Money Service Businesses: AML Registration and Risks Explained

Money service businesses, usually shortened to MSBs, sit in a part of the financial system that criminals find attractive: fast, often cash-based and sometimes cross-border. That is why the UK treats them as a regulated sector with their own registration process, a fit and proper test and ongoing supervision. This guide explains who counts as an MSB, how HMRC registration works, what the fit and proper test looks at and why it matters if you act for, bank alongside or onboard an MSB as a client. It reflects HMRC and gov.uk guidance as read in October 2026, so check the current pages before relying on a detail.

What counts as a money service business

According to HMRC's registration guidance on gov.uk, a business must register as an MSB if it carries out any of the following activities:

• Running a bureau de change or currency exchange office.
• Transmitting money, or any representation of money, including businesses that hold an FCA small e-money issuer exemption certificate.
• Cashing cheques that are payable to its customers.
• Acting as an intermediary between payer and supplier by taking payments through telecommunication, digital or IT devices.
• Providing a payment service for utility and other household bills.

Some activities are excluded. Collecting and delivering cash as a cash courier, for example restocking cash dispensers, does not count. Nor does accepting card payments for your own goods or services. Occasional money transmission that is not carried on "by way of business", such as personally carrying cash abroad for customers, may also fall outside registration, although HMRC advises contacting it if you are unsure.

There is also a limited exemption for occasional currency exchange or cheque cashing. HMRC's guidance says it applies only if the activity is a minor part of, and directly related to, the main business; money service turnover is no more than £100,000 a year or 5% of total turnover; transactions above 1,000 euros are limited to one per customer, including linked smaller transactions; and the service is available only to the main business's own customers. The 2026 amendments to the Money Laundering Regulations replaced many euro amounts with sterling figures, so confirm the current wording of the threshold in HMRC's guidance rather than assuming the euro figure still stands.

HMRC or the FCA: who supervises an MSB

The default supervisor for an MSB is HMRC. A business that is already supervised by the Financial Conduct Authority does not also need to register with HMRC. Money transmitters must in addition be registered or authorised by the FCA under the Payment Services Regulations 2017, so many money transfer businesses deal with both regulators. Businesses holding a Consumer Credit Act 1974 licence must be supervised by the FCA. Once a business is registered with HMRC for money service activities, HMRC also supervises its consumer credit and safe custody work.

The registration process and the "do not trade until approved" rule

Applications are made online through HMRC's anti-money laundering supervision service. For applications made after 10 January 2020, a business must not operate as an MSB until HMRC confirms that the application has been approved. Registration is renewed each period: HMRC sends an annual supervision notice inviting the business to pay the annual fee for all of its listed premises, and may cancel the registration and remove the business from the register if the correct fee is not paid. A business that no longer needs to be registered should tell HMRC.

The fit and proper test

Except for bill payment providers and telecommunication, digital and IT payment providers, MSBs must pass HMRC's fit and proper test. According to HMRC's guidance, the test applies to the business and to its beneficial owners, officers and managers, often shortened to BOOMs. That includes directors, company secretaries, managers involved in regulated activity or in AML policy, the nominated officer and anyone effectively directing the business. The test has three parts:

1. Criminal convictions. An unspent conviction for an offence listed in Schedule 3 to the Regulations is an automatic fail.
2. Compliance. HMRC considers whether there has been a consistent failure to comply with the Regulations, or a risk that the business could be used for money laundering or terrorist financing. A long history of non-compliance is not required.
3. Wider suitability. HMRC looks at honesty and integrity, skills and experience, and financial soundness, including tax affairs.

HMRC aims to decide within 45 days of receiving an application, although requests for further information extend that. If it does not receive a response to its questions within 21 days, the application is refused. New BOOMs must be added to the registration and apply within 30 days of the change, and the nominated officer and the director or senior manager responsible for AML compliance must apply within 14 days. If any BOOM fails, HMRC must refuse registration, and a person who fails must stop their duties. Providing false or misleading information may lead to prosecution.

Agents

Many MSBs, particularly money transmitters, operate through agents. HMRC's Economic Crime Supervision Handbook explains that a principal MSB must include its agents under its own registration and make sure the agents are fit and proper when they are taken on and throughout the relationship. If an agent fails the test, HMRC tells the principal that the agent has failed, without giving the reasons, and advises the principal to consider ending the relationship. A principal that carries on regardless may itself stop being considered fit and proper and could face sanctions, including cancellation of its registration.

What MSBs must do once registered

Registration is the start, not the end. HMRC's guidance says an MSB's anti-money laundering policies and procedures must cover all of its regulated activities, and that suspicious activity must be reported. In practice that means the same building blocks that apply across the regulated sector: a business-wide risk assessment, customer due diligence, ongoing monitoring, record keeping, staff training and a nominated officer who handles suspicious activity reports. Our guide to customer due diligence covers the detail. Money transmitters also have to follow the rules on information that must accompany transfers of funds.

Why the sector carries risk

MSBs are exposed because they move value quickly, often for walk-in customers with whom there is no long relationship, and sometimes through informal networks. Regulators and law enforcement commonly highlight the abuse of money transfer services by money mules, the use of cash to avoid bank controls and links to informal value transfer systems. Our guides to money mules and account misuse and hawala and informal value transfer explain how those typologies work.

What accountants should do if a client is an MSB

An MSB client is usually a higher-risk client, and your own customer due diligence should reflect that. Sensible steps include:

• Ask for evidence of HMRC registration or FCA authorisation, and check it against the relevant regulator rather than relying on a certificate alone.
• Understand the activities. A currency exchange counter, a remittance agent and a bill payment provider carry different risks.
• Ask about agents, premises, corridors served and the typical size and source of transactions.
• Check that the client has a written risk assessment, policies and a named nominated officer, and ask when its staff were last trained.
• Consider whether the client's bank account activity looks consistent with its stated business, since unexplained flows are a classic warning sign.
• Document your reasoning, apply enhanced due diligence where the risk calls for it and keep the risk rating under review.

If your firm is a trust or company service provider as well as an accountant, remember the same fit and proper test applies to you. Our guide to trust and company service provider obligations covers that.

Frequently asked questions

Can an MSB trade while its application is pending?

No. For applications made after 10 January 2020, HMRC's guidance says the business must not operate until HMRC confirms approval.

Does a bureau de change always need to register?

Usually yes, but there is a narrow exemption for occasional currency exchange that is a minor, directly related part of another business. All of the conditions must be met.

Does an FCA-authorised firm also register with HMRC?

No. HMRC's guidance says businesses already supervised by the FCA do not also need to register with HMRC.

Who is responsible when an agent fails the test?

The principal MSB. It is responsible for its agents and may be treated as no longer fit and proper if it keeps a failed agent.

Where can I get training on AML for regulated sector clients?

See Learnsignal's CPD courses for finance professionals.