The SAR Activity Review Issue 12 - FinCEN

Section 5 – Industry Forum
In each issue of The SAR Activity Review, representatives from the financial
services industry offer insights into some aspect of compliance management or
fraud prevention that presents their view of how they implement the BSA within
their institutions. The Industry Forum section provides an opportunity for the
industry to share its views. The information provided may not represent the
official position of the U.S. Government.
Suspicious Activity Reporting Issues Confronting
the Money Services Business Industry
By George R. Brown V
Merle, Brown & Nakamura, P.C. for the
National Money Transmitters Association
Money service businesses have been required to file SARs for over five years
now. Even before this requirement, many MSBs were already filing SARs on a
voluntary basis. Money transmitters are a large subset of MSBs that are heavily
regulated on both the state and federal levels.
Due to the nature of this business and the lack of federal licensing requirements,
onerous and detailed state regulations have developed that require money
transmitters to obtain state issued licenses before they are permitted to engage
in business in a state. Almost every state has such a licensing requirement. In
this state licensing process, the money transmitters are almost always required
to demonstrate, among many other things, a compliance program that ensures
SAR filings will be made when required and all other federal compliance issues
are addressed.
One method of engaging in business as a money transmitter is to become an
authorized representative of another money transmitter. Basically, an authorized
representative sells another money transmitter’s product (money transfer
services) on behalf of the other money transmitter. In most cases, the authorized
representative does not have a license and is specifically permitted by state law
to engage in business as a money transmitter without a license because they
are acting as an authorized representative of another money transmitter who in
fact possesses the required state licensing. When a licensed money transmitter
engages in business through authorized representatives, the licensee is required to
demonstrate to the state licensing authorities that the authorized representatives
are fully integrated into the money transmitter’s SAR compliance program and are
independently meeting their SAR compliance requirements as well.