Progress on the MSB Front
In a recent decision, the US District Court for the Eastern District of Michigan held that the defendant did not have to know that conducting an unlicensed money transmitting business was illegal in order to be subject to penalties.
The defendant, Mohammed Islam Uddin argued that his ignorance of the requirement to register was an adequate defense. The court rejected his argument taking note of changes to the law contained in the USA PATRIOT Act. Knowledge of the requirement and thus intent to violate the law is not a requirement. Instead, simply operating the MSB without registering with FinCEN is all that is necessary to trigger a penalty. The government need only allege that the defendant knew that he was operating a money transmitting business and knew that the business did not have a license or registration.
In addition to clarifying the level of proof needed to support a violation, the court has also provided some clarity on where the responsibility to register the MSB lies. This case should help financial institutions dealing with examiners who attempt to place all responsibilities on them rather than the MSB.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 5, 4/05
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