In a long-promised move to curb money laundering via nonbanks, the Treasury Department announced Wednesday that it would require as many as 8,000 check cashers, money transmitters, and currency dealers to register themselves and their agents with the government.
Under the new rule, "money services businesses" have until Dec. 31, 2001, to register with the Treasury Department's anti-money-laundering arm, the Financial Crimes Enforcement Network. Fincen will maintain their names in a central data base and offer access to law enforcement agencies and regulators. Those failing to comply could be fined up to $5,000 per day and imprisoned.
By Jan. 1, 2002, registrants also must compile lists of agents they use to carry out their services and make a note when any one does more than $100,000 of business in a month. MoneyGram, for example, will have to keep tabs on 26,000 agents that it works with in 120 countries. An individual MoneyGram agent would not have to register with Fincen unless it did additional business on the side, such as issuing travelers checks.
Fincen Director James F. Sloan said the rule will give law enforcement agencies a "roadmap" to a largely unregulated industry that, at times, has proven susceptible to drug-related money laundering. In 1996 alone, he said, about $200 billion was transferred through money services businesses. He also estimated the annual proceeds of drug sales in the United States at $57 billion, much of which is laundered.
"The more avenues that are cut off, the better we can fight this problem," he said.
Boris F. Melnikoff, chairman of the American Bankers Association's money laundering task force, had not yet seen the rule, which will be published in Friday's Federal Register.
But he congratulated Fincen for moving forward and said the rule would help level out differences between banks and their nonbank competitors. Check cashers and related businesses are already required to file reports on cash transactions involving $10,000 or more.
"Slowly but surely, we are the closing the loopholes," said Mr. Melnikoff, who is also a senior vice president at Wachovia Corp. in Winston-Salem, N.C.
"Slowly" may be an understatement.
When Congress passed the Money Laundering Suppression Act of 1994, it gave Fincen until March 1995 to register money transmitters and similar cash processing businesses.
As the General Accounting Office pointed out last year in a critical report, Fincen did not even propose its registration rule until May 1997.
Even now, the rule is more than two years away from going into effect. "This is an important first step, but I am dismayed that it has taken this long," Rep. Marge Roukema, R-N.J., chairwoman of House Banking's financial institutions subcommittee, said in a press release.
"Anyone familiar with money laundering understands how important it is that we begin to regulate money services businesses."
Fincen's registration rule is also notable for what it does not do.
It does not impose expected suspicious-activity-reporting requirements on money services businesses. Mr. Sloan said a separate rule on such requirements would be issued and implemented by Dec. 31, 2001.
Fincen also postponed "indefinitely" a proposal that would require a money services firm to file a report any time it transmitted more than $750 overseas. Mr. Sloan said the agency nevertheless has the right to impose such a requirement temporarily in regions troubled by drug-related money laundering, as it did in New York in 1996.
Unlike Fincen's May 1997 proposal, the final rule exempts nonbank issuers and sellers of stored value cards from any registration requirement. It also exempts the U.S. Postal Service, one of the country's eight largest money services businesses. The postal service proposed a separate set of anti-money-laundering rules for itself on July 30.
Ezra C. Levine, a partner at Howrey & Simon whose clients include Travelers Express, Western Union, Comdata Network, Thomas Cook, American Express, and Citicorp Services, expressed satisfaction with Fincen's registration rule.
"I think this shows a successful cooperation and coordination between the government and industry," he said in an interview. "The government listened."