Money Services Business (MSB)

What Is a Money Services Business?

A money services business (MSB) is a non-bank financial institution that provides services such as money transmission, currency exchange or check cashing. MSBs range from global remittance companies and online payment firms to a single currency exchange counter or a corner shop that cashes checks.

The term has a specific legal meaning in the United States. Under FinCEN's regulations implementing the Bank Secrecy Act, MSB categories include:

• Money transmitters, which accept currency, funds or value from one person and transmit it to another location or person
• Dealers in foreign exchange
• Check cashers
• Issuers or sellers of traveler's checks or money orders
• Providers and sellers of prepaid access

Money transmitters are covered regardless of the amount of their activity. For dealers in foreign exchange, check cashers and issuers or sellers of traveler's checks or money orders, a business generally falls within the definition only if it conducts more than $1,000 of that activity for any one person on any day. Banks and persons registered with and functionally regulated by the SEC or CFTC are excluded.

The term is also used in the United Kingdom, where money service businesses that are not supervised by the Financial Conduct Authority are registered with and supervised for AML purposes by HM Revenue and Customs. Other countries use their own terms, such as remittance provider or payment institution.

Why MSBs Matter

MSBs provide essential services. Remittances are a lifeline for many households, and currency exchange and check cashing serve people who use banks little or not at all. At the same time, MSBs have characteristics that attract criminal use:

• Cash intensity. Many MSBs accept large amounts of physical cash.
• Cross-border reach. Money transmitters move value internationally, sometimes to jurisdictions with weak controls.
• Occasional customers. Many customers are walk-in or one-off rather than long-term account holders, which limits how much the business knows about them.
• Agent networks. Large transmitters operate through many independent agents, whose own compliance can vary.
• Informal competitors. Unregistered transmitters and informal value transfer systems such as hawala can operate in the same communities.

Because of these risks, banks often treat MSB customers as higher risk, and the sector has been heavily affected by de-risking.

AML Obligations for MSBs in the United States

MSBs are financial institutions under the Bank Secrecy Act and carry a substantial set of obligations:

1. Registration. Most MSBs must register with FinCEN, renew registration periodically and keep a list of their agents. Sellers of prepaid access and businesses that are MSBs only as agents of another MSB have specific rules, and some are exempt from registering.
2. AML program. Every MSB must maintain a written, risk-based AML program with internal policies and controls, a designated compliance officer, training and independent review.
3. Currency transaction reports. MSBs file reports on currency transactions above $10,000, including multiple transactions that aggregate above that amount in one business day.
4. Suspicious activity reports. MSBs must report suspicious transactions involving at least $2,000, as set out in FinCEN's SAR rule for MSBs.
5. Recordkeeping. Specific records apply to funds transfers, including the requirement to pass certain information to the next institution, and to the sale of monetary instruments.
6. State licensing. Money transmitters are typically also licensed and examined by individual states.

FinCEN has issued guidance confirming that certain businesses dealing in convertible virtual currency, such as exchangers and administrators, are money transmitters and therefore MSBs.

International Expectations

FATF Recommendation 14 requires countries to license or register providers of money or value transfer services, subject them to monitoring for AML/CFT compliance, take action against unlicensed providers and require providers that use agents to license or register them or maintain a current list of them. In the European Union, comparable activity is carried out by payment institutions and e-money institutions authorized under PSD2 (Directive (EU) 2015/2366), which are obliged entities under the AML framework, including the AML Regulation (EU) 2024/1624. In the UK, the Money Laundering Regulations 2017 apply to money service businesses.

Best Practices

• Risk-assess corridors. Assess risk by sending and receiving country, not just by customer, and set limits accordingly.
• Oversee agents. Vet agents before appointment, monitor their transaction patterns and audit them on a risk basis.
• Aggregate across locations. Link transactions from the same customer across agents, channels and days to detect structuring.
• Screen senders and recipients. Screen both parties to a transfer against sanctions lists and act on matches before paying out.
• Keep identification thresholds visible. Make sure front-line staff and systems know when identification and recordkeeping requirements apply.

How on8.ai Helps

SmartSanction lets MSBs screen senders, recipients and counterparties against sanctions, PEP and risk lists through an API at the point of transfer or in batch across the customer base. Pre-KYC adds email, phone, IP and velocity checks for online onboarding.

Related Terms

• Hawala
• De-Risking
• Smurfing
• SAR (Suspicious Activity Report)
• Cross-Border Transactions
• Alternate Payment Methods (APM)