A money services business (MSB) is a legal term financial regulators use to describe companies that transmit or convert money. The definition was created to encompass more than just banks that generally provide these services including non-bank financial institutions.
A money service company is a type of non-bank financial institution that allows customers to exchange products and services, store value, and transfer money. Money service businesses are subject to the same AML rules and the Bank Secrecy Act (BSA) as banks. MSB is a catch-all phrase for banking services. The Financial Action Task Force (FATF) updated its risk evaluation of remittance and money transmission businesses in 2016. Any financial service that distributes money to clients in cash or through a transaction is referred to as a money transfer business. To qualify as an MSB, the purchase must have a value greater than or equal to 1,000 USD. (2)
An MSB provides a significant financial service to underdeveloped regions that frequently have few or no banking services. For example, a small company with outlets of markets, pharmacies, and retailers,
MSBs offer these businesses and people a wide range of services. Several of these programs include;
- Money Transfer
- Currency exchange
- Remittance services
- Selling cash checks
- Offering payment services comparable to those for services, taxes, and insurance fees
- Providing intermediary payments
- Serving as a dealer, broker, or exchange agent
- Offering supplementary financial services to businesses, such as microloans, car loans, crowdfunding, online markets, and investment services
Although MBSs offer a variety of banking services, they are not banks. Banks have distinct customers and offers than MBSs do. MBSs give customers bank options. Despite not being banks, MSBs must abide by the regulations that national and international regulators place on banks.
Due to the lack of traceability of cash and one-off deals, MBSs are susceptible to money laundering. MSBs are needed to have anti-money laundering compliance programs in order to adhere to rules and ensure that necessary information is shared between interested parties during transactions.
Money service providers can identify suspicious clients and transactions in a variety of methods. FAFT guidelines, which establish universal AML / CFT compliance standards, are followed by high-risk jurisdictions.
MBSs should use Know Your Customer (KYC) services to conduct background checks. High-value trades are another illustration; MBSs should exercise greater caution when engaging in these transactions.
More detailed information about KYC and AML you can read in our article: Identity verification and risk assessment: what is KYC and AML
MBSs must scan their clients using screening services to find any potential risks they may pose. Additionally, MBSs must adhere to various regulations based on their location and sort of business.
Collect & Pay is a licensed fintech company that is a Money Service Provider. We offer a full range of banking services for companies from different countries and industries. Contact us to get more information about the services that we have and how we can help your company – contact@collectnpay.com