Audit Report

OIG-16-006

BANK SECRECY ACT

FinCEN Continues to Face Challenges with Money 

Services Businesses

November 10, 2015

Office of

Inspector General

Department of the Treasury
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Contents

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Audit Report

Results in Brief ............................................................................................... 2

Background.................................................................................................... 3

Findings......................................................................................................... 7

FinCEN Took Steps to Improve BSA Compliance by MSBs, But 

Challenges Remain with Its MSB Registration Program ......................................7

FinCEN Has Taken Action on Many IRS Referrals for Enforcement 

Action Against MSBs Although a Backlog Remained .......................................15

Recommendations..........................................................................................16

Appendices

Appendix 1: Objective, Scope, and Methodology.........................................19

Appendix 2: Management Response ..........................................................22

Appendix 3: Major Contributors to this Report.............................................24

Appendix 4: Report Distribution.................................................................25

Abbreviations

AML anti-money laundering

BSA Bank Secrecy Act

CTR currency transaction report

FinCEN Financial Crimes Enforcement Network

IRS Internal Revenue Service

MOU memorandum of understanding

MSB money services business

MSB search page MSB Registration Search Web page

OIG Office of Inspector General

RMSB Registration of Money Services Business form

SAR suspicious activity report
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OIG Audit

Report

The Department of the Treasury

Office of Inspector General

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Audit Report

November 10, 2015

Jennifer Shasky Calvery, Director

Financial Crimes Enforcement Network

This report presents the result of our audit of the Financial Crimes 

Enforcement Network (FinCEN) activities related to money services 

businesses (MSBs). FinCEN has responsibility for administering the 

Bank Secrecy Act (BSA) and safeguarding the financial system 

from financial crime, including terrorist financing, money 

laundering, and other illicit activities. Among the financial 

institutions subject to BSA and FinCEN oversight are MSBs —nonbank financial institutions, such as money transmitters (including

administrators and exchangers of virtual currencies), check 

cashers, dealers in foreign exchange, issuers or sellers of travelers’ 

checks and money orders, and providers and sellers of prepaid 

access products.

The Money Laundering Suppression Act of 1994 requires certain 

MSBs to register with the Secretary of the Treasury.1In addition, 

the USA PATRIOT Act of 2001 and its implementing regulations 

require MSBs to maintain a BSA compliance program. FinCEN 

delegated authority to the Internal Revenue Service (IRS) to 

examine MSBs for compliance with registration and BSA 

requirements.2In 2005, we reported on problems with the MSB 

registration program and related concerns with examination and 

enforcement.

3

The objective of our audit was to assess FinCEN’s management 

systems and controls over MSB registration and BSA compliance. 

We reviewed MSB registration and examination documentation and 

interviewed FinCEN officials responsible for MSB registration and 

 

1 Agents of MSBs, MSBs that only sell prepaid access, government agencies, and the U.S. Postal 

Service are not required to register with FinCEN.

2 31 C.F.R. 1010.810(b)(8), Enforcement.

3 Treasury, Office of Inspector General (OIG), OIG-05-050, Major Challenges Faced by FinCEN in Its 

Program to Register Money Services Businesses, Sep. 2005.
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compliance, officials from IRS’s MSB supervision and examination 

staffs, and law enforcement officials. After we completed initial 

fieldwork in 2011, FinCEN got a new Director and announced plans 

to reorganize, so we performed additional fieldwork beginning in 

2013 to determine the impact of these changes on FinCEN’s MSB 

program and amended our report accordingly. Appendix 1 provides 

a detailed description of our audit objectives, scope, and 

methodology.

Results in Brief

FinCEN continued to take actions to improve MSB compliance with 

BSA but challenges remain. Among the actions undertaken by 

FinCEN were its efforts to identify unregistered MSBs and better 

understand the MSB universe.4 However, issues in the MSB 

registration program require FinCEN’s continued attention. These 

issues include (1) the completeness and reliability of MSB 

registration data and (2) the maintenance of the MSB registration 

list. We found that the MSB registration data contains duplicate 

entries, expired registrations, and other anomalies. We note that 

FinCEN is not required to validate registration data provided.

FinCEN also took steps to improve the processing of IRS’s referrals 

of MSB violations and the issuing of enforcement actions. 

However, at the time of our review a backlog of IRS referrals 

remained. In 2013, FinCEN enhanced its collaboration with IRS and 

developed procedures for the referral process. 

We are recommending that FinCEN (1) continue efforts to learn 

more about MSBs and outreach to promote compliance with 

registration and other BSA requirements, (2) take steps to ensure 

expired registrations are removed from the MSB registration list and 

consider what other measures could be taken to make the MSB 

registration data more useful for its stakeholders, and (3) continue 

to refine procedures used to process incoming enforcement 

referrals from the IRS.

 

4 MSBs include principal MSBs and agent MSBs. Agent MSBs are affiliated with one or more principal 

MSBs.
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In its management response, which is provided in appendix 2, 

FinCEN concurred with our recommendations. FinCEN’s actions,

both taken and planned, are summarized in the Recommendations 

section of this report and meet the intent of the recommendations. 

In its response, FinCEN commented that the MSB industry plays a 

vital role in our economy and provides valuable financial services, 

especially to individuals who may not have easy access to the 

formal banking sector. State regulators, IRS, and FinCEN have 

worked collectively over the past several years to increase 

regulatory oversight and financial transparency within this sector. 

FinCEN stated that it recognizes the importance for MSBs to be 

able to receive services from other parts of the financial sector, 

including the banking sector, for MSBs to continue to provide 

valuable services to their customers and critical BSA reporting to 

help thwart illicit activity. 

Background

Risks with MSBs and the Challenge of BSA Compliance

Some MSBs may be at risk for misuse by terrorist financiers and 

money launderers. Unlike banks, which are account-oriented and 

know their customers, MSBs are transaction-oriented and operate 

in an environment that may be more vulnerable to illegal activity.5

MSBs can engage in a variety of financial transactions, including

selling money orders and traveler’s checks; providing or selling

prepaid access products, such as gift cards; and administrating and 

exchanging convertible virtual currency.

6

 

5 31 C.F.R. 1020.220, Customer identification programs for banks, savings associations, credit 

unions, and certain non-Federally regulated banks. When opening a customer account the financial 

institution must obtain each customer’s name, date of birth, address, and identification number.

6 Bitcoin is an example of a virtual currency. FinCEN’s guidance states that, unlike real currency, 

"virtual" currency is a medium of exchange that operates like a currency in some environments but 

does not have all the attributes of real currency. Virtual currency does not have legal-tender status in 

any jurisdiction. FinCEN’s guidance also addresses "convertible" virtual currency, which either has an 

equivalent value in real currency or acts as a substitute for real currency.
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MSBs provide their customers a means of conveniently moving 

money, either domestically or internationally. MSBs can include 

grocery stores and small businesses that operate within 

neighborhoods.

7

Concerned that money services businesses were largely 

unregulated and could be used for money laundering, Congress 

passed the Money Laundering Suppression Act of 1994, which 

requires certain MSBs to register with Treasury.8FinCEN has 

responsibility for ensuring the registration occurs and for designing

the framework that helps protect the U.S. financial system from 

money laundering, terrorist financing, and other illicit finance, 

including determining emerging trends and methods in money 

laundering and other financial crimes.

9

FinCEN issued regulations in 1999 requiring existing MSBs to 

register by December 31, 2001, and new MSBs to register within 

180 days of opening. FinCEN requires an MSB to register if it

provides services to transmit money, provides prepaid access, or is 

another form of an MSB that conducts one or more transactions in 

an amount greater than $1,000 for any one person on any day in 

one or more transactions.10 In addition, all MSBs and their agents 

must develop, implement, and maintain effective anti-money 

laundering (AML) programs. These programs are described below.

MSBs must renew their registration every 2 years. In addition, an 

MSB must re-register with FinCEN no later than 180 days after it

has: a change in ownership requiring it to re-register with the state,

a transfer of more than 10 percent voting power or equity 

interests, or more than a 50 percent increase in agents during the 

registration period.

 

7 This is according to former official with the Money Transmitter Regulators Association. The Money 

Transmitter Regulators Association consists of state regulatory authorities in charge of regulating 

money transmitters and sellers of traveler’s checks, money orders, drafts and other money 

instruments.

8 Treasury defines money laundering as ”financial transactions in which criminals, including terrorist 

organizations, attempt to disguise the proceeds, sources, or nature of their illicit activities. Money 

laundering facilitates a broad range of serious underlying criminal offenses and ultimately threatens 

the integrity of the financial system.”

9 31 U.S.C. 310(b)(2)(C)(v), Financial Crimes Enforcement Network.

10 31 C.F.R. 1022.380(a)(1), Registration of money services businesses.
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MSB Requirements for BSA Compliance

Similar to other financial institutions, MSBs must comply with BSA 

requirements and maintain effective AML programs that include at 

a minimum:

11

 policies, procedures, and internal controls reasonably designed 

to assure compliance with BSA requirements

 a designated person to ensure day-to-day compliance with the 

program and BSA requirements

 education and/or training of appropriate personnel concerning 

their responsibilities under the program

 independent review to monitor and maintain an adequate 

program

MSBs, except check cashers, are also required to file a suspicious 

activity report (SAR) when a transaction involves, or aggregates, at 

least $2,000 and the MSB knows or suspects the transaction 

(1) involves funds derived from illegal activity; (2) is designed to 

conceal funds from illegal activity, or to evade reporting 

requirements; (3) is designed to evade the BSA; (4) serves no 

legitimate business or apparent lawful purpose, and the MSB 

knows of no reasonable explanation for the transaction; or 

(5) involves the use of the MSB to facilitate illegal activity.12 All 

MSBs have the obligation to file a currency transaction report 

(CTR) for a cash transaction greater than $10,000.13

MSBs have several other recordkeeping requirements.14 For 

example, for fund transfers of $3,000 or more, MSBs must retain 

the name and address of the transmitter and the recipient’s 

financial institution. If the transmitter or recipient is not an 

established customer, MSBs must also obtain and retain the name, 

address, and identification number of the transmitter and recipient. 

For an entity, the customer’s identification number is the employer 

identification number, and for an individual, it is the Social Security 

 

11 31 C.F.R. 1022.210(d), Anti-money laundering programs for money services businesses.

12 31 C.F.R. 1022.320, Reports by money services businesses of suspicious transactions.

13 31 C.F.R. 1010.311, Filing obligations for reports of transactions in currency.

14 These include 31 C.F.R. 1010.410(e), Records to be made and retained by financial institutions; 

31 C.F.R. 1022.410, Additional records to be made and retained by dealers in foreign exchange; and 

31 C.F.R. 1022.420, Additional records to be maintained by providers and sellers of prepaid access.
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number or individual taxpayer identification number. If no 

identification is provided, the MSB must make a notation.

MSB Principals and Agents

An MSB principal is the issuer of the MSB product or service and 

could have one or more agents. An agent is a separate business 

entity that the principal authorizes, through a written agreement or 

otherwise, to sell its instruments, such as money orders; or, in the 

case of funds transmission, to send and receive funds. For 

example, an agent can be a corner store with a money transmitter 

terminal or a store that sells money orders provided by another 

company that is an MSB. MSB principals are required to maintain 

information about their agents and make it available to FinCEN 

upon request. An agent is not required to register with FinCEN 

unless it is separately engaged in money services activities beyond 

its capacity as an agent. Thus, if the same corner store also cashes 

checks in an amount greater than $1,000 for any one customer on 

any day in one or more transactions, it would need to register as

an MSB.

According to FinCEN, the MSB industry is quite diverse, ranging 

from small neighborhood convenience stores, where English may 

not be the primary language, to large companies with a global 

presence. In 2015, one of the largest MSBs, the Western Union 

Company, reported that the company had 500,000 agent locations

and that in 2014 it completed 255 million consumer-to-consumer 

transactions, totaling $85 billion worldwide.

15

Office of Inspector General 2005 Audit 

In our 2005 audit, we reported that data quality problems with the 

publicly available FinCEN registration list limited its usefulness to 

banking organizations for determining the MSBs’ registration 

status. There were, for example, over 1,000 duplicate registrants 

as well as closed businesses found on this list. We also reported 

that FinCEN could improve the registration program by measuring 

 

15 Another major MSB is the United States Postal Service (USPS), which issued nearly 97 million money 

orders during 2014. The Secretary of the Treasury delegated oversight of USPS’s MSB operations to 

USPS. USPS in turn delegated oversight to its Office of Inspector General. Accordingly, we did not 

review BSA compliance activities by USPS.
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how registration was improving MSB BSA compliance and 

addressing the reliability of the publicly available MSB registration 

list. 

FinCEN Reorganization

FinCEN announced a reorganization in June 2013. In this 

reorganization, employees were organized based on job function 

rather than stakeholder served, including law enforcement agencies 

and the Federal banking agencies. Upon completion of the 

reorganization, FinCEN was organized into six divisions: 

Intelligence, Enforcement, Policy, Liaison, Technology, and 

Management. The Enforcement Division is FinCEN’s primary arm 

for investigating referrals from examining authorities and enforcing 

compliance with the BSA, and has three offices: Compliance and 

Enforcement, Special Measures, and Special Investigations. The

Office of Compliance and Enforcement includes a dedicated Money 

Services Businesses and Casinos Section.

Office of Inspector General Investigations of MSB

The Office of Inspector General’s Office of Investigations (OI) has 

worked with FinCEN on several MSB violation cases. In January 

2015, OI reported that since September 2013, it investigated 12 

cases involving MSB employees or owners and 3 involving 

unregistered MSBs. OI reported that, in connection with these 

cases, 42 subjects had been convicted.

Findings

Finding 1 FinCEN Took Steps to Improve BSA Compliance by 

MSBs, But Challenges Remain with Its MSB Registration 

Program

FinCEN took steps to identify unregistered MSBs and improve BSA 

compliance by MSBs. However, processes were not in place to 

detect data-quality issues in information provided on Registration of 

Money Services Business (RMSB) forms. Furthermore, FinCEN was

not timely in removing expired registrations from its MSB 

Registration Search Web page (MSB search page).
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FinCEN Took Steps to Improve MSB Compliance with 

BSA Requirements

Several FinCEN actions and initiatives facilitated better MSB 

compliance with BSA requirements:

Unregistered Money Transmitters Initiative

In reaction to the May 2010 attempted bombing by a terrorist in 

New York City’s Times Square, FinCEN developed the Unregistered 

Money Transmitters Initiative designed to identify unregistered 

money transmitters, including informal value-transfer systems.

16

Through this initiative, FinCEN searched SARs filed by depository

institutions for specific search terms that might identify an 

unregistered money transmitter.

17

FinCEN officials stated that unregistered MSBs are still a top 

priority, although resources are no longer assigned to this initiative.

In 2013, FinCEN officials stated that they had recently 

implemented a program similar to the one used in the Unregistered 

Money Transmitters Initiative to search SARs to help identify

potentially unregistered MSBs.

Agent Request Initiative

With its 2011 Agent Request Initiative, FinCEN took action in an 

attempt to improve the quality of MSB agent data and to better 

understand the size and geographic distribution of agents 

nationwide. Through this initiative, FinCEN asked 24,668 

 

16 FinCEN defines an informal value-transfer system as “any system, mechanism, or network of people 

that receives money for the purpose of making the funds or an equivalent value payable to a third 

party in another geographic location and generally outside of the conventional banking system.”

17 31 C.F.R. 1020.320, Reports by banks of suspicious transactions. Banks are required to file a SAR 

for a transaction that involves or aggregates at least $5,000 in funds or other assets, and the bank 

knows, suspects, or has reason to suspect that the transaction (1) involves funds derived from illegal 

activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal 

activities as part of a plan to violate or evade any Federal law or regulation or to avoid any 

transaction reporting requirement under Federal law or regulation; (2) is designed to evade any 

requirements under regulations promulgated under BSA; or(3) has no business or apparent lawful 

purpose or is not the sort in which the particular customer would normally be expected to engage, 

and the bank knows of no reasonable explanation for the transaction after examining the available 

facts, including the background and possible purpose of the transaction.
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registered MSBs that reported having agents, to provide 

information about their agents. 

Of the 24,668 letters mailed, 11,211 (or 45 percent) of the MSBs 

responded, and only 197 MSBs (2 percent) reported themselves as 

principals. Although FinCEN concluded that the information 

provided through the initiative contributed significantly to a better 

understanding of the MSB agent population and would help to 

inform future decisions about the MSB registration process, it did 

not plan to continue the initiative. One thing FinCEN learned

through the initiative was that MSBs had different interpretations 

of which entities were considered agents. FinCEN published the 

results of this initiative in May 2012.

18

New or Revised Rules

In 2011, FinCEN issued two final rules—one to clarify which 

businesses must register as MSBs and a second rule to address 

regulations relating to prepaid access. In the first rule, issued in

July 2011,19 FinCEN revised its MSB definitions to clarify the

activities subject to BSA rules. The final rule also updated MSB 

definitions to reflect past guidance, rulings, and current business 

operations, and to accommodate evolving technologies and 

emerging lines of business.

The second final rule, also issued in July 2011, renamed “stored 

value” as “prepaid access,”

20 among other things. The rule imposed

suspicious activity reporting, and customer and transaction 

information recordkeeping requirements on both providers and 

sellers of prepaid access products, such as gift cards.

21 Although 

prepaid access is most often associated with a card similar to a 

credit card or gift card, the new rule was designed to be 

technology neutral and was meant to be adaptable to a range of 

 

18 SAR Activity Review - Trends, Tips & Issues, Issue 21, May 2012.

19 76 Fed. Reg. 140, Bank Secrecy Act Regulations; Definitions and Other Regulations Relating to 

Money Services Businesses (July 21, 2011).

20 76 Fed. Reg. 146, Bank Secrecy Act Regulations; Definitions and Other Regulations Relating to 

Prepaid Access (July 29, 2011).

21 In accordance with the Credit Card Accountability, Responsibility and Disclosure Act of 2009 

(P.L.111–24) the Secretary of Treasury is required to issue regulations in final form implementing 

BSA, for the sale, issuance, redemption, or international transport of stored value, including stored 

value cards.
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products, including those using magnetic-stripe cards, Internet

systems, and mobile phone networks.

To help MSBs understand the implications of this final rule and 

facilitate compliance, FinCEN conducted outreach in 2011 that 

addressed the vulnerabilities of these methods of payment and 

issued an administrative ruling that clarified provisions of the rule.

FinCEN held town hall meetings with industry representatives, 

which identified areas of prepaid card vulnerability, such as tax 

refund fraud and the use of prepaid access cards to divert drug 

proceeds.

New MSB Registration Site

Also in 2012, FinCEN launched a new MSB registration website to 

improve the availability of MSB registration information. This 

website was intended to provide updated information on a weekly 

basis whereas before the information was updated monthly.

According to FinCEN, the new website provided MSBs, banks, 

regulators, law enforcement, and the general public the ability to 

access, search, verify, download, and print MSB registration 

information 24 hours a day, 7 days a week.

Electronic BSA Filing System 

FinCEN published a Final Notice in February 2012 that mandated all 

financial institutions subject to BSA reporting to use electronic 

filing beginning no later than July 1, 2012. According to the 

notice, MSBs that demonstrated a substantial hardship in meeting 

this effective date would be granted exemptions not to extend 

beyond March 2013. FinCEN reported that 28 MSBs applied for 

and received an exemption. All exemptions from filing electronically 

ended on March 31, 2013.

FinCEN reported that, from July 1, 2012, through December 31, 

2013, MSBs filed more than: 29,000 registrations, 320,000 CTRs, 

and 951,000 SARs. These totals included both paper and 

electronic filings. FinCEN could not specify the number of forms 

filed by paper during that time. FinCEN may impose civil money 

penalties on MSBs that do not comply with the electronic filing 
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mandate.22 As of December 2014, FinCEN had not issued a penalty 

against an MSB for paper filings.

Virtual Currency Guidance

FinCEN issued guidance on March 18, 2013, to provide clarity and 

regulatory certainty for businesses and individuals administering, 

exchanging, or using virtual currencies.23 The guidance classifies as 

an MSB any person engaged as a business in putting virtual 

currency into circulation, and who has the authority to redeem 

virtual currency, or a person engaged as a business in the 

exchange of virtual currency for real currency, funds, or other 

virtual currency. A person who obtains virtual currency to purchase 

goods or services for his or her own personal use is not considered 

an MSB under FinCEN regulations.

In 2014, to further interpret its March 2013 guidance, FinCEN

published five administrative rulings that provide additional 

information on whether conduct related to convertible virtual 

currency brings a person within the BSA’s definition of a money 

transmitter.24 Those designated as MSBs are responsible for 

complying with BSA regulations. Our audit did not include an 

assessment of FinCEN’s oversight of virtual currency exchangers’ 

compliance with BSA.

MSBs and Casinos Section

After its June 2013 re-organization, FinCEN organizationally 

created the Money Services Businesses and Casinos Section. This 

newly created section works with State and local partners to focus 

on strengthening MSB compliance and serves as FinCEN’s authority

on MSBs. We did not assess, as part of this audit, the work 

 

22 31 C.F.R. 1010.820, Civil Penalty.

23 FinCEN guidance, Application of FinCEN’s Regulations to Persons Administering, Exchanging, or 

Using Virtual Currencies (Mar. 18, 2013).

24 FIN-2014-R001, Application of FinCEN’s Regulations to Virtual Currency Mining Operations (January 

2014), FIN-2014-R002, Application of FinCEN’s Regulations to Virtual Currency Software 

Development and Certain Investment Activity (January 2014), FIN-2014-R007: Application of Money 

Services Business Regulations to the Rental of Computer Systems for Mining Virtual Currency (April 

2014), FIN-2014-R011 Application of FinCEN’s Regulations to a Virtual Currency Trading Platform 

(October 2014), and FIN-2014-R012 Application of FinCEN’s Regulations to a Virtual Currency 

Payment System (October 2014).
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performed by this section or any of its components but we will 

consider this area going forward. We did note that in 2012 and 

2013, FinCEN did not have a single enforcement action against an 

MSB but between 2014 through June 2015, FinCEN had nine such 

cases.

MOU with Mexico

In October 2013, FinCEN entered into an MOU with Mexico’s 

National Banking and Securities Commission to share supervisory 

information related to combating money laundering and terrorist 

financing. FinCEN’s Director stated in a press release that the 

MOU, its first with that agency, should help FinCEN to more 

effectively oversee MSB activities.25

Registration Data Continues to Need Improvement

Despite FinCEN’s efforts, two primary areas in its MSB registration 

program require the bureau’s continued attention: (1) the

completeness and reliability of registration data reported to FinCEN

and (2) the maintenance of the MSB registration list to ensure its 

usefulness. 

BSA required FinCEN to establish an MSB registration regime but 

did not require FinCEN to validate MSB registration data provided 

by MSBs. According to FinCEN officials, it needs to balance the 

usefulness of the data to its stakeholders with the accuracy of the 

data received by the filers. To improve usefulness, we believe that 

FinCEN should review published MSB registration data for expired 

and duplicative entries, and for certain anomalies to improve the 

usefulness of the data for its stakeholders.26 

 

25 “Statement of Jennifer Shasky Calvery, Director, Financial Crimes Enforcement Network Upon 

Signing a Memorandum of Understanding with Mexico’s National Banking and Securities 

Commission,” October 24, 2013.

26 A principle of internal control in the Federal government is that management should use quality 

information to achieve the entity’s objectives. Another principle is that management should externally 

communicate the necessary quality information to achieve the entity’s objectives. In this case, these 

principles would call for the accurate and reliable presentation of MSB registration data to the extent 

possible. The principles for internal control are prescribed in the publication GAO-14-704G, 

Standards for Internal Control in the Federal Government (Sep. 2014).
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Discrepant MSB Registrant Information

Users have two ways to search for registered MSBs, one is using a 

search engine found on FinCEN’s MSB Registrant Search Web page

and the other is a downloadable MSB registration Excel 

spreadsheet also accessible from this web page. In August 2013, 

we found that MSB Registrant Search Web page stated that the 

total number of registered MSBs was approximately 35,000; the 

number of registered MSBs on the downloadable Excel spreadsheet

available through the same web page totaled approximately 47,900

records.

27 This was a difference of approximately 12,900 

registrations. According to FinCEN, the number of registered MSBs 

stated on the web page was based on a count of unique Taxpayer 

Identification Numbers reported by the MSB registrants. With 

respect to the spreadsheet showing 47,900 registered MSBs, we 

noted approximately 5,300 of the listed MSBs (11 percent) 

appeared to be duplicate records based on the entries in the Legal 

name, Street, City, and State fields of the spreadsheet. FinCEN 

personnel attributed the possible duplicate records to two reasons: 

(1) some MSBs may have filed an amended registration without 

linking it to the original registration, contrary to FinCEN 

instructions; and (2) some MSBs may have registered more often 

than every 2 years.

Inaccurate Branch Information

An MSB must report the number of branch locations it operates on 

the RMSB form. We found a number of obvious inaccuracies with 

this information as it was reported in 2010. For example, the 

registration data from one MSB, a stand-alone market, showed that 

it had 823,563 branch locations in a June 2009 filing.

We found similar questionable branch totals in FinCEN’s 

registration information reported in 2013. For example, in August 

2013, there were 17 MSBs reporting 10,000 or more branches. 

The registration data from one MSB, a small, local, grocery store,

showed that it had over 54,000 branch locations. In 2015, we 

found that both these MSB showed no branch locations.

 

27 http://www.fincen.gov/financial_institutions/msb/msbstateselector.html (accessed August 21, 2013).
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FinCEN acknowledged that there were problems with the 

registration list, and it referred to a disclaimer on its MSB search 

page (see Figure 1), advising that FinCEN did not verify the 

information provided by the MSB, and it did not certify the 

legitimacy of the MSBs included on the MSB Registrant Search 

web page. FinCEN representatives stated that FinCEN does not 

have the resources to verify the accuracy of the registration 

information provided on the RMSB forms. 

Figure 1. FinCEN’s MSB Registrant Search Web Page Disclaimer

Source: MSB search page; accessed by OIG on July 29, 2015.

As a general observation, errors with the website were noted in our 

2005 report. Given the continued problems with the data, we 

question the utility of maintaining this public listing, and we believe 

that FinCEN should explore steps to improve the data quality.

Erroneous or Expired MSB Registrations

MSB registrations run on 2-year cycles, which expire on December 

31 of the 2nd year. In the past, FinCEN reported it would take 

approximately 60 days to process a paper registration or renewal, 

and it would allow registrants with expired registrations to remain 

on the list in case their renewal was in process. The electronic 

filing of MSB registrations, according to FinCEN, had decreased the 

time necessary to process registrations and add them to its

website. FinCEN stated that MSBs are now generally added to the 

MSB registration website 2 weeks after their electronic filing of an

RMSB form. Therefore, the date by which FinCEN should remove 

expired registrations could be as early as mid-January. In 2013, 

MSBs with expired registrations were removed in late February.
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FinCEN representatives were considering removing expired 

registrations from its website, a process they call the “annual 

drop,” just after they expire. As of January 2015, however we 

found 16,555 MSB registrations listed on the MSB registration 

Excel spreadsheet that were received in 2011, and therefore 

expired. FinCEN did not remove any MSBs from its MSB Registrant 

Search web page for non-renewal of registration between February 

2013 and May 2015 when it dropped 14,223 entities.

In an effort to improve the data quality of the MSB registration list,

FinCEN’s Policy Division was looking into ways for MSBs to 

deregister, allowing them to be removed from the list with more 

certainty.

Finding 2 FinCEN Has Taken Action on Many IRS Referrals for 

Enforcement Action Against MSBs Although a Backlog 

Remained

IRS examines MSBs for BSA compliance. When MSBs with 

significant areas of noncompliance are identified, IRS refers them

to FinCEN for potential enforcement action. 

FinCEN’s 2013 reorganization changed the structure of its 

Enforcement Division. Prior to the reorganization, IRS referrals were 

submitted to FinCEN’s former Office of Compliance, which would 

decide whether the referrals should be forwarded to FinCEN’s 

former Office of Enforcement. FinCEN officials explained that these 

two offices had little interaction and did not have a coordinated 

approach to enforcement. This resulted in duplication of work, 

untimely action, and bottlenecks.

Since its June 2013 reorganization, a FinCEN Enforcement Division 

official stated that they have made IRS referrals a priority. The 

reorganization combined FinCEN’s Office of Compliance and the 

Office of Enforcement to form the Office of Compliance and 

Enforcement within the Enforcement Division. That office created a 

section devoted to MSBs and casinos, which was formed, in part, 

to focus on MSB compliance. During our initial fieldwork in 2011,

we found that IRS referred 22 MSBs to FinCEN for possible 

enforcement action during the period 2008 through 2010. IRS 

referred an additional 25 MSBs from January 2011 through 

September 2013. As of September 2013, of the 47 MSBs referred 
FinCEN Continues to Face Challenges with Money Services Businesses Page 16

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by IRS, FinCEN had closed 27 cases and 20 referrals were awaiting 

action—1 from the earlier period and 19 from the later period, 

indicating that backlogged referrals were being reduced. Eleven 

(11) of the 20 referrals were referred for enforcement action.

FinCEN officials stated that they were working to expedite the 

processing of cases.

In February 2014, FinCEN took enforcement action against an MSB 

that was the subject of one of the backlogged cases. As a 

condition of this action, the MSB agreed to cease operating as an 

MSB and immediately surrendered its registration to FinCEN. 

According to FinCEN, this was the first time an MSB surrendered 

its registration under such conditions.28

We asked officials from the reorganized Enforcement Division if 

they had developed written standard operating procedures for the

referral function. FinCEN provided a draft of its Office of 

Compliance and Enforcement Standard Operating Procedures. The

standard operating procedures included guidance for opening an 

enforcement case, processing a case, commencing an enforcement 

action, and resolving a case. FinCEN officials stated that the 

procedures were in use but would be refined as FinCEN progressed 

with continuing to build the reorganized Enforcement Division.

Recommendations

We recommend the Director of FinCEN:

1. Continue efforts to learn more about MSBs and outreach to 

MSBs so as to promote compliance with registration and other 

BSA requirements.

Management Response 

FinCEN concurred with the recommendation. As with all of the 

industries subject to BSA, FinCEN is responsible for 

continuously learning about MSBs and conducting outreach with 

 

28 The MSB had not registered with FinCEN and did not maintain an anti-money laundering program. The 

MSB owner admitted he did not comply with BSA requirements to keep customers who did not want 

to be identified or questioned about their transactions. The MSB repeatedly wired funds to a country 

at high-risk for money laundering and terrorist financing activity.
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(OIG-16-006)

that industry to promote compliance with registration and other 

BSA requirements. FinCEN views this as an ongoing 

responsibility.

OIG Comment 

The above commitment by FinCEN meets the intent of our 

recommendation.

2. Take steps to ensure the downloadable MSB registration data 

online is updated in a timely manner to remove expired 

registrations. FinCEN should also consider what other measures

could be taken to make the MSB registration data more useful 

for its stakeholders.

Management Response

FinCEN concurred with the recommendation. FinCEN recently 

took steps to delete expired MSB registrations and will develop 

supporting documentation that defines the process for ensuring 

this is done in a timely manner going forward. FinCEN has an 

on-going data management process, which leverages its Data 

Management Council—comprised of internal and external 

stakeholders—to review and prioritize system and data-related 

issues and requests for improvement. FinCEN’s Investment 

Review Board will continue to align any system and data 

changes with current business priorities for all stakeholders. The 

planned completion date for supporting documentation that 

defines the process for timely removal of expired MSB 

registrations is January 31, 2016.

OIG Comment 

FinCEN’s proposed action meets the intent of our 

recommendation.

3. Continue to refine the standard operating procedures used to 

process incoming enforcement referrals.

Management Response

FinCEN concurred with the recommendation. FinCEN will 

continue to refine and improve the guidance for processing
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incoming cases, and anticipates that these procedures will 

continually evolve based on new information learned. FinCEN 

views this as an ongoing responsibility. 

OIG Comment

FinCEN’s commitment as stated above meets the intent of our 

recommendation.

* * * * * *

We would like to extend our appreciation to FinCEN personnel for 

the cooperation and courtesies extended to our staff. If you have 

any questions, please contact me at (617) 223-8638.

/s/

Sharon Torosian

Director

Appendices
Appendix 1

Objectives, Scope, and Methodology

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(OIG-16-006)

The objective of our audit was to assess the Financial Crimes 

Enforcement Network’s (FinCEN) management systems and 

controls over money services businesses (MSBs) registration and 

Bank Secrecy Act (BSA) compliance.

To gain an understanding of FinCEN’s delegated authority over 

MSBs, we interviewed senior managers and staff members from 

FinCEN’s Vienna, Virginia and Washington, D.C., offices. We also 

interviewed:

 Internal Revenue Service (IRS) officials from the Enterprise 

Computing Center in Detroit, Michigan; Small Business/SelfEmployed in Lanham, Maryland, and Detroit, Michigan; IRS 

agent examiners, during walkthroughs at BSA examinations of 

both a large and small MSB at locations in the Boston, 

Massachusetts, area; and IRS Criminal Investigations, from one 

of the Suspicious Activity Report review team locations in 

Boston, Massachusetts.

 law enforcement officials from the Department of Justice in 

Washington, D.C.

 senior managers and staff members with the Federal Deposit 

Insurance Corporation, National Credit Union Administration, 

and the Office of the Comptroller of the Currency, at their

offices in Washington, D.C.

 representatives from Massachusetts Division of Banks in 

Boston, Massachusetts

 officials with Treasury’s Office of Terrorist Finance and 

Financial Crimes Office of Strategic Policy Director, and Policy 

Advisor, in Washington, D.C.

 officials with the Department of the Treasury, Office of 

Inspector General, Office of Investigations

 representatives from the United States Postal Service (USPS) 

BSA compliance program and Postal Office of Inspector General 

(USPS OIG)

 representatives from MSB companies MoneyGram and The 

Western Union Company

 representatives from MSB state regulator and trade associations 

that include the Conference of State Bank Supervisors, Financial 
Appendix 1

Objectives, Scope, and Methodology

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(OIG-16-006)

Service Centers of America, Money Transmitters Regulators 

Association, National Money Transmitters Association, and The 

Money Services Round Table

 law enforcement representatives from the New York High 

Intensity Financial Crime Area

 representatives from Office of Foreign Assets Control

Although FinCEN delegated examination authority and paper form 

processing to IRS, the scope of this audit did not include an 

assessment of IRS’s performance in its BSA examinations or 

processing of BSA filings. Similarly, the Secretary of the Treasury 

delegated to USPS the power to implement, monitor, and enforce 

its own compliance program. The Postmaster General has 

delegated this authority to the USPS OIG. Our scope did not 

include an assessment of USPS’s compliance program.

After we completed fieldwork in September 2011, FinCEN gained a 

new Director and announced plans to reorganize. We conducted 

additional fieldwork, beginning in 2013, to determine the impact of 

the reorganization’s changes on FinCEN’s MSB program, and 

amended our report based on subsequent findings. In both of these 

periods of fieldwork, we interviewed FinCEN and IRS officials with 

MSB-related responsibilities and reviewed information provided to 

us by FinCEN associated with:

 MSB registration data integrity

 analytical procedures for BSA filings

 processing of MSB-related case referrals

 results of BSA examinations, including standard operating 

procedures, training manuals, memoranda of understanding 

(MOUs), MOU-related reports, Suspicious Activity Report 

analytical reports, and registration analysis

We reviewed information provided on FinCEN’s public website, 

including the BSA/Anti-Money Laundering Examination Manual, 

directors’ speeches, the MSB registration list, rulemakings, the 

Code of Federal Regulations, and other MSB-related material. We 

also requested and reviewed information from IRS, including BSA 

filings received by the Enterprise Computing Center in Detroit, 

Michigan, a listing of examinations completed by IRS Small 
Appendix 1

Objectives, Scope, and Methodology

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(OIG-16-006)

Business/Self-Employed, examination referral documents, internal 

guidance, manuals, internal IRS directives, exam target 

methodology, workflow analysis, BSA exam staffing, training 

plans, and copies of MOUs.

We compared requirements outlined in the FinCEN and IRS MOU 

with MOU-related documentation provided and maintained by 

FinCEN and IRS. We reviewed FinCEN Office of Compliance case 

referral memoranda for cases closed during 2008 through 2013.

During our additional fieldwork we discussed with FinCEN its 

recent enforcement efforts and related initiatives with the MSBs.

We also obtained updated data on MSB-related enforcement cases.

We performed fieldwork from December 2010 through August 

2015.

We conducted this performance audit in accordance with generally 

accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix 2

Management Response

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Appendix 2

Management Response

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Appendix 3

Major Contributors To This Report

FinCEN Continues to Face Challenges with Money Services Businesses Page 24

(OIG-16-006)

Maryann Costello, Audit Manager

Timothy Cargill, Auditor-In-Charge

James Shepard, Auditor-In-Charge

Patrick Arnold, Auditor

Paul Harris, Referencer
Appendix 4

Report Distribution

FinCEN Continues to Face Challenges with Money Services Businesses Page 25

(OIG-16-006)

Department of the Treasury

Under Secretary, Office of Terrorism and Financial Intelligence

Assistant Secretary, Terrorist Financing and Financial Crimes

Office of Strategic Planning and Performance Management

Office of the Deputy Chief Financial Officer, Risk and Control 

Group

Financial Crimes Enforcement Network

Director

Management and Program Analyst, Management Division, 

Financial Management

Assistant Director, Financial Management

Office of Management and Budget

OIG Budget Examiner
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