[Federal Register Volume 64, Number 161 (Friday, August 20, 1999)]

[Rules and Regulations]

[Pages 45438-45453]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 99-21667]

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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 103

RIN 1506-AA09

Amendment to the Bank Secrecy Act Regulations--Definitions

Relating to, and Registration of, Money Services Businesses

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

ACTION: Final rule.

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SUMMARY: This document contains amendments to the regulations

implementing the statute generally referred to as the Bank Secrecy Act.

The amendments revise the definitions of certain non-bank financial

institutions for purposes of the Bank Secrecy Act and group the revised

definitions together in a separate category called ``money services

businesses.'' The amendments also require certain money services

businesses to register with the Department of the Treasury and to

maintain a current list of their agents for examination, on request, by

any appropriate law enforcement agency. The amendments regarding

registration and maintenance of agent lists by money services

businesses reflect changes to the law made by the Money Laundering

Suppression Act of 1994.

DATES: Effective Date: September 20, 1999.

   Applicability Date: Registration of money services businesses will

not be required prior to December 31, 2001, and maintenance of the

agent list will not be required prior to January 1, 2002. See

Sec. 103.41(f) of the final rule contained in this document.

FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director,

FinCEN, (703) 905-3930; Charles Klingman, Financial Institutions Policy

Specialist, FinCEN, (703) 905-3602; Stephen R. Kroll, Chief Counsel,

Cynthia L. Clark, Deputy Chief Counsel, and Albert R. Zarate and

Christine L. Schuetz, Attorney-Advisors, Office of Chief Counsel,

FinCEN, (703) 905-3590.

SUPPLEMENTARY INFORMATION:

I. Statutory Provisions--General

   The Bank Secrecy Act, Titles I and II of Public Law 91-508, as

amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31

U.S.C. 5311-5330, authorizes the Secretary of the Treasury, inter alia,

to issue regulations requiring financial institutions to keep records

and file reports that are determined to have a high degree of

usefulness in criminal, tax, and regulatory matters, and to implement

counter-money laundering programs and compliance procedures.

Regulations implementing Title II of the Bank Secrecy Act (codified at

31 U.S.C. 5311-5330) appear at 31 CFR Part 103. The authority of the

Secretary to administer Title II of the Bank Secrecy Act has been

delegated to the Director of FinCEN.

   31 U.S.C. 5312. The Bank Secrecy Act generally applies to financial

institutions, a term broadly defined in 31 U.S.C. 5312(a)(2)(A-Z). The

statutory definition includes, inter alia:

* * * * *

   (J) a currency exchange;

   (K) an issuer, redeemer, or cashier of travelers' checks,

checks, money orders, or similar instruments;

* * * * *

   (R) a licensed sender of money;

* * * * *

   (Y) any business or agency which engages in any activity which

the Secretary of the Treasury determines, by regulation, to be an

activity which is similar to, related to, or a substitute for any

activity in which any business described in this paragraph is

authorized to engage; or

   (Z) any other business designated by the Secretary whose cash

transactions have a high degree of usefulness in criminal, tax, or

regulatory matters.

   31 U.S.C. 5330. 31 U.S.C. 5330 was added to the Bank Secrecy Act by

section 408 of the Money Laundering Suppression Act of 1994 (the

``Money Laundering Suppression Act''), Title IV of the Riegle Community

Development and Regulatory Improvement Act of 1994, Public Law 103-325

(September 23, 1994). Under that section, any person who owns or

controls a money services business (which the statute refers to as a

``money transmitting business'' ¹), whether or not the

business is licensed as a money services business in any State, must

register the business with the Secretary of the Treasury. 31 U.S.C.

5330(a). (A money services business required to be registered under 31

U.S.C. 5330 remains subject to any State law requirements relating to

the operation of the business in the State. 31 U.S.C. 5330(a)(3).) The

form and manner of registration must be prescribed by regulations.

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   \1\ The statute uses the term ``money transmitting business'' to

name those businesses subject to registration. See 31 U.S.C.

5330(a)(1) and (d)(1). However, FinCEN believes that the statute's

use of this term to refer to all the types of businesses subject to

registration and its later use of the nearly identical term ``money

transmitting service'' to refer to a particular type of business

subject to registration, compare 31 U.S.C. 5330(d)(1)(A) with 31

U.S.C. 5330(d)(2), may lead to confusion. Therefore, FinCEN has

adopted the term ``money services business'' in place of the term

``money transmitting business'' throughout this document and under

the final rule.

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   The purpose of the registration requirement is to assist

supervisory and law enforcement agencies in the enforcement of

criminal, tax, and regulatory laws and to prevent money services

businesses from engaging in illegal activities. See, section 408(a), of

the Money Laundering Suppression Act. 31 U.S.C. 5311 (Note). In

requiring the registration of money services businesses, Congress found

that such businesses are largely unregulated and are frequently used in

sophisticated schemes to transfer large amounts of money that are the

proceeds of unlawful enterprises and to evade the

[[Page 45439]]

requirements of Title II of the Bank Secrecy Act, the Internal Revenue

Code of 1986, and other laws of the United States. Congress also found

that information on the identity of each money services business and

the names of the persons who own or control, or are officers or

employees of, a money services business would have a high degree of

usefulness in criminal, tax, or regulatory investigations and

proceedings. Id.

   The statute defines a ``money transmitting business'' ²

as any business, other than the United States Postal Service, that is

required to file reports under 31 U.S.C. 5313 and that provides check

cashing, currency exchange, or money transmitting or remittance

services,³, or issues or redeems money orders, traveler's

checks or other similar instruments. 31 U.S.C. 5330(d)(1). Depository

institutions (as defined in 31 U.S.C. 5313(g)), however, are not within

the classes of institutions required to register under the statute. 31

U.S.C. 5330(d)(1)(C).

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   \2\ Although the statutory term is ``money transmitting

business,'' FinCEN has decided to use the term ``money services

business'' in this rule. See footnote 1, supra.

   \3\ The term ``money transmitting service'' includes accepting

currency or funds denominated in the currency of any country and

transmitting the currency or funds, or the value of the currency or

funds, by any means through a financial agency or institution, a

Federal Reserve Bank or other facility of the Board of Governors of

the Federal Reserve System, or an electronic funds transfer network.

31 U.S.C. 5330(d)(2).

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   Section 5330 specifies the information that must be included as

part of the registration. 31 U.S.C. 5330(b). The required information

is--

   (1) The name and location of the business;

   (2) The name and address of each person who owns or controls the

business, is a director or officer of the business, or otherwise

participates in the conduct of the affairs of the business;

   (3) The name and address of any depository institution at which the

business maintains a transaction account (as defined in section

19(b)(1)(C) of the Federal Reserve Act);

   (4) An estimate of the volume of business in the coming year, which

shall be reported annually to the Secretary; and

   (5) Such other information as the Secretary of the Treasury may

require.

   Section 5330 contains two provisions directed explicitly at agents

of money services businesses. First, a money services business must

maintain a list containing the names and addresses of its agents and

such other information about the agents as the Secretary may require,

and the list must be made available on request to any appropriate law

enforcement agency. See 31 U.S.C. 5330(c)(1). Second, the Secretary is

to establish by regulation, on the basis of such criteria as the

Secretary deems appropriate, a threshold point for treating an agent of

a money services business as itself a money services business for

purposes of section 5330.

   Section 5330 prescribes a civil penalty for any person who fails to

comply with any requirement of 31 U.S.C. 5330 or the regulations

thereunder. The penalty is $5,000 for each violation; each day a

violation of 31 U.S.C. 5330 or the regulations thereunder continues

constitutes a separate violation. 31 U.S.C. 5330(e). A failure to

comply with 31 U.S.C. 5330 or the regulations under section 5330 may

also result in a criminal penalty under 18 U.S.C. 1960.

   Under section 5330, a money services business must be registered

not later than the end of the 180-day period beginning on the later of

the date of enactment of the Money Laundering Suppression Act of 1994

(September 23, 1994), and the date on which the business is

established. 31 U.S.C. 5330(a). On May 18, 1995, FinCEN issued a notice

explaining that regulations prescribing the form and manner of

registration would not require initial registration of money services

businesses before the 90th day following the effective date of the

implementing regulations. FinCEN Notice 95-1. The notice further

explained that no penalty or other compliance sanction would be imposed

under the provisions of the Bank Secrecy Act on account of the failure

of any money services business to register before the last date for

initial registration specified by the implementing regulation.

II. Money Services Businesses--General

   The rulemaking of which this final rule is a part deals with a

number of aspects of the application of the Bank Secrecy Act to money

services businesses. In conducting the rulemaking, FinCEN and the

Department of the Treasury are not only following the mandate of

Congress in the Money Laundering Suppression Act and the Annunzio-Wylie

Anti-Money Laundering Act, Title XV of the Housing and Community

Development Act of 1992, Public Law 102-550, but are more generally

responding to the need to update and more carefully tailor the

application of the Bank Secrecy Act to a major, if little understood,

part of the financial sector in the United States.⁴

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   \4\ The Congress has long-recognized the need generally to

address problems of abuse by money launderers of ``non-bank''

financial institutions. See, e.g., Permanent Subcommittee on

Investigations, Senate Comm. on Governmental Affairs, Current Trends

in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).

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   The term ``money services business'' refers to five distinctive

types of financial services providers: currency dealers or exchangers;

check cashers; issuers of traveler's checks, money orders, or stored

value; sellers or redeemers of traveler's checks, money orders, or

stored value; and money transmitters. (The five types of financial

services are complementary and are often provided together at a common

location.) These businesses are quite numerous; based on a study

performed for FinCEN by Coopers & Lybrand LLP (now a part of

PriceWaterhouse Coopers LLP), they comprise approximately 158,000

⁵ outlets or selling locations, and provide financial

services involving approximately $200 billion annually. To some

significant extent, the customer base for such businesses lies in that

part of the population that does not use traditional financial

institutions, primarily banks.

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   \5\ The number does not include Post Offices (which sell money

orders and other money services business financial products),

participants in stored value product trials, or sellers of various

stored value or smart cards in use in, e.g., public transportation

systems.

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   Money services businesses, like banks, can be large or small. It is

estimated that approximately eight business enterprises account for the

bulk of money services business financial products (that is, money

transmissions, money orders, traveler's checks, and check cashing and

currency exchange availability) sold within the United States, and also

account, through systems of agents, for the bulk of locations at which

these financial products are sold. Members of this first group include

large firms, with significant capitalization, that are publicly traded

on major securities exchanges.

   A far larger group of (on average) far smaller enterprises competes

with the eight largest firms in a highly bifurcated market for money

services. In some cases, these small enterprises are based in one

location with two to four employees. Moreover, the members of this

second group may provide both financial services and unrelated products

or services to the same sets of customers.⁶ Far less is

known about this

[[Page 45440]]

second tier of firms than about the major providers of money service

products.⁷

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   \6\ Members of the second group may include, for example, a

travel agency, courier service, convenience store, grocery or liquor

store.

   \7\ For example, according to the Coopers & Lybrand study, at

the time of that study, two money transmitters and two traveler's

check issuers made up approximately 97 per cent of their respective

known markets for non-bank money services. Three enterprises made up

approximately 88 per cent of the $100 billion in money orders sold

annually (through approximately 146,000 locations). The retail

foreign currency exchange sector was found by Coopers & Lybrand to

be somewhat less concentrated, with the top two non-bank market

participants accounting for 40 per cent of a known market that

accounts for $10 billion. Check cashing is the least concentrated of

the business sectors; the two largest non-bank check cashing

businesses make up approximately 20 per cent of the market, with a

large number of competitors.

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   Because money services businesses primarily serve individuals, they

have grown to provide a set of financial products, albeit in large part

for non-depository customers, that others look to banks to provide. For

example, a money services business customer who receives a paycheck can

take his or her check to a check casher to have it converted to cash.

He or she can then purchase money orders to pay his or her bills.

Finally, he or she may choose to send funds to relatives abroad, using

the services of a money transmitter.

III. Notice of Proposed Rulemaking

   On May 21, 1997, FinCEN published a notice of proposed rulemaking,

62 FR 27890--27900 (the ``Notice''), that described several proposed

changes to the Bank Secrecy Act rules of the Department of the

Treasury. First, the Notice proposed amendment of 31 CFR 103.11 to

revise definitions of certain non-bank financial services businesses

that had been treated as financial institutions for purposes of the

Bank Secrecy Act (or in the case of stored value, to add a definition

of a product whose issuers, sellers, and redeemers would be so treated)

and to group the revised and new definitions together under the heading

money services business; the businesses involved generally provide

check cashing, currency exchange, or money transmitting services, or

issue, sell, or redeem money orders, traveler's checks, or other

similar instruments. Second, the Notice proposed the addition to 31 CFR

part 103 of a set of new rules to require certain money services

businesses to register with the Department of the Treasury and, as part

of the registration requirement, to maintain a current list of their

agents in a central location for examination by appropriate law

enforcement agencies.⁸ The rules proposed in this portion of

the Notice were designed to implement the terms of 31 U.S.C. 5330.

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   \8\ The Notice proposed to place section 103.41 in a new subpart

D, Special Rules for Money Services Businesses, of Part 103, and to

redesignate existing subparts D through F as subparts E through G of

Part 103. The sections in redesignated subparts E through G were to

be redesignated to reflect the addition of new subpart D, and

corresponding changes were to be made to the references to such

redesignated sections in other portions of part 103.

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   The Notice was one of three notices of proposed rulemaking dealing

with money services businesses issued on May 21, 1997. The second

notice, 62 FR 27900--27909, proposed to amend the Bank Secrecy Act

rules to require money transmitters, and issuers, sellers, and

redeemers of money orders and traveler's checks, to report suspicious

transactions to the Department of the Treasury. The third notice, 62 FR

27909-27917, proposed to add a special currency transaction reporting

requirement--and related customer verification requirements--for money

transmitters involved in the transmission or other transfer of funds to

persons outside of the United States.

   The proposed rules were designed as part of a coordinated approach

to dealing with abuse of money services businesses by criminals and to

strengthening the application of general Bank Secrecy Act concepts to

this part of the nation's payment system. The decision to deal with

each rule separately, rather than finalizing the rules as a group,

reflects a number of practical and policy considerations, most

importantly the desire to allow time for the construction of the

necessary administrative and compliance structures by both the

Department of the Treasury and the money services businesses subject to

the rules. As indicated in greater detail below, following the Section-

by-Section Analysis, the Department of the Treasury is planning next to

issue the rule relating to the reporting of suspicious transactions,

and will be working with interested parties, independently of the

rulemaking itself, to advance the preparation of guidance about

particular patterns of suspicious activity of which money services

businesses must be aware.

   FinCEN held five public meetings during the summer of 1997, in

order to provide interested parties with the opportunity to present

their views about the potential effects of the three proposed

regulations, as well as to provide FinCEN with additional information

useful in preparing the final rule.⁹ Transcripts of these

meetings were then made available by FinCEN to requesting parties.

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   \9\ These public meetings were held in Vienna, Virginia, on July

22, 1997; New York, New York, on July 28, 1997; San Jose,

California, on August 1, 1997; Chicago, Illinois, on August 15,

1997; and Vienna, Virginia, on September 3, 1997.

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   The first of the five meetings, which was held in Vienna, Virginia,

dealt particularly with issues raised by the Notice, and the San Jose,

California, meeting dealt with the Notice's treatment of stored value.

The final meeting, also held in Vienna, Virginia, dealt with the

details of the various prototype compliance forms designed in

connection with the issuance of both the Notice and the two related

notices of proposed rulemaking and produced further discussion of the

money services business registration requirements.

   The comment period for the three notices of proposed rulemaking

originally ended on August 19, 1997, but it was extended to September

30, 1997, by a notice published on July 30, 1997 (62 FR 40779). FinCEN

received a total of 82 comment letters on the three notices of proposed

rulemaking; 60 comment letters dealt in whole or in part with issues

raised by the Notice. Of these, 17 were submitted by money services

businesses and their affiliates, 11 by banks or bank holding companies,

17 by financial institution trade associations, 5 by law firms, 5 by

agencies of the United States government, 2 by credit unions, and 3 by

private individuals.

IV. Summary of Comments and Revisions

A. Introduction

   The format of the final rule is generally consistent with the

Notice. The terms of the final rule, however, differ from the terms of

the Notice in the following significant respects:

Definitions

    The definition of money services business has been revised

to exclude from treatment as money services businesses for any purpose

banks and persons registered with, and regulated or examined by, the

Securities and Exchange Commission or the Commodity Futures Trading

Commission.

    The definition of money transmitter has been revised to

make plain that the activity that makes one a money transmitter must be

carried on as a business and to provide a general limitation to the

definition.

    The dollar thresholds for treatment of persons as money

services businesses on account of activities related to check cashing,

currency exchange, and money order, traveler's checks, and stored value

transactions has been raised from $500 to $1,000.

[[Page 45441]]

Registration

    Registration will not be required prior to December 31,

2001.

    Persons are excluded from the registration requirements to

the extent that they are issuers, sellers, or redeemers of stored value

products.¹⁰

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   \10\ Although the final rule expressly excludes redeemers of

stored value products, it should be noted that as with redeemers of

traveler's checks and money orders, FinCEN did not intend that the

Notice would apply to redeemers of stored value products to the

extent the products are taken in exchange for goods or general

services.

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    The requirement that agents whose gross transaction amount

exceeds $50,000 for any month must register has been eliminated;

registration by a person that is a money services business solely

because that person serves as an agent of another money services

business is indefinitely deferred.

    The agent list maintained by each money services business

that offers its products or services through agents must include an

indication of each month in the preceding 12 months in which the gross

transaction amount of an agent exceeded $100,000.

    A money services business is not required to keep records

required by section 103.41 in a centralized location so long as the

records are maintained in the United States and are readily available

at the request of FinCEN or any appropriate law enforcement agency; the

agent list, however, must be maintained in a central location in the

United States.

    Certain publicly traded businesses are not required to re-

register before the end of their renewal period when there is a 10-per

cent or more change in the ownership of such businesses.

    Agent lists must be updated annually, as of January 1 of

each year, rather than quarterly.

    For any agent that is an agent of the money services

business maintaining the list before the first day of the month

beginning after February 16, 2000, the agent list need not include

information about the year in which the agent first became an agent and

the agent's branches or subagents, but such information must be readily

available at the request of FinCEN or any appropriate law enforcement

agency.

    The effective date of the registration rule is September

20, 1999; the initial registration must be filed, by December 31, 2001,

and the initial agent list must be prepared by January 1, 2002.

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

Definitions

   Comments on the proposed changes to the Bank Secrecy Act

definitions relating to money services businesses concentrated on five

matters: (i) The relationship between the general Bank Secrecy Act

definitions and the language of 31 U.S.C. 5330(d)(1) and (2), defining

the businesses required to register as money services businesses; (ii)

whether the Notice properly invoked the authority required for a change

in the general Bank Secrecy Act definitions; (iii) the proposed

inclusion of businesses issuing, selling, or redeeming stored value

within the definition of ``financial institution'' for Bank Secrecy Act

purposes; (iv) the treatment under the Notice of financial businesses

subject to other federal regulatory systems; and (v) the application of

the money services business definition to various kinds of businesses

whose activities include the transmission of funds.¹¹

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   \11\ A related issue, whether and the extent to which it was

necessary to define the term ``agent'' as used both in the

definition of money services business and the registration

provisions, is discussed below.

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   1. Relationship between 31 U.S.C. 5312 and 31 U.S.C. 5330. Several

commenters argued that the Department of the Treasury mistakenly relied

upon the terms of 31 U.S.C. 5330, in seeking to revise the definition

of financial institution, as part of proposed 31 CFR 103.11(uu). These

commenters asserted that the Notice reflected a misunderstanding of the

relationship of the general Bank Secrecy Act definitional provision, 31

U.S.C. 5312, and the registration provisions. In their view, the

definition of the sorts of businesses required to be registered under

31 U.S.C. 5330 bore no relationship to the definition of the

``financial institutions'' covered by the remainder of the Bank Secrecy

Act, and the designation of registrable businesses in 31 U.S.C. 5330

provides no independent authority for making such businesses otherwise

subject to the Bank Secrecy Act. In support of this argument, the

commenters cited the language at the beginning of 31 U.S.C. 5330(d)

that the definitions of a money transmitting business and money

transmitting service apply ``[f]or purposes of this section.'' In

addition, they cited the requirement that the definition be limited

only to a business that ``is required to file reports under [31 U.S.C.]

section 5313.'' Thus, according to the commenters, the broad

definitional language in section 5330 cannot be used to define a

financial institution for a Bank Secrecy Act purpose other than

registration. This language further suggests, according to the

commenters, that the class of registrable money services businesses is

necessarily larger than the class of money services businesses that

were both registrable and otherwise subject to the Bank Secrecy Act's

reporting and recordkeeping rules.

   FinCEN believes that this argument misperceives both the

relationship of the registration provisions to the remainder of the

Bank Secrecy Act and the basis for the redefinition of money services

business proposed in the Notice. In enacting 31 U.S.C. 5330, Congress

made a direct finding that:

   Money transmitting businesses are subject to the recordkeeping

and reporting requirements of subchapter II of chapter 53 of title

31. * * * Section 408(a)(1)(A) of the Money Laundering Suppression

Act, 31 U.S.C. 5330 (Note).

Thus, Congress assumed that the sorts of businesses for which it was

requiring registration were precisely the sorts that would be (and

indeed that were already) subject to the Bank Secrecy Act's rules.

FinCEN therefore believes that Congress intended the definition of

money transmitting business to describe that class of enterprises that

were both financial institutions and required to register as money

transmitting services (or money services businesses) and that the

harmonized definitions could not be read to include any businesses that

were not otherwise eligible for treatment as financial institutions

under 31 U.S.C. 5311. The purpose of the changes to the definitions of

financial institution was, in accordance with this understanding of

Congress' intent and as stated in the Notice (62 FR 27890 and 27891),

to harmonize the two sets of rules by modernizing the definitions of

money transmitter and the other terms included as components in the new

money services business subcategory of the general definition of

``financial institution.''

   While the final definition of money transmitter tracks to some

extent the language used in 31 U.S.C. 5330, this in no way indicates a

reliance upon that section for authority, but instead indicates the

Department of the Treasury's desire to follow Congress' lead in

construing the term ``money transmitter'' in a way that reflects

technological advances, and the need to adapt the application of the

Bank Secrecy Act to the continually evolving nature of the industry

that comprehends ``financial institutions.''

   31 U.S.C. 5312 does provide such authority, there is every reason

for the definitions to be the same, and the language of the preamble to

the Notice, although not perhaps ideal, was sufficient to put the

public on notice

[[Page 45442]]

that both matters were at issue in the rulemaking.

   2. Authority for Revisions to the Definition of Financial

Institution. Commenters argued that the Notice gave insufficient

indication that a general exercise of Treasury's authority to define

financial institution for purposes of the Bank Secrecy Act in proposing

31 CFR 103.11(uu) was a subject of the rulemaking. They also argued

that no findings had been made, or suggested by the Notice, that the

changes were required to fight money laundering, and that there was no

basis in the record in any event for such findings.

   Combining the new registration requirements with the rewriting of

provisions of the financial institution definition in a single document

may have led to a misunderstanding of the reasons or basis for the

definitional changes. However, as indicated above, FinCEN believes that

the Notice made it clear that the revision of existing Bank Secrecy Act

definitions involved in the components of money services business was

proposed under the authority of 31 U.S.C. 5312 and for all purposes of

the Bank Secrecy Act. See 62 FR 27890, 27893, and 27897.

   In addition, the changes made to the definitions, with the

exception of the addition of ``stored value,'' discussed separately

below, merely clarified the scope of the coverage already inherent in

the existing language of the Bank Secrecy Act definitions. For example,

the definition of money transmitter contained in 31 CFR 103.11(n)(5)

(revised as of July 1, 1999), which section 103.11(uu)(5) of the final

rule will replace, stated that the term financial institution included:

   (5) A licensed transmitter of funds, or other person engaged in

the business of transmitting funds.

In adopting the revised definition, FinCEN is clarifying the meaning of

the term ``person engaged in the business of transmitting funds''

within the scope of the interpretive range of the existing language of

the rule; in that context, adoption of the language provided by the

Congress in the registration provisions is appropriate--if not

mandated--in light of the Congress' view that it was itself simply

explicating the scope of the existing regulatory language in requiring

registration of certain types of financial institutions. Treasury,

indeed, explicitly sought (and received) comments on whether ``it is

necessary or appropriate specifically to exclude certain activities

from the scope of registration of money services businesses (and

perhaps as well from the definition of money transmitter for purposes

of the Bank Secrecy Act regulations generally).'' 62 FR 27893.

   Other commenters argued that the definitional changes could not be

made in any event without specific findings showing that the changes

were required to fight money laundering. The purposes of the Bank

Secrecy Act are not so narrowly set. The statute is aimed at assuring

the maintenance of records constituting a financial trail, and the

reporting of certain transactions, in each case because the records and

reports ``have a high degree of usefulness in criminal, tax, or

regulatory investigations and proceedings.'' The Congressional findings

underlying the money services business registration rules adopt the

same objective.¹²

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   \12\ Information about the identity and ownership of money

services businesses ``would have a high degree of usefulness in

criminal, tax, or regulatory investigations or proceedings''; the

registration requirement will assist federal and other law

enforcement and supervisory authorities ``to effectively enforce the

criminal tax, [sic] and regulatory laws and prevent such money

services businesses from engaging in illegal activities.'' See

section 408(a)(1)(C) and (a)(2) of the Money Laundering Suppression

Act, 31 U.S.C. 5330 (Note).

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   3. Stored Value. The final rule continues to treat ``stored value''

as a financial instrument whose issuers and sellers are financial

institutions for purposes of the Bank Secrecy Act. However, the final

rule revises the Notice to exempt stored value issuers and sellers from

any money services business registration obligation. Under the

circumstances, the only immediate consequence of the rule will be to

make clear that currency transactions in excess of $10,000 by stored

value issuers and sellers require reporting under the Bank Secrecy Act

(rather than under section 6050I of the Internal Revenue Code) and that

businesses that participate as financial intermediaries in transactions

in which stored value is transferred electronically may, if otherwise

covered, be subject to the rules requiring the maintenance of records

for funds transfers of $3,000 or more.

   This limited treatment of stored value--which frees the industry

from registration requirements to which issuers and sellers of money

orders and traveler's checks will be subject--eliminates the ``chilling

effect'' on the technology industry to which commenters objected. The

limited step that is being taken should create certainty as to the

outlines of the Bank Secrecy Act's application to electronic funds

equivalents, while allowing further development prior to any rulemaking

that deals with more specific issues such as, for example, exemptions

for ``closed system'' or small denomination stored value devices or the

terms for possible tailored application of the registration or other

Bank Secrecy Act requirements to aspects of these emerging payment

products.

   4. Other Regulated Financial Businesses. A number of commenters

argued that the final rule should eliminate any possible application to

other classes of financial institutions, of rules aimed at money

services businesses; the argument was made by banks, securities

businesses subject to the jurisdiction of the Securities and Exchange

Commission, and futures commission merchants and other businesses

regulated by the Commodity Futures Trading Commission. (Banks and

brokers and dealers in securities are, of course, already subject to

the Bank Secrecy Act.)

   Congress characterized money services businesses as ``largely

unregulated,'' and FinCEN believes that Congress generally did not find

a need for the money services business regime under the Bank Secrecy

Act to extend to other federally regulated financial services

providers. Accordingly, under the final rule, depository institutions,

or securities brokers and dealer, futures commission merchants, or

other persons registered with and regulated or examined by, the

Securities and Exchange Commission or the Commodity Futures Trading

Commission are explicitly excluded from the money services business

definition. (For further discussion, see ``Section-by-Section

Analysis,'' below.)

   5. Application of Money Transmitter Definition to Other Businesses

Whose Activities Include Transmission of Funds. A number of commenters

sought clarification of the definition of money transmitter and

objected to any interpretation of the definition that would cause to be

classed as money transmitters particular businesses that simply

transmit funds as part of their other business activities. Commenters

raising such issues included, for example, operators of hedge funds and

public and private investment companies, representatives of financial

professionals, persons involved in real estate closing activities, bank

credit card systems, clearing corporations and associations, insurance

companies, and bank holding companies and subsidiaries. All of these

commenters sought assurance that their businesses could not fall within

the definition of money transmitter in the Notice.

   FinCEN agrees that the breadth of the definition of money

transmitter proposed in the Notice requires limitation to avoid both

unnecessary

[[Page 45443]]

burden and the extension of the Bank Secrecy Act to businesses whose

money transmission activities either do not involve significant

intermediation or are ancillary to the completion of other

transactions. But the varieties of methods by which funds are

transmitted and remitted by persons performing the function of

financial intermediary for that purpose, as well as the pace of

financial change, make any rigid definition both impossible and

inadvisable. Ultimately, the question of whether a particular person is

in the ``business'' of transmitting funds is a question of facts and

circumstances. The final rule attempts to respond to the comments, as

described in more detail below, by providing a limitation on the scope

of the definition to make clear that the acceptance and transmission of

funds as an integral part of the execution and settlement of a

transaction other than the funds transmission or transfer, for example,

a bona fide sale of securities or other property, will not cause a

person to be a money transmitter for purposes of the Bank Secrecy Act.

Registration

   Comments on the proposed registration requirements concentrated on

four matters: (i) exclusions from those requirements, (ii) agent

registration, (iii) registration procedures, and (iv) the content and

terms of the agent list.

   1. Exclusions from the Registration Requirements. The Notice

excluded the following persons from the registration requirements: the

United States Postal Service, depository institutions (as defined in 31

U.S.C. 5313(g)), the United States, a State or political subdivision of

a State, or a person registered with, and regulated or examined by, the

Securities and Exchange Commission or the Commodity Futures Trading

Commission. In response to a specific request for comment in the

preamble to the Notice, FinCEN received comments suggesting that other

persons should be excluded from the registration requirements.

   A number of commenters asked that issuers, sellers, or redeemers of

stored value products be so excluded. Those commenters were concerned

that the application of the registration requirements to issuers of

stored value products would cause the issuers to defer the development

of such products, or limit their design in commercially undesirable

ways simply in order to avoid the registration requirements. They were

also concerned that businesses that might otherwise wish to sell or

redeem stored value products would not do so if they might be required

to comply with the registration requirements, and that the manner in

which the new products would be marketed was not sufficiently settled

to permit the design of a reasonable registration system.

   Some commenters, however, agreed with the inclusion of businesses

engaged in issuing or selling stored value products within the scope of

the registration requirements. In general, these commenters believed it

was appropriate to subject non-bank providers of electronic payment

systems to Bank Secrecy Act requirements in order to treat purveyors of

competing financial services in the same manner.

   The final rule excludes issuers, sellers, or redeemers of stored

value products from the registration requirements. Although the final

rule expressly excludes redeemers of stored value products, it should

be noted that as with redeemers of traveler's checks and money orders,

FinCEN did not intend that the Notice would apply to redeemers of

stored value products to the extent the products are taken in exchange

for goods or general services.

   One commenter recommended that a money services business should not

be required to register if it would qualify as an exempt person under

the currency transaction reporting rules (31 CFR 103.22(d)). The final

rule does not adopt this suggestion. The suggestion would exclude from

registration, and consequently the agent list requirement, publicly

traded money services businesses that could qualify as exempt persons

under 31 CFR 103.22(d). Because these publicly traded money services

businesses operate through extensive networks of agents, which may not

be exempt from currency transaction reporting, the suggestion would

seriously limit information about agents of money services businesses.

   Several commenters were concerned that because some credit unions

provide money transmitting services to their customers, and some banks

might be acting as agents of a money services business, these

depository institutions could be subject to the registration rules in

Sec. 103.41. The commenters asked for clarification that banks and

credit unions are not required to be registered. Paragraph (a)(1) of

Sec. 103.41 of the Notice provided that the section did not apply to

depository institutions. The final rule goes further and expressly

excepts banks from the definition of money services business so that

the sentence in proposed paragraph (a)(1) relating to depository

institutions is no longer necessary. Under the final rule, all of

section 103.41 is inapplicable to depository institutions such as banks

and credit unions.

   Several commenters asked that non-bank affiliates and subsidiaries

of banks be excluded from the registration requirements.¹³

One commenter argued that because these companies are subject to

regulation by the Federal Reserve Board under the Bank Holding Company

Act, they should be excluded. Another commenter recommended excluding a

bank's non-bank affiliates and subsidiaries if they can demonstrate

that they have some type of Bank Secrecy Act compliance program in

place.

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   \13\ The preamble to the Notice clarified that if a bank has a

non-bank subsidiary or affiliate (e.g. a brother-sister subsidiary

owned by the bank's holding company) that itself engages in a money

services business (or a broker-dealer has a non-broker-dealer

affiliate that engages in a money services business), the affiliate

must register even though the bank (or broker-dealer) is not

required to register.

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   The Bank Secrecy Act rules, in general, do not adopt a consolidated

group approach to determining whether a company is or is not subject to

particular Bank Secrecy Act provisions. That is, the Bank Secrecy Act

rules do not look to the status of a parent company in a bank holding

company group for the purpose of determining what rules a company owned

by the parent must apply. For example, the Bank Secrecy Act regulations

do not generally treat non-bank subsidiaries as falling within the

definition of bank for purposes of the Bank Secrecy Act regulations.

Thus, the final rule continues to require non-bank affiliates and

subsidiaries to register and maintain a list of their agents.

   One commenter suggested that issuers of monetary instruments that

are sold only through banks should be excluded from the registration

requirements. In light of 31 CFR 103.29, which requires banks to keep

records of certain transactions, the commenter believed there would be

little informational value gained by requiring such issuers to

register. The final rule does not adopt this suggestion. The

registration requirements are designed to create a comprehensive

picture of money services businesses, which will provide law

enforcement agencies with information either currently not available or

not available in an accessible format. Excluding an issuer whose

products are sold exclusively through banks would eliminate information

about a segment of this industry.

   One commenter questioned the sufficiency of the rulemaking record

[[Page 45444]]

with respect to the registration of check cashers. According to the

commenter, nothing in the record, including the New York enforcement

operations and geographic targeting orders discussed in the May 21,

1997 notices of proposed rulemaking, supports the proposition that the

check cashing function has been or is being abused by the illicit drug

industry and criminal money laundering. The comment fails to take into

account the fact that Congress specifically included check cashers

among those businesses that are required to register with the

Department of the Treasury when it enacted 31 U.S.C. 5330.

   A commenter also recommended that check cashers should not be

required to register if they engage in other money services business

activities, for example, money transmitting, as an agent for others.

The commenter indicated that approximately 90 per cent of check cashers

are also agents for money transmitters and would be included on the

agent lists of the transmitters. The final rule does not adopt this

recommendation. Section 5330 does not contemplate that businesses that

conduct money services activities on their own behalf will be excluded

from registration simply because they also act as agents for other

money services businesses.

   One commenter suggested that, in the future, ``wire transmitters''

should be exempt from state registration requirements if the

transmitters comply with federal registration requirements. FinCEN is

interested in sharing information, and otherwise coordinating with,

state regulators to reduce administrative burden, but 31 U.S.C.

5330(a)(3) states that the federal registration requirements ``shall

not be construed as superseding any requirement of State law relating

to money [services] businesses operating in such State.''

   2. Agent Registration. Commenters raised a number of issues about

agent registration. Most of the comments sought a clarification of the

meaning of the term ``agent,'' sought an increase in the dollar amount

of the registration threshold, and questioned the need for agent

registration.

   The Notice did not contain a specific definition of the term

``agent'' for purposes of the money services business registration

rules, including the requirement that a list of agents be maintained by

each money services business as part of its registration requirement.

Instead the Notice spoke simply of ``agents.'' Commenters recommended

that the term ``agent'' be defined or that the term be replaced with a

more neutral term such as selling outlet. A number of commenters argued

that they did not believe that the terms of the contracts under which

they authorize persons to sell their money services products should be

read to treat those persons as agents.

   FinCEN believes that the relationship between issuers or service

providers and persons at the point of sale for particular products is

governed by the law of agency, and that in most (if not all) cases the

businesses at which these products or services are sold to the public

are non-servant agents of the issuers or service providers

¹⁴; thus, such businesses must be included on the agent

lists required to be maintained with respect to ``agents'' by 31 U.S.C.

5330(c)(1)(A). As indicated elsewhere in this preamble, Congress's use

of the term ``agent'' in 31 U.S.C. 5330 indicates a similar

understanding. Thus, it is expected that a money services business will

include on the agent list any businesses it authorizes to sell its

money services or money products.

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   \14\ Of course, in cases in which the products or services are

offered at branches of the issuers or providers, the individuals

involved are likely servants of the issuers or providers. (It has

long been clear that an ``agent'' of a financial institution is

itself a financial institution. See, 31 CFR 103.11(n).) FinCEN is

aware of few, if any, claims prior to the issuance of the Notice,

that the language in section 103.11(n) does not fully comprehend

businesses at which money services products were sold to the public.

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   The bulk of the comments on the registration requirement concerned

the registration of businesses whose status as money services

businesses derived solely from the fact that they sold products or

services issued or performed by others. The Notice had required

independent registration of such agent businesses if the volume of

money services products or services sold or performed through such

businesses was $50,000 in any month.

   Commenters questioned the level of the proposed registration

threshold. Most of these commenters believed that the threshold was too

low and recommended increasing the threshold to at least $100,000 a

month or preferably $500,000 a month (or $500,000 a month, annualized).

One commenter, however, recommended lowering the threshold to $25,000 a

month or even zero. Another commenter suggested that a threshold based

on an annual rather than a monthly amount would be less likely to cause

agents to meet the threshold because of seasonal or holiday sales. As

explained below, the final rule defers agent registration and thus

eliminates the registration threshold.

   Commenters argued that because a money services business includes

information about its agents on its agent list, no agent should be

required to register independently with Treasury. Instead, several of

these commenters argued, a money services business should register its

agents with Treasury, or as one commenter suggested, should simply

submit its agent lists to the Treasury Department.

   This registration requirement for agents reflected the terms of 31

U.S.C. 5330(c)(2). That paragraph states that:

   The Secretary of the Treasury shall prescribe regulations

establishing, on the basis of such criteria as the Secretary

determines to be appropriate, a threshold point for treating an

agent of a money transmitting business as a money transmitting

business for purposes of [section 5330].

The mandate to require registration of ``large agents'' was tempered

both by the grant to the Secretary of discretion to fix the criteria

defining registrable agents, and by a Congressional statement, in the

Conference Report accompanying the bill, that:

   The intent of the Conferees is to eliminate the need for all

agents of money transmitting businesses to register with the

Secretary. Such massive registration of thousands of agents would

only create another needless and costly administrative burden. This

legislation is designed to reduce unnecessary paperwork, not create

additional administrative burdens for law enforcement.

   The statute's agent registration requirement permits the

identification of significant points for the movement of funds into the

financial system, especially points at which one or more money services

business products or services are grouped together (as, for example, in

so-called ``giro houses''). But selecting criteria that will further

that objective in a cost efficient manner is difficult at best. Money

services business volume levels are unlikely to be uniform throughout

the nation, and even within particular areas variations can reflect the

size of an agent's other business rather than any absolute variation

from a theoretical norm.

   Rather than attempting to set criteria on the basis of imperfect

knowledge, the Department of the Treasury has decided to defer any

implementation of the agent registration provisions. Instead, money

services businesses are asked simply to note on the agent lists they

are required to maintain the months in the preceding twelve month

period in which every agent generated a volume of money services

business products of more than $100,000.

   Thus, under the final rule, a firm that is a money services

business solely

[[Page 45445]]

because it offers products or services on behalf of another money

services business need not now register with the Department of the

Treasury. It should be noted that a firm that both offers products or

services on behalf of another money services business and in addition

offers its own money services products or services (that is, exchanges

currency, cashes checks, or transmits funds for customers through

channels or mechanisms of its own) is required independently to

register under this rule (and, to the extent that it is an agent, must

be carried on the agent list of another money services business as

well).

   3. Registration Procedures. The Notice set forth the general

requirement to register a money services business and to report on the

registration form the information required by section 5330(b) and any

other information required by the form. In the preamble to the Notice,

FinCEN noted its understanding that information required to be included

on the registration form (and on the agent list) might include

privileged and confidential trade secrets, commercial, and financial

information. FinCEN also explained that while Congress affirmed in the

legislative history that confidential proprietary or trade secret

information provided by registrants may be disclosed only subject to

applicable law, Congress anticipated that certain information derived

from the registration material would be made available to the public,

but in a manner that balances the need to protect confidential business

information and the need for the public to have access to information

about businesses on which the public relies. H.R. Conf. Rep. No. 652,

103 Cong., 2d Sess. 192-93 (1994). FinCEN specifically invited comment

on how to make certain information provided by registrants available to

the public without revealing confidential business information.

   Several commenters expressed concerns about the need, for

competitive reasons, to avoid disclosure to the public of confidential

information on the registration form or agent list, particularly

information about business volume and the dollar size of transactions.

FinCEN will not release confidential information on the registration

form or agent list except as required or permitted by law. Moreover,

before FinCEN releases any other information that may be included on

the registration form or agent list, FinCEN will work with money

services businesses to establish specific procedures for release of

such information to the public. FinCEN anticipates that such procedures

would exclude the release of information (other than perhaps limited

statistical information) about agents of money services businesses.

   4. Agent List. Most of the commenters addressing the agent list

requirement recommended that a money services business be permitted to

provide less information than the Notice required. The commenters

argued that information not now on agent lists prepared for state

licensing purposes--especially information about the year in which an

agent first became an agent and about the agent's transaction

accounts--would be difficult to provide. The commenters indicated they

would either have to compile the rest of the information from other

records (which might not be in electronic format, or in a format,

electronic or otherwise, that was easily retrievable) or request the

necessary information from their agents. Some commenters suggested that

money services businesses be permitted to provide all the requested

information prospectively rather than trying to gather the information

for existing agents. Alternatively, commenters suggested that the

information required to be included on the agent list should be limited

to the same information that a money services business must provide

about its agents for state licensing purposes. Generally this

information includes only the name of the agent, the agent's locations,

and the services the agent provides.¹⁵

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   \15\ More than one commenter argued that requiring the

information requested on the agent list exceeds FinCEN's authority

under 31 U.S.C. 5330. According to the commenters, FinCEN may ask

for the agent's name and address only. Although section 5330

specifically requires the agent's name and address, the section does

not constrain FinCEN's authority in the manner suggested by the

commenters. Section 5330 authorizes FinCEN to request, in addition

to the name and address, ``such other information about such agents

as the Secretary may require.'' 31 U.S.C. 5330(c)(1)(A).

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   The final rule continues generally to require that the information

requested by the Notice must be included on the agent list. In response

to the comments, however, the final rule provides that with respect to

any agent that is an agent of the money services business maintaining

the list before the first day of the month beginning after February 16,

2000, the list need not include information about the year in which the

agent first became an agent and the agent's branches or subagents. Such

information must be made available, however, upon the request of FinCEN

or any other appropriate law enforcement agency (including, without

limitation, the examination function of the Internal Revenue Service in

its capacity as delegee of Bank Secrecy Act examination authority).

With respect to any agent that becomes an agent on or after the first

day of the month beginning after February 16, 2000, the list must

include all of the requested information, including the date the agent

first becomes an agent and the agent's branches or subagents.

   As indicated above, one additional element is added to the

information required to be included in the agent list. That element is

the notation of each month in the 12-month period immediately preceding

January 1, 2002, and each January 1 thereafter, in which the gross

transaction amount of the agent's sale of products or services offered

by the money services business maintaining the list exceeded $100,000.

Setting the requirement at $100,000 generally limits it to agents doing

more than $1 million of money services business transactions annually,

is an amount suggested in the comments as a threshold for agent

registration, and gives knowledge about agent volume which can be

evaluated to determine whether the implementation of agent registration

should continue to be deferred. That requirement is prospective, does

not take effect for at least 18 months, and involves a single

recordkeeping threshold. Moreover, the requirement involves only

information that must flow to each money services business in the

performance of its normal business functions, and the addition of this

element to the agent list derives from the elimination from the rule of

the most heavily criticized element of the original proposal, the agent

registration requirement.

V. Section-by-Section Analysis

A. 103.11--Meaning of Terms

1. 31 CFR 103.11(c)(7)--Definition of ``Bank''

   One component of the definition of ``bank'' in 31 CFR 103.11(c)

speaks of ``[a]ny other organization chartered under the banking laws

of any State and subject to the supervision of the bank supervisory

authorities of a State.'' In many states, various money services

businesses are licensed or examined by state banking departments. In

order to avoid any confusion about the interaction of the ``bank'' and

``money services business'' definitions, the phrase ``(except a money

services business)'' has been added to 31 CFR 103.11(c)(7).

2. 31 CFR 103.11(n)(3)--Definition of Financial Institution to Include

``Money Services Business''

   The final rule retains the addition of a new category called

``money services

[[Page 45446]]

business'' to the definition of financial institution. The new category

includes the financial institutions previously defined at 31 CFR

103.11(n)(3), (4), (5), and (10), and will permit these institutions to

be referred to, when necessary, by one convenient term. FinCEN believes

this restructuring of the definition of financial institution will

clarify, and facilitate flexibility in the administration of, the Bank

Secrecy Act regulations. (As a result of this restructuring, 31 CFR

103.11(n)(4), (5), and (10) will be deleted, and 31 CFR 103.11(n)(6),

(7), (8) and (9) will be redesignated as 31 CFR 103.11(n)(4), (5), (6)

and (7)).

3. 31 CFR 103.11(uu)--Definition of Money Services Business

   This section defines money services business. The term includes

each agent, agency, branch, or office within the United States of any

person doing business, whether or not on a regular basis or as an

organized business concern, in one or more of the capacities listed in

(1)-(6) below. (It should be noted that only one registration form per

money services business is required.)

   Regulated Businesses. The definition of ``money services business''

excludes persons registered with, and regulated or examined by, the

Securities and Exchange Commission or the Commodity Futures Trading

Commission. This provision excludes from the new regulatory structure

for money services businesses the financial services businesses

regulated by those agencies. The exclusion from the definition does not

apply to issuers whose securities offerings are registered with the SEC

under the Securities Act of 1933 or companies whose securities are

registered with the Commission under the Securities Exchange Act of

1934. The companies themselves are not registered with the SEC, and

these entities are not intended to be excluded from the rule's

definition of money services businesses because the Commission neither

regulates nor examines the business activities of those companies.

Instead, it establishes, by regulation, disclosure, accounting, and

other related standards for them. Accordingly, businesses that engage

in the activities described in 31 CFR 103.11(uu) are not excluded from

the definition merely because their shares are publicly held and

registered with the SEC.

   Several commenters asked that any exemption for depository

institutions or other regulated businesses be extended to holding

companies or subsidiaries of those businesses--for example to bank

holding companies or bank operating subsidiaries. As explained in

greater detail at ``Exclusion from the Registration Requirement''

above, the Bank Secrecy Act rules at present operate on an individual

entity rather than a consolidated group basis; so long as that is so,

each corporation in a controlled group must be analyzed separately to

determine its characterization under the Bank Secrecy Act and its

rules.

   Thresholds. The Notice contained a threshold of $500 for any person

any day at or below which a business otherwise included within the

definition of a currency dealer or exchanger, a check casher, or an

issuer, seller, or redeemer of money orders, traveler's checks or

stored value would not be a money services business. In the final rule

that threshold has been raised in each case to $1,000 for any person

any day in one or more transactions.

   The addition of explicit floors in the definitions relating to

currency exchange and check cashing businesses is an attempt to

eliminate from Bank Secrecy Act treatment those businesses, such as

grocery stores and hotels, that cash checks or exchange currency as an

accommodation to customers who are otherwise purchasing goods,

services, or lodging from the businesses involved. (Of course, currency

exchange and check cashing businesses that exceed the threshold become

subject to the general Bank Secrecy Act reporting and recordkeeping

requirements if the amounts involved are sufficiently high to implicate

particular reporting or recordkeeping thresholds, for example, the

$10,000 threshold for currency transaction reporting.)

   In determining whether the $1,000 definitional floor is met in the

case of a particular definition, different money services provided by

the same business are not aggregated. Thus, for example, a hotel that

in fact limits its check cashing services to $650 for a customer on any

day and in fact limits its currency exchange services to $600 for a

customer on any day does not meet the $1,000 definitional floor for

check cashers or for currency exchangers.

   (1) Currency dealer or exchanger. The definition of currency dealer

or exchanger is unchanged, other than for the increase of the $500

threshold to $1,000. The Notice invited comment on whether the old

definition of currency dealer or exchanger appearing at 31 CFR

103.11(i) was still necessary in light of the carve out of banks from

the recordkeeping requirements of 31 CFR 103.37. In response to

comments, that definition is removed from 31 CFR 103.11(i), but the

language of the recordkeeping rules of 31 CFR 103.37 is being amended

specifically to exclude banks that offer services in dealing or

exchanging currency to their customers as an adjunct to their regular

services.

   (2) Check casher. The definition of check casher is also unchanged,

other than for the increase of the $500 threshold to $1,000. Several

commenters suggested that the threshold should be lowered rather than

raised; however, the registration of businesses that only cash checks,

especially those that do so as an accommodation for customers and then

in an amount of $1,000 or less per day, is not necessary at this time

to accomplish the Congressional intent behind section 5330.

   (3) Issuer of traveler's checks, money orders, or stored value. The

definition of issuer of traveler's checks or money orders or stored

value is also unchanged other than for the increase of the $500

threshold to $1,000.¹⁶

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   \16\ The definition eliminates the phrase ``similar

instruments'' in response to comments that said the phrase was too

vague. The phrase has also been eliminated from the definition of

seller or redeemers.

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   (4) Seller or redeemer of traveler's checks, money orders, or

stored value. The definition of seller or redeemer of traveler's checks

or money orders or stored value is also unchanged other than for the

increase of the $500 threshold to $1,000.

   The $1,000 floor in 31 CFR 103.11(uu)(4) replaces the definitional

floor (of $150,000 sold in instruments per 30-day period) for selling

agents in 31 CFR 103.11(n)(4). The $150,000 limitation produces a great

deal of unnecessary complexity (dealing with the movement of particular

businesses into or out of the scope of the Bank Secrecy Act) and does

not, in FinCEN's view, any longer provide a meaningful threshold for

distinguishing between businesses that ought to, or that need not,

incorporate appropriate Bank Secrecy Act rules into their operations

(or the operations they undertake on behalf of their principals).

Moreover, the operation of the $150,000 limitation would exclude from

Bank Secrecy Act treatment particular transactions (for example

purchases of money orders of more than $3,000 under the customer

verification and recordkeeping rules of 31 CFR 103.29, or transactions

in excess of $10,000 under the currency transaction reporting rules of

31 CFR 103.22) that ought not be so excluded, regardless of the overall

volume of sales of a particular business.

   The definition in 31 CFR 103.11(uu)(4) extends to ``redeemers'' of

money orders and traveler's checks only insofar as the instruments

involved are

[[Page 45447]]

redeemed for monetary value--that is, for currency or monetary or other

negotiable or other instruments. The taking of the instruments in

exchange for goods or general services is not a redemption for purposes

of these rules. (See, however, 26 CFR 1.6050I-1(c)(1)(ii)(B) for

situations in which certain traveler's checks or money orders (among

other instruments) may be treated as currency, if taken in exchange for

certain goods or services, for purposes of the requirement that

businesses not subject to the rules in 31 CFR part 103 report

transactions in currency in excess of $10,000.)

   (5) Money transmitter. The definition of money transmitter

continues to reflect the determination that the definitions of that

term for purposes of the general Bank Secrecy Act rules and the

registration rules should be the same. As noted above, a limitation on

the definition has been added to clarify insofar as possible the reach

of the definition, when it is combined with the general limitation on

the scope of money services business.¹⁷ Particular classes

or subclasses of money transmitters can be excluded from the operation

of the definition for particular substantive rules (as for example the

proposed rule relating to the reporting of suspicious activities by

money transmitters excluded from its coverage sellers or transmitters

of stored value or other advanced electronic payment system products).

---------------------------------------------------------------------------

   \17\ The term ``money transmitter'' in 31 CFR 103.11(uu)(5) is

not necessarily synonymous with the term ``transmittor's financial

institution'' in existing 31 CFR 103.11(mm). The term

``transmittor's financial institution'' in existing 31 CFR

103.11(mm) was designed with a narrower purpose in mind--''to

preserve as much uniformity as possible'' between the special rules

for recordkeeping for wire transfers and the language of Article 4A

of the Uniform Commercial Code. See 60 FR 220 (January 3, 1995).

---------------------------------------------------------------------------

   (6) United States Postal Service. The definition of United States

Postal Service has not been changed. Thus, unlike the prior regulation,

which treated the United States Postal Service as a financial

institution only with respect to the sale of money orders, the final

rule treats the Postal Service as a financial institution with respect

to its provision of any money services products. The Postal Service, in

its comments, requested clarification of the status of an

``international postal money order'' under the rules. FinCEN believes

that that topic is not appropriate for treatment in a general

rule.¹⁸

---------------------------------------------------------------------------

   \18\ This comment, like a number of other comments, concerns the

application of these rules in specific situations, for example,

armored car companies. FinCEN does not believe it is appropriate to

resolve those fact specific situations in the context of a general

rulemaking, but is willing to consider them in the context of

specific, fact based inquiries.

---------------------------------------------------------------------------

4. 31 CFR 103.11(vv)--Definition of Stored Value

   The definition of stored value is unchanged. Given the

determination to exclude stored value from the registration

requirements, FinCEN does not believe that it is necessary now to

exclude particular ``closed systems'' from the limited application of

the Bank Secrecy Act to such instruments, or to issue a threshold

exclusion based upon the maximum value capable of storage on particular

media. It agrees that consideration of both such steps would be

appropriate if the treatment of stored value under the Bank Secrecy Act

were to be expanded at a future date.

B. 103.41--Registration of Money Services Businesses

1. 31 CFR 103.41(a)(1)--Registration Requirement; In General

   The final rule continues to provide that a money services business

(whether or not licensed as a money services business by any State)

must register with the Department of the Treasury and, as part of that

registration, must maintain a list of its agents. The final rule

expressly excludes from the registration and list requirements the

following persons: the United States Postal Service, an agency of the

United States, of any State, or of any political subdivision of a

State, and any person to the extent that the person is an issuer,

seller, or redeemer of stored value. Unlike the Notice, the final rule

does not expressly exclude from the registration and list requirements

a depository institution (as defined in 31 U.S.C. 5313(g)) or a person

registered with, and regulated or examined by, the Securities and

Exchange Commission (SEC) or the Commodity Futures Trading Commission

(CFTC). Such an express exclusion in paragraph (a)(1) of section 103.41

is unnecessary because the final rule revises the definition of money

services businesses to exclude those persons.

2. 103.41(a)(2)--Agent Registration

   As noted above, the final rule defers indefinitely implementation

of a requirement that a money services business that offers products or

services as an agent on behalf of another money services business

register with the Department of the Treasury if the former firm exceeds

a ``threshold point'' set by the Secretary. If, however, a firm in

addition to offering products or services on behalf of another money

services business, offers its own money services products or services

(that is, exchanges currency, cashes checks, or transmits funds for

customers through channels or mechanisms of its own), the firm must

register independently.

3. 31 CFR 103.41(a)(3)--Agent Status.

   The final rule provides that the determination of whether a person

is an agent depends on all the facts and circumstances.

4. 31 CFR 103.41(b)(1)--Registration Procedures; In General

   The Notice set forth the general requirement to register a money

services business and to report on the registration form the

information required by 31 U.S.C. 5330 and any other information

required by the form. A draft of the registration form was discussed at

a public meeting in September 1997. Although this section of the

preamble discusses comments on the draft form, money services

businesses should bear in mind that FinCEN expects to continue to work

with the money services business industry to develop the registration

form. As part of that process, FinCEN will publish in the Federal

Register a separate notice regarding the form.

   A commenter pointed out that for certain items, for example, the

name and address of directors, the instructions to the draft form

discussed at the September 1997 public meeting request a more limited

set of information than could be required under section 5330(b). The

commenter asked that the information requested by the final rule be

limited in the same manner as in the instructions to the form.

Accordingly, the final rule continues to set forth the general

requirement to register and report the information required by 31

U.S.C. 5330, but the words ``to the extent required by the form'' have

been added after the words ``the information required by 31 U.S.C.

5330.'' A similar change has been made regarding the identity of the

person who is responsible for filing the registration form.

   Section 5330(b) provides that the registration shall include an

``estimate of the volume of business in the coming year (which shall be

reported annually to the Secretary).'' The instructions to the draft

form thus require an estimate of business volume. Several comments

objected to the business volume requirement, and one commenter asked

for clarification of how an annual estimate would be made when the form

is filed only every other year.

   Because section 5330 specifically requires, as part of the

registration information, that a money services

[[Page 45448]]

business make an estimate of its business volume, FinCEN anticipates

that the form will continue to require the estimate. Although a money

services business is required to make an annual estimate of its

business volume, FinCEN anticipates that the registration form will not

require the estimate to be reported on the form itself but will permit

the business to retain the estimate in its records and make it

available upon request. Thus, the annual estimate requirement may be

satisfied even though the registration form is required to be filed

only every other year.

   One commenter urged that money services businesses be permitted to

file the registration form electronically. FinCEN will consider this

recommendation as it works to finalize the form and the filing

procedures for the form.

   The Notice required a money services business to retain, at a

central location in the United States, a copy of any registration form

the business files and to report that location on the form. One

commenter recommended that as an alternative to the requirement to keep

information in a centralized file, a money services business be

required only to have access to information within a reasonable period

of time. One commenter requested that money services businesses be

permitted to keep records concerning registration outside the United

States, provided that the information was readily available at the

request of FinCEN or any appropriate law enforcement agency.

   The final rule continues to require records concerning registration

to be maintained in the United States. The final rule does not require

a money services business to keep records in a central location so long

as information is readily available at the request of FinCEN or any

appropriate law enforcement agency; however, the agent list must be

maintained in a central location in the United States.

5. 31 CFR 103.41(b)(2)--Registration Period

   Paragraph (b)(2) of the final rule continues to provide that after

an initial registration period of two calendar years, the registration

must be renewed every two years. One commenter asked that the

registration and renewal periods be increased to five years. Given the

frequency of change in this segment of the financial industry and law

enforcement's need for relatively current information about these

businesses, FinCEN does not believe the registration and renewal

periods should be increased from two years to five years.

6. 31 CFR 103.41(b)(3)--Due Date

   Paragraph (b)(3) of the final rule sets forth the due date for

filing the registration form for the initial registration period and

each renewal period. The Notice would have required the registration

form for the initial registration period to be filed by the end of the

180-day period beginning on the later of (i) the date on which the

final rules are published in the Federal Register, and (ii) the date

the business is established. Commenters asked for more time to file the

initial registration form. The final rule does not require the initial

registration form to be filed until December 31, 2001.

7. 31 CFR 103.41(b)(4)--Events Requiring Reregistration

   Paragraph (b)(4) of the final rule continues to provide that a

money services business must be re-registered before the end of a

renewal period upon the occurrence of certain events. That paragraph

requires re-registration if the money services business experiences a

change in ownership or control that requires re-registration under a

State law registration program for money services businesses, more than

10 per cent of its voting power or equity interests is transferred

(except in the case of certain publicly-traded businesses, as explained

below), or the number of its agents increases by more than 50 per cent

during any registration period.

   One commenter argued that publicly-traded companies should not be

required to re-register when required by state law or when there is a

more than 50 per cent increase in the their agents. The final rule

continues to require publicly-traded companies to register in these

situations.

   Several commenters suggested that re-registration was unnecessary

in the case of a 10 per cent change in ownership of publicly-traded

companies. One of the commenters suggested that because a 10 per cent

change in ownership of a publicly-traded company would require a filing

with the Securities and Exchange Commission, law enforcement agencies

could get information about the ownership change from the filing. The

final rule provides that a money services business is not required to

re-register before the end of its regular registration or renewal

period on account of a 10 per cent ownership change if that change must

be reported to the Securities and Exchange Commission.

   One commenter suggested that for smaller businesses, a 50 per cent

change in ownership (rather than 10 per cent) would be a more

appropriate standard for requiring re-registration. The final rule does

not adopt this suggestion because it would permit significant changes

in the ownership of smaller money services businesses, which are

generally subject to little federal oversight, to take place between

renewal periods without Treasury's knowledge.

   One commenter recommended that ``wire transmitters'' be exempted

from the re-registration requirements if the transmitters are required

to re-register by state law. The final rule does not adopt this

recommendation. FinCEN believes that it is important to establish

uniform, national registration requirements for money services

businesses.

8. 31 CFR 103.41(c)--Persons Required to File Registration Form

   The Notice provided that, as required by 31 U.S.C. 5330(a), any

person who owns or controls a money services business shares the

responsibility for seeing that the business is registered. (Only one

registration form, however, is required to be filed for each

registration period.) Commenters pointed out that the instructions to

the draft form take a more limited approach, requiring only certain

owners or controlling persons to register. Paragraph (c) of the final

rule addresses this difference by adding the language ``to the extent

provided by the form'' after the language ``any person who owns or

controls.''

9. 31 CFR 103.41(d)(1)--List of Agents; In General

   Paragraph (d)(1) of the final rule provides that a money services

business must prepare and maintain a list of its agents, and must

revise the agent list to contain current information. The Notice

required the agent list to be revised each quarter. Several commenters

objected to the requirement to make quarterly updates of the agent

list, arguing that annual updates are more reasonable. One commenter,

however, stated that quarterly updates of internal records of seller

information could be required without any additional burden. The final

rule requires annual updates of the agent list.

   The Notice provided that the list of agents is not filed with the

registration form but is maintained at the location in the United

States reported on the registration form. Several commenters asked that

the final rule clarify that an agent list need not be kept in the

United States so long as the list is readily available. As indicated

above, the agent list must be maintained in the United States.

[[Page 45449]]

   Upon request, a money services business must make its list of

agents available to FinCEN and any other appropriate law enforcement

agency (including, without limitation, the examination function of the

Internal Revenue Service in its capacity as delegee of Bank Secrecy Act

examination authority). One commenter stated that the requirement to

make the agent list available to law enforcement is vague and

potentially burdensome. This commenter suggested that it would be

preferable to route all law enforcement requests for the lists through

FinCEN, which would then evaluate both the appropriateness of the

requests and the bona fides of the law enforcement agency.

   The maintenance and ready availability of ``agent lists and other

information'' is a crucial part of the scheme of 31 U.S.C. 5330. But it

is equally true that a system in which money services businesses are

overrun by duplicative or otherwise burdensome requests is in no one's

interest. In response to the comment, and in light of the fact that 31

U.S.C. 5330(c)(1)(B) authorizes the Secretary of the Treasury to issue

rules defining the terms of law enforcement access to agent list

information, the final rule states that requests for agent list

information shall be coordinated through FinCEN in the manner and to

the extent determined by FinCEN. Such coordination will (i) avoid the

imposition of unnecessary burden on money services businesses, (ii)

ensure the confidentiality of sensitive business information, and (iii)

facilitate the orderly administration of the agent list requirement.

   The same commenter also suggested that agent lists could

voluntarily be filed by money services businesses with the Department

of the Treasury, under a system in which law enforcement agencies

obtain access through Treasury, rather than by seeking information from

the money services businesses that chose to file such lists. FinCEN

believes that such a system has merit, and it intends to work with the

affected businesses to develop such a system, during the period

provided for implementation of this rule prior to January 1, 2002.

   The Notice provided that the original list of agents and any

revised list must be retained for five years, as specified in 31 CFR

103.38(d). Commenters objected to the requirement to retain lists of

agents for five years. As indicated above, the requirement to update

agent lists has been relaxed from quarterly updates to annual updates.

Further, the Bank Secrecy Act rules generally require Bank Secrecy Act

information to be retained for five years. Thus, the final rule

continues to require agent lists to be maintained for five years.

   One commenter recommended that FinCEN allow past lists to be

substituted, in the discretion of the money services business, with any

``readily accessible'' records of the information no longer on the

current list. The final rule does not adopt this recommendation. The

revisions the final rule makes regarding the information on the agent

list and the decrease from quarterly to annual revisions to the agent

list will reduce the amount of information that has to be retained.

10. 31 CFR 103.41(d)(2)--Information Included on the List of Agents

   The final rule provides that the following information must be

included on the agent list--

   (i) The name of the agent, including any trade names or doing-

business-as names,

   (ii) The address of the agent, including street address, city,

state, and ZIP code,

   (iii) The telephone number of the agent,

   (iv) The type of service or services (sale or redemption of money

orders, traveler's checks, check sales, check cashing, currency

exchange, and money transmitting) the agent provides,

   (v) A listing of the months in the 12 months immediately preceding

the date of the most recent agent list in which the gross transaction

amount of the agent with respect to financial products or services

issued by the money services business maintaining the agent list

exceeded $100,000. For this purpose, the money services gross

transaction amount is the agent's gross amount (excluding fees and

commission) received from transaction of one or more businesses

described in Sec. 103.11(uu),

   (vi) The name and address of any depository institution at which

the agent maintains a transaction account (as defined in 12 U.S.C.

461(b)(1)(C)) for all or part of the funds received in or for its money

services business whether in the name of the agent or of the money

services business for which the agent acts or whose products it sells,

   (vii) The year in which the agent first became an agent of the

money services business, and

   (viii) The number of branches or subagents the agent has.

   As noted above, the final rule requires a money services business

to include information about the months in the preceding 12-month

period in which its agent's gross transaction amount exceeded $100,000.

Again, the $100,000 need reflect only business done for the particular

``prinicipal''. Thus, money services business are not expected to

obtain information about the gross transaction amount for business

their agents may conduct for other principals or to disaggregate

information about the gross transaction amount of any agent that

conducts business for more than one principal and provides a principal

with an aggregate figure reflecting business conducted for both

principals. To allow time to intregrate information, the final rule

provides that information about agent volume must be current within 45

days of the due date of the list.

   For any agent that is an agent of the money services business

maintaining the list before the first day of the month beginning after

February 16, 2000, the final rule does not require the following

information to be included on the list: the year in which the agent

first became an agent and the agent's branches or subagents. Such

information must be made available upon the request of FinCEN and any

other appropriate law enforcement agency (including, without

limitation, the examination function of the Internal Revenue Service in

its capacity as delegee of Bank Secrecy Act examination authority).

   Several commenters asked that the final rule clarify that a money

services business is not required to include on its agent list any

agent that is a depository institution. The final rule expressly

excepts banks from the definition of money services business. Thus, a

money services business is not required to include on its agent list

any agent that is a depository institution.

   Another commenter suggested that only agents in the United States

should be included on the agent list. FinCEN agrees that only agents

doing business in the United States should be included on the agent

list.

   Commenters indicated that because of the way they currently

maintain information about their agents and the need to devote computer

programming resources to the Year 2000 problem in general, they would

need more time than allowed by the Notice to prepare the initial list

of their agents. The final rule does not require the preparation of the

initial agent list to be completed until January 1, 2002. This change

should provide sufficient time for money services businesses to prepare

their agent lists.

VI. Other Pending Notices of Proposed Rulemaking Concerning Money

Services Businesses

   The second rule proposed on May 21, 1997 (the ``Proposed SAR

Rule''), would require money transmitters, and issuers,

[[Page 45450]]

sellers, and redeemers of money orders and traveler's checks to report

suspicious transactions to the Department of the Treasury. See 62 FR

27900-27909. Suspicious activity reporting by all classes of financial

institutions covered by the Bank Secrecy Act is an essential part of

the government's counter-money laundering efforts generally and its

efforts to strengthen counter-money laundering controls at money

services businesses in particular. The Department of the Treasury is

committed to producing the most cost-effective reporting regime, for

both law enforcement and the industries involved. To permit effective

implementation, suspicious activity reporting by the relevant classes

of money services businesses will not begin until the initial

registration process is complete.

   The Department also believes that it is critical to provide written

guidance about what must be reported, at the time the final rule is

issued. It intends to work with the money transmission, money order,

and traveler's check industries to shape that guidance, independent of

the rulemaking itself. That work should be assisted by the information

gathered during initial stages of implementation of the registration

rule.

   The third rule proposed on May 21, 1997 (the ``Proposed Special CTR

Rule''), would add a special currency transaction reporting

requirement--and related customer verification requirements--for money

transmitters involved in the transmission or other transfer of funds to

persons outside the United States. See 62 FR 27909-27917. Action on the

Proposed Special CTR Rule is being deferred, but it is not being

withdrawn at this time.

VII. Executive Order 12866

   The Department of the Treasury has determined that this final rule

is not a significant regulatory action under Executive Order 12866.

VIII. Unfunded Mandates Act of 1995 Statement

   Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded

Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an

agency prepare a budgetary impact statement before promulgating a rule

that includes a federal mandate that may result in expenditure by

state, local and tribal governments, in the aggregate, or by the

private sector, of $100 million or more in any one year. If a budgetary

impact statement is required, section 202 of the Unfunded Mandates Act

also requires an agency to identify and consider a reasonable number of

regulatory alternatives before promulgating a rule. FinCEN has

determined that it is not required to prepare a written statement under

section 202 and has concluded that on balance this final rule provides

the most cost-effective and least burdensome alternative to achieve the

objectives of the rule.

IX. Regulatory Flexibility Act

   FinCEN certifies that this rule will not have a significant

economic impact on a substantial number of small entities. FinCEN

anticipates that the provisions of the rule generally excluding agents

of money services businesses from registration will limit the impact of

the rule on small businesses. Further, most of the recordkeeping and

reporting requirements that would be imposed by the rule concern

information already found in routine business records. For example, as

part of their business records, money services businesses (to the

extent such businesses are small entities) will generally have

information needed for the required agent list, such as the name and

addresses of their agents and agent transaction account information,

because such information is necessary to establish and maintain the

relationship between the businesses and their agents. In addition to

recordkeeping and reporting requirements, other requirements of the

rule may also be satisfied with information that is currently

available. For example, many businesses currently have policies in

place regarding the maximum dollar amount of a money service

transaction they will perform for a customer, such as the maximum

amount for which a business will cash a check, which may help (assuming

the policy is observed) them determine whether they have exceeded the

$1,000 floor in several of the definitions in the rule.

X. Paperwork Reduction Act

   The collection of information contained in this final regulation

has been reviewed and approved by the Office of Management and Budget

(OMB) in accordance with the requirements of the Paperwork Reduction

Act (44 U.S.C. 3507(d)) under control number 1506-0013. An agency may

not conduct or sponsor, and a person is not required to respond to, a

collection of information unless it displays a valid control number

assigned by OMB.

   The collection of information in this final rule is in 31 CFR

103.41(d). This information is required to be provided pursuant to 31

U.S.C. 5330. This information will be used to locate agents of money

services businesses to ensure that they are complying with the

provisions of the Bank Secrecy Act. The information will also be used

by law enforcement agencies in the enforcement of criminal, tax, and

regulatory laws and to prevent money services businesses from engaging

in illegal activities. The collection of information is mandatory. The

likely recordkeepers are businesses.

   The estimated average burden associated with the collection of

information in this final rule is 130 hours per recordkeeper.

   Comments concerning the accuracy of this burden estimate and

suggestions for reducing this burden should be directed to the

Financial Crimes Enforcement Network, Department of the Treasury, 2070

Chain Bridge Road, Suite 200, Vienna, VA 22187, and to OMB, Attention:

Desk Officer for the Department of Treasury, FinCEN, Office of

Information and Regulatory Affairs, Washington, D.C. 20503.

List of Subjects in 31 CFR Part 103

   Administrative practice and procedure, Authority delegations

(Government agencies), Banks and banking, Currency, Foreign banking,

Foreign currencies, Gambling, Investigations, Law enforcement,

Penalties, Reporting and recordkeeping requirements, Securities, Taxes.

Amendment

   For the reasons set forth above in the preamble, 31 CFR part 103 is

amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND

FOREIGN TRANSACTIONS

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

follows:

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

   2. Section 103.11 is amended by--

   a. Revising paragraph (c)(7),

   b. Removing and reserving paragraph (i),

   c. Revising paragraph (n)(3),

   d. Removing paragraphs (n)(4), (n)(5), and (n)(10),

   e. Redesignating paragraphs (n)(6), (n)(7), (n)(8), and (n)(9) as

paragraphs (n)(4), (n)(5), (n)(6), and (n)(7) respectively,

   f. In newly redesignated paragraphs (n)(5) and (n)(6), removing the

period at the end of the paragraph and adding a semicolon in its place,

   g. In newly redesignated paragraph (n)(7), removing ``;.'' and

adding a period in its place, and

[[Page 45451]]

   h. Adding new paragraphs (uu) and (vv).

   The revised and added paragraphs read as follows:

Sec. 103.11 Meaning of terms.

* * * * *

   (c) Bank. * * *

   (7) Any other organization (except a money services business)

chartered under the banking laws of any state and subject to the

supervision of the bank supervisory authorities of a State;

* * * * *

   (n) Financial institution. * * *

   (3) A money services business as defined in paragraph (uu) of this

section;

* * * * *

   (uu) Money services business. Each agent, agency, branch, or office

within the United States of any person doing business, whether or not

on a regular basis or as an organized business concern, in one or more

of the capacities listed in paragraphs (uu)(1) through (uu)(6) of this

section. Notwithstanding the preceding sentence, the term ``money

services business'' shall not include a bank, nor shall it include a

person registered with, and regulated or examined by, the Securities

and Exchange Commission or the Commodity Futures Trading Commission.

   (1) Currency dealer or exchanger. A currency dealer or exchanger

(other than a person who does not exchange currency in an amount

greater than $1,000 in currency or monetary or other instruments for

any person on any day in one or more transactions).

   (2) Check casher. A person engaged in the business of a check

casher (other than a person who does not cash checks in an amount

greater than $1,000 in currency or monetary or other instruments for

any person on any day in one or more transactions).

   (3) Issuer of traveler's checks, money orders, or stored value. An

issuer of traveler's checks, money orders, or, stored value (other than

a person who does not issue such checks or money orders or stored value

in an amount greater than $1,000 in currency or monetary or other

instruments to any person on any day in one or more transactions).

   (4) Seller or redeemer of traveler's checks, money orders, or

stored value. A seller or redeemer of traveler's checks, money orders,

or stored value (other than a person who does not sell such checks or

money orders or stored value in an amount greater than $1,000 in

currency or monetary or other instruments to or redeem such instruments

for an amount greater than $1,000 in currency or monetary or other

instruments from, any person on any day in one or more transactions).

   (5) Money transmitter--(i) In general. Money transmitter:

   (A) Any person, whether or not licensed or required to be licensed,

who engages as a business in accepting currency, or funds denominated

in currency, and transmits the currency or funds, or the value of the

currency or funds, by any means through a financial agency or

institution, a Federal Reserve Bank or other facility of one or more

Federal Reserve Banks, the Board of Governors of the Federal Reserve

System, or both, or an electronic funds transfer network; or

   (B) Any other person engaged as a business in the transfer of

funds.

   (ii) Facts and circumstances; Limitation. Whether a person

``engages as a business'' in the activities described in paragraph

(uu)(5)(i) of this section is a matter of facts and circumstances.

Generally, the acceptance and transmission of funds as an integral part

of the execution and settlement of a transaction other than the funds

transmission itself (for example, in connection with a bona fide sale

of securities or other property), will not cause a person to be a money

transmitter within the meaning of paragraph (uu)(5)(i) of this section.

   (6) United States Postal Service. The United States Postal Service,

except with respect to the sale of postage or philatelic products.

   (vv) Stored value. Funds or monetary value represented in digital

electronics format (whether or not specially encrypted) and stored or

capable of storage on electronic media in such a way as to be

retrievable and transferable electronically.

   3. Part 103 is further amended by redesignating the following

subparts and sections as follows:

------------------------------------------------------------------------

                                                          New subparts

          Old subparts and sections subpart D            and sections

                                                            subpart E

------------------------------------------------------------------------

103.41..................................................         103.51

103.42..................................................         103.52

103.43..................................................         103.53

103.44..................................................         103.54

103.45..................................................         103.55

103.46..................................................         103.56

103.47..................................................         103.57

103.48..................................................         103.58

103.49..................................................         103.59

103.50..................................................         103.60

103.51..................................................         103.61

103.52..................................................         103.62

103.53..................................................         103.63

103.54..................................................         103.64

Subpart E                                                     Subpart F

103.61..................................................         103.71

103.62..................................................         103.72

103.63..................................................         103.73

103.64..................................................         103.74

103.65..................................................         103.75

103.66..................................................         103.76

103.67..................................................         103.77

Subpart F                                                     Subpart G

103.70..................................................         103.80

103.71..................................................         103.81

103.72..................................................         103.82

103.73..................................................         103.83

103.74..................................................         103.84

103.75..................................................         103.85

103.76..................................................         103.86

103.77..................................................         103.87

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

Subpart D--Special Rules for Money Services Businesses

Sec.

103.41 Registration of money services businesses.

Subpart D--Special Rules for Money Services Businesses

Sec. 103.41 Registration of money services businesses.

   (a) Registration requirement--(1) In general. Except as provided in

paragraph (a)(2) of this section, relating to agents, each money

services business (whether or not licensed as a money services business

by any State) must register with the Department of the Treasury and, as

part of that registration, maintain a list of its agents as required by

31 U.S.C. 5330 and this section. This section does not apply to the

United States Postal Service, to agencies of the United States, of any

State, or of any political subdivision of a State, or to a person to

the extent that the person is an issuer, seller, or redeemer of stored

value.

   (2) Agents. A person that is a money services business solely

because that person serves as an agent of another money services

business, see Sec. 103.11(uu), is not required to register under this

section, but a money services business that engages in activities

described in Sec. 103.11(uu) both on its own behalf and as an agent for

others must register under this section. For example, a supermarket

corporation that acts as an agent for an issuer of money orders and

performs no other services of a nature and value that would cause the

corporation to be a money services business, is not required to

register; the answer would be the same if the supermarket corporation

served as an agent both of a money order issuer and of a money

transmitter. However, registration would be required if the

[[Page 45452]]

supermarket corporation, in addition to acting as an agent of an issuer

of money orders, cashed checks or exchanged currencies (other than as

an agent for another business) in an amount greater than $1,000 in

currency or monetary or other instruments for any person on any day, in

one or more transactions.

   (3) Agency status. The determination whether a person is an agent

depends on all the facts and circumstances.

   (b) Registration procedures--(1) In general. (i) A money services

business must be registered by filing such form as FinCEN may specify

with the Detroit Computing Center of the Internal Revenue Service (or

such other location as the form may specify). The information required

by 31 U.S.C. 5330(b) and any other information required by the form

must be reported in the manner and to the extent required by the form.

   (ii) A branch office of a money services business is not required

to file its own registration form. A money services business must,

however, report information about its branch locations or offices as

provided by the instructions to the registration form.

   (iii) A money services business must retain a copy of any

registration form filed under this section and any registration number

that may be assigned to the business at a location in the United States

and for the period specified in Sec. 103.38(d).

   (2) Registration period. A money services business must be

registered for the initial registration period and each renewal period.

The initial registration period is the two-calendar-year period

beginning with the calendar year in which the money services business

is first required to be registered. However, the initial registration

period for a money services business required to register by December

31, 2001 (see paragraph (b)(3) of this section) is the two-calendar

year period beginning 2002. Each two-calendar-year period following the

initial registration period is a renewal period.

   (3) Due date. The registration form for the initial registration

period must be filed on or before the later of December 31, 2001, and

the end of the 180-day period beginning on the day following the date

the business is established. The registration form for a renewal period

must be filed on or before the last day of the calendar year preceding

the renewal period.

   (4) Events requiring re-registration. If a money services business

registered as such under the laws of any State experiences a change in

ownership or control that requires the business to be re-registered

under State law, the money services business must also be re-registered

under this section. In addition, if there is a transfer of more than 10

percent of the voting power or equity interests of a money services

business (other than a money services business that must report such

transfer to the Securities and Exchange Commission), the money services

business must be re-registered under this section. Finally, if a money

services business experiences a more than 50-per cent increase in the

number of its agents during any registration period, the money services

business must be re-registered under this section. The registration

form must be filed not later than 180 days after such change in

ownership, transfer of voting power or equity interests, or increase in

agents. The calendar year in which the change, transfer, or increase

occurs is treated as the first year of a new two-year registration

period.

   (c) Persons required to file the registration form. Under 31 U.S.C.

5330(a), any person who owns or controls a money services business is

responsible for registering the business; however, only one

registration form is required to be filed for each registration period.

A person is treated as owning or controlling a money services business

for purposes of filing the registration form only to the extent

provided by the form. If more than one person owns or controls a money

services business, the owning or controlling persons may enter into an

agreement designating one of them to register the business. The failure

of the designated person to register the money services business does

not, however, relieve any of the other persons who own or control the

business of liability for the failure to register the business. See

paragraph (e) of this section, relating to consequences of the failure

to comply with 31 U.S.C. 5330 or this section.

   (d) List of agents--(1) In general. A money services business must

prepare and maintain a list of its agents. The initial list of agents

must be prepared by January 1, 2002, and must be revised each January

1, for the immediately preceding 12 month period; for money services

businesses established after December 31, 2001, the initial agent list

must be prepared by the due date of the initial registration form and

must be revised each January 1 for the immediately preceding 12-month

period. The list is not filed with the registration form but must be

maintained at the location in the United States reported on the

registration form under paragraph (b)(1) of this section. Upon request,

a money services business must make its list of agents available to

FinCEN and any other appropriate law enforcement agency (including,

without limitation, the examination function of the Internal Revenue

Service in its capacity as delegee of Bank Secrecy Act examination

authority). Requests for information made pursuant to the preceding

sentence shall be coordinated through FinCEN in the manner and to the

extent determined by FinCEN. The original list of agents and any

revised list must be retained for the period specified in

Sec. 103.38(d).

   (2) Information included on the list of agents--(i) In general.

Except as provided in paragraph (d)(2)(ii) of this section, a money

services business must include the following information with respect

to each agent on the list (including any revised list) of its agents--

   (A) The name of the agent, including any trade names or doing-

business-as names;

   (B) The address of the agent, including street address, city,

state, and ZIP code;

   (C) The telephone number of the agent;

   (D) The type of service or services (money orders, traveler's

checks, check sales, check cashing, currency exchange, and money

transmitting) the agent provides;

   (E) A listing of the months in the 12 months immediately preceding

the date of the most recent agent list in which the gross transaction

amount of the agent with respect to financial products or services

issued by the money services business maintaining the agent list

exceeded $100,000. For this purpose, the money services gross

transaction amount is the agent's gross amount (excluding fees and

commissions) received from transactions of one or more businesses

described in Sec. 103.11(uu);

   (F) The name and address of any depository institution at which the

agent maintains a transaction account (as defined in 12 U.S.C.

461(b)(1)(C)) for all or part of the funds received in or for the

financial products or services issued by the money services business

maintaining the list, whether in the agent's or the business

principal's name;

   (G) The year in which the agent first became an agent of the money

services business; and

   (H) The number of branches or subagents the agent has.

   (ii) Special rules. Information about agent volume must be current

within 45 days of the due date of the agent list. The information

described by paragraphs (d)(2)(i)(G) and (d)(2)(i)(H) of this section

is not required to be included in an agent list with respect to

[[Page 45453]]

any person that is an agent of the money services business maintaining

the list before the first day of the month beginning after February 16,

2000 so long as the information described by paragraphs (d)(2)(i)(G)

and (d)(2)(i)(H) of this section is made available upon the request of

FinCEN and any other appropriate law enforcement agency (including,

without limitation, the examination function of the Internal Revenue

Service in its capacity as delegee of Bank Secrecy Act examination

authority).

   (e) Consequences of failing to comply with 31 U.S.C. 5330 or the

regulations thereunder. It is unlawful to do business without complying

with 31 U.S.C. 5330 and this section. A failure to comply with the

requirements of 31 U.S.C 5330 or this section includes the filing of

false or materially incomplete information in connection with the

registration of a money services business. Any person who fails to

comply with any requirement of 31 U.S.C. 5330 or this section shall be

liable for a civil penalty of $5,000 for each violation. Each day a

violation of 31 U.S.C. 5330 or this section continues constitutes a

separate violation. In addition, under 31 U.S.C. 5320, the Secretary of

the Treasury may bring a civil action to enjoin the violation. See 18

U.S.C. 1960 for a criminal penalty for failure to comply with the

registration requirements of 31 U.S.C. 5330 or this section.

   (f) Effective date. This section is effective September 20, 1999.

Registration of money services businesses under this section will not

be required prior to December 31, 2001.

Sec. 103.36 [Amended]

   5. Paragraph (b)(10) of Sec. 103.36 is amended by removing the

language ``Sec. 103.54(a)'' and adding the language ``Sec. 103.64(a)''

in its place.

   6. Section 103.37 is amended by adding a new paragraph (c) to read

as follows:

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

dealers or exchangers.

* * * * *

   (c) This section does not apply to banks that offer services in

dealing or changing currency to their customers as an adjunct to their

regular service.

Sec. 103.56 [Amended]

   7. Paragraph (b)(7) of newly redesignated Sec. 103.56 is amended by

removing the language ``Sec. 103.48'' and adding the language

``Sec. 103.58'' in its place.

Sec. 103.57 [Amended]

   8. Newly redesignated Sec. 103.57 is amended by:

   a. In paragraph (d) removing the language ``Sec. 103.48'' and

adding the language ``Sec. 103.58'' in its place.

   b. In the first sentence of paragraph (e) removing the language

``Sec. 103.53'' and adding the language ``Sec. 103.63'' in its place.

Sec. 103.72 [Amended]

   9. Newly redesignated Sec. 103.72 is amended by removing the

language ``Sec. 103.61'' from the introductory text and adding the

language ``Sec. 103.71'' in its place.

Sec. 103.73 [Amended]

   10. Newly redesignated Sec. 103.73 is amended by:

   a. In paragraph (a) introductory text removing the language

``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.

   b. In paragraph (a)(1) removing the language ``Sec. 103.62'' and

adding the language ``Sec. 103.72'' in its place.

   c. In paragraph (b) introductory text removing the language

``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.

   d. In paragraph (b)(1) removing the language ``Sec. 103.62'' and

adding the language ``Sec. 103.72'' in its place.

Sec. 103.74 [Amended]

   11. Newly redesignated Sec. 103.74 is amended by removing the

language ``Sec. 103.62'' from paragraph (a) and adding the language

``Sec. 103.72'' in its place.

Sec. 103.75 [Amended]

   12. Newly redesignated Sec. 103.75 is amended by:

   a. In the first sentence of paragraph (a) removing the language

``Sec. 103.62'' and adding the language ``Sec. 103.72'' in its place.

   b. In paragraph (c) introductory text removing the language

``103.62(a)'' and adding the language ``103.72(a)'' in its place and

removing the language ``Sec. 103.62 (b) or (c)'' and adding the

language ``Sec. 103.72 (b) or (c)'' in its place.

Sec. 103.76 [Amended]

   13. Newly redesignated Sec. 103.76 is amended by:

   a. In the first sentence removing the language ``Sec. 103.62'' and

adding the language ``Sec. 103.72'' in its place.

   b. In the second sentence removing the language ``Sec. 103.62(a)''

and adding the language ``Sec. 103.72(a)'' in its place.

Sec. 103.82 [Amended]

   14. Newly redesignated Sec. 103.82 is amended by removing the

language ``Sec. 103.71'' from the first sentence and adding the

language ``Sec. 103.81'' in its place.

Sec. 103.83 [Amended]

   15. Paragraph (b) of newly redesignated Sec. 103.83 is amended by:

   a. In the first sentence removing the language ``Sec. 103.71'' and

adding the language ``Sec. 103.81'' in its place.

   b. In the last sentence removing the language ``Sec. 103.71'' and

adding the language ``Sec. 103.81'' in its place.

Sec. 103.85 [Amended]

   16. Newly redesignated Sec. 103.85 is amended by removing the

language ``Sec. 103.71'' from the first sentence and adding the

language ``Sec. 103.81'' in its place.

Sec. 103.86 [Amended]

   17. Newly redesignated Sec. 103.86 is amended by:

   a. In paragraph (a) introductory text removing the language

``Sec. 103.75'' and adding the language ``Sec. 103.85'' in its place.

   b. In the second sentence of paragraph (b) removing the language

``Sec. 103.71'' and adding the language ``Sec. 103.81'' in its place.

   Dated: August 17, 1999.

James F. Sloan,

Director, Financial Crimes Enforcement Network.

[FR Doc. 99-21667 Filed 8-18-99; 8:45 am]

BILLING CODE 4820-03-P