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What is a Money Services Business (MSB)?
A Money Services Business (MSB) is a business that offers one or more of the following services:
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money orders
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traveler’s checks
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stored value
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check cashing
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currency dealing
AND
The business conducts more than $1,000 in money services business activity with the same person (in one type of activity) on the same day.
OR
The business provides money transfer services in any amount.
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Are all money services businesses required to file Suspicious Activity Reports (SARs)?
No, only money transmitters; issuers, sellers, and redeemers of money orders and traveler’s checks; currency exchangers or dealers; and the United States Postal Service are required to file SARs. Check cashers and issuers, sellers, or redeemers of stored value are not required to file SARs, but they can voluntarily file SARs.
- When is an MSB required to file a SAR?
An MSB identified in question two must file a SAR on a transaction or series of transactions conducted or attempted by, at, or through the MSB if both of the following occur:
- The transaction or series of transactions involves or aggregates funds or other assets of $2,000 or more, AND
- The MSB knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part) falls into one or more of the following categories:
- It involves funds derived from illegal activity, or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade any federal law or regulation, or to avoid any transaction reporting requirement under federal law or regulation; or
- Is designed to evade any BSA regulations; or
- Has no business or apparent lawful purpose, or is not the sort in which the particular customer would normally be expected to engage, and the MSB knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or
- Involves use of the money services business to facilitate criminal activity.
An issuer of money orders or traveler’s checks is required to report a transaction or pattern of transactions that involves or aggregates funds or other assets of $5,000 or more when that establishment identifies the transaction(s) as suspicious from its review of clearance records or other similar records of money orders or traveler’s checks that it has sold or processed.
An MSB is required to file each SAR no later than 30 calendar days after the date of the initial detection by the MSB of facts that may constitute a basis for filing a SAR.
An MSB may voluntarily file a SAR for a suspicious activity in situations where reporting is not required.
- Why is SAR information important?
The SARs provide law enforcement agencies with a paper trail to investigate illegal activities, including money laundering and terrorism. SARs are one of the government’s main weapons in the battle against money laundering and other financial crimes.
- How does an MSB comply with the law?
The MSB needs to file FinCEN Form 109 (PDF), Suspicious Activity Report by Money Services Business, within 30 calendar days of the suspicious transaction.
If the MSB suspects that a customer’s transactions may be linked to terrorist activity, the MSB should immediately call the Financial Institutions Hotline at (800) 556-3974.
In addition, an appropriate law enforcement official should be informed in situations that require immediate attention.
- Where are the SAR forms available?
FinCEN Form 109 (PDF) is available on the Internet at:
or by telephone from the IRS Forms Distribution Center at (800) 829-3676.
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Where does the MSB file SARs?
An MSB should send completed paper reports to:
Detroit Computing Center
ATTN: SAR-MSB
P.O. Box 33117
Detroit, MI 48232-5980
An MSB can also file reports electronically. For more information on BSA e-filing, visit FinCEN.gov.
- What should the narrative section (Part VII) of the SAR include?
The narrative section is one of the most critical sections of the form. Information about the activity should be as complete as possible, and:
- Describe what is unusual, irregular or suspicious
- Describe conduct that raised suspicion
- Explain if transaction was attempted or completed
- Explain who benefited from transaction
- Describe/retain explanation provided by subject
- Describe the subject
- Describe and retain any evidence
- Include any correspondent bank name/account information; names/locations of business entities; names of cities, countries and foreign financial institutions linked to the transaction, especially if funds transfer activity is involved; and account numbers and beneficiary names.
It is also essential to provide descriptive information about the suspect.
An MSB should not include attachments in place of a narrative. Attachments are supporting documents for its own records.
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What happens if an MSB does not comply with the law?
The law may impose civil and criminal penalties against businesses and their employees who fail to comply with the law. Penalties may be assessed for:
- Failure to secure identifying information
- Failure to maintain required records
- Failure to file a report or filing a report containing any material omission or misstatement
A civil penalty of $500 may be asserted against a financial institution for failure to file a SAR due to negligence. A civil penalty for willful failure to file a SAR can be asserted against any domestic financial institution and its partners, directors, officers, or employees in the amount of the transaction (not to exceed $100,000), or $25,000, whichever is greater. The penalty for recordkeeping violations can be up to $1,000 per violation.
Criminally, a person may be subject to a fine of $250,000 or imprisoned up to five years for failure to file a SAR. If the violation is committed during a violation of another federal law or as a pattern of illegal activity involving transactions exceeding $100,000 in any 12-month period, the fine is increased up to $500,000 and/or ten years in prison. In addition, any person who knowingly makes any false, fictitious or fraudulent statement or representation in the SAR may be fined up to $10,000 and/or imprisoned up to five years. For recordkeeping violations, the penalty may not exceed $1,000 per violation and/or up to one year in prison. The fine increases to $10,000 and/or up to five years in prison if committed in furtherance of another Federal crime.
- An MSB or its employees may be worried about damaging someone’s reputation or getting someone in trouble if they are wrong about a transaction being suspicious. What happens to SARs after they are filed and who looks at them?
A SAR is not an accusation against someone or an allegation that they have committed a crime. A SAR indicates that a transaction may be suspicious. SARs are not disseminated to the public; rather, they are provided only to appropriate law enforcement and financial supervisory agencies.
- What protection does an MSB and its employees have against being sued by a customer for filing a SAR?
Federal law (31 U.S.C. 5318(g)(3)) provides a “safe harbor” or protection from civil liability to financial institutions and their directors, officers, employees or agents that report suspicious activity to FinCEN or appropriate law enforcement or supervisory agencies. A financial institution is prohibited from notifying any person involved in the transaction that the transaction was reported on a SAR (31 USC 5318(g)(2)). If you receive a subpoena for a SAR, or a request of any kind to produce a copy of a SAR (other than a request by FinCEN, or an appropriate law enforcement or supervisory agency), you should contact FinCEN’s Office of Chief Counsel at (703) 905-3590 immediately; federally regulated depository institutions should also contact their regulator.
- How long does an MSB need to keep records?
An MSB must keep a copy of the SAR and supporting documentation for five years from the date of filing.
A business must make all supporting documentation available to FinCEN and any appropriate law enforcement agencies or regulatory authorities. If a business receives a subpoena for a SAR, or a request of any kind to produce a copy of a SAR (other than a request by FinCEN, or an appropriate law enforcement or supervisory agency), the business should contact FinCEN’s Office of Chief Counsel at (703) 905-3590 immediately.
- Where is additional information available concerning SAR reports and MSBs?
Answers to questions about filing a SAR are available through the IRS Detroit Computing Center at (800) 800-2877.
Free MSB guidance material is available at the MSB Web site or through the MSB Outreach office at (800) 386-6329.
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