We have a potential customer that is a video gaming parlor. Our understanding is that the video game machines receive money used for gambling as ACH payments. Would this be a money transmitter subject to the requirements for a money services business?

We do not believe that a video gaming establishment operating under Illinois law would meet the definition of “money transmitter,” unless the terminals or the establishment offer ancillary services that would trigger the money services business requirements.

The definition of a money transmitter includes a business that accepts funds and transfers those funds to a third party, or any business engaged in the “transfer of funds.” Under the Illinois Video Gaming Act, video gaming terminals may accept funds as currency (or, as in this case, by ACH transfer), but they may not pay out or transfer winnings — instead, winnings are paid as receipt tickets.

FinCEN has published guidance stating that an ATM that allows consumers to withdraw funds is not a money transmitter, as the ATM does not transfer funds to third parties or to other bank accounts. Similarly, we do not believe that accepting funds from a user’s deposit account to use for video gaming would constitute a “transfer of funds,” and we do not believe that the video gaming establishment should be treated as a money transmitter. Of course, if the video gaming terminals provide other money services (such as currency exchange) or have the capability to transfer funds to third parties, that would change our analysis.

Also note that any gaming establishment with annual gaming revenue of over $1 million is considered a casino, which is treated as a financial institution subject to FinCEN’s BSA/AML program requirements.

For resources related to our guidance, please see:

FinCEN Regulations, 31 CFR 1010.100(ff)(5) (“Money services business [includes a] . . . . (5) Money transmitter. (A) person that provides money transmission services. The term ‘money transmission services’ means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. ‘Any means’ includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or (B) Any other person engaged in the transfer of funds.”)

Illinois Video Gaming Act, 230 ILCS 40/20 (“A video gaming terminal may not directly dispense coins, cash, tokens, or any other article of exchange or value except for receipt tickets. . . . The player shall turn in this ticket to the appropriate person at the licensed establishment, licensed truck stop establishment, licensed fraternal establishment, or licensed veterans establishment to receive the cash award. The cost of the credit shall be one cent, 5 cents, 10 cents, or 25 cents, and the maximum wager played per hand shall not exceed $2. No cash award for the maximum wager on any individual hand shall exceed $500.”)

FinCEN Guidance, FIN-2007-G006, Application of the Definition of Money Services Business to Certain Owner-Operators of Automated Teller Machines Offering Limited Services (December 3, 2007) (“The owner-operator of an ATM described above provides a customer with electronic access to the customer’s own account. The ATM dispenses funds belonging to the customer, pursuant to withdrawal instructions that are authorized by the customer’s depository institution. The ATM is unable to transmit funds to third parties or to customer accounts at other financial institutions. In consequence, the owner-operator would not be doing business that meets the definition of ‘money transmitter’ as that term is defined in our regulations.”)

FinCEN Ruling 2003-4, Definition of Money Transmitter/Stored Value (Gift Certificates/Gift Cards) (August 15, 2003) (Company “issues mall wide gift certificates in paper form through authorized agents. . . . The authorized agent provides a paper gift certificate to the customer, and then deposits the amount collected into the authorized agent’s own bank account. The money is then transferred by ACH debit from the authorized agent’s bank account to an [ ] bank account. . . . FinCEN has determined that the issuance of paper gift certificates as described in your letter does not constitute the ‘transfer of funds’ for purposes of the definition of money transmitter found at 31 CFR 103.11(uu)(5). Because [ ] is not a money transmitter (or any other category of MSB) for purposes of BSA regulations, it is not required to register with FinCEN..”)

FinCEN Regulations, 31 CFR 1010.100(t)(5) (“Financial institution. Each agent, agency, branch, or office within the United States of any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the capacities listed below: . . . (5) Casino. A casino or gambling casino that: Is duly licensed or authorized to do business as such in the United States, whether under the laws of a State or of a Territory or Insular Possession . . . ; and has gross annual gaming revenue in excess of $1 million. . . .”)