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#1975486 - 11/10/14 05:07 PM FinCEN statement on banking MSBs
John Burnett Offline
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FinCEN seems to be the latest agency asking banks to back away from blanket bans or avoidance of providing banking services to specific industries. In a statement issued today (http://www.fincen.gov/news_room/nr/pdf/20141110.pdf), FinCEN says it "does not support the wholesale termination of MSB accounts without regard to the risks presented or the bank’s ability to manage the risk."
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#1975552 - 11/10/14 09:00 PM Re: FinCEN statement on banking MSBs John Burnett
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Now if that would filter down to Examiners ... wink

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#1975554 - 11/10/14 09:01 PM Re: FinCEN statement on banking MSBs John Burnett
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^ That's exactly what I was thinking Magic. FinCEN can opine on whatever topic they so choose. But it's up to the regulators that actually set up shop in a bank to toe the line.
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#1975600 - 11/11/14 12:09 PM Re: FinCEN statement on banking MSBs John Burnett
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I may get flamed for saying this, but the risk-based approach is not working for "heightened risk" customer types. It would be much more useful if FinCEN told us EXACTLY what controls should be in place for each specific type of risk. Subjectivity just gives examiners ammunition.
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#1975601 - 11/11/14 12:13 PM Re: FinCEN statement on banking MSBs MagicCity
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Originally Posted By: MagicCity
Now if that would filter down to Examiners ... wink


Oh this will trickle down...

Pretty soon we'll have examiner criticism for closing MSBs or prohibiting them in policy without a novel-sized report using advanced statistics to support our stance.
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#1975603 - 11/11/14 01:05 PM Re: FinCEN statement on banking MSBs John Burnett
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I agree with patsfan, while I know FinCEN's message is actually on point, it will only provide fuel for one more "gotcha" from the idiotic field examiners for those banks that choose not to bother with banking MSBs.

Banks only quit banking MSBs because of the unfounded fits thrown by the field examiners when it came to "their" expected due diligence requirements.

This is not a problem created or perpetuated by the "financial institutions". If FinCEN wants to solve these sorts of problems they need to become more actively involved in the actual examination processes (a little more than contributing to writing an exam manual every 4 or 5 years).
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#1975821 - 11/12/14 07:44 PM Re: FinCEN statement on banking MSBs John Burnett
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The FinCEN "statement" is a somewhat distorted echo from the FATF announcement made a couple weeks ago. "De-risking" (which would include an across the board decision not to bank MSBs), is now a bad, bad thing. It's particularly bad if the version of risk a bank is trying to avoid is "regulatory risk."

Generally speaking, de-risking refers to the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk in line with the FATF’s risk-based approach. De-risking can be the result of various drivers, such as concerns about profitability, prudential requirements, anxiety after the global financial crisis, and reputational risk. It is a misconception to characterise de-risking exclusively as an anti-money laundering issue

While I would like to make some searing, intellectual comment, I am working on a deadline and all I can think of to say is that this is way beyond ridicule; Kafka would be proud.

They should have spent their time and effort updating the favorably cited April, 2005 Interagency Guidance on providing banking services to MSBs, It is full of inaccuracies due to changes in the regulatory landscape including what exactly is an MSB...
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#1975831 - 11/12/14 07:56 PM Re: FinCEN statement on banking MSBs John Burnett
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In most cases it is not solely a risk based approach but includes a business decision to not bank accounts that cost more to service (including compliance costs) than you receive in fees. The talk in the conference just seems like another excuse to kick the banker for not banking unprofitable accounts which also have a huge reputational risk.

A MSB is not a protected class.
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#1976881 - 11/17/14 07:40 PM Re: FinCEN statement on banking MSBs John Burnett
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Amen!

Regulators need to understand that there are a variety of reasons for not banking certain types of customers. And if the primary reason is regulatory risk, then so what? They need to stop trying to influence how we run our business.
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#1977541 - 11/19/14 06:57 PM Re: FinCEN statement on banking MSBs John Burnett
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Well, here comes the OCC with their "Banking Money Service Businesses: Statement on Risk Management."

I can see it now. We don't open MSBs because we're a small one branch bank with a manual BSA program. Now I'll probably be criticised for making a statement that we don't bank MSBs and the like.

I wish I was closer to retirement. This is beyond a circus.
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#1977554 - 11/19/14 07:35 PM Re: FinCEN statement on banking MSBs John Burnett
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^ The OCC just left my shop about 4 months ago. They were pleased to hear that we wouldn't do business with payday lenders, TPPPs and in most cases, MSBs. I've yet to actually hear a banker state that a regulator has given them issues over derisking. Maybe at the money centers, but for most posters on BOL, I don't foresee this being an issue.
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#1979605 - 11/26/14 09:16 PM Re: FinCEN statement on banking MSBs ACBbank
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As a practical matter, I think the only risk is for banks that have been thoughtful enough to use their policy to list customers they will not bank (just like they should have). The problem will come based on the explanation they offered for the denial of service to MSBs. If it was based on "regulatory risk" or anything close to that: GOTCHA!

If your paper trail recites a reason for not banking MSBs, make it something, anything, other than regulatory risk or the inability to evaluate the risks involved. On the other hand, if your policy says you won't bank marijuana related businesses due to regulatory risk, that will be just peachy. wink
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#1979637 - 11/27/14 12:21 AM Re: FinCEN statement on banking MSBs John Burnett
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I suggest developing a MSB checking account that has a monthly fee of say - $750. You can then say - hey - we will bank them - we don't discourage them from applying for an account, we even have developed a specific product for them. Unfortunately, we don't seem to have any takers. smile
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#1979805 - 11/29/14 06:04 PM Re: FinCEN statement on banking MSBs John Burnett
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Randy - That's very similar to what we do. Besides the normal analysis fees, we have a "MSB Fee" which ranges from $500 through $5,000.
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#1986176 - 01/03/15 12:58 PM Re: FinCEN statement on banking MSBs ACBbank
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I like rlcarey's suggestion. My friendly amendment would be to have the base fee assessed against all nonbank financial institutions (NBFI's) including MSB's; i.e. any customer that provides financial services. NBFI's require monitoring on the same level as MSBs. The irony is that when the customer crosses some line and becomes an MSB, it's easier to establish more detailed documentation requirements because MSB's are required to register and have a written BSA/AML compliance program. They may also be required to have a license from the state.

In short, an NBFI that morphs into an MSB is now easier to document.

Article on de-risking small foreign business accounts, not just MSBs.

Article regarding bank decisions, including account closures, affecting charities' ability to fund essential activities.

There were a couple articles on de-risking in the December 29 issue of the American Banker, but there is no point in linking them as they are only available to subscribers. (Standard subscription, $1475 a year.)
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#1992072 - 01/29/15 12:09 PM Re: FinCEN statement on banking MSBs Elwood P. Dowd
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So, they really do want to make MSBs a protected class. FIL 5 - 2015

This underscores the need to be careful in wording policy statements regarding a decision not to bank MSB's. It also will encourage some to take care of the issue with a fee structure driven by monitoring requirements.

A word to the wise, don't call it a "MSB fee." One client had such a fee and the customer said it was going to repent and stop cashing checks in excess of $1,000. The customer wanted the fee to be removed immediately. Obviously, monitoring is based on NBFI status and, in part, to make certain the customer does not meet the "MSB" definition; i.e. monitoring is not going to stop just because the customer says it no longer meets the definition.
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#1992092 - 01/29/15 02:14 PM Re: FinCEN statement on banking MSBs John Burnett
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#1992209 - 01/29/15 05:04 PM Re: FinCEN statement on banking MSBs rlcarey
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It appears that they do not wish for banks to decide not to bank MSBs but to risk rate them individually and then decide to not bank them. smirk
Last edited by edAudit; 01/29/15 05:04 PM.
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#1992411 - 01/30/15 01:48 PM Re: FinCEN statement on banking MSBs edAudit
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Hmmm...you've identified Plan B and I rather like it. Then, however, they will claim an "effects test" where your risk rating, the one that always reaches the same result, is inherently discriminatory. grin

For entertainment purposes, I'm liking the idea of putting the statement "We do not bank money service businesses or marijuana related businesses" in the policy. Let's see them rationalize their position that refusing to bank one based on regulatory risk is fine, but refusing to bank the other is a bad, bad thing.
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#1992647 - 01/30/15 09:30 PM Re: FinCEN statement on banking MSBs Elwood P. Dowd
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Excerpt from opening Remarks of Under Secretary for Terrorism and Financial Intelligence David S. Cohen at the Treasury Roundtable on Financial Access for Money Services Businesses

To be sure, whatever reluctance financial institutions may have to work with the MSB sector is likely driven by several factors; it is not simply a response to money laundering and terrorist financing risk. As you all know, many considerations come into play when a financial institution decides whether to take on or retain a customer. These include profitability, the overall economic climate, capital requirements, and risk appetite, to name just a few.

And we have no problem with financial institutions that, after applying a risk-based approach to their decision-making, say “no” to some customers -- in fact, that’s what we expect of them. A bank that terminates a relationship with a money transmitter because it reasonably determines that it cannot responsibly mitigate the customer’s illicit finance or other risk is to be applauded, not criticized.

What we are concerned about, however, is the possibility that financial institutions are terminating or restricting an entire class of business relationships simply to avoid perceived regulatory risk, not in response to an assessment of the actual risk posed by individual MSBs.


There really should be some acknowledgement of the fact that we started down this path more than 10 years ago because the regulators wanted to make banks the functional equivalent of the regulatory agency for MSB's...
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#1992686 - 01/30/15 10:34 PM Re: FinCEN statement on banking MSBs John Burnett
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simply to avoid perceived regulatory risk

Well, from first hand experience with the regulators over the last 10 years, I think Mr. Cohen's choice of the word "perceived" is a little too self-serving. The risks to banks presented by the examination staff of the various regulators was a little more than just "perceived".
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