Money services businesses (MSBs) play a vital role in the financial landscape, providing essential services to individuals and businesses. But what exactly constitutes an MSB? This article delves into the definition of a money services business, outlining its key activities and regulatory considerations.
Defining Money Services Businesses
A money services business (MSB) encompasses any person or entity engaged in specific financial activities, regardless of regularity or business structure. These activities include:
- Currency Dealer or Exchanger: Buying and selling currency.
- Check Casher: Cashing checks for a fee.
- Issuer of Traveler’s Checks, Money Orders, or Stored Value: Providing these financial instruments.
- Seller or Redeemer of Traveler’s Checks, Money Orders, or Stored Value: Facilitating transactions involving these instruments.
- Money Transmitter: Transferring funds domestically or internationally.
- U.S. Postal Service: Engaging in certain financial services.
Activity Thresholds for MSB Classification
For most MSB activities, a threshold of more than $1,000 per person per day in one or more transactions applies. This means if a business engages in currency exchange, check cashing, or issuing/selling traveler’s checks, money orders, or stored value below this threshold, it might not be classified as an MSB for that specific activity. The threshold is assessed separately for each activity.
However, no such threshold exists for money transmitters. Any business engaged in transferring funds as a business is considered an MSB, regardless of the transaction volume.
Exclusions from the MSB Definition
While the MSB definition is broad, certain entities are excluded:
- Banks: Traditional banking institutions as defined in 31 CFR 1010.100(d) are not considered MSBs.
- Registered Entities: Businesses registered with and regulated by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) are also exempt.
Regulatory Definition and Financial Institution Status
The complete regulatory definition of “money services business” can be found in 31 CFR 1010.100(ff). It’s crucial to consult this regulation for a comprehensive understanding of MSB classification. Importantly, each MSB is also classified as a financial institution, as defined in 31 CFR 1010.100(t). This designation carries specific regulatory obligations and compliance requirements.
