Guidance was issued by FinCEN and the other Regulatory Agencies concerning how banks are to handle MSBs. Other issuances were also made today on the same topic. All are posted on FinCEN's What's New section.

Thank you.

Just got it in my inbox. Thanks for the heads up, looks like great potty reading.

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...looks like great potty reading.

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Overshare.

You're most welcome, Ken. BTW, I ordered the CD-ROM version of your BOL MSB Training and thoroughly enjoyed it.

KEN!! - anxiously awaiting your comments and interpretations!!!

DITTO

I've read through everything issued today and I am glad to see that the pendulum has swung back towards the middle to some degree. I do get a little miffed over language in some of the guidance and pronouncements that make it sound as if banks were "overreacting" to the MSB situations because we were misinterpreting existing guidance and regulations.

The "misinterpretation" in my mind has been the disconnect between governmental agencies who decided to go ahead and push MSBs as an issue (rightly or wrongly) without waiting for this guidance to come out...there was no mass closing of MSB accounts going on BEFORE the examiners started pushing MSBs as an issue.

This being said, I do think that the guidance issued reflects an obviously measured approach on the part of FinCEN and I look forward to the interagency examination procedures to see if they continue to reflect this measured tome, or if they try to raise the bar by way of interpretation.

What does "if required" to register as an MSB mean exactly? Are we still at the "over $1,000" even once, at any time, makes you an MSB that must register?

Anyone care to weigh in on this "slippery slope"?

To Anon... Registration is on a State by State basis.
I think it is great news !
I was in the process of downgrading the risk of some of our MSBs and this supports me!
Cheers to Director Fox for moving forward so quickly on this issue.

Did I miss it? I thought one of the things FinCEN was supposed to clarify was whether an entity that may have in the past cashed checks for more than $1000 for a person in one day without knowing that made them an MSB could avoid that designation by adopting a policy to not do that anymore. I didn't see anything in here addressing this issue at all. Is that something we can expect future guidance on?

Registration is on a federal level, and in some cases a state level. My question is about the federal definition of being an MSB and the need to register at that level. I think the issue has been dodged big time and we are still left to decide whether and when a quasi-MSB crosses that "elusive magic threshold" that means it has to register.

If I have missed something PLEASE enlighten me! To you point, I do feel like we are much better off overall in knowing how to approach the MSB issue than we were before.

Pinkie,
Mary Beth's synopsis (linked above) is the "executive summary" of the guidance and I recommend that you forward it to other affected parties in your institution.

Like Anon #355545 I bristle at the implication that the unilateral closure of MSB accounts reflected some big misunderstanding on the part of the banks...

The Guidance is very good news for banks whose MSB customers are the businesses whose check cashing activities are of an incidental nature. Their banks are still stuck with monitoring any required registration and licensure as well as activity, but they can establish a pretty low level of due diligence for a convenience store that is willing to voluntarily limit its activity to certain types of transactions; e.g. cashing only payroll and Treasury checks for in-state customers.

For the banks that deal with sophisticated MSBs, it's still good news, but not for the same reasons. Although it does not reduce their responsibilities appreciably, it does provide an objective list of criteria they are to consider in determining the appropriate level of due diligence to assign to a customer.

The lynchpin in every MSB client relationship will be the risk assessment. The minimum due diligence requirements for every MSB client are:
*Apply the banking organization’s Customer Identification Program;
*Confirm FinCEN registration, if required;
*Confirm compliance with state or local licensing requirements, if applicable;
*Confirm agent status, if applicable; and
*Conduct a basic Bank Secrecy Act/Anti-Money Laundering risk assessment to determine the level of risk associated with the account and whether further due diligence is necessary.

The first four requirements can be accomplished by someone with a low level of skill and comprehension. The last is the kicker. In essence, each MSB will require a documented risk assessment. The guidance outlines the negative and positive factors in determining the level of risk a particular MSB customer might represent. Reducing them to a checklist would not be difficult. Evaluating the completed checklist and assigning a risk level to a particular MSB will require appreciable levels of skill and knowledge.

While the guidance explicitly says that banks are not to be the de facto regulatory agency for MSBs, financial institutions dealing with high risk MSBs will have very substantial “self imposed” compliance burdens.

The component on SAR filing reiterates the concept that an unregistered MSB may generate a SAR filing responsibility. The idea was clearly set out by the OCC in prior official communications. However, it goes on to say that violation of a state licensing requirement is also a SAR filing trigger.

One relatively minor point in the guidance captures my curiosity. Specifically: The decision to maintain or close an account should be made by a banking organizations management under standards and guidelines approved by its board of directors. Currently, banks have an unfettered right to close a customer’s account. This guidance isn’t difficult to follow; it just seems to make MSBs something of a “protected class,” a concept that is wildly counterintuitive to the longstanding concept that they are “high risk.”

Based on the "guidance", the $1,000 issue was not addressed directly. However, since there was nothing in writing that exempts a business from filing with FinCEN if they cash a check over $1,000, I'd surmise that we would have to file a SAR in those cases where the customer does not register.

On the other hand, we have been given the leeway to retain these businesses as customers, provided we perform a risk assessment on the customer and support our case for not filing additional SARs, or not closing the account. This is where the problem lies.

If we decide to retain the non-FinCEN filers as customers, that leaves us open to criticism from the examiners, whom you know are going make a case because the customer has never registered with FinCEN, regardless of the fact that you have designated the activity in the account as "low" risk and regardless of the fact that the cashing of checks has stopped.

From my point of view, a business that has been a customer of the bank for 30 years, without any problems, that has cashed one check over $1,000 in the last 6 months poses little risk. Will the examiners agree with this? I don't know. I wish they would have addressed this more directly.

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One relatively minor point in the guidance captures my curiosity. Specifically: The decision to maintain or close an account should be made by a banking organizations management under standards and guidelines approved by its board of directors. Currently, banks have an unfettered right to close a customer’s account. This guidance isn’t difficult to follow; it just seems to make MSBs something of a “protected class,” a concept that is wildly counterintuitive to the longstanding concept that they are “high risk.”

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Ken, I think this is just another case of a regulator writing a rule without a true understanding of bank practices. I don't think FinCEN was intending to insert a new requirement here. I honestly think FinCEN made the assumption that all banks already have in place board approved standards and guidelines for closing accounts where suspicious activity has occurred. But by making that assumption they have in fact created a new requirement that ostensibly only applies to MSBs and as you say giving these high-risk customers a higher level of protection against account closing.

The guidance is just as expected. It continues to be a complex issue surrounded by more hard choices for banks. The guidance is filled with scenarios for banks to compare but warns banks to follow its risk assessment of such accounts. The problem with MSB's is that there is too much baggage with them. The constant monitoring costs and potential for criticism and fines does not justify such accounts. According to guidance, an MSB may not be closed unless approved by the board. Now they are protecting them? What gives? Its going to be very interesting come July when the BSA wolves arrive. Good luck with'em!! or Close'em down!! Choose your poison.
EITHER WAY ITS A NO WIN SITUATION WITH'EM WHEN IT COMES TO BSA (bull shooters academy).

BSA = Bankers Secret Agony

Absolutely!!

In addition to the guidance for banking institutions, there is also guidance for the MSBs themselves. Does anyone know how FinCEN distributes the information to the MSBs? Email, snail mail? I hope it it is mailed since I know of at least one of my MSBs that does not have internet access.

Thanks for your help!

If an MSB hasn't registered, how does the government know how to get the information to them? If the government doesn't get the information to them, how do they know they have to register? Seems like a Catch 22 situation. I can see where the major check cashers, wire transmitters, etc. would probably know something about the requirements, but not the Mom & Pop stores that just do a little of this on the side.

Banjo,
You have figured it out. An NBFI/MSB must have a bank account. The government is using the banks to find them and force them to register.

We are little more than the hounds chasing the fox to the hunters.

And, let's not forget, folks, that the government regularly issues regulations and such without sending us invitations to participate. The MSB rules are published in the Federal Register, and that constitutes notice as effectively to the NBFI community as it does to us bankers.

It is my understanding that a customer who cashed checks in the past for amounts over the threshold, but decides to discontinue check cashing services all together, is NOT an MSB under the "once an MSB, always an MSB" rule.

However, if a customer has cashed checks over the threshold amount in the past, but decides to change their policy and only cash checks under the threshold amount, then they are an MSB under the "once an MSB, always an MSB" rule because they are still providing a check cashing service.

FYI: This information came directly from an FDIC BSA Specialist in the Memphis Office.

I spoke to a FinCEN represntative who said (in effect) the customer can repent, adopt a policy that says they will not cross the threshold again and then they will not be an MSB from that point forward. A couple weeks later, I spoke with an IRS specialist in MSBs who said the act of contrition would have no effect, they would still be an MSB even though they no longer crossed the dollar threshold. Your FDIC representative seems to have coined a third opinion, they have to stop cashing checks altogether.

Personally, I think the IRS approach is more logical, but the variety of opinions involved simply indicates to me there is no answer you could rely on. In candor, the FDIC's opinion on this issue is the least weighty of the three - they do not get to interpret any of the rules involved.

The "guidance" that prompted this thread does not address this issue and was not supposed to. The FinCEN representative I spoke with indicated they were hoping to address the issue in writing in the near future, but did not give an expected date of publication.