CUNA Comment Letter

Proposed Rulemaking on Definitions and Other Regulations Relating to Money Services Businesses

September 9, 2009

Financial Crimes Enforcement Network
Department of Treasury
Post Office Box 39
Vienna, Virginia 22183

RE: RIN 1506-AA97, Proposed Rulemaking on Definitions and Other Regulations Relating to Money Services Businesses

To Whom It May Concern:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Financial Crimes Enforcement Network’s (FinCEN’s) proposed rule on the definition of Money Services Businesses (MSBs) and other related provisions. By way of background, CUNA represents approximately 90 percent of our nation’s 8,000 state and federal credit unions, which serve approximately 92 million members.

FinCEN is proposing to update its MSB regulations and definitions to reflect past guidance, rulings, current business operations, and evolving technologies, as well as to bring certain foreign-located MSBs with a United States (U.S.) presence under the purview of the regulations. In addition, the proposal incorporates a minor change to the stored value product regulations and seeks comments for substantive changes envisioned at a later date.



Clarification of Definitions

Currently, there is a great deal of confusion within the financial sector, as well as in the marketplace as to what types of business and/or activities fall under the purview of the MSB regulations. CUNA commends FinCEN’s efforts to minimize this confusion by addressing some of the more perplexing concepts in this rule. For example, the proposed rule incorporates a new term “doing business” to make clear that the type of activity in which a person engages determines whether or not that person falls within the definition of MSB. Additionally, under the proposed rule, the term “dealer in foreign exchange” is added with the intention of capturing the activity of all individuals (dealers and brokers) engaged in foreign exchange activities, as well as to make clear that this definition encompasses exchanges involving currency, monetary instruments and other payment instruments that fall outside of these categories. Also, the rule updates other definitions to reflect actual, present-day. For example, “money transmitter” is updated to capture both formal and informal money transmission activities.

CUNA generally agrees that these amendments to the MSB definitions will assist financial institutions to determine which individuals and business activities are covered by the MSB regulations, as well as assist institutions in managing the risks involved in serving those individuals or businesses.

In addition, CUNA believes that the proposed change to include foreign-located businesses addresses the realities of the financial industry today. This term is intended to bring certain foreign-located businesses that conduct business in the U.S. within the scope of the regulations. We believe this change will close a significant loophole in the MSB regulation.

Dollar Threshold

CUNA generally supports FinCEN’s review of the $1000 per person, per day threshold applicable to certain categories of MSBs. CUNA believes it is important to review regulations on an ongoing basis to determine if they continue to be as effective as initially intended. However, we are concerned that substantially lowering the threshold could result in additional burdens for institutions. Lowering the threshold would increase the number of businesses and individuals designated as MSBs and thus increase the risk management burden for financial institutions. In most cases, MSBs would be classified in a higher risk category than most consumers and would require a more stringent level of risk management. Ultimately, this increased level of review and management would place an additional strain on already over-taxed resources within the financial institution community.

Stored Value Products

CUNA supports FinCEN’s current review of stored value products and their proper place under the Bank Secrecy Act (BSA) regulatory scheme. Currently, there is a good deal of confusion as to how stored value products should be treated for BSA purposes and what risk management steps should be taken when dealing with such products. We believe that the comments provided will offer useful insight into how these products are being handled currently within the industry, as well as provide information on the difficulty institutions face when attempting to capture information for certain products. We would like to note that our Payments Subcommittee is currently reviewing this issue, and we hope to provide you with helpful feedback shortly. Going forward, CUNA believes that it would be better, to avoid confusion, to address the stored value issue in a stand-alone proposed rulemaking as opposed to including it in the MSB rulemaking.

Service of Legal Process

CUNA supports FinCEN’s proposal to require a service of process agent in the United States for foreign-located MSBs. We believe that this proposal merely brings foreign-located MSBs in line with other businesses that are required to provide such contact information in the event that law enforcement or regulatory agencies reach out to these companies.

Thank you for the opportunity to comment on the proposed definitions and related regulations for MSBs. If you have any questions about our comments, please do not hesitate to contact Senior Vice President and Deputy General Counsel Mary Dunn or me at (202) 638-5777.


Nichole Seabron
Federal Compliance Counsel