A Money Services Business (MSB) is a transaction that involves currency exchange and money transfer. Checks, foreign currency transactions, and money order transactions are examples of MSB, which can take numerous forms ranging from individuals to multinational enterprises, payment firms to investments. ‘Money Services Business’ refers to financial institutions that transport or convert money (MSB). MSBs are not banks, despite the fact that they provide some of the same services: because of the vast selection of cheaper, more diverse commercial product options available to anyone seeking to convert or transmit money, the term ‘MSB’ now encompasses a wide range of organisations, including those that provide crowdfunding, e-commerce, and cryptocurrency services.
Money services businesses account for a large part of an economy: in the U.S, for example, MSBs processed over $1 trillion in transactions in 2017. With that in mind, employees of financial institutions should aim to understand how MSBs work, and the relevant legislation which may apply when doing business with them.
Learn More: Understanding Money Laundering
What does a Money Services Business do?
Money services businesses range from small niche-market start-ups to large multinational corporations with worldwide reach. MSBs might range from traditional bureau de changes and post offices to the most cutting-edge smartphone payment app, due to the ever-changing commercial currency exchange and transfer scene.
Although the definition of a ‘MSB’ varies by geographical jurisdiction, it typically refers to any company that provides the following financial services:
- Bill payment services, such as gas and electricity, as well as tax payment services
- Money transmission (or representation of money)
- Customer-payable checks are cashed.
- Performing the functions of a bureau de change or a currency exchange office
- Using telecommunications, digital, and IT equipment to facilitate payments between a payer and a provider.
What compliance laws do MSBs have to follow?
Due to the high levels of criminal risk connected with currency conversion and money transfer, MSBs are expected to follow strict compliance rules applicable to the anti-money laundering and counter-terrorist legislation of the region in which they operate.
They are subject to the Bank Secrecy Act, much like other regulated financial organisations including MSBs, banks, and credit unions (BSA). The BSA requires money service organisations to comply with its registration, reporting, record-keeping, and anti-money laundering programme requirements.
MSBs are a catch-all phrase used by financial regulators who represent the bulk of the economy to refer to a variety of enterprises that deal with money conversion or transfer. A person must make more than $1,000 in one or more transactions on any given day to qualify as a money service. A non-bank financial institution or a non-deposit supplier of non-financial services is also known as a money service company compliance. Money service businesses are widely traded all over the world. In 2016, the Financial Action Task Force (FATF) updated its risk assessment of money service and remittance companies. A money transfer business is any financial service that distributes money to recipients in cash or in some other form. MSB can contain a good digital platform or a range of non-traditional remittance modes, according to the FATF.
What are the AML risks for MSBs?
Money laundering of money services makes it particularly vulnerable. They are a danger because of the nature of their dealings, which involve cash and one-off transactions that are frequently untraceable.
Anti-money laundering compliance is required of MSBs. The company’s Anti-Money Laundering and Terrorism Financing (AML / CFT) compliance programme should allow it to determine the transaction’s underlying purpose and verify specific facts about the persons involved. There are different ways for money services businesses to identify risky customers and transactions. High-risk nations, for example, adhere to the Financial Action Task Force (TAFT) guidelines, which establish worldwide AML/CFT compliance criteria. MBSs in high-risk nations should also conduct screening checks at Know Your Customer (KYC).
Another example is large transactions; MBSs should use greater caution in deals involving significant sums of money. As part of their suspicious transaction reporting obligations, MBSs must look after their customers in order to detect risks or report concerns to a regulatory body. Regulatory bodies will impose varying rules on MBSs based on their jurisdiction.
With AML solutions, Tookitaki assists money services businesses in detecting and preventing financial crimes. You can identify money laundering and increase your anti-money laundering compliance across all stages, from client interaction through customer transactions.
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