Consider a foreign company that takes in, via wire transfers or other bank transfers, money from Americans. This company is located in, say, Costa Rica. Under new regulations published this week in the Federal Register, that company must register with the Financial Crimes Enforcement Network (FINCEN).
First, who must register with FINCEN?
Currently, the MSB [Money Service Business] regulations apply to persons engaged in specified activities that exceed $1,000 for any person in any day (‘‘activity threshold’’). The activity threshold applies to all MSB categories except money transmitters, which do not have an activity threshold.
One change in the regulation is that foreign entities are now covered.
FinCEN proposed to amend 31 CFR 1010.100(ff) to provide that foreign located persons engaging in MSB activities in the United States are subject to the BSA rules. Specifically, FinCEN proposed to revise 31 CFR 1010.100(ff) so that an entity qualifies as an MSB based on its activity within the United States, not the physical presence of one or more of its agents, agencies, branches, or offices in the United States. This proposal arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations.
The new regulations require a foreign MSBs to register with FINCEN, and designate a US-person to accept service of papers. The new regulation goes into effect in 60 days.
So what businesses must register? “A commenter also noted that foreign banks, broker dealers, and possibly other financial institutions might be subject to the MSB regulations. FinCEN does not intend to include these institutions in the MSB definition.” That leaves foreign businesses that take in money from US customers but aren’t regulated by US regulators. One obvious category is Internet gambling.
Take an entity like Bodog. They offer sports betting and online poker to Americans. Bodog tells Americans to wire money or transfer money into various accounts outside of the United States. It’s almost certain that Bodog takes in over $1,000 a day from Americans, so they definitely fall under this regulation.
The Wire Act makes offering sports betting to Americans decidedly illegal; Bodog hasn’t been deterred in the least. I doubt this will have any impact on them. However, it may have an impact on the online poker companies that still offer games to Americans. In 60 days, there will be yet another law that can be used against them. We’ll see what happens.
Tags: FINCEN