The Money Services Round Table

Michael J. Bloom
Assistant Director
Bureau of Competition
Office of Policy & Coordination
Phone: (202) 326-2475
Email: mjbloom@ftc.gov
Ezra C. Levine, Esq.
Morrison & Foerster LLP
UNITED STATES OF AMERICA
Federal Trade Commission
Washington, D.C. 20580
September 4, 2013
2000 Pennsylvania Avenue, NW
Washington, D.C. 20006
Dear Mr. Levine,
This letter responds to your request on behalf of The Money Services Round
Table ("TMSRT") for an advisory opinion concerning TMSRT's proposal to collect and
disseminate certain information regarding terminated United States money transmitter
agents. TMSRT wishes to know whether Federal Trade Commission ("FTC" or
"Commission") staff is likely to recommend an enforcement action, challenging the
information exchange as an anticompetitive restraint of trade.
Based on the information you provided, 1 FTC staff has no present intention of
recommending law enforcement action. As discussed below, the stated purpose of the
proposed information exchange is to improve money transmitters' ability to evaluate
prospective United States agents and to comply with federal and state money laundering
and other laws, and there appears to be little or no potential for competitive harm
associated with the information exchange. Our conclusions, however, are entirely
dependent on the completeness and accuracy of the information you provided to us, and
on our understanding ofthe pertinent facts, as described below. Should there be
information that we are unaware of that qualifies, modifies or contradicts this
information, or should the proposed information exchange materially change in the
future, we may change our law enforcement recommendations accordingly.
1 Our analysis and conclusions rely on your representations to staff, including those made in
correspondence you provided to us on July 25,2013 (which superseded an earlier June 14,2013 letter), as
well as those made during our telephone conversations with you and your colleague, Sean Ruff. We have
not conducted an independent investigation or otherwise verified the information that you provided.

Ezra C. Levine, Esq.
September 4, 2013
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Statement of the Pertinent Facts
TMSRT is a trade association comprised of six licensed national money
transmitters (hereinafter "TMSRT Participants"). 2 Money transmitters are non-bank
entities that transfer funds from one individual or institution to another by wire, check,
computer network, or other means. TMSRT Participants are the largest money
transmitters in the United States by volume and revenue, and offer money transfer
services to consumers through a network of agents located in cities across the United
States and abroad.
Under the money transmitter agent model, money transmitters enter into agent
service agreements with commercial entities, such as neighborhood grocery stores,
convenience stores, liquor stores, and check casher services, which seek to add money
transmission services to their existing inventory of consumer products and services?
Agents serve as the point of contact for the money transmitter with the public, and act
pursuant to express contractual authority and the pertinent state's money transmitter law. 4
Money transmitters pay their agents a commission based on a percentage of their revenue
-that is, the transaction fees charged to consumers to transfer funds. The commission
may be split between the sending agent (i.e., the agent that initiated the transaction) and
the receiving agent (the agent that paid the transaction). Agents frequently migrate among
money transmitters to obtain higher commissions and other benefits. 5
A typical money transmission requires four parties: the sender, the money
transmitter's sending agent, the money transmitter's receiving agent, and the recipient. 6 A
sender walks in to one of the money transmitter's agent locations and provides the agent
the funds and instructions for delivery to the recipient, as well as the fee established by
the money transmitter for the transmission service. 7 The sending agent takes the funds
and instructions, and enters the transaction information into a computer terminal owned
by the money transmitter. 8 Upon receiving the instructions, the money transmitter
contacts the appropriate receiving agent for payment to the recipient.
Recipients may receive payment within several minutes or several days,
depending on the sender's instructions, the money transmitter's policies, and the
2 TMSRT members include Western Union Financial Services, Inc.; MoneyGram Payment Systems, Inc.;
American Express Travel Related Services Co., Inc.; RIA Financial Services; Sigue Corporation; and
Integrated Payment Systems, Inc. Letter from Ezra C. Levine, Morrison & Foerster LLP, to DonaldS.
Clark, Secretary, Fed. Trade Comm'n (July 25, 2013) ("July 25 Letter") at 1.
3 July 25 Letter at 2.
4 /d. Nearly every state regulates money transmission services through licensing requirements.
5 !d.
6 !d. at 2-3. All United States money transmitter agents are contractually obligated to send and receive
transmissions.
7 !d. at 3.
8 /d. Transmissions also may occur by telephone, facsimile or other means.

Ezra C. Levine, Esq.
September 4, 2013
Page 3 of6
receiving agent's location and availability. In certain instances, the money transmitter
may remit payment to the recipient before receiving the funds from the sending agent. 9
For example, the sending agent may not have transferred (deposited) the funds before the
appointed transmission time. Alternatively, the sending agent may have fraudulently
withheld the funds from the money transmitter. 10
Both agent fraud and reliability concerns have prompted many money transmitters
to vet prospective agents by conducting background checks. 11 In addition, money
transmitters are obligated to perform due diligence on prospective agents under various
federal and state laws designed to prevent money laundering, terrorist financing, and
other criminal behavior. 12
1. 	Federal Regulation
The Currency and Foreign Transactions Reporting Act (commonly referred to as
the "Bank Secrecy Act" or "BSA") 13 requires money transmitters, banks, and other
financial institutions to maintain certain records and to file certain reports, which are used
by law enforcement agencies to prevent and detect money laundering, terrorist financing,
and other crimes. 14 In addition, the BSA requires money transmitters to develop and
implement an "effective anti-money laundering program reasonably designed to prevent
[the money transmitter] from being used to facilitate money laundering and the financing
of terrorist activities." 15 An effective anti-money laundering program includes
"evaluat[ing] the suitability of prospective agents," which means that money transmitters
that contract with agents must conduct "reasonable, risk-based due diligence* * *to help
ensure that such agents themselves are not complicit in illegal activity." 16
2. 	State Regulation
Nearly every state regulates money transmitters through licensing laws. In
addition, several states have enacted statutes or implemented regulations that make
violations of the BSA a state violation. 17 Certain states also require money transmitters to
9 !d. at 3.
10 See id.
llld.
12 !d.
13 Currency and Foreign Transactions Reporting Act, 31 U.S.C. §§ 5311-5314, 5316-5322 (2013).
14 July 25 Letter at 3.
15 Jd. (citing Rules for Money Services Businesses, 31 C.F.R. § 1022.210(a) (2013)).
16 Jd. at 4 (citing Financial Crimes Enforcement Network ("FinCEN") Interpretive Release 2004-1, Anti-
Money Laundering Program Requirements for Money Services Businesses With Respect to Foreign Agents
or Foreign Counterparties, 69 Fed. Reg. 74,439, 74,440 (Dec. 14, 2004)). FinCEN, a bureau of the United
States Department of Treasury, is authorized to implement and administer the regulations under the BSA.
17 Jd. at 5 (citing, as an example, Wash. Rev. Code§ 19.230.180, which requires "every licensee and its
delegates [to] file all reports required by federal currency reporting, recordkeeping, and suspicious
transaction reporting requirements * * * and other federal and state laws pertaining to money laundering").

Ezra C. Levine, Esq.
September 4, 2013
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conduct "risk-based background investigations" of prospective agents to determine
whether such agents have "complied with applicable state and federal law, including laws
dealing with fraud and other criminal activities harmful to consumers." 18
3. 	The Proposed Information Exchange
Spurred, in part, by these federal and state requirements, TMSRT proposes an
information exchange that will consist of a database developed, maintained, and secured
by an independent third-party vendor. 19 The database will contain information regarding
former United States sending and receiving agents whose contractual relationships were
terminated due to failure to comply with federal and/or state law, or money transmitter
contract terms or policies? 0 Exchange membership will be open to all licensed non-bank
money transmitters, and will include TMSRT Participants.21 Participation in the
information exchange will be voluntary,22 and each member of the information exchange
("Exchange Member") will retain the right to decide unilaterally whether to appoint an
agent that has been terminated by another Exchange Member (and thus included in the
database). 23
Per your correspondence and conversations with staff, the following information will
be collected and made available in the Exchange Member database:
• 	the name of the Exchange Member that supplied the terminated agent
information;
• 	the agent's name(s), address, telephone number, and business tax identification
number (including any name under which the agent is doing business);
• 	the name, address, telephone number, and individual or business tax identification
number of any individual or entity that owns more than ten percent of the agent;
• 	the name, addresses, telephone number, and tax identification number or social
security number of any other principal, including executive officers, directors, and
managers;
• 	the date of termination; and
• 	the reason( s) for termination.
Once an agent has been added to the database, the third-party vendor will notify the agent
in writing and provide the agent, upon the agent's request, a copy of its database record? 4
Exchange Members will be under a continuing obligation to update any information
submitted to the exchange and to correct any errors? 5
18 I d. (citing, as examples, Tex. Fin. Code § 151.402(b) and Fla. Stat. § 560.1235).
19 I d. at 6, 8.
20 Jd. at 6-7.
21 Jd. at 1.
22 Jd. at 8.
23 I d. at 6, 8.
24 I d. at 7.
25 Jd.

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September 4, 2013
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Analysis of the Proposed Information Exchange
TMSRT's proposal contemplates a type of information exchange among
competitors? 6 Both the United States Department of Justice and the Commission have
recognized that information exchanges among competitors may be competitively neutral
or even procompetitive?7 However, certain information exchanges among competitors
may violate Section 1 of the Sherman Act, which prohibits a "contract, combination * * *
or conspiracy" that unreasonably restrains trade. 28 The antitrust concern is that the
information exchange may facilitate anticompetitive harm by advancing competitors'
ability to collude or tacitly coordinate in a manner that lessens competition.
Under the antitrust laws, information exchanges among competitors generally are
examined under the "rule of reason. " 29 The "rule of reason" is a method of antitrust
analysis that distinguishes legitimate information exchanges from illegal ones by
balancing the information exchange's anticompetitive effects with its efficiencies and
other procompetitive benefits. Various criteria are considered in assessing the legality of
an information exchange, including the nature and quantity of the information shared, the
parties' intent in sharing the information, and how the information exchange is structured
and controlled. 30
Based on the information you provided, TMSRT' s proposed exchange does not
appear likely to facilitate collusion or anticompetitive refusals to deal, or to otherwise
restrict competition. To the contrary, the information exchange has the potential to
generate efficiencies that benefit consumers. Our assessment is based on a number of
factors.
First, the goals of the information exchange do not appear to be either directly or
indirectly anticompetitive, or designed to further coordination among United States
money transmitters with regard to any significant competitive factor, such as the
commission rates paid to agents for completing money transfer services. Given that the
information sharing is unlikely to facilitate coordination on a significant competitive
26 Without performing a formal market defmition exercise, it is not possible to know whether or to what
extent Exchange Members are actual competitors. Nonetheless, for purposes of this analysis, we assume
that Exchange Members are competitors, at least with respect to one or more relevant United States
markets.
27 U.S. DEP'T OF JUSTICE AND FED. TRADE COMM'N, ANTITRUST GUIDELINES FOR COLLABORATIONS
AMONG COMPETITORS (2000), available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf (hereinafter
the "Collaboration Guidelines"). The Collaboration Guidelines provides a general outline of the analytical
framework for evaluating collaborations among competitors.
28 15 U.S.C. § 1.
29 United States v. United States Gypsum Co., 438 U.S. 422,441, n. 16 (1978) (information exchanges
among competitors may be procompetitive, and thus such exchanges- when not evidence of actual
agreements to limit competition- should be subject to the rule of reason).
30 !d. See also United States v. Container Corp. of America, 393 U.S. 333, 335-38 (1969) (finding a direct
exchange of pricing information among competitors unlawful, despite finding no agreement on price,
largely because of the nature of the information exchanged, the structure of the market, and the absence of
a benign justification for the exchange).

Ezra C. Levine, Esq.
September 4, 2013
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factor, such as price, cost, or output, efforts by Exchange Members to identify and share
terminated agent information is not likely to create a substantial risk of competitive harm.
Second, the proposed information exchange appears to contain several safeguards
that further lessen the risk of competitive harm. For example, the database will be
maintained and secured by a third-party vendor; participation in the exchange will be
voluntary; and each Exchange Member will conduct its own risk assessment and render
its own judgment regarding whether to appoint a terminated agent.
Finally, the proposed information exchange could generate efficiencies for
Exchange Members and enhance consumer welfare. For example, to the extent that the
sharing of terminated agent information improves Exchange Members' ability to conduct
thorough background checks on prospective agents, the intormation exchange could
prevent the appointment of problematic agents, including agents who may be money
launderers or other criminal offenders, and thus benefit consumers.
Conclusion
For the reasons stated above, FTC staff believes that TMSRT's proposed
information exchange is unlikely to constitute an unreasonable restraint of trade.
Accordingly, we have no present intention to recommend a challenge to the program.
This letter sets out the views of the staff of the Bureau of Competition, as
authorized by Rule l.l(b) ofthe Commission's Rules ofPractice, 16 C.F.R. § l.l(b).
Under Commission Rule 1.3(c), 16 C.F.R . § 1.3(c), the Commission is not bound by this
staff advisory opinion and reserves the right to rescind it at a later time. In addition, FTC
staff retains the right to reconsider this opinion, and, with notice to the requesting party,
to rescind or revoke it if implementation of the proposed information exchange appears to
result in significant anticompetitive effects, if the exchange is used for improper
purposes, if pertinent facts (or our understanding thereof) change significantly, or if it
would be in the public interest to do so.
Sincerely,
Michael J. Bloom
Assistant Director
Office of Policy & Coordination