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Bank Secrecy Act Requirements for Money Services Businesses
by Dr. Linda Eagle
In 1970, Congress passed the Bank Secrecy Act (BSA) to help prevent money laundering and other financial crimes. The BSA sets forth provisions for reporting and recordkeeping for many types of financial institutions. These provisions apply to Banks, Credit Unions, Savings and Loans, as well as Money Services Businesses (MSBs).
MSBs are required to register with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. The MSB must register within the first 180 days of its establishment. The owner or the principal controlling person of the MSB can do this by completing, signing and filing FinCEN Form 107. Any business that meets the definition of an MSB must register. An MSB can be defined as “any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities: check casher, currency dealing or exchange, issuer of traveler’s cheques, money orders or stored value, seller or redeemer of traveler’s cheques, money orders or stored value, money transmitter or U.S. Postal Service.”
There are a few exceptions to the registration rule. If a business serves solely as an agent of another MSB, it is not required to register unless that business provides other MSB services. If the MSB only issues, sells or redeems stored value, it is not required to register. Finally, the U.S Postal Service or any agency of the U.S. is not required to register.
In addition, any MSB that is required to register with FinCEN must complete a list of all their agents, which will be updated annually. The list must contain the following information for each agent: the name, address and telephone number of the agent, type of services the agent provides on behalf of the MSB, gross transaction amount, depository institution, the year it became an agent and the number of branches the agent has, if any. All documentation, including a copy of Form 107, an estimate of the volume of business, ownership or controlling information and the agent list must be kept by the MSB for five years.
All MSBs are required to implement an Anti-Money Laundering (AML) compliance program. Each AML compliance program must be proportionate to the risks presented by the MSB’s location and size, and the nature and volume of the services it provides. The purpose of the AML compliance program is to prevent money launderers from using MSBs to facilitate their financial crimes. The AML compliance program must be in writing and it must cover the following topics: policies, procedures and internal controlsthat are designed to maintain compliance with the BSA, designating a compliance officer who will be responsible for the AML compliance program, training for all employees who need to know the AML compliance program and providing an independent review to monitor and maintain the AML compliance program. As part of the AML compliance program, MSBs are encouraged to implement customer identification and verification policies. This includes properly identifying all customers and verifying their information.
All MSBs have recordkeeping requirements. MSBs must file a Currency Transaction Report (CTR) within 15 days when one of the following situations occur: the transaction or series of transactions involves more than $10,000 in cash-in or cash-out, the transaction or series of transactions is conducted by the same person or on behalf of the same person or the transaction or series of transactions is completed on the same business day. To complete the CTR, the MSB must verify and record the customer identification, record the transaction information, make a copy of the CTR and send the original CTR to the IRS Detroit Computing Center. The MSB must keep the copy of the CTR for five years.
Records must be made in other instances as well. These include: when traveler’s cheques or money orders are purchased with cash and the transaction totals $3,000 to $10,000, when multiple transactions made at the same time or during the same business day total more than $3,000, when money transfers occur using any method of payment totaling $3,000 or more or when any currency exchanges totaling $1,000 or more in domestic or foreign currency occur. MSBs must note the customer and transaction information and keep the record for five years.
Finally, certain MSBs are required to file a Suspicious Activity Report (SAR) for some transactions. If the MSB provides money transfers or currency exchange, or issues, sells or redeems money orders or traveler’s cheques, then the MSB must file a SAR when a transaction or a series of transactions involves $2,000 or more or $5,000 or more for issuers reviewing clearance records. The MSB must file the SAR within 30 days of the transaction. To file a SAR, MSBs must record all information on a Suspicious Activity Report by MSB (SAR-MSB) form, make a copy of the form and send it to the IRS Detroit Computing Center. The MSB must keep the copy of the form for five years.
It is the responsibility of the MSB to be informed of all BSA requirements and to make sure that it is compliant with the BSA. For more information, visit www.msg.gov.
Dr. Linda Eagle is President of The Edcomm Group and Banker’s Academy — a 20-year-old banking and financial services consulting firm specializing in the development of creative education and communication business solutions that improve productivity, customer service and market share, providing bottom-line results.
The Edcomm Group
The Edcomm Group is a 19-year old multimedia training company specializing in the banking industry. The Edcomm Group offers programs such as Compliance, Teller, BSA, AML, EEO, Sexual Harassment, Elder Financial Abuse, Bank Risk, Credit Risk Management, Fraud Prevention, Security, Ethics, OSHA, Lending, Sales & Service, System Simulations, Retail Systems, System Conversions, Leadership & Operations Management. To learn more, please contact Dr. Linda Eagle, President of The Edcomm Group, at 888-433-2666 or linda.eagle@edcomm.com, and visit us on the web at www.bankersacademy.com.
First published on BankersOnline.com 12/17/07
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