Best Practices for Banking MSBs
Anti-Money Laundering Association
Chicago, Illinois
May 15, 2009
Michelle Hassen-Hemerley – Corus Bank
First Vice President, BSA/AML Officer
INTRODUCTION
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MSB Definition
FinCEN Registration & Acknowledgment
Deciding Your Bank’s Policy
New Account Due Diligence
Enhanced Due Diligence
Ongoing Monitoring
Reminders
MSB Guidance Resources
MSB DEFINITION
A business is an MSB if it conducts more
than $1,000 cash activity with one person in
one or more transactions on the same day in
one or more of the following services:
 Money orders and/or traveler’s checks
 Check cashing and/or payday lending
More
MSB DEFINITION
 Currency Dealer/Currency Exchanger
 Stored Value Cards
OR
 Money Transfer services in any dollar
amount
FINCEN REGISTRATION
• Registration with FinCEN NOT required if:
 The business is “solely an agent,” or
 The business NEVER goes over $1,000 limitation
(except for money transmitters), or
 The business is solely an issuer or seller of
stored value cards & does no other MSB activity
NOTE: Registration must be renewed by 12/31 of the
second calendar year from the date of initial
registration and renewed every 24 months by 12/31.
NEW REGISTRATION FORM
• Revised MSB Registration Form 107 dated 8/08
• Available at www.msb.gov
• As of January 1, 2009, the MSB must use the new
form or the form will be sent back to them and they
will not be registered
• As of January 1, 2009, the MSB must complete all
required fields or the form will be sent back to them
and they will not be registered
LETTER OF ACKNOWLEDGMENT
Per FinCEN, the list of registered MSBs on
FinCEN’s website is NOT definitive proof
Obtaining a copy of the IRS Letter of
Acknowledgment is the only proof
The IRS Letter has the “Date of Notice” and “Date of
Filing” but does not list an expiration date
Review IRS Letter to ensure customer registered
the correct activity
Best Practices for Banking MSBs
Deciding Your
Bank’s Policy
THINGS TO CONSIDER
• Assume you have MSBs (not always obvious)
• Risk rate based on the MSB’s activity
• Analyze your monitoring systems capabilities
• Decide the approach for monitoring the
activity
• Determine the potential FTE impact
Best Practices for Banking MSBs
New Account
Due Diligence
INITIAL ACCOUNT OPENING
Obtain the following documents:
 Identification in accordance with CIP
 Confirmation of FinCEN Registration
 Confirmation of License with (DFPR) Department of
Financial & Professional Regulation
 Adequate BSA/AML Compliance Program
 Confirmation of Money Transfer Agent Status
 Annual Financial Report submitted to DFPR
 On-site visit (if brand new store)
COMPLIANCE PROGRAM REVIEW
Requirements of Compliance Program
 BSA/AML Policies & Procedures
 Designated Compliance Officer
 Training
 Independent Test
Note: The Compliance Officer cannot be the same
person that conducts the Independent Test
ACCOUNT OPENING AND CLOSING
• Do not open account if the owner cannot provide all
required documentation including an adequate
Compliance Program
• Send Anti-Money Laundering Questionnaire and
call to discuss requirements if the Compliance
Program is not adequate
• Run all owners through OFAC list
• Terminate relationship if poses too much BSA risk
Best Practices for Banking MSBs
New Account Due Diligence
For Secondary MSBs
SECONDARY MSB ACTIVITY
• Some banks define any business conducting MSB activity
as an MSB even if registration not required
• Obtain standard CIP for opening account
• If registration required, obtain Compliance Program or
signed Anti-Money Laundering Questionnaire
• If registration not required, obtain signed MSB Activity
Certification
• Some banks obtain collateral for businesses cashing thirdparty checks to reduce risk
Best Practices for Banking MSBs
Enhanced Due Diligence and
Ongoing Monitoring
ASSESSING THE MSB’s RISK
Questions to ask:
Are MSB services primary or secondary?
How long has the MSB been in business?
Is the MSB an agent of a well known MSB?
Have SARs been filed on the MSB?
Have any subpoenas been received related to
MSB?
 Does the MSB have a compliance program?
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MONITORING THE MSB
Customer Due Diligence – All MSBs
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Review Cash
Review Wires
Review Money Orders
Review Large Checks Deposited
Enhanced Due Diligence
 Conduct analysis of all services provided
 Conduct detailed on-site visit
ANNUAL REVIEW
• Obtain and review account
documentation
• Re-calculate risk analysis of each MSB
• Perform onsite visit for high-risk MSBs
• Obtain IRS Letter of Acknowledgment and
State License
• Obtain or review Compliance Program or
AML Questionnaire
Best Practices For Banking MSBs
Reminders, Challenges,
and Opportunities
REMINDERS
• Complete SARs on MSB customer’s customers
 If you have knowledge of unusual or suspicious activity –
you should file a SAR
 You can’t know for sure if the MSB is filing a SAR
because it is confidential
• Can ask the MSB for a copy of the CTR filed by the
MSB to be sure they are filing when necessary.
• Obtain and review compliance programs for now….
Potential legislative changes
INITIAL CHALLENGES
• Discovering the “not so obvious” existing
MSB customer
• Overcoming customer concerns with long
term customers while enforcing new
policies
• Language barriers
• Training issues on the importance of
watching for MSBs and follow-up
OPPORTUNITIES
• Help customers understand the FinCEN
registration requirements and the AML
responsibilities
• Give branch employees the tools and
knowledge to help educate the customers
• Inform customers of endorsement
standards for third-party checks and 3
year risk of return
Best Practices For Banking MSBs
New MSB
Exam Manual
Best Practices For Banking MSBs
NEW EXAM MANUAL
• Ensures that examinations are consistent and
examiners are using the same guidelines
• Contains specific examinations procedures for
CTRs, SARs, recordkeeping, AML Compliance
Program – similar to Bank BSA Exam Manual
• Appendices contain helpful information
 Sample interview questions (Appendix G)
 Chart of recordkeeping requirements (Appendix I)
 Records commonly found at MSBs (Appendix J)
RISK ASSESSMENT
• MSB should identify and assess money laundering
risks associated with their unique combination of
products, services, customers, geographic location
• MSBs not “required” to create written risk
assessment but “encouraged” to document risk
assessment in writing
• If no written risk assessment, examiner will
determine MSB’s risk profile (Don’t want that!)
• Appendix J contains a Risk Matrix to assist MSBs
Best Practices For Banking MSBs
MSB
Guidance Resources
WEBSITES AND HOTLINE
• www.msb.gov (Now at FinCEN.gov – Guidance
for your MSB customers (materials in 9
languages)
• www.FinCEN.gov
• FinCEN Regulatory Helpline: 800-949-2732
for BSA/MSB policy and interpretation of BSA
regulations
• www.cia.gov
• www.occ.treas.gov
• www.treas.gov
MSB RULINGS AND GUIDANCE
• Interagency MSB Guidelines for bankers
(FinCEN Advisory Issue #38, 4/6/2005)
• FinCEN Guidance 2007-G006 (12/3/07) – Clarifies
that owners of Privately Owned ATMs are not MSB
service providers
• FinCEN Ruling 2002-2 – Definition of a Payday
Lender adds Payday Lending to the list of MSB
activities
• FinCEN Guidance 2006-G005 (3/31/06) – Clarifies
that a business that cashes its own paychecks is
NOT an MSB check casher
Best Practices for Banking MSBs
Questions?
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