I have identified 3 customers that are MSBs and have sent them a letter requesting their registration and AML policy. It has been over a month and none of them have responded to my letter. Could someone please advise me if bank's are actually required to get this information from Money Services Business or do we just have to identify them?

If you identify them and are reasonably certain they are MSBs, and they fail to provide you with documentation of their registration with FinCEN (and you are unable to find them on FinCEN's database of registered MSBs), and/or you can't confirm they have registered with or become licensed under an applicable state requirement, you should file a SAR.

You aren't required to document that they have an AML policy -- you are not their regulator and it is not incumbent upon you to become one. That's for the IRS (typically) and/or state authorities to determine.

You should have a copy of their registration and any other licenses that your state requires.
There are two schools of thought on obtaining their policy.
Some banks get a copy of it.
I however just request it when I do a site visit, and I look at it to see that it covers the topics required and that someone is designated as the compliance officer.
I have them sign a statement saying they understand the compliance requirements, that they abide by them, and that they have an attorney or accountant to advise them.
I also provide them with the links to the relevant websites to keep up to date on information.
I would also recommend regular site visits. I do one annually.
I also review deposits and they are not allowed to cash checks payable to businesses.
Hope this helps you.

Thank you both. One of the MSBs I was able to on FINCEN's website as being registered but the other two I don't. From what I have read and knowing the businesses, all they do is send Money Grams and such so they are acting as an agent for a MSB so they would not have to register. How would I document that other than getting a copy of the agreement from them?

If they are an agent of Money Gram, Western Union, etc I request a copy of their agreement and review their activit5y semi-annually to ensure that the activity is consistent with an agent of an MSB. We also require an annual site visit.

Tagging onto this thread....how do you handle the situation when you discover an MSB "check casher" is cashing checks made out to businesses. Does someone at the branch discuss this activity with him. Do you file a SAR?

A stupid and dangerous practice? - yes. A violation of law? - not unless it violates a State law (some State laws prohibit check cashers from doing this).

This should be addressed in your MSB contract and agreement to provide services to the MSB and you either give them a warning or terminate their relationship if your bank does not want to be exposed to the inherent risk presented by these actions.

Ann, as rlcarey stated, this has to be something you discuss as part of your agreement to bank the MSB, - so there are no discoveries at a later date.

We do not allow ours to cash checks made payable to businesses.
We also do not allow checks from a business payable to cash.
We are clear that we expect to see only checks from local businesses payable to local persons.

It is good to have a strict set of guidelines for them or what is acceptable and not acceptable to the bank.

If MSBs do cash checks made out to businesses its recommended that they do so only for business customers that they know well (which is usually the case as it is a risk to the MSB as well, should the check not clear or be false - check cashers don't want to be ripped off either) and have on file paperwork on the business's letterhead (with additional obvious proper due diligence performed by the MSB regarding the document) authorizing persons allowed to cash checks for that business.

MSB Consultant,
I'm leery of MSBs cashing business check, but even more so due to the recent NPRM regarding identifying beneficial owners for business entities. Does the NPRM change your opinion at all?

Our MSB only cash checks payable to individuals. It all comes down to how much risk your bank is willing to accept knowing this is happening. A discussion needs to be had with them by their account officer, the branch manager or your BSA officer otherwise the activity will continue. You could also write them a letter and document in your files and then decide if you want to continue the relationship if they do not cease the activity.

What business in their right mind, if they are doing business legitimately, would authorize anyone to cash checks made payable to the business? It eliminates all audit trails. Risk or not, authorization or not, anyone that cashes a check made payable to a business can be 99% sure that they are most likely aiding and abetting a crime - that crime would be tax evasion. Without proper authorizations, the risk is embezzlement and casher of the check would be on the hook for years' worth of checks.

Just tell your MSBs - No.

A friendly addition to rlcarey's post:

The fact that the MSB is playing the role of the prostitute does not mean your bank is required accept its casting as the pimp. Your customer is engaging in a practice that your bank abhors, but your customer can't do it without your support. The risks are incredibly obvious and you have full knowledge of what is going on. Send them packing.

Just came across this and it seemed to fit: Capital One subpoenaed over activities of check casher clients If you lie down with dogs you get up with fleas.

The NPRM only applies to entities who are required to have CIP, which MSBs do not. As such MSBs are not required to obtain beneficial ownership information at this time. That said, even though MSBs are not required to have a CIP, they still need to know enough about persons cashing checks to be able to identify suspcious activity, so as a matter of practice, they should have a CIP (tailored to MSB) with CDD and EDD policies and procedures in place. Some MSBs do have such procedures and policies, many do not.

As a MSB Consultant you are free to advise your MSB clients in any way you see fit.

Since I am a bank consultant and this is a question asked by a banker, I will take the liberty to advise them as I see fit.

A MSB that chooses to cash checks made payable to a business expose themselves too considerable risks and in turn they expose their bank. These risks go far beyond any risk presented by CIP, CDD, or EDD concerns and the financial ramification could far outstrip the available assets of 99% of the MSB customers that I review which will leave the bank holding the bag.

Whether you "know the person" cashing the check or not has nothing to do with their legal right to do so. You might want to spend some time with the UCC and case law regarding the negotiation of checks made payable to a business that have been negotiated for cash by unauthorized individuals.

There is a very valid reason why banks refuse to do this directly (again totally unrelated to BSA). Why would they put up with one of their customers that chooses to do it?

I must have unintentionally hurt a nerve with rlcarey, not my intention. I have MSB consulting experience but am now a bank consultant and former examiner and former Bank/NBFI regulator. I was just offering up my perspective. All three parties industry-wide need to better communicate as there is room for MSBs in banking unfortunately there is a lot of mis-informatio, misunderstanding n and knee jerk reaction on all sides.
Again, I wasn't second guessing you rlcarey or trying to trump any of your advice. Just offering up some additional food for thought should anyone be open to opinions outside of what is typical of banking forums which always tends to be MSBs are bad.

I cannot possibly imagine that cashing checks made payable to businesses is even being considered in this day and age for the exact reasons that Randy, Ken and company listed. This practice would immediately lead to us exiting the customer at my shop. It has nothing to do with not understanding how MSBs operate either. Their business model is not rocket science. This is very risky practice and exposes the MSB and their bank a number of different operational and legal risks.

If I told my regulator that we permitted this practice, we would be hit with MRA on the spot.