Guide to Obtaining the MSB License in the United States

Introduction - MSB License in the United States

Operating money services in the United States requires federal Money Services Business registration with FinCEN plus state-level money transmitter licensing where applicable. Understanding which requirements apply to your business determines whether you can legally serve US customers.

Buckingham Capital Consulting has offices in the UK and US, helping fintech companies, remittance businesses, and cryptocurrency platforms navigate US MSB registration and state licensing since 2013. We manage federal registration, state licensing programmes, and ongoing compliance.

What MSB Registration Covers

Money Services Business is a federal designation under the Bank Secrecy Act covering businesses that provide money services including money transmission, currency exchange, check cashing, money orders and traveller's cheques, and prepaid access or stored value.

Federal MSB registration with FinCEN is mandatory for businesses operating in these categories. Registration addresses anti-money laundering obligations, reporting requirements, and record-keeping under federal law.

MSB registration is separate from state money transmitter licensing. Most businesses operating money transmission need both federal MSB registration and individual state licenses.

Who Needs MSB Registration in the United States

If your business provides any money services, you need federal MSB registration. This includes money transmission and remittance services, cryptocurrency exchanges and digital asset platforms, payment processors handling customer funds, currency exchange services, check cashing services, and businesses issuing or selling money orders or prepaid access.

Banks, credit unions, securities brokers registered with SEC, and commodities dealers registered with CFTC are exempt from MSB registration as they fall under separate federal regulatory frameworks.

Federal MSB Registration Process

Federal MSB registration is straightforward compared to state licensing. You complete FinCEN Form 107 electronically through the BSA e-filing system. The form requires basic business information including legal name, doing business as names, business address, and tax identification number.

You provide ownership information for individuals owning 10% or more of the business. You describe the money services you provide. You identify your principal business location and any additional locations where you operate.

Registration is free. FinCEN charges no application fee or registration fee. Processing typically takes 2-4 weeks once submitted. You receive a registration number confirming your MSB status.

Registration must be filed within 180 days of beginning money services operations. Registration renews every two years. You must re-register when material changes occur including ownership changes exceeding 10%, significant increases in agent networks, or substantial business model changes.

Federal MSB Compliance Obligations

MSB registration brings ongoing federal compliance obligations. You must implement a comprehensive anti-money laundering programme with written policies and procedures, designated compliance officer, staff training, and independent testing.

You must maintain an agent list if you operate through agents. The list must be updated annually and made available to regulators upon request.

You must file Suspicious Activity Reports when you identify transactions that appear suspicious, involve potential money laundering or terrorist financing, or meet SAR filing thresholds. SARs must be filed within specific timeframes once suspicious activity is identified.

You must file Currency Transaction Reports for cash transactions exceeding $10,000. You must maintain records of transactions, customer identifications, and compliance activities for five years. You must implement customer identification procedures verifying identity for transactions meeting specified thresholds.

MSB vs Money Transmitter License

MSB registration and money transmitter licensing are different requirements serving different purposes.

MSB is federal registration addressing anti-money laundering obligations under the Bank Secrecy Act. Registration is straightforward, free, and processes within weeks.

Money transmitter licensing is state-level authorization permitting you to operate money transmission in each state. Licensing addresses consumer protection, financial stability, and operational standards. Each state requires separate application, surety bonds, minimum net worth, and extensive documentation. Licensing takes months to over a year per state and involves substantial costs.

If you operate money transmission, you need both federal MSB registration and state money transmitter licenses in every state where you serve customers. MSB registration alone does not authorize state-level operations.

State Licensing Requirements for Money Transmitters

Forty-nine states plus DC require separate money transmitter licensing for businesses transmitting money. Montana is the only state requiring no license.

State licensing requirements include comprehensive business plans and operational documentation, audited financial statements, background checks for owners and key management, surety bonds ranging from tens of thousands to millions depending on state and transaction volumes, minimum net worth meeting each state's thresholds, and comprehensive anti-money laundering compliance programmes.

State licensing timelines vary dramatically. Major states including California, New York, Texas, Illinois, and Pennsylvania typically take 12-18 months. Smaller states take 3-6 months. There is no reciprocity between states. Each requires individual application and approval.

MSB Registration for Cryptocurrency Businesses

Cryptocurrency exchanges, custody services, and digital asset platforms are considered MSBs under federal law. If you provide cryptocurrency exchange services or cryptocurrency transmission services, you must register as an MSB with FinCEN.

Federal registration brings the same compliance obligations as other MSBs including anti-money laundering programmes, suspicious activity reporting, currency transaction reporting, and record-keeping.

Additionally, most states treat cryptocurrency activities as money transmission requiring state licensing. Some states like New York require separate BitLicense. California is implementing new digital asset licensing frameworks.

Cryptocurrency businesses typically need federal MSB registration plus state-by-state money transmitter or digital asset licensing.

Compliance Programme Requirements

Your anti-money laundering programme is the foundation of MSB compliance. Federal requirements mandate written policies and procedures addressing your specific risks. Generic templates are inadequate. FinCEN expects programmes demonstrating understanding of your business model, customer base, and inherent risks.

You need a designated compliance officer with appropriate authority and resources. You need staff training ensuring everyone understands their obligations. You need independent testing evaluating programme effectiveness. You need transaction monitoring identifying suspicious patterns. You need customer due diligence procedures appropriate to your risk profile.

Strong compliance programmes satisfy federal examiners and support sustainable operations.

FinCEN Examinations

FinCEN and delegated examiners conduct examinations of registered MSBs. Examinations assess whether you maintain effective anti-money laundering programmes, comply with reporting requirements, maintain adequate records, and implement appropriate customer identification procedures.

Examination findings can result in corrective action requirements, civil money penalties, or referrals for criminal prosecution in severe cases. Examinations occur periodically though frequency varies based on risk profile and previous examination results.

Penalties for Non-Compliance

Operating money services without MSB registration is illegal. FinCEN can assess civil penalties up to $5,000 per day for each violation. Criminal penalties include fines up to $250,000 and imprisonment up to five years for willful violations.

Beyond regulatory penalties, operating without registration means you cannot access US banking services, cannot partner with legitimate payment processors, and face reputational damage affecting fundraising and commercial relationships.

Timeline for MSB Registration and State Licensing

Federal MSB registration processes within 2-4 weeks once application is submitted. This is the straightforward component.

State money transmitter licensing is where timeline extends. If you need state licensing, major states take 12-18 months while smaller states take 3-6 months. A 10-state licensing programme typically requires 12-18 months total with phased applications.

Most businesses start with federal MSB registration immediately, then pursue state licensing strategically based on where customers are located and business priorities.

Cost Considerations

Federal MSB registration is free. FinCEN charges no fees for registration or renewal.

State money transmitter licensing involves substantial costs. Application fees range from hundreds to thousands per state. Minimum net worth requirements range from tens of thousands to hundreds of thousands per state. Surety bonds require annual premiums typically 1-5% of bond amount.

For a 10-15 state licensing programme, total startup investment typically ranges from several hundred thousand to over one million dollars including application fees, net worth requirements, surety bonds, and compliance development.

Ongoing costs include annual state license renewals, surety bond premiums, compliance staff, transaction monitoring systems, and examination preparation.

Strategic Approach to MSB and State Licensing

Most businesses handle federal MSB registration first as it's required within 180 days of beginning operations and processes quickly.

State licensing follows strategically. You prioritize states where you have largest customer concentrations or highest transaction volumes. You phase applications managing capital deployment and regulatory bandwidth. You evaluate whether direct licensing or partnership structures suit your business model and growth plans.

How Buckingham Capital Consulting Manages Your Programme

We handle MSB registration and state licensing end-to-end from our UK, European and US offices.

For federal MSB registration, we prepare and file FinCEN Form 107. We develop your anti-money laundering programme meeting federal requirements. We establish suspicious activity reporting procedures. We implement customer identification protocols. We provide compliance officer training and support.

For state licensing, we manage comprehensive programmes across target states. We prepare applications addressing each state's requirements. We develop business plans, financial documentation, and compliance materials. We manage surety bond procurement. We handle all regulator communications throughout review processes.

We build compliance infrastructure tailored to your business. We design transaction monitoring systems. We establish customer identification procedures. We create record-keeping frameworks. We develop staff training programmes.

Post-registration and licensing, we manage ongoing compliance including biennial MSB registration renewals, annual state license renewals, examination preparation for both federal and state reviews, compliance programme updates as regulations evolve, and support for business changes.

Why Federal and State Requirements Both Matter

Federal MSB registration establishes your legal status to operate money services under federal law. It brings you into the Bank Secrecy Act framework with anti-money laundering obligations and reporting requirements.

State money transmitter licensing authorizes you to actually conduct money transmission in each state. It addresses consumer protection, financial stability, and state-specific operational standards.

Most money transmitters need both. Without federal registration, you violate federal law. Without state licenses, you cannot legally serve customers in those states.

Both are mandatory. Both require proper implementation. Both bring ongoing obligations requiring systematic compliance management.

Frequently Asked Questions

What's the difference between MSB registration and money transmitter licensing?

MSB registration is federal, addressing anti-money laundering requirements under the Bank Secrecy Act. Money transmitter licensing is state-level, authorizing operations in each state. Most money transmitters need both.

How long does MSB registration take?

Federal MSB registration processes within 2-4 weeks once application is submitted. Registration itself is straightforward.

Does MSB registration cost anything?

No. Federal MSB registration is free. FinCEN charges no application or registration fees.

Do I need MSB registration if I already have state money transmitter licenses?

Yes. Federal MSB registration and state licensing are separate requirements. Both are mandatory for money transmitters.

Do cryptocurrency businesses need MSB registration?

Yes. Cryptocurrency exchanges and transmission services are considered MSBs requiring federal registration plus applicable state licensing.

How often does MSB registration need renewal?

MSB registration renews every two years. State money transmitter licenses typically renew annually.

What happens if I operate without MSB registration?

Operating without registration violates federal law. Penalties include civil fines up to $5,000 per day and potential criminal prosecution. You also cannot access banking services or legitimate payment partnerships.

Can I register as an MSB but skip state licensing?

Only if your activities don't include money transmission or you operate exclusively in Montana. Most money transmitters need both federal registration and state licensing.

Contact Buckingham Capital Consulting

Buckingham Capital Consulting manages federal MSB registration and state money transmitter licensing from strategy through ongoing compliance. Contact us to discuss your registration and licensing requirements.

Email us at info@buckinghamcapitalconsulting.co.uk or call 0207 866 2512