Monitoring an MSB customer
by Mary Beth Guard and John Burnett Guru Bios
Question: I am under the impression that if a customer has a deposit account with the bank, and that customer is considered a “money service business”
because they cash checks for others, that the bank has a responsibility to monitor the activities of that depositor.
I read 31 CFR Section 103.125 pertaining to money service businesses, but I can’t seem to locate the section that requires the bank to monitor the activities or
anti-money laundering program of that depositor. If someone could assist me in finding that section that requires the bank to monitor the “check cashing”depositor,
it would be greatly appreciated.
Answer: Sometimes the answer just isn’t found in the regulations because it isn’t there!
Banks are required by regulation to have effective AML policies. The regulators interpret “effective AML policies” to include knowledge of customers’ businesses
and increased scrutiny of those customers likely to present greater potential for money laundering (“Enhanced Due Diligence”).
MSBs and other non-bank financial institutions (NBFIs) are included in the regulators’ list of businesses that present greater than average risk for
being involved in or used for money laundering.
With that information, it becomes a “connect the dots” to determine why you have to monitor these businesses.
The original version appeared in the September/October 2004 edition of the Oklahoma Bankers Association Compliance Informer.
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