MSB License Requirements FAQ

A Money Services Business (MSB) is a financial services provider that falls under specific categories defined by the Bank Secrecy Act (BSA) and FinCEN regulations at 31 CFR 1010.100(ff). You must register as an MSB with FinCEN if your business operates as:

• A currency dealer or exchanger
• A check casher (exceeding $1,000 per person per day)
• An issuer, seller, or redeemer of money orders or traveler's checks
• A provider or seller of prepaid access
• A money transmitter (including cryptocurrency businesses)
• The U.S. Postal Service

Registration is required regardless of business size, with very limited exceptions for banks and certain agents. Any person or entity that engages in money transmission as a business, whether or not on a regular basis or as an organized business, must register. Failure to register is a federal crime under 18 U.S.C. 1960.

The registration requirement applies to businesses physically located in the United States, as well as foreign-located businesses that provide MSB services to U.S. persons.

Registering as an MSB with FinCEN involves a straightforward process that can be completed online:

Step 1: Gather required information including your business legal name, DBA names, EIN, business address, ownership information for anyone holding 25% or more, and details about your MSB activities.

Step 2: Create an account on the FinCEN BSA E-Filing System at bsaefiling.fincen.treas.gov.

Step 3: Complete FinCEN Form 107 (Registration of Money Services Business) electronically, specifying which MSB activities you conduct and the states where you operate.

Step 4: Submit the form - there is no filing fee for MSB registration.

Step 5: Receive confirmation - FinCEN will acknowledge receipt and you will receive documentation of your registration status.

Your registration becomes effective upon filing. You must renew your registration every two years by the end of December. Additionally, you must update your registration within 180 days of any change to the information provided, such as ownership changes, new activities, or expansion to new states.

Operating as an unregistered MSB carries severe criminal and civil penalties under federal law:

• Criminal penalties under 18 U.S.C. 1960: Operating an unlicensed money transmitting business is a federal felony punishable by up to 5 years in prison and fines up to $250,000 for individuals
• Civil penalties under 31 U.S.C. 5330: For willful violations of BSA registration requirements, civil penalties can reach $5,000 per violation, with each day of non-compliance potentially constituting a separate violation
• Enhanced criminal penalties: Willful BSA violations can include fines up to $250,000 and imprisonment up to 5 years, or $500,000 and 10 years for violations involving other criminal activity

The government has aggressively prosecuted unregistered MSBs, particularly in the cryptocurrency space. Cases like United States v. Faiella and United States v. Murgio demonstrate that prosecutors pursue unlicensed money transmission charges even when the operator was unaware of registration requirements.

Additionally, state regulators can impose separate penalties for operating without required state money transmitter licenses, which can include cease and desist orders, additional fines, and criminal prosecution.

Yes, in most cases you need both federal MSB registration with FinCEN AND state money transmitter licenses in each state where you conduct business. Federal registration and state licensing are separate requirements that operate independently.

FinCEN registration is a one-time federal requirement with no fee, while state licensing typically requires:

• Separate applications for each state
• Significant fees (often $1,000-$50,000+ per state)
• Surety bonds ($25,000 to several million dollars depending on the state)
• Ongoing compliance obligations and examinations

Currently, 49 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have money transmitter licensing laws - only Montana has no state-level money transmitter licensing requirement.

Many businesses use the Nationwide Multistate Licensing System (NMLS) to streamline applications across multiple states, though not all states participate. State licenses typically require detailed business plans, financial statements, background checks on officers and directors, AML/BSA compliance programs, and minimum net worth requirements.

Several states stand out for particularly rigorous money transmitter licensing requirements:

• New York: Widely considered the most demanding, requiring a BitLicense for cryptocurrency businesses (separate from money transmitter license), with extensive application requirements, significant capital requirements, and ongoing supervision by the Department of Financial Services
• California: Requires a license through the DFPI with bonds starting at $250,000 and extensive financial requirements
• Texas: Has robust examination procedures and requires a minimum net worth of $300,000
• Washington State: Has strict requirements including detailed business plans, significant surety bonds, and was an early regulator of cryptocurrency transmitters
• Connecticut, Louisiana, and Arizona: Also have comprehensive requirements with substantial compliance obligations

States vary significantly in their approach: some like Wyoming and Nebraska have created more favorable regulatory frameworks for fintech and cryptocurrency businesses. The Conference of State Bank Supervisors (CSBS) has developed model language and the NMLS system to improve uniformity, but substantial differences remain.

When planning a licensing strategy, businesses often prioritize states based on market opportunity while considering regulatory complexity and cost. Working with experienced compliance counsel is essential for navigating state-by-state requirements.

Yes, most cryptocurrency businesses must register as MSBs with FinCEN. In 2013, FinCEN issued guidance (FIN-2013-G001) clarifying that exchangers and administrators of convertible virtual currencies are money transmitters and must register as MSBs. This includes:

• Cryptocurrency exchanges
• Bitcoin ATM operators
• Peer-to-peer trading platforms
• Cryptocurrency payment processors
• Businesses that buy or sell virtual currency for fiat or other virtual currencies

In 2019, FinCEN reinforced this guidance (FIN-2019-G001), confirming that the regulatory framework applies based on the nature of the financial activity, not the technology used. Cryptocurrency businesses must implement comprehensive AML/BSA compliance programs, file Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs), maintain records for five years, and comply with the Travel Rule for transfers over $3,000.

Some limited exceptions may apply: users who obtain virtual currency solely for purchasing goods and services are not MSBs; software developers creating wallets or protocols may not be MSBs if they do not also engage in transmission; and miners generally are not considered MSBs unless they also engage in exchange or transmission activities. However, the line between exempt and regulated activity can be unclear, making legal consultation essential.

Registered MSBs face substantial ongoing compliance obligations under the Bank Secrecy Act and FinCEN regulations. Core requirements include:

• AML Program (31 CFR 1022.210): Developing and implementing a written Anti-Money Laundering program with internal controls, independent testing, designated compliance officer, and employee training
• Currency Transaction Reports (31 CFR 1010.311): Filing CTRs for cash transactions exceeding $10,000
• Suspicious Activity Reports (31 CFR 1022.320): Filing SARs for transactions of $2,000 or more involving suspected illegal activity
• Travel Rule (31 CFR 1010.410): Maintaining records of transmittals of funds of $3,000 or more, including transmission of customer information to receiving institutions
• Recordkeeping: Retaining records for at least five years
• 314(a) Requests: Responding to law enforcement information sharing requests

MSBs must also renew their FinCEN registration every two years by December 31 and update registration within 180 days of any material changes. State-licensed MSBs have additional state-level reporting requirements, typically including quarterly or annual financial reports, call reports through NMLS, and periodic examinations.

Non-compliance can result in significant civil monetary penalties, criminal prosecution, and loss of banking relationships, making robust compliance infrastructure essential.

Limited exemptions from MSB registration exist, but they are narrow and strictly interpreted:

• Banks and bank holding companies: Regulated by federal banking agencies are exempt from MSB registration, as their activities are already subject to BSA compliance through their primary regulators
• Agents of MSBs: Generally not required to register separately if they operate under the principal MSB's registration, though the principal remains responsible for the agent's compliance
• Payment processor exemption: May apply to entities that only process payments on behalf of others without taking control of funds, but this exemption is narrow and frequently misapplied

FinCEN has issued rulings clarifying that many businesses claiming the payment processor exemption are actually money transmitters. Some states offer limited exemptions for specific activities, authorized delegates, or businesses below certain transaction thresholds.

For cryptocurrency businesses, miners and certain software developers may fall outside the MSB definition depending on their specific activities. However, the agent exemption has important limitations and does not always apply at the state level.

Due to the severe penalties for incorrect analysis and aggressive enforcement, any business considering relying on an exemption should obtain a formal legal opinion and consider requesting a FinCEN administrative ruling for definitive guidance on their specific business model.

Federal MSB Registration: Relatively quick - the online registration through the BSA E-Filing System can be completed in one session and becomes effective immediately upon submission, typically taking only a few hours to a few days to prepare and file.

State Money Transmitter Licensing: A significantly longer process with timelines that vary dramatically:

• Straightforward applications in faster states may be approved in 3-6 months
• Complex applications or states with backlogs can take 12-18 months or longer
• New York BitLicense applications have historically taken 1-3+ years in some cases

Factors affecting timeline include: completeness of the initial application; background check processing for all control persons; state regulatory workload and staffing; complexity of your business model; quality of your AML/BSA compliance program documentation; and whether additional information requests are needed.

To minimize delays: prepare all required documents before starting applications; ensure background check forms are completed accurately; respond to regulator requests promptly and completely; consider using NMLS for states that participate; and engage experienced licensing counsel who understand each state's specific requirements. Many businesses pursue a phased licensing strategy, prioritizing key states for initial launch while continuing applications in remaining jurisdictions.

MSB registration and money transmitter licensing are distinct regulatory requirements at different government levels:

MSB Registration (Federal - FinCEN):

• A registration (not a license) under the Bank Secrecy Act
• No filing fee
• Requires no prior approval to begin operating
• Has no financial requirements like bonding or net worth
• Primarily creates reporting and recordkeeping obligations
• All MSBs nationwide file the same Form 107
• Registration becomes effective immediately upon filing

Money Transmitter License (State Level):

• A license requiring prior approval before operating
• Involves substantial application fees and ongoing assessments
• Requires surety bonds (typically $25,000 to several million)
• Mandates minimum net worth requirements
• Involves detailed business plan review and background checks
• Must be renewed periodically (usually annually)

You typically need both: federal registration AND state licenses in each state where you operate. The federal registration enables BSA compliance reporting, while state licenses provide consumer protection and authorize you to conduct money transmission in that state. Operating without state licenses - even if federally registered - violates state law and potentially federal law under 18 U.S.C. 1960, which criminalizes operating without required state licenses.