FinCEN and MSBs
In recent days, the Financial Crimes Enforcement Network (FinCEN), an agency of the U.S. Department of the Treasury, announced an enforcement operation targeting more than 100 Money Services Businesses (MSBs) operating in the country.
The focus is on companies that provide financial services outside the traditional banking system and may be failing to comply with anti-money laundering regulations.
In many cases, the issue is not necessarily an intention to violate the law, but something more common: companies that do not fully understand the regulatory framework in which they operate.
What Is an MSB?
A Money Services Business is a company that provides certain financial services that are not typically performed by banks.
The most common services include:
Money transmission
Remittance services
Currency exchange
Management of third-party funds
Certain services related to crypto assets
Many fintech companies or structures used by international entrepreneurs may fall within this category without realizing it.
When this occurs, the company becomes subject to regulatory obligations under the Bank Secrecy Act, including compliance programs and mandatory reporting to the authorities.
What Is FinCEN Investigating?
The operation announced by FinCEN is based on the analysis of large volumes of financial information reported to the government.
Based on this analysis, the authorities identified patterns that may be linked to:
Money laundering
Structures used to move funds between countries
Failures in financial compliance programs
As a result, investigation notices, referrals to the IRS, and warning letters regarding regulatory compliance have already been issued.
The Key Point: Many Companies Do Not Know They Are MSBs
This is one of the most relevant issues.
In practice, many companies begin operating business models that include payment processing, remittances, or the management of third-party funds without determining whether those activities make them regulated businesses.
From the regulator’s perspective, however, what matters is the activity performed by the company—not how the company describes itself.
What Does This Mean for Fintech Companies and International Structures?
For companies that use U.S. entities to move money internationally, these regulatory actions send a clear message: the level of oversight is increasing.
Before launching a business model involving money transmission or the management of third-party funds, it is essential to determine whether the company may be considered a Money Services Business and which regulatory obligations may apply.
