Money Service Business (MSB) is a money transfer or currency exchange transaction in general terms. MSB, which has many forms such as individuals, global businesses, payment companies, and investment services, is a check, currency, and money order transaction. The definition of an MSB may vary depending on the jurisdiction. According to HM Revenue and Customs in the UK, some conditions have to be met for businesses to be considered MSB. It is vulnerable to MSB Anti-Money Laundering. Therefore, proper money laundering policies are implemented for MSB in the UK.
The Importance and Role of MSBs in The UK
The MSB sector covers a number of services in the UK, such as currency and checks exchange services, money transfer services, and money transfer. The UK's MSB sector is quite wide. UK MSBs provide financial services for individuals and institutions that do not have access to banking services. MSBs in the UK and around the world have facilitated cross-border remittance transactions, therefore supporting economic development in developing countries. A notable striking example is that World Bank data reported that foreign currency outflows from the UK were approximately $11.5 billion in 2014. Due to the money laundering risks of the MSB, they are subject to some regulations. UK's MSBs have to comply with the EU Fund Transfer Regulation to reduce the risk of money laundering and terrorist financing. If an institution in the UK is considered under MSB, it has to be registered with HMRC under Money Laundering Regulations.
Money Laundering and Terrorist Financing Risks in UK MSBs
The quality of cash and one-off transactions that are not followed in money services is risky. Therefore UK MSBs may be vulnerable to money laundering. The National Risk Assessment (NRA) report reported that MSBs have money laundering risks. According to the report, some MSBs are used significantly for money laundering. Money laundering activities in MSBs can take many forms. Some money laundering activities identified by HM Revenue and Customs in the UK's MSB sector are as follows. For example;
- A third-party cash check was used to avoid taxes payable by scrap metal for some individuals,
- The exploitation of currency denominations to convert small denominations into large denominations in another currency makes it easier to carry large amounts of illegal cash.
- Depositing cash in someone else's bank account, transferring money on behalf of someone else
- Submission of illegal working income to other countries by persons not allowed to work in the UK
High risks associated with the MSB sector are not managed according to the situation. The UK government is making international efforts to hedge trends and raise the profile of the issue. The UK headed a Financial Stability Board working group to report to the G20 Finance Ministers in March 2018, leading leadership in improving remittance providers' access to banking services. Furthermore, with money laundering risks, UK's MSB has terrorist financing risks. The NRA report emphasized that there are terrorist financing risks in the MSB sector and that these risks should be eliminated. There are some terrorist financing risks identified in the UK MSBs, and the processing of any of these activities is considered a crime. As an example of these crimes:
- To hide any money used to finance terrorism, the real source of property.
- They are raising money to fight terrorism.
- Funding illegal funds or economic resources
- Keeping money spent or obtained for terrorism
Legislation of MSBs in The UK
Regulations required for UK's MSB exist to prevent money laundering or terrorist financing risks and crimes. UK MSBs have to comply with these regulations according to UK AML requirements. Otherwise, they will be subject to certain penalties. Some of these Regulations in the UK are:
- Proceeds of Crime Act 2002
- Terrorism Act 2000 Criminal Finances Act 2017
- Terrorist Asset-Freezing Act of 2010
- Anti-terrorism, Crime and Security Act 2001
- Counter-terrorism Act of 2008
The Crime Income Act reveals the following regarding the money laundering activities of UK MSBs: transforming any criminal property, acquiring criminal property by another person or on behalf of another person, and acquiring criminal property. Suspicious Activity Reports (SARs) should be prepared for suspicious activity under the Crime and Security Act. If the report is not prepared and submitted to authorized institutions, the institutions will be punished. These reporting processes should be carried out by civil servants and employees appointed in money service businesses. Likewise, The Terrorism Act should report and report that UK MSBs are suspicious of crimes related to terrorist funds.
According to the 2017 Criminal Financing Law, law enforcement authorities are expanding their powers to seek more information, recover crime revenues, and fight terrorism financing. In addition, this law brings crimes that can be applied to businesses that facilitate criminal activities—moreover, Terrorist Asset Freezing, etc. Law 2010 authorizes the HM Treasury to freeze the assets of individuals and groups considered to be involved in terrorism, whether in the UK or abroad, and deprive them of access to financial resources.
Sanction Scanner Solution for MSBs
There are heavy regulations in the UK to prevent money laundering in businesses. One sector subject to these regulations is money services. UK MSBs offer money transfer services, so transactions involve many financial risks, such as money laundering and terrorist financing. UK MSBs can perform AML and KYC procedures so that they can identify the risks of their clients and partners as well. In addition, they can receive alerts for any suspicious transaction done with the AML Transaction Monitoring, so they can be prepared SARs when required by regulations.
We provide solutions that meet MSBs AML needs with our global enforcement, Adverse Media, PEP, and sanction lists. MSBs can perform CDD and KYC transactions in accordance with their obligations with our AML Screening and Monitoring Software to avoid financial crime risks. In addition, with Our AML Transaction Monitoring Software, MSBs can automatically detect high-risk and suspicious activities by creating their own rules and scenarios without any coding knowledge. In this way, businesses can be protected from potential financial crime risks and legal penalties.