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  • Goldstein Thrane posted an update 5 months, 1 week ago

    A money services company is a legal phrase used by financial regulators worldwide to define companies that convert or transfer money through the use of their services. The term has been created to encompass not only traditional banks that usually offer these services but also non-bank financial organizations that do not have their own banking structure. In many countries, these companies are considered money service establishments and are subject to very strict licensing regulations and standards. Money services companies are regulated by government bodies such as the Office of Fair Trading in the UK and the Payment Card Industry Data Security Standard (PCI DSS) in the US.

    The money laundering risk that is involved in these financial services operations requires immediate attention from financial regulators. This is because terrorist activities might involve the conversion or laundering of illicit proceeds. If a money laundering program is not immediately put in place, the potential damage to the financial system could be catastrophic. According to the law, the money laundering and anti-money-laundering regulation agency in any country that authorizes financial services must develop an anti-money laundering program.

    The UK Office of Fair Trading developed a code of compliance for money services businesses. This code stipulates that financial agencies must take measures to detect and prevent terrorist activities, including the use of funds in order to carry out terrorist acts or to finance terrorist activities. These measures therefore include surveillance and monitoring activities.

    Money services operators must register with the FSA and undergo a series of examinations. Prior to offering their services, they must register with the AML/ FATCA unit. Their AML/ FATCA registration must be active for at least five continuous years. The five-year registration requirement ensures that money laundering and anti-money laundering practices can be detected and implemented early.

    In order to operate in the United States, money services businesses are required to obtain a license from the U.S. Department of Treasury. Money service companies are required to register with the Treasury’s National Foreign Currency Assigned Inspection Account. MSBS inspections are conducted at random and based on the foreign currency firm’s own policy. However, most financial transactions involving U.S. residents are subject to a routine inspection. This inspection may involve a visit by the NTFIA’s money services firm to the offices of the Bank of America or the Wells Fargo Bank in order to determine the nature and extent of the firm’s compliance program.

    Financial institutions that provide money services businesses with a license to operate must comply with the financial institution laws of the United States. Among these laws are the Anti-Money Laundering and Counter Financing Act (AMLCA), which establishes penalties for money laundering and other financial crimes. An AMLCA violation may impose fines and other consequences on the institution, including loss of banking privileges and the disinthification of its foreign currency exchange business. The Financial Services Authority, which is a United Kingdom regulator, also has issued statements describing the importance of proper money services firm supervision. The FSA has concluded that financial institutions should use state-of-the-art internal controls as well as oversight by an externally independent board, in order to detect and prevent illicit activity and maintain appropriate risk exposure.

    Money services firms are required to promptly report any instances of unusual activity involving U.S. residents that would help to determine whether such activity is conducted through illicit or illegal means. Among the reports to be filed are those regarding currency orders or wire transfers in excess of the normal amount that would be deposited into a regular bank account. Such transactions must also be reported to the BSA e-filing system, through the Internet. BSA e-filing requires financial institutions to provide information regarding the account involved, the type of payment used in the transaction, the recipient’s name, address, and account number. By doing so, BSA e-filing allows users to quickly obtain suspicious activity reports.

    In addition to having BSA e-filing and BSA compliance obligations, money services businesses must register with the regulatory agency. To do so, the firm must submit requests for registration, including an application that is filed with the FSA, along with all applicable documents. Registration, once completed, is valid for a specific period of time. This time period is called an ‘infringement period’ and refers to the time frame within which a money services firm may continue to conduct financial transactions using the registered office. Once an individual firm completes registration with the FSA, the business will become a member of its organisation.