Who Is a Financial Institution Under 31 CFR 1010.100(t)?
This FinCEN regulation defines a broad range of entities as financial institutions, establishing the fundamental scope of Bank Secrecy Act compliance.
The regulation at 31 CFR 1010.100(t) is a component of the Bank Secrecy Act (BSA) framework, administered by the Financial Crimes Enforcement Network (FinCEN). Its function is to define the term “financial institution” specifically for applying anti-money laundering (AML) and counter-terrorist financing (CTF) rules. This definition establishes which entities must comply with the BSA’s recordkeeping and reporting requirements. By creating a broad list of businesses, FinCEN aims to safeguard the U.S. financial system from illicit use.
Businesses Defined as Financial Institutions
The regulation captures entities far beyond what is typically considered a bank. The definition includes any agent, agency, branch, or office within the United States of any person doing business in a specified capacity.
A core entity covered is a bank, which encompasses most depository institutions, including commercial banks and credit unions. The definition also includes any person subject to supervision by a state or federal bank supervisory authority. Notably, the term does not extend to operators of credit card systems.
Another category consists of brokers or dealers in securities registered, or required to be registered, with the Securities and Exchange Commission (SEC). Futures commission merchants and introducing brokers in commodities, regulated by the Commodity Futures Trading Commission (CFTC), are also named as financial institutions.
The term “Money Services Business” (MSB) is a broad category covering several activities, including:
- A dealer in foreign exchange
- A check casher
- A money transmitter
- An issuer or seller of traveler’s checks and money orders
A dealer in foreign exchange, a check casher, or an issuer or seller of traveler’s checks or money orders are subject to a threshold of handling more than $1,000 for any person on any single day. A money transmitter has no minimum transaction amount.
The regulation also extends to other businesses, including casinos and card clubs with gross annual gaming revenue exceeding $1 million. The definition also includes mutual funds and the U.S. Postal Service due to its role in selling money orders.
Core Compliance Obligations
Classification as a financial institution imposes several compliance responsibilities. The primary requirement is the development of a formal, written anti-money laundering program designed to prevent the institution from being used for money laundering or terrorist financing. The program must be approved in writing by the institution’s senior management.
The AML program must be built upon five pillars:
- A system of internal controls, which are the day-to-day policies and procedures for compliance.
- The designation of a qualified BSA Compliance Officer responsible for managing the program.
- Ongoing, relevant training for appropriate personnel.
- Independent testing for compliance to assess the program’s adequacy.
- Customer due diligence (CDD), which requires establishing a Customer Identification Program (CIP) and conducting ongoing due diligence.
Financial institutions also have reporting and recordkeeping duties, such as filing a Currency Transaction Report (CTR). A CTR is required for any cash transaction or series of related cash transactions exceeding $10,000 in a single business day. This report must be filed with FinCEN within 15 calendar days of the transaction.
A Suspicious Activity Report (SAR) must be filed on any transaction an institution suspects involves funds from illegal activities or is intended to hide funds. For most financial institutions, the filing threshold is $5,000, but for Money Services Businesses (MSBs), it is $2,000. A SAR must be filed no later than 30 calendar days after detecting the activity, with a possible 30-day extension if a suspect is not identified, for a maximum of 60 days.
Key Exemptions and Special Definitions
The regulations contain specific thresholds and exemptions for certain businesses, focusing on those that engage in covered activities with a certain regularity and volume.
An example is the definition for a “dealer in precious metals, precious stones, or jewels.” A business is considered a dealer only if it meets a two-part test from the prior year: it must have both purchased and sold more than $50,000 in covered goods. If a business meets only one of these thresholds, it is not classified as a dealer.
The regulations also clarify “covered goods.” A “precious metal” must have a purity of 50% or greater, applying to gold, silver, and platinum group metals. This includes finished goods, like jewelry, that derive 50% or more of their value from the precious materials. When calculating the $50,000 threshold for these goods, a business counts only the value of the precious materials.
A distinction applies to retailers who purchase covered goods from the public. A retailer who, in the prior year, purchased and sold more than $50,000 in covered goods from non-dealers is considered a dealer. However, their required AML program only needs to cover those specific purchases from non-dealer sources.