If you're involved with BSA compliance at your financial institution, you've probably been addressed, at least once with the question.... Can we open an account for a Money Service Business (MSB) customer? You start to get the rundown from Retail on how they want to open several accounts, and they are going to be a great customer. Then the Commercial Lender down the hall approaches you on the potential MSB customer and how they want to get a loan for another store location. Everyone, seems to be excited about a new "great customer." However, from a BSA Officer's perspective all you can think about is the additional monitoring. You start worrying about how the ten page currency report is now going to be twenty pages, yikes! How can you complete all of the additional efforts on your own? Regardless of your perspective, banking a MSB can be accomplished.
A MSB is business that provides financial services to their customers. To be consider a MSB, there is a specific criteria on what financial services they offer. A Money Service Business is any person doing business that offers the following to their customers:
- Currency dealer or exchanger
- Check casher
- Issuer of traveler's checks, money orders or stored value
- Seller or redeemer of traveler's checks, money orders or stored value
- Money transmitter
- U.S. Postal Service
The activity of any of these must meet the threshold of greater than $1,000 per person per day in one or more of the transactions listed above, with the exception of a money transmitter; there is no threshold for being a money transmitter. If the threshold is not met, but the services are offered the business is not considered an MSB.
If a business meets the definition of a MSB, than it comes along with specific requirements for the customer. First, there is a requirement that a MSB register with FinCEN. The registration must be completed within 180 days from when the MSB is established and renewed every two years. They must also have a written Anti-Money Laundering Program such as, a BSA/AML Policy, appointment of a BSA Officer, an independent review conducted and training on the topic provided to all employees. Sound familiar? Those requirements are pretty similar as those placed upon a financial institution.
The MSB also has an obligation for reporting and monitoring. They are required to file CTR's for cash activity above the $10,000 threshold. In addition, they must keep record of funds transmittals and other activity to monitoring for suspicious activity. If suspicious activity is identified, they are also responsible for filing a SAR. This too is very familiar to financial institutions.
Not only does the MSB have BSA/AML requirements, but if you decide to bank a MSB, you will be taking on additional requirements as well. The responsibility for the additional efforts doesn't have to be the sole responsibility of the BSA Officer, it can be completed with everyone's support. First, the institution should identify in their BSA Policy and Risk Assessment whether or not you will open an account for a MSB. A MSB customer comes at higher risk and requires additional efforts, so you will want to make sure you have addressed this decision by documenting it in your BSA Policy. In addition, your BSA/AML Risk Assessment should address the volume of MSB customers you have, the risk of the MSB customers, and any mitigating risk or internal controls in place.
Next, you will want to take a closer look at your customer by performing enhanced due diligence. Consider verifying that they meet all of the FinCEN requirements to act as a MSB. Maintain documentation of a review of their registration with FinCEN. A quick search on FinCEN's website can provide documentation of their registration. Ask to verify that they have a BSA/AML Policy, along with documentation of an independent review and an appointed BSA Officer. Request to see their records of training and their process for filing CTRs or SARs. You may even want to consider conducting a site visit. By completing enhanced due diligence on the MSB customer, the BSA Officer can ensure they are meeting their regulatory requirements and the institution can better understand your customer's business.
Even if you have completed these steps with a registered MSB customer, you should continue the efforts for identifying customers that may be unregistered MSB's. Look for cash intensive activity or deposits of third party negotiated checks. Consider if the customer has separate accounts labeled to distinguish MSB activity such as, "money transmitting" or "incoming/outgoing money transmittal." If you identify a customer that is acting as an unregistered MSB, address the situation right away, and keep in mind your SAR filing requirements.
Reduce your risk with MSB customers. Have you considered working with the institution's legal counsel to draft up a letter for cash intensive customers that indicates they won't operate as a MSB, and if they do, they are required to notify the financial institution? The due diligence review can reduce your risk. By completing enhanced due diligence, it gives you the resources to better understand your customer. You may consider scaling back your high risk review once you are familiar with the typical activity the MSB customer conducts. Lastly, don't be afraid to be compensated for your time and efforts. With the list of enhanced requirements, it comes with additional time and resources, which cost money. With everyone on board, you can bank MSB customers.