This change also underscores the international 
nature of money laundering and terrorist financing.
    By inserting the phrase ``currency, or other monetary instruments, 
funds or other instruments'' the final rule clarifies that dealing in 
foreign exchange is not limited to the physical exchange of the 
currency of one country for the currency of another country. This 
language sets forth the media of exchange that trigger the definition 
more clearly than in the previous version of the rule. FinCEN's current 
rules and existing body of administrative rulings establish that a 
person who converts funds denominated in the currency of one country 
into funds denominated in the currency of another country is an MSB by 
virtue of that activity.\38\ Additionally, the phrase ``other 
instruments'' is intended to capture those types of payment instruments 
that do not fall precisely into one of the other categories, but 
nevertheless are readily recognizable as payment instruments.
---------------------------------------------------------------------------

    \38\ See FinCEN Ruling 2008-R003 (Whether a Person That is 
Engaged in the Business of Foreign Exchange Risk Management is a 
Currency Dealer or Exchanger or Money Transmitter) (May 9, 2008); 
FinCEN Ruling 2008-R002 (Whether a Foreign Exchange Dealer is a 
Currency Dealer or Exchanger or Money Transmitter) (May 9, 2008); 
and 31 CFR 1022.410(b)(6) (formerly 31 CFR 103.37(b)(6)).
---------------------------------------------------------------------------

    One commenter expressed concern that the inclusion of ``other 
instruments denominated in currency'' in addition to ``currency'' would 
cover persons offering foreign exchange transactions that involve 
stored value or other products in a manner that would implicate a wide 
range of retailers and other entities not generally understood to be 
dealers in foreign exchange. FinCEN does not consider this to be the 
case however, because payment devices such as debit cards, credit 
cards, and stored value do not involve currency exchanges at a point of 
sale. The point of sale transaction, from the perspective of the buyer 
and the seller (including the U.S.-located merchant hypothesized by the 
commenter), is only denominated in U.S. dollars. Any exchange of 
currency involved in such a transaction occurs in the back office 
processing of the financial institution issuing the device. A 
merchant's acceptance of foreign issued stored value to purchase U.S. 
issued stored value or U.S. currency, other monetary instruments, 
funds, or other instruments does not make that merchant a dealer in 
foreign exchange. On the other hand, there are transactions involving 
stored value that FinCEN would deem foreign exchange, including 
scenarios where a merchant either accepts or pays out foreign currency 
in exchange for stored value. For example, a person is a dealer in 
foreign exchange if the person:

[[Page 43590]]

(1) Accepts foreign currency, or other monetary instruments, funds, or 
other instruments (other than stored value) denominated in foreign 
currency, and provides a stored value product in return; or (2) accepts 
stored value and provides in return foreign currency, or other monetary 
instruments, funds, or other instruments (other than stored value) 
denominated in foreign currency.
    The final rule includes the phrase ``of one or more other 
countries'' \39\ in the definition, underscoring FinCEN's policy that a 
person is not a dealer in foreign exchange based on exchanges that 
involve currency or instruments denominated exclusively in the currency 
of one country. Assuming all other conditions under the BSA rules are 
met, a dealer in foreign exchange is a person that converts the 
currency, other monetary instruments, funds, or other instruments 
denominated in one currency for the currency, other monetary 
instruments, funds, or other instruments denominated in a different 
currency.
---------------------------------------------------------------------------

    \39\ The addition of ``one or more other countries'' is intended 
to capture the fact that some foreign currencies are used by 
multiple countries. For instance, the Euro is used by member states 
of the European Union. Accordingly, a dealer in foreign exchange may 
accept funds of one or more other countries in exchange for funds of 
one or more other countries.
---------------------------------------------------------------------------

    FinCEN received one comment in support of this proposal, and two 
comments in opposition. One commenter argued that when a person accepts 
instruments denominated in the currency of one country in exchange for 
currency of the same country, where the currency is not U.S. dollars, 
the exchange may technically require an intermediate transaction 
involving U.S. dollars. FinCEN, however, is concerned with the customer 
transaction and what currency the customer begins with and ends with, 
not any exchanges or recording that take place in the back office of 
the merchant. The other commenter opposing the proposal argued that the 
activity of exchanging bills within the same currency should be covered 
under the MSB rules because certain criminals convert denominations of 
cash exclusively within the currency of one country. Both of these 
comments, however, in essence propose to include activities within the 
category that are not commonly understood to be ``foreign exchange.'' 
Therefore, FinCEN believes the proposed change better comports with the 
common understanding of the foreign exchange business.
    The final rule includes the phrase ``for any other person'' to 
explicitly reflect FinCEN's longstanding position that a person is not 
a dealer in foreign exchange to the extent the person exchanges their 
own money on their own behalf.\40\
---------------------------------------------------------------------------

    \40\ See, e.g., FinCEN Ruling 2003-9, (Definition of Money 
Services Business (Money Transmitter/Currency Dealer or Exchanger)) 
(October 20, 2003). See also, FinCEN Ruling 2004-3, (Definition of 
Money Services Business (Money Transmitter/Currency Dealer or 
Exchanger)) (Aug. 17, 2004).
---------------------------------------------------------------------------

    The final rule includes the phrase ``whether or not for same-day 
delivery'' to account for the potential time difference between the 
date on which the exchange rate is agreed and the date of the exchange. 
Common settlement terms in foreign exchange markets include: (1) Same-
day or cash--where the parties both agree to an exchange of currency 
and conclude the exchange on the same working day; (2) spot--where the 
parties agree to an exchange of currency on one date, with the exchange 
taking place two working days thereafter; (3) cash forward--where the 
parties agree to an exchange of currency on one date, with the exchange 
of currency deferred until an agreed-upon date in the future; and (4) 
future--where the parties agree to an exchange of currency on one date, 
with settlement to occur in an agreed upon delivery period in the 
future, typically by payment of an amount reflecting the change in the 
foreign currency rate between the time of the agreement and delivery. A 
contract for future delivery of currency may also be settled with the 
delivery of currency, resulting in the exchange of the currencies 
underlying the futures contract.
    One commenter expressed concern that this change will create 
confusion regarding the $1,000 threshold where the dealer in foreign 
exchange is instructed to make multiple disbursements of exchanged 
currency over time. The use of the phrase ``whether or not for same day 
delivery'' is intended to capture such activity and to make clear that 
the date of the payment by the customer to the dealer in foreign 
exchange, not the date of any subsequent disbursements, is the date 
relevant to the calculation of the $1,000 threshold.
    Persons registered with and functionally regulated or examined by 
the CFTC including retail foreign exchange dealers are excluded from 
the definition of dealer in foreign exchange. As noted above, FinCEN is 
consulting with the CFTC regarding retail foreign exchange dealers.\41\
---------------------------------------------------------------------------

    \41\ 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)).
---------------------------------------------------------------------------

C. Meaning of the Term ``Check Casher''

    FinCEN proposed to amend 31 CFR 1010.100(ff)(2) (formerly 31 CFR 
103.11(uu)(2)) to clarify the meaning of the term ``check cashing'' by 
splitting the existing regulatory definition into two paragraphs: one 
paragraph to define check cashing activity; another paragraph to 
exclude certain activity from that definition.
    In the Notice, FinCEN proposed several changes to the definition of 
``check casher'' to more accurately describe which activities are 
covered by or excluded from the definition. Nine commenters addressed 
various issues related to the definition of ``check casher.'' Most 
commenters generally supported the proposed changes. As a result, the 
final rule adopts most of them without change with one exception, 
related to stored value, discussed below regarding activities not 
subject to the ``check casher'' definition.
    ``In return'' was added to the definition to more accurately 
describe the activity that occurs when cashing a check or redeeming a 
monetary instrument. The Uniform Commercial Code references were added 
to provide a clear definition of ``check.'' A reference to the 
definition of ``monetary instruments'' was also provided. ``Other 
instruments'' is intended to capture those types of payment instruments 
that do not fall precisely into one of the other categories. The term 
``other instruments'' is meant to capture those instruments that are 
readily recognizable as payment instruments without capturing goods or 
services that may be purchased with a check or monetary instrument.
    The definition incorporates the redeeming of monetary instruments 
into the definition of ``check casher.'' Given its similarity to check 
cashing, it is unnecessary to treat this activity separately from check 
cashing.\42\ Accordingly, a person engaged in redeeming monetary 
instruments (including traveler's checks and money orders) is a check 
casher if it redeems checks for currency or a combination of currency 
and monetary or other instruments. This revision does not capture 
activity that is tantamount to merely exchanging one monetary 
instrument for another monetary or other instrument and accordingly 
requires currency to be included in the redeeming. All of the 
commenters that addressed this proposal were

[[Page 43591]]

supportive. As a result, the final rule adopts this proposal without 
change.
---------------------------------------------------------------------------

    \42\ FinCEN does not interpret ``redeem'' to include taking 
payment instruments or mechanisms in exchange for goods or services. 
See 1999 Rulemaking, 64 FR at 45441-45443.
---------------------------------------------------------------------------

    One commenter requested clarification regarding the cashing of 
checks or other instruments in exchange for both goods and services and 
currency. Entities that accept payment for goods or services with a 
check and return more than $1,000 in currency or a combination of 
currency and other monetary instruments fall under the definition of 
``check casher'' regardless of the value of the goods or services.\43\
---------------------------------------------------------------------------

    \43\ See Guidance--Definition of Check Casher and BSA 
Requirements (Jan. 2003), http://www.fincen.gov/statutes_regs/guidance/html/definition_of_check_casher.html.
---------------------------------------------------------------------------

    The revision also clarifies what activities are not subject to the 
``check casher'' definition. The definition, as proposed, exempted 
purchases of closed loop stored value with a check, monetary 
instrument, or other instrument. One commenter objected to this 
limitation, expressing concerns that it was too narrow and that sellers 
of open loop stored value in exchange for checks would be ``check 
cashers'' for purposes of this rule. As a result, this final rule 
exempts the purchase of any type of stored value with a check, monetary 
instrument, or other instrument from being an activity subject to the 
check casher definition. Stored value related issues generally will be 
dealt with in a separate rulemaking, as will be discussed 
subsequently.\44\
---------------------------------------------------------------------------

    \44\ See the discussion below under ``Meaning of the Term 
`Stored Value''' for a discussion of the relationship of this final 
rule to the recent Notice of Proposed Rulemaking ``Definitions and 
Other Regulations Relating to Prepaid Access,'' 75 FR 36589 (June 
28, 2010).
---------------------------------------------------------------------------

    The definition also exempts persons who cash checks for the 
verified maker of a check otherwise buying goods and services. One 
commenter was in favor of this proposal and one opposed. The commenter 
opposed to this proposal was concerned that retailers would not be able 
to verify the maker of a check. FinCEN does not believe that this will 
be a problem, however, because retailers can verify the identity of the 
maker of the check in any manner that comports with their internal 
policies. Retailers can verify the maker of a check by, for example, 
checking a driver's license or other form of identification at the time 
of purchase against the name of the maker of the check, already a 
common practice of some retailers who accept personal checks. The 
Notice asked for comment on other types of low risk check cashing that 
should be exempt, such as government or payroll checks. Several 
commenters agreed that cashing such low risk checks should be exempt, 
but two commenters disagreed, noting that fraud exists in such low risk 
checks as well and that such exemptions unnecessarily complicate due 
diligence. FinCEN may address other types of low risk check cashing in 
a future rulemaking after further study.
    Finally, under the previous regulations, redeemers of traveler's 
checks and money orders had SAR obligations while check cashers did 
not. As these two categories of MSB have been combined, we will seek 
comment in a future rulemaking on whether or not to require check 
cashers to report suspicious activity to FinCEN under the BSA. 
Commenters to this rulemaking were largely in favor of a SAR 
requirement for check cashers, though two commenters disagreed, noting 
the high number of reports that would be generated and the burden on 
check cashing businesses. Issuers of traveler's checks and money orders 
will continue to have SAR reporting requirements with respect to the 
instruments that they issue.

D. Meaning of the Term ``Issuer or Seller of Traveler's Checks or Money 
Orders''

    This rule combines prior sections 1010.100(ff)(3) (formerly 
103.11(uu)(3)), ``issuer of traveler's checks, money orders, or stored 
value,'' and 1010.100(ff)(4) (formerly 103.11(uu)(4)), ``seller or 
redeemer of traveler's checks, money orders, or stored value,'' into 
new section 1010.100(ff)(3), ``issuer or seller of traveler's checks or 
money orders.'' Issuance and sale of traveler's checks and money orders 
are similar activities in that they can be covered by a single 
definition. A new, separate category relating to stored value, renamed 
``Issuer, seller, or redeemer of stored value,'' replaces 
1010.100(ff)(4) and is discussed subsequently.\45\
---------------------------------------------------------------------------

    \45\ See the discussion below under ``Meaning of the Term 
`Stored Value''' for a discussion of the relationship of this final 
rule to the recent Notice of Proposed Rulemaking ``Definitions and 
Other Regulations Relating to Prepaid Access,'' 75 FR 36589 (June 
28, 2010).
---------------------------------------------------------------------------

    In the Notice, FinCEN proposed to clarify the definitions regarding 
activities related to traveler's checks and money orders by removing 
redundant language and specifying how to calculate the activity 
threshold for such activities. Five commenters addressed various issues 
related to the definition of ``issuer or seller of traveler's checks or 
money orders.''
    The rule eliminates the ``redeemer'' language that is contained in 
the previous definitions. Although the previous rules included those 
who ``redeem'' traveler's checks and money orders, traveler's checks 
typically are redeemed by their issuers, making a separate redemption 
category redundant in such circumstances. Moreover, redeeming a 
traveler's check or money order by a non-issuer has been incorporated 
into the definition of a check casher.\46\ All of the commenters who 
addressed this proposal were supportive. As a result, the final rule 
adopts this proposal without change.
---------------------------------------------------------------------------

    \46\ FinCEN has never held that a business that provides goods 
or services in exchange for payment in the form of money orders or 
traveler's checks is an MSB. See 1999 Rulemaking, 64 FR at 45447. 
Accordingly, only a business that redeems these instruments for 
currency, or exchanges them for a combination of currency and 
monetary or other instruments, is considered an MSB, specifically a 
check casher, under the rule.
---------------------------------------------------------------------------

    The rule defines an ``issuer'' by virtue of the amount at which its 
monetary instruments or traveler's checks are sold, as opposed to the 
amounts at which they are issued. For example, the amount of the sale 
includes the face value of the monetary instruments plus any fees. 
Because money orders are not issued in round dollar increments like 
traveler's checks, but are rather sold either directly by the issuer or 
by its agent to a customer who specifies the exact amount, a business 
must look at this activity to determine whether its transactions exceed 
the activity threshold per person per day. Similarly, although 
traveler's checks are usually issued in large round amounts (e.g., $20, 
$50, or $100), the definition is linked to the aggregate amount at 
which those checks are sold, either directly by the issuer or at the 
agent level, to a customer in a single day. All of the commenters who 
addressed this proposal were supportive, though one commenter argued 
that issuers and sellers should only be responsible for aggregation 
based on the amount for which the instrument is sold to the extent that 
they have actual knowledge that the transactions involve the same 
person and exceed the threshold. However, changing the requirement from 
the face value of the instrument to the amount for which the instrument 
is sold does not change the aggregation requirement. Businesses have 
the same aggregation requirements as under the prior rule, only the 
determination of the amount has changed. The final rule adopts this 
proposal without change.

E. Meaning of the Term ``Stored Value''

    Under the prior rules, FinCEN addressed traveler's checks, money 
orders, and stored value under two separate definitions of providers of 
those products: (1) Issuers and (2) sellers or redeemers. The Notice 
proposed to group providers of stored

[[Page 43592]]

value together, separately from issuers or sellers of traveler's checks 
and money orders. All of the commenters who addressed this proposal 
were supportive. The final rule adopts this proposal without change.
    Several commenters noted that stored value is empirically similar 
to activity engaged in by persons defined as ``money transmitters,'' 
but the mechanisms for directing that the money be transmitted are 
different. Most commenters on this issue recommended treating stored 
value as a separate category of MSB. FinCEN agrees, and is therefore 
treating stored value as a distinct MSB activity, keeping it separate 
from the category established for money transmitters, while at the same 
time acknowledging that stored value should have more comprehensive 
anti-money laundering regulation.
    In 1999, FinCEN issued a final rulemaking deferring certain 
requirements for the stored value industry based on the complexity of 
the industry and the desire to avoid unintended consequences with 
respect to an industry then in its infancy. In 2009, Congress passed 
the Credit CARD Act, which required FinCEN to issue regulations 
relating to stored value. On June 28, 2010, FinCEN issued Notice of 
Proposed Rule Making, Amendment to the Bank Secrecy Act Regulations--
Definitions and Other Regulations Relating to Prepaid Access.\47\ The 
proposed changes to stored value are generally not reflected in this 
rulemaking, but will be addressed in a separate Prepaid Access rule.
---------------------------------------------------------------------------

    \47\ See 75 FR 36589.
---------------------------------------------------------------------------

F. Meaning of the Term ``Money Transmitter''

    This rule revises the regulation interpreting 31 U.S.C. 
5312(a)(2)(R), which includes money transmitters within the definition 
of ``financial institution'' under the BSA. The prior regulation 
contained a facts and circumstances limitation that excluded from the 
``money transmitter'' definition persons that are engaged in the 
business of money transmission as an integral part of the execution and 
settlement of the transaction. The ``integral'' exception includes 
entities that could not engage in their businesses without engaging in 
the transmission of funds. This rule clarifies the language of these 
limitations.
    This rule's definition of ``money transmitter'' is ``a person who 
provides money transmission services.'' This language is consistent 
with existing language in the BSA.\48\ The definition removes the 
phrase ``engages as a business'' as FinCEN continues to regulate an MSB 
by its activity and the context in which the activity occurs and not by 
its status. The removal of ``engages as a business'' does not broaden 
the regulation beyond its present scope.\49\ The commenters were 
generally supportive regarding this change, though one commenter argued 
that because the statute used the phrase ``engages as a business'' the 
regulation also must use the same phrase. The change to the regulation, 
however, does not alter the scope or meaning of the rule; the change 
only clarifies the rule's application. As a result, it is unnecessary 
to replicate the phrase and the final rule adopts this proposal without 
change.
---------------------------------------------------------------------------

    \48\ 31 U.S.C. 5330 uses the language ``any business that 
provides * * * money transmitting or remittance services.''
    \49\ FinCEN notes that ``money services business'' is defined as 
``[a] person wherever located doing business. * * *'' (emphasis 
added). 31 CFR 1010.100(ff).
---------------------------------------------------------------------------

    The definition also removes the phrase ``whether or not licensed or 
required to be licensed.'' While this phrase reflects language in 31 
U.S.C. 5312, FinCEN finds the phrase to be unnecessary because it does 
not add substantive value to the meaning of money transmitter.
    The regulatory definition of ``money transmission services'' 
includes the phrase ``or other value that substitutes for currency'' to 
state that businesses that accept stored value or currency equivalents 
as a funding source and transmit that value are providing money 
transmission services. FinCEN has modified the final rule so that both 
references to ``value'' in the regulation are expressed as ``value that 
substitutes for currency'' to maintain consistency in the rule's 
language. The word ``such'' has also been removed from the final rule 
to eliminate the possibility of any misinterpretation that a person 
must receive and transmit the exact same currency, funds, or other 
value to be covered under the definition of ``money transmitter.''
    By including the transmission of value, the prior and current 
regulatory definitions of ``money transmitter'' are worded to include 
persons engaged in informal value transfer systems, including 
hawalas.\50\ Such activity is money transmission, and the persons 
engaged in that activity are money transmitters subject to the 
requirements of the BSA.\51\ To further emphasize the rule's 
applicability to these money transmitters, FinCEN has modified the 
final rule to include a specific reference to informal value transfer 
systems as a means of money transmission.
---------------------------------------------------------------------------

    \50\ ``An `informal value transfer system' refers to any system, 
mechanism, or network of people that receives money for the purpose 
of making the funds or an equivalent value payable to a third party 
in another geographic location, whether or not in the same form.'' 
FinCEN Advisory Issue 33 (Informal Value Transfer Systems) (March 
2003). ``Hawala'' is one name for a type of informal value transfer 
system that operates outside of, or parallel to, ``traditional'' 
banking or financial channels. See generally FinCEN Advisory FIN-
2010-A011 (Informal Value Transfer Systems) (September 2010).
    \51\ Id.
---------------------------------------------------------------------------

    The regulatory definition of ``money transmission services'' also 
adds the phrase ``to another location or person.'' Although this phrase 
is not in the statutory definition of money transmitting service, it is 
implicit in the statutory definition's use of the word 
``transmitting.'' Transactions involving the acceptance of currency 
from one person at one location and the return of that currency to that 
same person at the same location would not be considered a money 
transmission service. The addition of the phrase ``to another location 
or person,'' explicitly conveys this interpretation.
    One commenter suggested that the phrase ``the acceptance of 
currency * * * from one person AND the transmission * * * to another 
location or person,'' indicated that acceptance by the money 
transmitter of funds had to precede any transmission to satisfy the 
definition. If this were the case, however, it would be easy--
particularly in an electronic environment--to circumvent this 
definition by the simple expedient of transmitting funds a fraction of 
a second before accepting them. The activity of money transmitting, for 
the purposes of FinCEN regulations, involves both acceptance and 
transmission, but not necessarily in that order. FinCEN is concerned 
about the ability to circumvent regulation if it were to require that 
the acceptance of currency must always precede transmission. The final 
rule adopts the phrase without change.
    The phrase ``any means'' is defined in the prior rule to include 
transmission ``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.'' The final rule moves the phrase 
``any means'' to a different part of the definition only to increase 
reader comprehension, and the change in placement of the phrase has no 
substantive effect on the meaning of the definition. The definition of 
``any

[[Page 43593]]

means'' in the final rule also includes a specific reference to 
informal value transfer systems. One commenter suggested adding the 
phrase ``but is not limited to'' following ```Any means' includes.'' 
While FinCEN believes that this clarification is not technically 
necessary, as ``any means,'' by its own meaning, encompasses more than 
the listed examples in the regulation, we will adopt the change to 
avoid possible confusion.
    The prior regulations also include in the definition, ``(B) Any 
other person engaged as a business in the transfer of funds.'' \52\ 
This phrase was removed from the definition in the Notice. The final 
rule, however, includes this phrase to minimize any possible confusion 
regarding whether there has been a change to the scope of the 
definition of ``money transmitter.'' The scope of the definition of 
``money transmitter'' in this final rule is the same as that of the 
prior regulatory definition.
---------------------------------------------------------------------------

    \52\ 31 CFR 1010.100(ff)(5)(i)(b) (formerly 31 CFR 
103.11(uu)(5)(i)(b)).
---------------------------------------------------------------------------

    As mentioned above, the prior regulation contained limitations 
regarding the definition of a ``money transmitter.'' \53\ The Notice 
also contained additional limitations that incorporate existing 
interpretations of the prior limitation by adding explicit language 
reflecting policy developed through administrative ruling letters and 
guidance. The limitation language reads, ``whether a person is a money 
transmitter as described in this section is a matter of facts and 
circumstances. The term `money transmitter' shall not include a person 
that only * * *'' engages in the following activity:
---------------------------------------------------------------------------

    \53\ 31 CFR 1010.100(ff)(5)(ii) (formerly 31 CFR 
103.11(uu)(5)(ii)).
---------------------------------------------------------------------------

    ``(A) Provides the delivery, communication, or network access 
services used by a money transmitter to support money transmission 
services. * * *'' Institutions that are used by money transmitters 
solely for the purpose of providing a medium of communication or 
transportation of information between money services businesses and 
their agents, financial institutions, or service providers are not 
deemed ``money transmitters.'' No commenters addressed this issue, and 
the final rule adopts this proposal without change.
    ``(B) Acts as a payment processor to facilitate the purchase or 
payment of a bill for a good or service through a clearance and 
settlement system by agreement with the creditor or seller. * * *'' 
Although payment processors may provide a money transmission service, 
the service is ancillary to their primary business of coordinating 
payments either from a debtor to a creditor or, if operating at the 
point of sale, from a purchaser to a merchant.\54\ A payment processor 
could not provide the primary service of coordination without providing 
ancillary money transmission services, but because the money 
transmission services are ancillary, and because they are generally low 
risk, it is appropriate for entities engaged in this activity to be 
excluded from the definition. Note, however, that this limitation only 
applies to transmission services by payment processors on behalf of the 
creditor or seller and not the debtor or buyer. A contractual agreement 
for transmission services between the creditor or seller and the money 
transmitter is a relatively controlled flow of money that poses little 
money laundering risk, provided that the funds are transmitted only to 
the creditor or seller with whom the payment processor has contracted 
and not to another location or person. The final rule adopts this 
proposal with only a change of punctuation needed for clarity.
---------------------------------------------------------------------------

    \54\ FinCEN Ruling 2003-R008 (Definition of Money Transmitter) 
(Nov. 19, 2003).
---------------------------------------------------------------------------

    ``(C) Operates a clearance and settlement system or otherwise acts 
as an intermediary solely between BSA regulated institutions. This 
includes but would not be limited to the Fedwire system, electronic 
funds transfer networks, certain registered clearing agencies regulated 
by the SEC, and derivatives clearing organizations, or other 
clearinghouse arrangements established by a financial agency or 
institution. * * *'' Persons who solely provide a clearance and 
settlement system or act as intermediaries between BSA regulated 
institutions and do not provide other types of money transmission 
services are mere instrumentalities that the financial institutions use 
to process their transfers. Therefore, these instrumentalities, such as 
the credit card networks, are not included in the definition of ``money 
transmitter.'' The final rule adopts this proposal without change.
    ``(D) Physically transports currency, other monetary instruments, 
other commercial paper, or other value that substitutes for currency as 
a person engaged in such business from one person to the same person at 
another location or to an account belonging to the same person at a 
financial institution, provided that the person engaged in physical 
transportation has no more than a custodial interest in the currency, 
other monetary instruments, other commercial papers, or other value at 
any point during the transportation.''
    This limitation encompasses past armored car rulings. The final 
rule slightly modifies the proposed language to make this connection 
explicit, by including a specific reference to armored cars, and by 
limiting the applicability of the limitation to persons that, like the 
armored car companies that requested rulings from FinCEN, were 
primarily engaged in providing armored car services. FinCEN previously 
ruled that although armored car services may fall within the definition 
of a ``money transmitter,'' to the extent that they transport currency 
on behalf of BSA regulated institutions, they should not be treated as 
money transmitters.\55\ FinCEN additionally determined that an armored 
car is not a money transmitter when it moves currency on behalf of a 
private party to an account or another location of the same party 
without taking a financial stake in the transaction.\56\
---------------------------------------------------------------------------

    \55\ FinCEN Ruling 2004-R003 (Definition of Money Services 
Business) (Aug. 17, 2004). See also FinCEN 2003-R007 (Definition of 
Money Transmitter) (Oct. 28, 2003).
    \56\ Id. In such instance, the armored car is merely a conduit 
or vehicle and has no control over the financial transaction.
---------------------------------------------------------------------------

    To take advantage of this limitation, the person engaged in 
physical transportation cannot have more than a custodial interest in 
what is being moved at any point during the transportation.\57\ The 
exclusion does not apply to such a person if it deposits currency or 
monetary instruments that it is transporting into its own operating 
account at a bank, regardless of the identity of the ultimate recipient 
of the funds represented by the currency or monetary instruments.
---------------------------------------------------------------------------

    \57\ Our rulings referred to the lack of a ``stake in the 
transaction'' in establishing the standard for the armored car 
exclusion; we have clarified our wording to ``no more than a 
custodial interest'' to qualify for the exclusion.
---------------------------------------------------------------------------

    One commenter suggested adding ``a bailment'' as an example of ``no 
more than a custodial interest.'' FinCEN does not believe that it is 
necessary to add this example in the text of the regulation, but does 
agree that such a status may not confer more than a custodial interest. 
Another commenter suggested clarifying ``custodial interest'' by adding 
the phrase ``without beneficial ownership.'' While the addition of 
``without beneficial ownership'' might clarify some cases, FinCEN 
believes that it could lead to confusion given its meaning and use in 
other money laundering contexts. Our intent with ``custodial interest'' 
is to convey that such an entity has no economic stake (beyond payment 
for its

[[Page 43594]]

transportation services) in any transaction involving currency, value 
that substitutes for currency, or other monetary instruments being 
transported. Based on that interpretation of the phrase, FinCEN adopts 
the proposed language.
    This exclusion applies to transport initiated by any person other 
than certain BSA-regulated institutions. Specifically, when transport 
is initiated by a bank, a broker-dealer or other SEC-regulated 
financial institution, or a futures commission merchant or other CFTC-
regulated institution, a transport business such as an armored car is 
not a money transmitter, regardless of whether the transport is to 
another location or person.
    Except as indicated above, the final rule adopts this proposal 
without change.
    ``(E) Provides stored value.'' A person who provides stored value 
is also excluded from the definition of ``money transmitter,'' whether 
the stored value is open or closed loop. Furthermore, by ``provides'' 
FinCEN intends that both entities involved in the sale and management 
of stored value programs be excluded. For example, a department store 
that offers gift cards that only may be used at that department store, 
a convenience store that sells network branded cards that may be used 
anywhere like a credit card, or a program manager who organizes a 
stored value program and facilitates loading the stored value device 
are not subject to the MSB rules as money transmitters.
    FinCEN previously determined that a person solely issuing, selling, 
or redeeming closed loop stored value is not an ``issuer, seller or 
redeemer of stored value'' and was therefore not subject to BSA 
regulation as an MSB under that MSB category.\58\ This limited 
exclusion, however, did not imply that all persons who provided open 
loop stored value were money transmitters. In part, this is because a 
significant amount of the open loop stored value issued within the 
United States is issued by or through a depository institution, a 
category of financial institution that expressly is excluded from the 
definition of MSB by statute and regulation.\59\ The Notice proposed 
only excluding ``providers of closed loop stored value'' from the 
definition. In light of the Prepaid Access NPRM, which addresses stored 
value issues as a separate category of MSB, FinCEN is excluding stored 
value in any form from being considered a form of money transmission.
---------------------------------------------------------------------------

    \58\ See FinCEN Ruling 2003-R004 (Definition of Money 
Transmitter/Stored Value (Gift Certificates/Gift Cards)) (Aug. 15, 
2003) (FinCEN does not currently interpret the definition of stored 
value to include closed system products such as a mall-wide gift 
card program).
    \59\ See 31 U.S.C. 5330(d)(1)(C); 31 CFR 1010.100(ff) (formerly 
31 CFR 103.11(uu)).
---------------------------------------------------------------------------

    Many of the commenters to the Notice regarding stored value were in 
favor of treating open and closed loop stored value differently under 
the regulations. While FinCEN agrees that the two forms of stored value 
have different risks and vulnerabilities, we believe it is appropriate 
to exclude both forms from the definition of ``money transmission.'' 
These issues are further addressed by the Prepaid Access NPRM. 
Additionally, one commenter noted that the distinctions between open 
and closed loop stored value are being removed as some closed loop 
systems can now be international, involve multiple retailers, and be 
reloadable. The commenter argued that the distinction should be based 
on whether the stored value product has cash access or not. FinCEN 
agrees that cash access is one aspect of a stored value product that is 
significant in assessing the product's risk, along with reloadability, 
the breadth of retailer acceptance of the product, and whether the 
product can be used internationally. These issues were addressed in the 
Prepaid Access NPRM.\60\ The final rule adopts the above described 
expanded limitation to the definition of ``money transmitter.''
---------------------------------------------------------------------------

    \60\ See 75 FR 36589, 36599.
---------------------------------------------------------------------------

    ``(F) Accepts and transmits funds only integral to the sale of 
goods or the provision of services, other than money transmission 
services, by the person who is accepting and transmitting the funds.''
    Similar to circumstance (B), persons that sell goods or provide 
services other than money transmission services, and only transmit 
funds as an integral part of that sale of goods or provision of 
services, are not money transmitters. For example, brokering the sale 
of securities, commodity contracts, or similar instruments is not money 
transmission notwithstanding the fact that the person brokering the 
sale may move funds back and forth between the buyer and seller to 
effect the transaction. Similarly, this limitation would apply to a 
debt management company that made payments to creditors as the conduit 
for a negotiated schedule of payments from the debtor to its 
creditors.\61\ The person who is accepting and transmitting the funds 
is offering a service other than money transmission services which 
could not be provided without transmitting funds. No commenters 
addressed this issue and the final rule adopts this proposal without 
change.
---------------------------------------------------------------------------

    \61\ See FinCEN Ruling 2004-R004 (Definition of Money Services 
Business) (Nov. 24, 2004).
---------------------------------------------------------------------------

G. Registration and Service of Legal Process

    There currently is no provision within 31 CFR Chapter X that 
requires foreign-located MSBs to designate an agent to accept service 
of legal process in the United States. To enhance the ability of U.S. 
law enforcement and regulatory agencies to reach these MSB registrants, 
FinCEN proposed to add the following language to 31 CFR 1022.380 
(formerly 31 CFR 103.41): ``(a)(2) Foreign-located Money Services 
Business. Each foreign-located person engaged in activities in the 
United States as a money services business shall designate the name and 
address of a person who resides in the United States and is authorized, 
and has agreed, to be an agent to accept service of legal process with 
respect to compliance with this part and shall identify the address of 
the location within the United States for records pertaining to 
paragraph (b)(1)(iii) of this section.'' FinCEN received three 
supportive comments on this issue. Accordingly, FinCEN adopts the 
proposal without change, except insofar as the language was changed 
slightly to reflect the corresponding language in the definition of 
MSB, which was changed from the Notice, discussed above.
    Compliance with the designation of an agent for service of process 
provision, however, will require a change to FinCEN Form 107, 
Registration of Money Services Business. The current form does not 
contain a field in which such an agent can be designated. FinCEN will 
soon publish a new proposed form for notice and comment which makes a 
number of conforming changes to reflect this final rule, including 
adding a checkbox to indicate whether an MSB is foreign located and 
allowing for designation of an agent for service of process. 
Accordingly, this rule provides that compliance with 31 CFR 1022.380 is 
not required until six months after the date of publication of this 
final rule in the Federal Register, by which time the revised FinCEN 
Form 107, Registration of Money Services Business, will be final and 
available.

V. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et 
seq.), FinCEN certifies that these regulation revisions will not have a 
significant economic impact on a substantial number of small entities. 
Because most MSBs are small

[[Page 43595]]

entities, this rule will affect a substantial number of small entities. 
Although a substantial number of small entities are affected, the 
economic impact of this rulemaking is not significant. This rulemaking 
imposes no new recordkeeping or reporting requirements on MSBs, with 
the possible exception of foreign-located MSBs. In fact, some 
commenters noted that this rule will have a modest reduction in 
reporting burden.
    In large part, the rule updates the MSB definitions to integrate 
past guidance and rulings into the regulatory text. Incorporating 
existing interpretations into the regulatory text would have no impact 
on small entities that have been aware of these interpretations for 
years. Even if an MSB was unfamiliar with the existing guidance and 
rulings, these regulatory changes will not impose a significant 
economic impact. First, this final rule is limited to revising the MSB 
definitions to make clearer what activities subject a person to the BSA 
rules pertaining to MSBs. This change provides additional certainty 
without adding additional burden. Second, as previously stated, the 
rule clarifies that certain foreign-located MSBs with a U.S. presence, 
such as having U.S. customers or recipients, are subject to the BSA 
rules. Finally, the rule makes minimal nomenclature changes with 
respect to certain MSB categories to help clarify distinctions.
    In addition, the rulemaking combines all of stored value into one 
category, without substantively changing the existing definition. This 
structural change will not affect small entities. Accordingly, a 
regulatory flexibility analysis is not required.

VI. Paperwork Reduction Act Notices

    The collection of information contained in this final rule has been 
approved by the Office of Management and Budget in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control 
numbers 1506-0004, 1506-0013, 1506-0015, 1506-0020, 1506-0052. Based on 
comments received, the clarification of the definitions in 31 CFR 
1010.100(ff) (formerly 31 CFR 103.11(uu)) will likely reduce the 
reporting burden for most MSBs. Certain foreign-located MSBs conducting 
business in the United States may see an increase in their obligation 
to collect and report information. However, any such potential must be 
weighed against the reduction in burden to be achieved by clarifying 
the exceptions we have made explicit regarding the type of business 
activity that would make a business an MSB. With the exception of 
foreign-located MSBs, this rulemaking does not impose any new reporting 
or recordkeeping requirements. Instead, it merely clarifies the current 
scope of the existing MSB definitions and related rules. To the extent 
that we have eliminated any uncertainty or ambiguities with this rule 
and to the extent that we have narrowed the scope of businesses subject 
to reporting or recordkeeping requirements, we have not in the 
aggregate expanded, and may in fact have in the aggregate reduced, 
regulatory obligations.\62\
---------------------------------------------------------------------------

    \62\ This amendment to 31 CFR 1010.100 (formerly 31 CFR 103.11) 
and 31 CFR 1022.380 (formerly 31 CFR 103.41) makes explicit that 
certain foreign-located persons that conduct MSB operations in the 
United States must register with FinCEN as an MSB and will be 
subject to certain BSA recordkeeping and reporting requirements.
---------------------------------------------------------------------------

    Description of Affected Financial Institutions: Money Services 
Businesses as defined in 31 CFR 1010.100(ff) (formerly 31 CFR 
103.11(uu)).
    Estimated Number of Affected Financial Institutions: 42,000.
    Estimated Average Annual Burden Hours per Affected Financial 
Institution: The estimated average decrease in burden associated with 
the recordkeeping requirements in this final rule is one hour per 
affected financial institution.
    Estimated Total Annual Burden: Minus 42,000 hours from OMB control 
number 1506-0052.
    In the Notice, FinCEN invited comment on: Whether the proposed 
collection of information was necessary for the proper performance of 
FinCEN's mission; the accuracy of the estimated burden associated with 
the proposed collection of information; how the quality, utility, and 
clarity of the information to be collected may be enhanced; and how the 
burden of complying with the proposed collection of information may be 
minimized, including through the application of automated collection 
techniques or other forms of information technology.\63\ Commenters did 
not address these issues specifically. However, commenters stated that 
clarifying the definitions will reduce the reporting burden on MSBs.
---------------------------------------------------------------------------

    \63\ Amendment to Bank Secrecy Act Regulations; Definitions and 
Other Regulations Relating to Money Services Businesses, 74 FR 22129 
(May 12, 2009).
---------------------------------------------------------------------------

    Under the Paperwork Reduction Act, an agency may not conduct or 
sponsor a collection of information, and a person is not required to 
respond to a collection of information, unless it displays a valid OMB 
control number.

VII. Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget.

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 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 rulemaking provides the most cost-effective and least 
burdensome alternative to achieve the objectives of the rule.

List of Subjects in 31 CFR Parts 1010, 1021 and 1022

    Authority delegations (Government agencies), Banks and banking, 
Currency, Investigations, Law enforcement, Reporting and recordkeeping 
requirements.

Authority and Issuance

    For the reasons set forth above, FinCEN is amending 31 CFR Parts 
1010, 1021 and 1022 as follows:

PART 1010--GENERAL PROVISIONS

0
1. The authority citation for part 1010 continues to read as follows:

    Authority:  12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 
5316-5332; title

[[Page 43596]]

III, secs. 311, 312, 313, 314, 319, 326, 352, Pub. L. 107-56, 115 
Stat. 307.


0
2. Section 1010.100 is amended by:
0
a. Revising paragraph (ff) introductory text;
0
b. Revising paragraph (ff)(1);
0
c. Revising paragraph (ff)(2);
0
d. Revising paragraph (ff)(3);
0
e. Revising paragraph (ff)(4);
0
f. Revising paragraph (ff)(5);
0
g. Adding and reserving paragraph (ff)(7); and
0
h. Adding paragraph (ff)(8) as follows.


Sec.  1010.100  General definitions.

* * * * *
    (ff) Money services business. A person wherever located doing 
business, whether or not on a regular basis or as an organized or 
licensed business concern, wholly or in substantial part within the 
United States, in one or more of the capacities listed in paragraphs 
(ff)(1) through (ff)(6) of this section. This includes but is not 
limited to maintenance of any agent, agency, branch, or office within 
the United States.
    (1) Dealer in foreign exchange. A person that accepts the currency, 
or other monetary instruments, funds, or other instruments denominated 
in the currency, of one or more countries in exchange for the currency, 
or other monetary instruments, funds, or other instruments denominated 
in the currency, of one or more other countries in an amount greater 
than $1,000 for any other person on any day in one or more 
transactions, whether or not for same-day delivery.
    (2) Check casher--(i) In general. A person that accepts checks (as 
defined in the Uniform Commercial Code), or monetary instruments (as 
defined at Sec.  1010.100(dd)(1)(ii), (iii), (iv), and (v)) in return 
for currency or a combination of currency and other monetary 
instruments or other instruments, in an amount greater than $1,000 for 
any person on any day in one or more transactions.
    (ii) Facts and circumstances; Limitations. Whether a person is a 
check casher as described in this section is a matter of facts and 
circumstances. The term ``check casher'' shall not include:
    (A) A person that sells stored value in exchange for a check (as 
defined in the Uniform Commercial Code), monetary instrument or other 
instrument;
    (B) A person that solely accepts monetary instruments as payment 
for goods or services other than check cashing services;
    (C) A person that engages in check cashing for the verified maker 
of the check who is a customer otherwise buying goods and services;
    (D) A person that redeems its own checks; or
    (E) A person that only holds a customer's check as collateral for 
repayment by the customer of a loan.
    (3) Issuer or seller of traveler's checks or money orders. A person 
that
    (i) Issues traveler's checks or money orders that are sold in an 
amount greater than $1,000 to any person on any day in one or more 
transactions; or
    (ii) Sells traveler's checks or money orders in an amount greater 
than $1,000 to any person on any day in one or more transactions.
    (4) Issuer, seller, or redeemer of stored value. A person that
    (i) Issues stored value (other than a person that does not issue 
such stored value in an amount greater than $1,000 to any person on any 
day in one or more transactions); or
    (ii) Sells or redeems stored value (other than a person that does 
not sell or redeem stored value for an amount greater than $1,000 from 
any person on any day in one or more transactions).
    (5) Money transmitter--(i) In general.
    (A) A person that provides money transmission services. The term 
``money transmission services'' means the acceptance of currency, 
funds, or other value that substitutes for currency from one person and 
the transmission of currency, funds, or other value that substitutes 
for currency to another location or person by any means. ``Any means'' 
includes, but is not limited to, 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; an electronic funds transfer network; or an informal 
value transfer system; or
    (B) Any other person engaged in the transfer of funds.
    (ii) Facts and circumstances; Limitations. Whether a person is a 
money transmitter as described in this section is a matter of facts and 
circumstances. The term ``money transmitter'' shall not include a 
person that only:
    (A) Provides the delivery, communication, or network access 
services used by a money transmitter to support money transmission 
services;
    (B) Acts as a payment processor to facilitate the purchase of, or 
payment of a bill for, a good or service through a clearance and 
settlement system by agreement with the creditor or seller;
    (C) Operates a clearance and settlement system or otherwise acts as 
an intermediary solely between BSA regulated institutions. This 
includes but is not limited to the Fedwire system, electronic funds 
transfer networks, certain registered clearing agencies regulated by 
the Securities and Exchange Commission (``SEC''), and derivatives 
clearing organizations, or other clearinghouse arrangements established 
by a financial agency or institution;
    (D) Physically transports currency, other monetary instruments, 
other commercial paper, or other value that substitutes for currency as 
a person primarily engaged in such business, such as an armored car, 
from one person to the same person at another location or to an account 
belonging to the same person at a financial institution, provided that 
the person engaged in physical transportation has no more than a 
custodial interest in the currency, other monetary instruments, other 
commercial paper, or other value at any point during the 
transportation;
    (E) Provides stored value; or
    (F) Accepts and transmits funds only integral to the sale of goods 
or the provision of services, other than money transmission services, 
by the person who is accepting and transmitting the funds.
* * * * *
    (7) [Reserved].
    (8) Limitation. For the purposes of this section, the term ``money 
services business'' shall not include:
    (i) A bank or foreign bank;
    (ii) A person registered with, and functionally regulated or 
examined by, the SEC or the CFTC, or a foreign financial agency that 
engages in financial activities that, if conducted in the United 
States, would require the foreign financial agency to be registered 
with the SEC or CFTC; or
    (iii) A natural person who engages in an activity identified in 
paragraphs (ff)(1) through (ff)(5) of this section on an infrequent 
basis and not for gain or profit.


0
3. Section 1010.605 is amended by:
0
a. Revising paragraph (f)(1)(iv) introductory text;
0
b. Revising paragraph (f)(1)(iv)(A); and
0
c. Revising paragraph (f)(2), to read as follows.


Sec.  1010.605  Definitions.

* * * * *
    (f) * * *
    (1) * * *
    (iv) Any person organized under foreign law (other than a branch or 
office of such person in the United States) that is engaged in the 
business of, and is readily identifiable as:
    (A) A dealer in foreign exchange; or
* * * * *
    (2) For purposes of paragraph (f)(1)(iv) of this section, a person 
is not ``engaged

[[Page 43597]]

in the business'' of a dealer in foreign exchange or a money 
transmitter if such transactions are merely incidental to the person's 
business.
* * * * *

PART 1021--RULES FOR CASINOS AND CARD CLUBS

0
4. The authority citation for part 1021 continues to read as follows:

    Authority:  12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 
and 5316-5332; title III, sec. 314, Public 107-56, 115 Stat. 307.


0
5. Section 1021.311 is amended by revising paragraph (c)(1) to read as 
follows:


Sec.  1021.311  Filing obligations.

* * * * *
    (c) * * *
    (1) Transactions between a casino and a dealer in foreign exchange, 
or between a casino and a check casher, as those terms are defined in 
Sec.  1010.100(ff) of this Chapter, so long as such transactions are 
conducted pursuant to a contractual or other arrangement with a casino 
covering the financial services in paragraphs (a)(8), (b)(7), and 
(b)(8) of this section;
* * * * *

PART 1022--RULES FOR MONEY SERVICES BUSINESSES

0
6. The authority citation for part 1022 continues to read as follows:

    Authority:  12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 
and 5316-5332; title III, sec. 314, Public Law 107-56, 115 Stat. 
307.


0
7. Section 1022.210 is amended by revising the first sentence of 
paragraph (d)(1)(iii) to read as follows:


Sec.  1022.210  Anti-money laundering programs for money services 
businesses.

* * * * *
    (d) * * *
    (1) * * *
    (iii) A person that is a money services business solely because it 
is an agent for another money services business as set forth in Sec.  
1022.380(a)(3), and the money services business for which it serves as 
agent, may by agreement allocate between them responsibility for 
development of policies, procedures, and internal controls required by 
this paragraph (d)(1). * * *
* * * * *


0
8. Section 1022.380 is amended by:
0
a. Revising the first sentence of paragraph (a)(1);
0
b. Redesignating paragraphs (a)(2) and (a)(3) as paragraphs (a)(3) and 
(a)(4), respectively;
0
c. Adding a new paragraph (a)(2); and
0
d. Revising paragraph (b)(3), to read as follows.


Sec.  1022.380  Registration of money services businesses.

    (a) Registration requirement--(1) In general. Except as provided in 
paragraph (a)(3) 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 agents as required by 31 
U.S.C. 5330 and this section. * * *
    (2) Foreign-located Money Services Business. Each foreign-located 
person doing business, whether or not on a regular basis or as an 
organized or licensed business concern, in the United States as a money 
services business shall designate the name and address of a person who 
resides in the United States and is authorized, and has agreed, to be 
an agent to accept service of legal process with respect to compliance 
with this chapter, and shall identify the address of the location 
within the United States for records pertaining to paragraph 
(b)(1)(iii) of this section.
* * * * *
    (b) * * *
    (3) Due date. The registration form for the initial registration 
period must be filed on or before 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.
* * * * *


0
9. Section 1022.410 is amended by:
0
a. Revising the heading of the section;
0
b. Revising paragraph (a)(1) introductory text;
0
c. Revising paragraph (a)(2);
0
d. Revising paragraph (b) introductory text; and
0
e. Revising paragraph (b)(9), to read as follows.


Sec.  1022.410  Additional records to be made and retained by dealers 
in foreign exchange.

    (a)(1) After July 7, 1987, each dealer in foreign exchange shall 
secure and maintain a record of the taxpayer identification number of 
each person for whom a transaction account is opened or a line of 
credit is extended within 30 days after such account is opened or 
credit line extended. Where a person is a non-resident alien, the 
dealer in foreign exchange shall also record the person's passport 
number or a description of some other government document used to 
verify his identity. Where the account or credit line is in the names 
of two or more persons, the dealer in foreign exchange shall secure the 
taxpayer identification number of a person having a financial interest 
in the account or credit line. In the event that a dealer in foreign 
exchange has been unable to secure the identification required within 
the 30-day period specified, it shall nevertheless not be deemed to be 
in violation of this section if:
* * * * *
    (2) The 30-day period provided for in paragraph (a)(1) of this 
section shall be extended where the person opening the account or 
credit line has applied for a taxpayer identification or social 
security number on Form SS-4 or SS-5, until such time as the person 
maintaining the account or credit line has had a reasonable opportunity 
to secure such number and furnish it to the dealer in foreign exchange.
* * * * *
    (b) Each dealer in foreign exchange shall retain either the 
original or a microfilm or other copy or reproduction of each of the 
following:
* * * * *
    (9) A system of books and records that will enable the dealer in 
foreign exchange to prepare an accurate balance sheet and income 
statement.
* * * * *

    Dated: July 14, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2011-18309 Filed 7-20-11; 8:45 am]
BILLING CODE 4810-02-P