Have you ever wired money or exchanged currency without making a trip to the bank? What about using a prepaid card?
If you have, you’ve likely used a Money Services Business (MSB). MSBs perform some of the same functions that banks do, but on a smaller scale. MSBs offer convenience for those without traditional banking services and use financial technology – fintech – to streamline money management.
Here’s a brief introduction to MSBs and their functions.
What Functions Do MSBs Serve?
MSBs are often used to transmit or exchange money. Some examples of MSBs are:
- Wire transfer services
- Currency exchangers
- Travelers checks providers
- Prepaid card issuers
You might find them in grocery stores or other locations, offered as a convenient way to facilitate transactions. MSBs need to register with the federal government, and, generally speaking, are businesses that facilitate transactions of at least $1,000 per day, per person.
Whenever you wire money, use a prepaid card, utilize check-cashing services, or exchange foreign currency without the help of a traditional bank, you’re using an MSB.
These services are an important resource for those who don’t have access to traditional banking services. Without MSBs, these consumers would have limited options to transfer and exchange money.
How Are They Regulated?
MSBs need to implement Anti-Money Laundering (AML) compliance programs. These programs need to administer safeguards to prevent money laundering and other illegal transaction activities.
MSBs also need to register with the United States Department of the Treasury Financial Crimes Enforcement Network and, in many jurisdictions, register with the state they are operating in. MSBs must provide training to employees to combat fraud, implement procedures, and report transaction history if they’ve completed transfers of more than $10,000 in a day.
MSBs represent the ways in which the financial landscape is changing – banks are no longer the only means to transfer or exchange money. Along with fintech, MSBs continue to change how we’re managing our finances and what that means from a regulatory lens.
For more information on MSBs, visit the FINCEN’s website.