Did I get your attention? Good! Here's the scenario - We have a potential prospect wanting to bank with us but want to determine if our bank will be able to serve his account activity. The parent company (financial services company/NBFI) is domiciled in the U.S. but also has several locations in Mexico. They want to deposit cash from their Mexican locations into the U.S. for "concentration purposes". I'm told with those deposits, they can disburse checks (pay vendors, payroll, etc). They were formerly banking at one of the mega banks but that bank now has an internal policy of not accepting clients of this type.

As the BSA Officer, my first/last instinct says - HECK NO!! But need justification (from a compliance/risk aspect) to make my point. BTW - this company also has several hundred locations in the U.S. The company is legit but this activity with their locations in Mexico doesn't give me a "warm & fuzzy" feeling. The biggest concern I have is the money laundering risk --- how can we be assured if the cash from the mexican stores is "clean"???

If you do accept them, fee the living poo out of them. Our company policy is not to bank a client of this type that is outside our footprint; is their nearest branch within yours?

You can't be assured the cash from the Mexican stores is clean, as you have no proof of origination. It makes me feel icky thinking about it. LOL.

If you know which Mega bank I would search on the internet and I am sure you will find a CMP or at least some justification for not opening the account.

Your bank is not required to serve as the de facto regulator of the NBFI. Furthermore, your bank should not be held responsible for the NBFI's lack of compliance with the BSA and other applicable federal and state laws and regulations.

That said there is no way to be 100% certain that the cash being deposited in Mexico is legitimate. If I was forced too, I would insist upon knowing your customer's customer in this situation. I would want some type of written agreement from the NBFI stating they will not conduct business with CDC's. If not, what's to stop the NBFI from opening accounts from CDC's and thus allowing those accounts to become nested accounts?

In terms of justification, how about:

1. Their current bank threw them out
2. The Wachovia CMP
3. Go to CNN and search Mexico and Drugs
4. Given the amount of work your department will have to do, will this relationship not just be profitable, but profitable enough to risk your bank’s reputation?

Appreciate the feedback thus far!!! Yes, I know the mega bank's name but wasn't sure if it was okay to state it. Yes, this prospect's home office is in our market.

My boss (Chief Risk Officer) says no but if he gets some push back from the regional president (where the account will be opened), this matter may have to go before the executive team.

I'm sure they'll think the potential fee income may outweigh the risk.....but if the decision is made to proceed with this prospect, I want a an increase in my salary and that of my dept personnel!!!!!

How do they plan to get the cash into the country?

Mexico has really clamped down on deposits made in U.S. currency as a way to battle the drug trade as well as the black market peso exchange. This has caused some issues for both legitimate and illegitimate businesses.

The problem you are facing is that you simply do not know enough to determine if the currency is from and for legitimate purposes or if it simply a part of a peso exchange laundering operation.

Here is a training presentation from ACAMS that provides some detailed information on money laundering risks associated with Mexico and South America:

Banking by the Border

Be sure to review this advisory from FinCEN regarding the new restrictions in Mexico on currency deposits:

http://www.fincen.gov/statutes_regs/guidance/pdf/fin-2010-a007.pdf

Thank you Princess for sharing the Banking by the Border with us - Good information to have.

Princess,

That's for the training presentation!! I had already read the FinCEN advisory that issued in June 2010.

This is a legitimate business but need to conduct thorough due diligence and communicate the risks to the "powers that be" so they can make an informed decision.

THANKS!

"This is a legitimate business". Hmmm, I believe it could possibly referred to as integration. Just make sure that you do all your due diligence now and in the future. The regulators are going to have a field day if you open this account, so if you decide to open, you better charge the begeezus out of this customer in order to make any profits. What you haven't indicated is what type of volumes you are talking about and how large of an institution you are. If you are small and they are big, it is a perfect set-up for bluffing the little guy. If you aren't set up to service and monitor an account like this, you are going to be winging the due diligence part and most likely can't afford to do it for just one and think you have the type of sophisticated investigation processes to do it correctly.

I'm hesitant to provide more info primarily b/c this forum is opened to the public. I guess I should have post it in the prvate forum.

This financial services company is listed on the NASDAQ Global Select Market. Per conversation with their general counsel, their anticipated cash volume will be under $850k per month. Our bank's asset size is roughly 2.2B with locations in 3 states. As I stated in an earlier post, their principal office is located in our trade area.

Princess - I was typing too fast on yesterday!! I meant to state - Thanks for the presentation link. I'm reading it right now.

I properly don't have the slightest idea how this entity operates or what their particular business model is. But a financial services company with $850,000 per month in cash? How is that even possible?

As a BSA Officer, I personally agree with rclarey. The regulators will have a field day with this one. I don't remember if I saw if you were a smaller bank or a bigger bank. We are a smaller bank and I look at it like this. If the account is going to be more cost than income-more manhours, more resources, etc...- then we usually decline the account. A bank can turn down any account regardless. So this is my reasoning. Hope it helps some.

It's probably a company like Sigue or Western Union.

Might want to look at the Union Bank CMP. Part of the money that was taken was the money they charged in fees.