Money-Transmitter Enterprises and the Threat of Money Laundering
Money service businesses (MSBs) play a crucial role in the global financial landscape, providing services such as money transfer, currency exchange, and remittance services. However, due to their nature, they are also vulnerable to money laundering and terrorist financing activities.
In the United States, MSBs are subject to the Bank Secrecy Act (BSA) and regulations from the Financial Crimes Enforcement Network (FinCEN). This means developing and maintaining Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) programs, filing Currency Transaction Reports (CTRs) for transactions over $10,000, and Suspicious Activity Reports (SARs) when suspicious behavior is detected. Designating a compliance officer, training staff, and undergoing independent program reviews are also essential.
Other countries have their own AML regulations tailored to their legal and financial systems. For example, in Canada, MSBs are regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). In Hong Kong, individuals or businesses conducting money services must apply for a Money Services Operator license from the Customs and Excise Department. In Singapore, the Monetary Authority of Singapore (MAS) regulates MSBs, with businesses such as account issuance services, domestic money transfer services, and digital payment token services falling under its regulatory scope.
In the UK, MSBs need to register with His Majesty's Revenue and Customs (HMRC) under the UK money laundering regulations. In Australia, if a business accepts instructions from clients to transfer money or property, it is a Remittance Service Provider (RSP) or MSB and needs to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC).
Failure to comply with these regulations can result in severe consequences. In Canada, fines of up to 2 million CAD ($1.5 million) and/or up to five years imprisonment may be imposed. In the US, civil penalties of up to $5,000 for each violation and $5,000 for each day a registration violation continues can be levied.
Recently, the UK-based MSB, MT Global, was fined $32.4 million by the HMRC for breaches of anti-money laundering regulations in 2021.
To effectively combat money laundering and avoid fines, MSBs should remain current with evolving AML laws and regulatory guidance in each jurisdiction, implement risk-based compliance measures, obtain necessary licenses and registrations, engage in third-party independent audits of AML programs, and use technology and compliance management tools. By doing so, MSBs can ensure they are operating within the law and contributing positively to the global financial system.
- The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) regulates money service businesses (MSBs) in Canada, similar to how the Monetary Authority of Singapore (MAS) regulates MSBs in Singapore.
- In Australia, if a business transfers money or property, it becomes a Remittance Service Provider (RSP) or MSB and must register with the Australian Transaction Reports and Analysis Centre (AUSTRAC).
- Compliance with AML regulations is crucial for MSBs to avoid severe consequences, such as fines of up to 2 million CAD ($1.5 million) and/or up to five years imprisonment in Canada, or civil penalties of up to $5,000 for each violation and $5,000 for each day a registration violation continues in the US.
- To combat money laundering effectively and maintain a positive reputation within the global financial system, MSBs should keep abreast of evolving AML laws, implement risk-based compliance measures, obtain necessary licenses and registrations, and leverage technology and compliance management tools.
