The Uniform Money Services Act was approved by the National Conference of Commissioners on Uniform State Laws as a worthwhile Uniform State Law to help regulate money service businesses. The point of the Act was to codify the nature of money service businesses, which were becoming a more and more prominent type of financial institution, and to then ensure that these financial institutions were properly regulated.
Money service businesses bear many traits of banks, but are not banks. As such, money service businesses escape some of the more stringent regulations aimed at banks. This, coupled with the problem of Internet growth and technology changing the very nature of financial transactions, led to the development of the Uniform Money Services Act.
Background
Prior to the Uniform Money Services Act, money services businesses were covered by a handful of different statutes, each of which applied only through interpretation and argument, as opposed to through definitive understanding. This was primarily because money service businesses were a kind of modified bank, offering many of the same services of a bank, without certain others. They are also a moderately recent development, arising partly out of continued improvements in the speed and ease of financial transactions.
The Uniform Money Services Act was implemented to put all money service businesses under a single, coherent, uniform code. The general point of the Uniform Money Services Act was to prevent the misuse of these businesses in money laundering schemes. The lack of regulation of money services businesses had allowed them to be used for a number of potentially fraudulent purposes, and the Uniform Money Services Act was an attempt to curtail such practices. Furthermore, it was an attempt to ensure that Internet-based money services businesses would fall under the same provisions, so that they, too, would be regulated properly.
As the Internet has become so tremendously important to the world today, Internet-based money service businesses play a similarly important role, and they, too, were not well-regulated by existing laws. The Uniform Money Services Act was an attempt to remedy this situation. To find out more about the basics of the Uniform Money Services Act, click the link.
Traditional Money Services
Traditional money services are those money services linked to traditional forms of media, to physical exchanges of money rather than to e-money exchanged through Internet money services. A traditional money service is an option for an individual who has no bank account to receive some of the benefits that a bank account might grant to him or her.
For example, a customer of a traditional money service might bring a check to the service’s office in order to have it cashed. The customer would not have an account with that service, such as one might with a bank, but would still be able to receive payment in exchange for the check, likely by endorsing the check over to the service or just giving it a blank endorsement.
Traditional money services also allow customers to make payments to other people or entities, as a customer may pay a money service business a certain amount of money to then receive a code which that customer may send to the recipient. Using that code, the recipient can obtain the same amount of money from the money service business (less the cost of transaction).
There are now huge numbers of such services all throughout the country, with many large name services offering international funds transfers. Western Union, for example, represents one of the most prominent and oldest of such services and it allows customers to transfer money throughout the world. Traditional money service businesses might also sell traveler’s checks, and they might offer prepaid stored value cards. For more information about traditional money services and the benefits they offer, follow the link.
Internet Money Services
Internet money services are similar to traditional money services in the actual functions that they fill, but Internet money services often deal entirely in e-money, as opposed to having any kind of physical presence. As such, an Internet money service would not, generally, allow a customer to cash a check, but it might instead allow a customer to submit a fast and easy payment through the Internet directly to another person or a merchant. These transactions are often at the core of Internet commerce, especially for transactions between two people or a buyer and a seller who do not have their own transaction systems.
PayPal, for instance, fills the role of an Internet money service in many cases, as an individual can make a payment to a given seller through PayPal instantaneously. This does, however, outline exactly some of the inherent dangers to Internet money services.
When money is exchanged through a third party, the potential exists for the third party to then misuse that money fraudulently. This is especially true of situations involving Internet money services, as the third party acting as transmitter of funds may be given actual information with which it could extract more funds from an account. If there is a breach of security, the party on either end of an Internet-based money transaction might find itself damaged.
This potential for fraud and damage was one of the major impetuses behind the creation of the Uniform Money Services Act. The Act helps to prevent such situations by ensuring that Internet services still have to gain authorization to operate. Click the link to learn more about Internet money services, their potential benefits and their potential risks.
