US moves to regulate Offshore Money Service Businesses/Exchangers

[idev]

On July 21, 2011, the Financial Crimes Enforcement Network (FinCEN) published in the Federal Register a final rule on definitions and other regulations relating to money services businesses (Final Rule).1 The Final Rule amended the definition of "money services business" at 31 CFR 1010.100(ff). An entity may now qualify as a money services business (MSB) under the Bank Secrecy Act (BSA) regulations based on its activities within the United States, even if none of its agents, agencies, branches or offices are physically located in the United States. The Final Rule arose in part from the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations.2 FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of the person's physical location.

FinCEN is issuing this Advisory to advise financial institutions of their obligations under the BSA when providing financial services to foreign-located MSBs. Financial institutions should note the following:

To qualify as an MSB, a person, wherever located, must do business, wholly or in substantial part within the United States , in one or more of the capacities listed in 31 CFR 1010.100(ff).3 Relevant factors include whether the foreign-located person, whether or not on a regular basis or as an organized or licensed business concern, is providing services to customers located in the United States.
     
Foreign-located MSBs are financial institutions under the BSA. With respect to their activities in the United States, foreign-located MSBs must comply with recordkeeping, reporting, and anti-money laundering (AML) program requirements under the BSA. They must also register with FinCEN.4
       
Foreign-located MSBs are subject to the same civil and criminal penalties for violations of the BSA and its implementing regulations as MSBs with a physical presence in the United States.
       
The Final Rule requires each foreign-located MSB to appoint a person residing in the United States as an agent for service of legal process with respect to compliance with the BSA and its implementing regulations.
     
The Final Rule became effective on September 19, 2011. Reporting, recordkeeping and AML program requirements under the BSA now apply to foreign-located MSBs. However, registration and the appointment of an agent for service of legal process will not be required until the revised registration form is available, which is currently planned for release in early March 2012.

Guidance

Financial institutions may find it necessary to update their AML programs if they provide financial services to foreign-located MSBs or engage in financial transactions with these entities.5 Financial institutions may find previously issued Guidance and Advisories helpful when incorporating foreign-located MSBs into their AML policies and procedures. In 2005, FinCEN and the federal banking agencies issued guidance (Joint Guidance) on providing financial services to MSBs operating in the United States.6 Additionally, financial institutions may find FinCEN's 2010 Advisory on informal value transfer systems (IVTS) to be useful in determining if their customers are operating as unregistered money transmitters.7

Suspicious Activity Reporting

Consistent with the standard for reporting suspicious activity under the BSA, if a financial institution knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity or appears to be indicative of money laundering, terrorist financing, or other violation of law or regulation, the financial institution should file a suspicious activity report (SAR).8 As noted in the Joint Guidance, financial institutions that provide banking services to MSBs should file a SAR if they become aware that their customers are operating as unregistered or unlicensed MSBs.9

Questions or comments regarding the contents of this Advisory should be addressed to the FinCEN Regulatory Helpline at 800-949-2732. Financial institutions wanting to report suspicious transactions that may relate to terrorist activity should call the Financial Institutions Toll-Free Hotline at (866) 556-3974 (7 days a week, 24 hours a day). The purpose of the hotline is to expedite the delivery of this information to law enforcement. Financial institutions should immediately report any imminent threat to local-area law enforcement officials.

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[BitBlitz]

Breaking News............................(from July)

[Stephen Gornick]

Combine that with today's release of the FATF recommendations though and there is news today:

From the glossary:

Funds:
The term funds refers to assets of every kind, whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such assets.

Money or value Money or value transfer services (MVTS):
Refers to financial services that involve transfer service the acceptance of cash, cheques, other monetary instruments or other stores of value and the payment of a corresponding sum in cash or other form to a beneficiary by means of a communication, message, transfer, or through a clearing network to which the MVTS provider belongs.

Transactions performed by such services can involve one or more intermediaries and a final payment to a third party, and may include any new payment methods.

Sometimes these services have ties to particular geographic regions and are described using a variety of specific terms, including hawala, hundi, and fei-chen.

Then:

14. Money or value transfer services
Countries should take measures to ensure that natural or legal persons that provide money or value transfer services (MVTS) are licensed or registered, and subject to effective systems for monitoring and ensuring compliance with the relevant measures called for in the FATF Recommendations. Countries should take action to identify natural or legal persons that carry out MVTS without a license or registration, and to apply appropriate sanctions.

15. New technologies
Countries and financial institutions should identify and assess the money laundering or terrorist financing risks that may arise in relation to (a) the development of new products and new business practices, including new delivery mechanisms, and (b) the use of new or developing technologies for both new and pre-existing products. In the case of financial institutions, such a risk assessment should take place prior to the launch of the new products, business practices or the use of new or developing technologies. They should take appropriate measures to manage and mitigate those risks.

 - http://www.fatf-gafi.org/document/17/0,3746,en_32250379_32236920_49656209_1_1_1_1,00.html
 - http://www.fatf-gafi.org/dataoecd/49/29/49684543.pdf

[Boussac]

This is censorship at its worst:
"In the case of financial institutions, such a risk assessment should take place PRIOR to the launch of the new products, business practices or the use of new or developing technologies."

Its becoming so obvious that this so-called FATF is using issues such as terrorism and money laundering to protect the crooks who operate the world'sfinancial systems AT ALL COSTS.
Tey would rule out any competition or innovation for the next hundred years if they could.
They are the root cause of terrorism by maintaining a system of political corruption and privileges that leads to despair and desperate actions.

[triplehelix]

what are the proposed repercussions if a foreign financial institute decides they only need to obey the legislation of their home country?