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#1853893 - 09/19/13 06:35 PM MSB
ATLbanker Offline
Gold Star
Joined: Sep 2005
Posts: 332
Georgia
We have a customer who stated they are not a money service business. Their activity would not indicate they are a MSB. They are not depositing alot of payroll checks. They deposit checks from businesses that have an account with the station. we have recently found out that they are listed on the State Department of Banking's website as a licensed check casher. Do we need to flag them as a MSB and increase our monitoring of them?

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#1853942 - 09/19/13 07:20 PM Re: MSB ATLbanker
devsfan Offline
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Joined: Jun 2004
Posts: 1,927
NYC
I think you need to explain your situation a bit more clearly.

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#1853969 - 09/19/13 07:47 PM Re: MSB ATLbanker
ATLbanker Offline
Gold Star
Joined: Sep 2005
Posts: 332
Georgia
We opened a checking account for a convenience store. When they opened the account they stated they were not a check casher. We verified their information. Their activity supported their assertion: no deposit of cashed payroll checks, no daily large cash withdrawals. Recently, they popped up for suspicious activity and we investigated. During our investigation we checked the State Department of Banking's website and found them listed as a licensed check casher. Since they are not processing the check cashing activity through our bank how should we rate them for BSA: high risk or normal? We have varying opinions and value input from the deep well of knowledge and experience here at Bankers Online.

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#1853979 - 09/19/13 08:07 PM Re: MSB ATLbanker
J2C Offline
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Joined: May 2004
Posts: 1,475
Big Brother knows and that's a...
Why don't you ask the customer, again based on what you found?
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#1853996 - 09/19/13 08:40 PM Re: MSB ATLbanker
devsfan Offline
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Joined: Jun 2004
Posts: 1,927
NYC
As Jenny indicated, you can certainly advise them that you know that they are a licensed check casher and ask them where they bank for that activity. You should also advise your front line staff to look for 3rd party checks that are deposited and advise you accordingly. I am also curious as to what activity popped up as suspicious in your monitoring.

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#1854251 - 09/20/13 05:40 PM Re: MSB ATLbanker
ATLbanker Offline
Gold Star
Joined: Sep 2005
Posts: 332
Georgia
we talked to the customer. They are a check casher and use a different bank for processing that part of their business. Now that we know about it, should we rate them as a high risk for our BSA risk assessment? We normally do not bank MSB's because of the extra work and risk involved. Do we need their anti-money laundering policy and procedures?

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#1854279 - 09/20/13 06:54 PM Re: MSB ATLbanker
MagicCity Offline

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MagicCity
Joined: Apr 2003
Posts: 3,003
Fort Lauderdale, Florida
You do not want to have the AML policies and procedures of any of your customers; that implies that you have read them and approve of them.
You are not their regulator.

I would simply document that you are aware they are a licensed check casher, and note that part of their business is handled by Bank ABC.

I would not make them a higher risk if you are comfortable with the rest of the business.

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#1854351 - 09/20/13 08:23 PM Re: MSB ATLbanker
devsfan Offline
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Joined: Jun 2004
Posts: 1,927
NYC
You should still instruct your front-line staff to report any deposits of 3rd party checks. Also do you offer them RDC? If so someone will need to review all of their deposits because you need to ensure than none of the check casher-related activity goes through the account with you.

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#1854524 - 09/23/13 03:36 PM Re: MSB ATLbanker
ATLbanker Offline
Gold Star
Joined: Sep 2005
Posts: 332
Georgia
Thankfully, we did not give them RDC. Our BSA Officer is going to increase her monitoring.

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#1854754 - 09/24/13 02:01 AM Re: MSB ATLbanker
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
We normally do not bank MSB's because of the extra work and risk involved.

Well you do now, regardless of whether they run that part of the business through you. They are a MSB. Small black and white mammals might claim to be polecats, but they are still skunks.

Why would a single location run separate parts of their business through several banks? That alone is a red flag. Many banks insist that if they are going to bank an MSB they have the entire relationship. Otherwise, there is no way to monitor them.

You do not want to have the AML policies and procedures of any of your customers; that implies that you have read them and approve of them.

Then why are two of the mentioned mitigation factors for MSBs in the Exam Manual the following?

Review the MSB’s BSA/AML program.
Review written procedures for the operation of the MSB.
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#1854772 - 09/24/13 12:35 PM Re: MSB ATLbanker
MagicCity Offline

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MagicCity
Joined: Apr 2003
Posts: 3,003
Fort Lauderdale, Florida
Review.

We review.
We see they have a written program.
We confirm they have access to msb.gov;
We confirm they have signed up for email notices.
We also confirm that they have a CPA or other that is familiar with MSB regulations.

In my opinion, if you have a copy of their program in file it implies that the bank has approved it.

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#1854855 - 09/24/13 03:06 PM Re: MSB ATLbanker
devsfan Offline
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Joined: Jun 2004
Posts: 1,927
NYC
At one time we had some accounts of commercial check cashers; they are licensed by the NYS Department of Banking (now known as department of Financial Services). All accounts have since been closed but when they were still open we required copies of their independent reviews but not their policies for the reasons indicated my MagicCity.

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#1854909 - 09/24/13 04:06 PM Re: MSB devsfan
Nova Offline
New Poster
Joined: Apr 2011
Posts: 5
CA
Agree with rlcarey -
The exam is manual is very clear;

Review the MSB’s BSA/AML program.
Review written procedures for the operation of the MSB.

How can an MSBs program and procedures be reviewed without acually having a copy? Furthermore, how am I to show my examiner that I have completed this review process?...because I have a copy.

IMHO if your going to bank MSBs be prepared to review, and prove said review by retaining a copy of their policies and procedures, it goes with the nature of the beast.

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#1854947 - 09/24/13 04:53 PM Re: MSB ATLbanker
MagicCity Offline

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MagicCity
Joined: Apr 2003
Posts: 3,003
Fort Lauderdale, Florida
The guidelines you state come from the section of the exam guidelines on MSBs for Enhanced Due Diligence, "if you decide that your MSB has a higher level of ML or TF risk."

Fortunately the guidelines also say:

"•Not all MSBs pose the same level of risk, and not all MSBs will require the same level of due diligence.
Accordingly, if a bank’s assessment of the risks of a particular MSB relationship indicates a lower risk of money laundering or other illicit activity, a bank is not routinely expected to perform further due diligence (such as reviewing information about an MSB’s BSA/AML program) beyond the minimum due diligence expectations.
Unless indicated by the risk assessment of the MSB, banks are not expected to routinely review an MSB’s BSA/AML program."

In the case being discussed, the bank does not have the MSB portion of the customer's business.

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#1854961 - 09/24/13 05:06 PM Re: MSB MagicCity
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Prior to 2005, the FDIC's examination procedures required that banks obtain a copy of the MSB's BSA policy and evidence of its program. Unless the agency's goal was to paper the file, they intended the recipient bank to review and analyze those documents. Banks reacted by saying they were not going to serve as the MSB's defacto regulatory agency and started kicking them out the door, right & left.

MagicCity's excerpt had its source in the Interagency guidance promulgated in 2005 which was intended to put an end to the idea that a depositary bank was to act as the MSB's keeper. It said:

As with any other accountholder that is subject to anti-money laundering regulatory requirements, the extent to which a banking organization should inquire about the existence and operation of the anti-money laundering program of a particular money services business will be dictated by the banking organization’s assessment of the risks of the particular relationship.

If a bank adjudges an MSB as high risk, then obtaining the documentation is simply prudent. However, on lower risk MSBs its a bit worse than a waste of file space, it's an unnecessary assumption of responsibility. There is no point in "mitigating" risk that you do not believe exists.

As evidence of the fact that those who do not remember history are doomed to repeat it, an FDIC exam team recently recommended to a client that the bank obtain copies of the policies of all MSB customers. Just as it should have, the bank balked. In defense of the recommendation, the FDIC directed the bank to that agency's "Risk Management Manual of Examination Policies."

However, that resource neither requires nor implies that banks should obtain MSB policies as a matter of routine. It pays to ask: "Where does it say that?"
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