Overview
If your trading platform is classified as a Money Services Business (MSB), you're subject to the Bank Secrecy Act (BSA) and must implement an Anti-Money Laundering (AML) program under FinCEN regulations.
This applies to platforms that transmit money, exchange currencies (including crypto), cash checks, or issue stored value.
⚠ Federal Crime
Operating an unregistered MSB is a federal crime under 18 U.S.C. 1960. Willful violations of AML requirements can result in criminal penalties and massive fines.
Are You an MSB?
FinCEN defines several categories of MSBs. For trading platforms, the most relevant are:
- Money Transmitter - Accepting and transmitting currency or value
- Currency Exchanger - Exchanging currency (including crypto)
- Currency Dealer - Dealing in currency or crypto for profit
💡 Crypto Exchanges
FinCEN has clarified that exchangers and administrators of convertible virtual currency are money transmitters. This includes crypto exchanges, OTC desks, and certain DeFi protocols with identifiable operators.
FinCEN Registration
All MSBs must register with FinCEN within 180 days of starting operations. Registration is:
- Free - No filing fee
- Online - Through FinCEN's BSA E-Filing system
- Renewal required - Every 2 years
- Update required - Within 180 days of material changes
Required AML Program
Every MSB must implement a written AML program with five pillars:
1. Internal Policies and Procedures
Written policies addressing how you identify, monitor, and report suspicious activity.
2. Designated Compliance Officer
A person responsible for day-to-day compliance. They must have authority and resources to implement the program.
3. Training Program
Ongoing training for all employees who handle transactions or customers.
4. Independent Testing
Regular audits of your AML program by independent parties.
5. Customer Identification (KYC)
Procedures to verify customer identity before providing services.
Reporting Requirements
| Report | Trigger | Deadline |
|---|---|---|
| SAR (Suspicious Activity Report) | Suspicious transactions over $2,000 | 30 days of detection |
| CTR (Currency Transaction Report) | Cash transactions over $10,000 | 15 days |
| FBAR | Foreign accounts over $10,000 | April 15 (extended to October) |
KYC Requirements
Customer Identification Program (CIP) minimum requirements:
- Name
- Date of birth (for individuals)
- Address
- Identification number (SSN, EIN, or government ID)
Many platforms also perform Enhanced Due Diligence (EDD) for higher-risk customers.
Recordkeeping
- Retain records of transactions over $3,000 for 5 years
- Maintain AML program documentation
- Keep SAR and CTR copies
- Document compliance decisions
Next Steps
- Determine if you're an MSB based on your activities
- Register with FinCEN (free, online)
- Develop written AML program
- Implement KYC procedures
- Set up SAR filing capability
- Train your team