Pigeon Drop Scam

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Question:

In consideration of 31 CFR 103 concerning MSBs, does "money transmitters" include online companies that offer international wire transfer services to businesses? They do not deal in actually physical currencies. Also, why would online bill payment services not meet the criteria for money transmitters given the regulatory definition? It is not backed by actual currency, but would be classified as "any other person engaged as a business in the transfer of funds." Also, since payments can be made to just about anyone, it is not verifiable that the payment is the execution and settlement of a transaction other than the funds transmission itself.

Answer:

FinCEN has not directly addressed the issue of online companies that transfer funds internationally. However, they have addressed online bill payment services (see Merchant Payment Processor letter dated November 19, 2003 http://www.msb.gov/pdf/fincenruling2003-8.pdf). Based on this guidance, merchant payment processors do not meet the MSB definition.

Online companies that offer international wire transfer services might not be as lucky. Currently the definition states:

"they engage as a business in accepting currency, or funds denominated in currency, and transmit the currency or funds, or the value of the currency or funds, by any means through a financial agency or institution, a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both, or an electronic funds transfer network,” or “any other person engaged as a business in the transfer of funds.”

We may need more guidance from FinCEN before we make a true determination.

First published on BankersOnline.com 2/6/06