Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

News Releases

6/17/2008 Security System For Internet Customers Is Money Transmitter, FinCEN Rules

Providing customers with greater security in making internet purchases resulted in the company providing the security being denominated a money services business by FinCEN. The security was provided in the following way. A customer wants to buy from an internet site but does not want to give any financial data to the seller in making the purchase. The customer therefore purchases a single-transaction credit card from the security company. The credit card does not have the customer’s real name, but rather a dummy name, though the card is billed to the customer’s actual shipping address. The credit limit on the single-transaction card exactly equals the amount of the customer’s purchase from the internet merchant, and the card cannot be reloaded. Thus, the information provided to the internet site from which the purchase is being made does not allow anyone who obtains access to the site’s records to steal the identity of the customer. The question posed to FinCEN by the security company was whether it was a money transmitter, and therefore a money services business. Though consumers, and even the security provider itself, might regard the security provider’s activities as only secondarily involving money transmission, FinCEN found that the security company “is engaged in the business of offering secure money transmission, rather than security to which money transmission is ancillary.” FinCEN’s determination means that the security company will have to register as an MSB with FinCEN, and will have to maintain funds transfer records under the Bank Secrecy Act and file suspicious activity reports. Arguably the security company could be characterized as a seller of stored value, but such sellers are not covered by BSA SAR and registration requirements. This ruling, and others like it regarding some marginal money services businesses, will be discussed in forthcoming issues of the Monitor.

USA PATRIOT ACT MONITOR is published by Civic Research Institute, Inc., 4478 U.S. Route 27, P.O. Box 585, Kingston, NJ 08528, 609-683-4450,, as an update service for Money Laundering, Terrorism and Financial Institutions: Law · Regulation · Compliance · USA PATRIOT Act Monitor © 2004 Civic Research Institute, Inc. All rights reserved. Unauthorized copying expressly prohibited. The information in this publication is not intended to replace the services of a trained legal professional. Neither the editors, nor the contributors, nor Civic Research Institute, Inc. are by this publication engaged in rendering legal, accounting, or other professional services. The editors, contributors, and Civic Research Institute, Inc., specifically disclaim any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use or application of the contents of this publication.

<< News Releases Main Page