When Stripe or PayPal approves or rejects your account, it feels like a government check. It is not. It is a private company deciding whether it wants your business as a customer.
There is a real federal registration in this space, but it does not belong to you or your LLC. It belongs to the processor, and only if the processor's own business model requires it. Most founders never come into contact with that registration at all. What they come into contact with is the processor's underwriting, and that process runs the same way regardless of where the business owner lives.
This page separates the two layers: the federal rule that applies to processors, and the private approval process that applies to merchants.
What the law actually requires
A "money transmitter" is defined in 31 CFR § 1010.100(ff)(5)(i) as a person who accepts currency, funds, or other value that substitutes for currency from one person and transmits it to another location or person. A money transmitter is a Money Services Business (MSB), and under 31 CFR § 1022.380 an MSB must register with FinCEN.
The definition has carve-outs, and one of them is aimed directly at this industry. Under 31 CFR § 1010.100(ff)(5)(ii)(B), a person is not a money transmitter if it "acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller." So whether a given processor has to register turns on how its own model is structured, not on any assumption that "moving money" always means registration. Some payment companies are registered MSBs; others operate inside this exemption.
Where registration does apply, it is filed on FinCEN Form 107 (Registration of Money Services Business). FinCEN stopped accepting paper Form 107 on July 1, 2012, so it is filed electronically through the BSA E-Filing System. The initial deadline is the end of the 180-day period beginning the day after the business is established, and registration is renewed every two years. 31 U.S.C. § 5330(e) sets a civil penalty of $5,000 for each violation, and each day a violation continues counts as a separate violation. That figure is adjusted for inflation, so the amount actually assessed is higher than the number printed in the statute. The current adjusted amount is in the table at 31 CFR § 1010.821.
None of this sits on you. If a processor's model requires MSB registration, the registration question is the processor's to answer, not yours. Your LLC does not file Form 107, because your LLC is not the one performing money transmission.
There is a second layer above that. In June 2023, the OCC, the Federal Reserve, and the FDIC published "Third-Party Relationships: Interagency Guidance on Risk Management" (OCC Bulletin 2023-17). It applies to a bank's third-party relationships generally, and it sets out risk management principles for each stage of the relationship life cycle rather than only at onboarding. The guidance does not name payment processors, and it does not tell processors how to underwrite merchants. What it does establish is that a bank remains responsible for activity conducted through third parties. Merchant underwriting is the processor's own commercial decision, made inside that supervisory environment.
State-level money transmitter licensing is a separate question, decided state by state, and it is outside what this page checked.
Two different things people mix up
The "approval" or "rejection" a merchant receives from Stripe or PayPal is the processor's own underwriting decision. It is a private business judgment about risk, not a filing with any government agency. A merchant getting approved or declined has nothing to do with whether the processor itself is registered as an MSB with FinCEN.
Confusing the two leads to bad conclusions. A founder might assume that because a processor asked for extra documents, some federal agency is reviewing their business. It is not. The processor is deciding, on its own criteria, whether to accept the risk of processing that business's transactions.
🇺🇸 If the IRS counts you as a U.S. person
The approval process is the same one every merchant goes through. You will typically be asked for your legal business name, EIN, business address, the nature of your business, and bank account details for payouts. The processor runs this through its own underwriting, and its own risk rules decide the outcome, not your residency status.
🌏 If it does not
The approval process is the same one every merchant goes through. Non-resident founders sometimes assume there is a separate, harder track because of where they live. There is not. The variable that actually moves the outcome is the processor's own risk assessment of the business, not the owner's citizenship or country of residence.
What decides approval, and what does not
| Factor | Does it change the process? |
|---|---|
| Owner's residency or citizenship | No. The underwriting process is the same for U.S. persons and non-residents. |
| Processor's own business model (does it move money for merchants?) | Yes, for the processor's own registration duty. It also decides whether the processor falls inside the payment processor exemption at 31 CFR § 1010.100(ff)(5)(ii)(B). Nothing about the merchant decides it. |
| Business documentation (EIN, business address, bank account) | Yes. This is what the processor's underwriting actually reviews. |
| Whether the merchant's home country restricts a payout method | Yes, but that is a payout-rail limitation set by the processor, separate from FinCEN registration. |
Common mistakes
🇺🇸 If the IRS counts you as a U.S. person
- Assuming a Stripe or PayPal rejection means you broke a federal rule. It usually means the processor's own underwriting flagged something in your application.
- Treating the processor's request for more documents as a legal proceeding rather than a private risk review.
🌏 If it does not
- Assuming the underwriting process is stricter, or a different process altogether, because of where you live. It is the same process applied to every merchant.
- Confusing the processor's own MSB registration duty with something you, as the merchant, are supposed to file. You are not.
FAQ
Is Stripe or PayPal registered with the government?
It depends on how the company structures what it does. A money transmitter has to register with FinCEN as a Money Services Business under 31 CFR § 1022.380, using FinCEN Form 107. But 31 CFR § 1010.100(ff)(5)(ii)(B) exempts a person who acts as a payment processor to facilitate the purchase of a good or service through a clearance and settlement system by agreement with the creditor or seller. Some payment companies register; others operate inside that exemption. Either way, the question belongs to the processor, and it is separate from the approval decision a merchant receives when opening an account.
Does my residency affect whether Stripe or PayPal approves my account?
No. The underwriting process that decides approval or rejection works the same way whether the business owner is a U.S. person or not. What the process reviews is the business itself: documentation, banking details, and the nature of the business.
If my payment processor account gets rejected, did I fail a government check?
No. A rejection from a payment processor is a private underwriting decision by that company. It is not a government filing, and it is not the same thing as the processor's own FinCEN registration status.
What is FinCEN Form 107 and do I need to file it?
FinCEN Form 107 is the registration form a Money Services Business files under 31 CFR § 1022.380. It applies to a company whose own business is money transmission. A merchant using a payment processor to accept payments does not file this form.
What does the 2023 Interagency Guidance actually say?
"Third-Party Relationships: Interagency Guidance on Risk Management" (OCC Bulletin 2023-17, June 6, 2023) was issued by the OCC, the Federal Reserve, and the FDIC. It sets out risk management principles for each stage of a bank's third-party relationship life cycle, and it makes clear that using a third party does not shift the bank's responsibility for the activity. It is addressed to banks. It does not set merchant underwriting rules, and it does not name payment processors.
Does a processor's decision to reject my account count as a government action I can appeal?
No. It is a private company's business decision. There is no federal appeal process tied to it, because no federal agency made the decision. Your options are the processor's own dispute or reconsideration process, or applying to a different processor.