FinCEN has issued two new letters in its series of fact-specific rulings that analyze when an entity qualifies as a “money transmitter” and therefore a “money services business.”
In a May 21, 2008 ruling, FinCEN concluded that a payment processor accepting payments from consumers on behalf of merchants to whom the consumers owed money did not qualify as a money transmitter. Under the facts addressed, the processor acted as an authorized agent of the merchant for the limited purpose of receiving consumer utility payments. In reaching its conclusion, FinCEN was influenced by the fact that the payment processor: (1) was an agent of the merchant, not the consumer; (2) accepted only funds on behalf of those entities with whom it contracted; and (3) declined to accept and transmit funds for any other purpose.
By contrast, on May 28 2008, FinCEN ruled that a company engaged in the business of providing consumers with “substitute” credit/debit cards for one-time, on-line purchases was engaged in money transmission and therefore met the definition of a money services business under FinCEN regulations. The “replacement card” product was designed for the purpose of protecting a consumer’s personal and financial information. FinCEN ruled that the company must register as a money services business because it is engaged in the business of offering secure money transmission, and the privacy component of the product was ancillary to the actual money transmission.