Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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5/14/2009 FinCEN Proposes Revisions to MSB Definitions, Stored Value Release Expected

FinCEN is proposing revisions to its MSB definitions along with some reorganization of the MSB provisions. Issuers of stored value and sellers or redeemers of stored value will be put into a single category. Although this consolidation is without substantive change at this point, FinCEN says that a comprehensive rule on stored value is in the works, and the agency seeks comment on definitions of stored value. The difficulties that some money services business have had in obtaining banking services “informs” the recent release, and representatives of money services businesses have argued that the term “money service business” should be discontinued. MSBs, they argue, should instead be categorized as “non-bank financial institutions,” thereby being lumped with such entities as broker-dealers and mutual funds. This ignores the fact that the problems banks have had with some MSBs arise from what they do, not what they are called, and FinCEN has rejected the idea. The proposed revisions would, however, help some businesses as the new definitions for money transmitters specify a number of activities that would not qualify as making a business into a money transmitter. Foreign-located MSBs with activities in the U.S. would have to designate an agent for service of process. The proposals will receive extensive coverage in the July issue of the Monitor.

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