What are the relevant U.S. laws that cover businesses that disburse cash?

Question

I'm interested in starting a business that sends customers rolls of quarters (and maybe at most 1-2 per week at most), e.g. for paying for laundry washing and drying machines. I'd like to be able to accept credit card payments (only) but I haven't yet found a payment processor that will agree to do business with my (potential) business.

Several prominent online payment processors seem to prohibit this type of business from

There was previously a U.S. business, Washboard, that attempted to offer this product/service, but they only remained in business for a few weeks and they stated that their payment processor prohibited their business's activity.

What is it about the business that's legally problematic for payment processors? What are the relevant laws?

Answer 1

You might be considered a money services business (MSB).

Such business are regulated by the Treasury Department. You can find an introduction to the relevant regulations here. MSBs are subject to many requirements, such as:

• Registration

• Maintaining a list of their agents

• Reporting suspicious activity by their customers

• Creating an anti-money laundering (AML) program

Also, a bank or payment processor that opens an account for an MSB is subject to much more stringent regulations. In some cases, if the MSB is involved in money laundering or other illegal activity, and the bank has not exercised sufficient oversight, the bank can be liable. As such, many banks may decline to open accounts for MSBs, charge substantial additional fees, or close their accounts on short notice if they see them as becoming too much of a hassle or risk.