On April 29, 2014, the Financial Crimes Enforcement Network (FinCEN) issued five Administrative Rulings providing clarification on how exemptions from money transmitter status may or may not apply to certain business models under the definition of money transmitter as stated in the 2011 modifications to the Bank Secrecy Act (BSA). Taken together, the five rulings consistently apply the definition of "money transmission services" and the specific exemption from money transmitter status providing useful insight to companies on how FinCEN might adjudicate different circumstances in the future.
The ruling FIN-2014-R008 considered whether a company providing an armored car coin and currency exchange service is a money transmitter and whether the armored car service exemption would apply. FinCEN ruled the latter exemption does not apply as the transaction consists of additional activity above and beyond the physical transportation of currency and/or coin; however, because the service does not involve the "acceptance and transmission of currency, funds, or other value that substitutes for currency to another location or person," FinCEN determined the company is not a money transmitter. This is because the amount of money delivered to the customer's location and then returned to the company's own vault is exactly the same.
FIN-2014-R007 deals with the specific exemption from money transmission status for persons that only provide the delivery, communication, or network data access services used by a money transmitter to supply money transmission services. In this instance, FinCEN examined the case of a company that rents a computer system that mines crypto currencies to third parties. As the third party benefits directly and exclusively from the mining work, renting such equipment, in and of itself, does not make the company a money transmitter.
FIN-2014-R005 and FIN-2014-R004 are similar in that both companies facilitate internet-based transactions to buyers and sellers. The former provides escrow services to individuals and companies, while the latter offers secure transaction management for goods and services. The companies were ruled as not being money transmitters because the acceptance and transmission of funds in both cases does not constitute a separate and discrete service in addition to the underlying transaction; they are a necessary and integral part of the service itself. This is because both companies, as part of their service, ensure the terms and conditions of the transaction are met protecting the interests of both parties. In support of this conclusion, FinCEN cited Ruling 2004-4, in which a debt management company was found not to be a money transmitter for the very same reason. In that case, the payment negotiated was binding on the creditor and debtor and required the debt management company as the payment processor.
FIN-2014-R006 represents the opposite of R005 and R006. The company also provides on-line transactions, in this case for real-time deposit, settlement, and payment services to banks and consumers. The key difference is that the company does not provide any verification or validation of the transaction; they are effectively 'neutral' when it comes to the actual discharge of their service. For this reason, FinCEN ruled the company was a money transmitter because they were not integral to the transaction.
Determining your status as a money transmitter is necessary because money transmitters must register as a money services business (MSB) under the BSA.