Principal or Agent MSB?
An MSB may perform transactions in the capacity of a Principal and/or Agent.
A Principal/Agent relationship exists when one entity (the Agent) acts on behalf of another (the Principal). For example, the principals of a company (its shareholders) elect management (agents) to act on their behalf. In the context of the Bank Secrecy Act, a Principal MSB must register with the Financial Crimes Enforcement Network (FinCEN) as a money services business and ensure compliance with the Bank Secrecy Act by its employees and its Agents.
Typically, a written contract called an “Agent Agreement” is established between the two parties outlining the various roles and responsibilities. A principal typically provides its agents with access to technology, systems, forms, advertising and marketing, and to written processes and procedures necessary to maintaining compliance with various federal and state laws and to the terms of the Agent Agreement. Most commonly, an MSB acts as an agent for one of the two largest principal MSB companies in the world: Western Union or MoneyGram. Of course, there are thousands of other Principal MSBs serving the market too.
MSBs that provide financial services as an agent typically provide domestic and foreign money transfers, bill payment, money orders, and stored value. While acting as an agent to one or more Principal MSBs, the MSB may also act as a principal itself for the provision of other financial services such as check cashing.
Regardless of whether an MSB is providing financial services as a Principal or as an Agent or as both Principal and Agent, it must comply with the Bank Secrecy Act. The business must also comply with any state laws concerning the provision of the financial services.