for Money Service Businesses Under the Bank Secrecy Act
Neil H. Fishman
APRIL 2006 - Since
its original implementation in 1970, the Bank Secrecy Act
(BSA) has been strengthened by subsequent legislation, making
it a formidable tool for fighting money laundering and curbing
the funding of terrorist activities. With the federal filing
requirements imposed on money service business (MSB) activities,
it is more important than ever to understand MSB definitions
order to improve awareness of, and disseminate knowledge
about, the expanded BSA and related MSB issues, a recent
Tax Talk Today webcast featured a panel of IRS
officials and tax experts. The panel focused on the definition
of an MSB as well as other topics, such as the registration,
filing, and reporting requirements for MSBs in the BSA.
first step is understanding what constitutes an MSB. An
MSB is any business that offers money orders, traveler’s
checks, stored value, check cashing, or currency dealing;
and conducts more than $1,000 in money services business
activity with the same person, in one type of activity,
on the same day; or provides money transfer services in
is classified as an MSB even if the MSB activity is ancillary
to the primary business activity. A travel agent selling
traveler’s checks, a grocery store offering check
cashing, and a convenience store selling money orders would
all qualify as MSBs.
dealing with any business, one should be alert for MSB activity.
For example, examine the addition of services or revenue
streams to determine whether MSB requirements will play
a role in how the new activity is integrated into the business.
In addition to integrating MSB services, a business must
be aware of the federal requirements for registration, reporting,
and compliance programs.
All MSBs are required to register with the Financial Crimes
Enforcement Network (FinCEN) using Form FinCEN 107, Registration
of Money Services Business. The only exemptions from this
requirement are government agencies; the U.S. Postal Service;
an issuer, seller, or redeemer of stored value; an agent
of an MSB; and a branch office of an MSB. MSBs are required
to keep a copy of the FinCEN registration and supporting
documentation for five years.
Reports required of MSBs usually fall into two categories:
currency transaction reports and suspicious activity reports:
Currency transaction reports (CTR): FinCEN Form 104, Currency
Transaction Report; or FinCEN Form 103, Currency Transaction
Report by Casinos, are required for currency-in or currency-out
transactions in excess of $10,000. Because same-day individual
transactions well below the $10,000 reporting threshold
can easily add up to the reportable amount, accurate records
are critical to maintaining proper reporting.
Suspicious activity reports (SAR): Once required only
of banks and other traditional financial institutions,
SARs provide the primary tool for criminal investigations
into money laundering and are the responsibility of any
MSB that knows, suspects, or has reason to suspect that
a transaction, or pattern of transactions, involving a
certain dollar amount is suspicious.
must be mindful of customers operating outside the box,
which may mean they are trying to use the MSB to circumvent
the system. In most cases, SARs must be filed no later than
30 days after the date that the suspicious activity occurred.
FinCEN provides a guide on its website, www.FinCEN.gov,
designed to help MSBs provide useful information if an investigation
programs. Every MSB is required to develop
and implement an anti–money laundering compliance
program designed to ensure that a business meets BSA guidelines
for proper recordkeeping, proper reporting of certain transactions,
and proper policies and procedures to prevent the use of
the business to launder money.
and tax experts agree that the key components of an anti–money
laundering compliance program include:
Policies and procedures that establish the anti–money
A compliance officer tasked with enforcing policies and
procedures, educating employees, and maintaining daily
A training program to educate all employees about BSA
requirements and MSB transactions of any size; and
Regular, independent audits of the anti–money laundering
provides guidance for the creation of MSB compliance programs
on its website, www.FinCEN.gov.
H. Fishman, CPA, CFE, is a principal in the firm
Fishman Associates. He is currently the vice-chair of National
Conference of CPA Practitioners’ (NCCPAP) national tax
committe. He can be contacted at email@example.com.