NCPA - National Center for Policy Analysis

Stricter Regulations For Check-Cashing Stores

August 19, 1999

Under new rules, the Treasury Department will require tens of thousands of check-cashing shops and money transmitters to register with the department's enforcement division by the end of 2001. Treasury's aim is to detect instances of money laundering.

The nation's big money transmitters, such as Western Union, will also be required to monitor more closely their vast network of agents and report when any do more than $100,000 worth of business a month.

  • Investigators have long suspected that drug dealers and other criminals use the services of small check-cashing shops to move money around the world in small sums -- evading much stricter rules of the traditional banking industry.
  • The government says that about $57 billion in drug proceeds move through the U.S. each year.
  • U.S. check-cashing and money transfer outfits -- known as money-service businesses -- handle more than $200 billion a year.
  • Treasury officials say the delay before registration becomes mandatory will allow them time to contact the industry's 5,000 to 8,000 businesses -- many of them small, corner shops in low-income neighborhoods.

In one case, investigators found that 12 cash shops in New York City sent $800 million to Colombia in a single year -- more than the annual earnings of all the city's Colombian households.

After the shops are registered, the next step that Treasury envisions would be to require that the shops blow the whistle on customers they suspect of trying to launder money.

Source: Neil King Jr., "Treasury to Require Registration of Money Shops," Wall Street Journal, August 19, 1999.


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