Would really like some input from others on this.

We bank about 100 MSBs. I have a great due diligence program in monitoring the customers. We have several MSB customers that lend money back and forth to each other. The lending of money makes it difficult at best to determine the cash flows through the account and affects my analysis. This also inflates their deposits. I've instructed the branches that in order for us to analyze the accounts, we can't allow funds to be flowing in and out of several MSB accounts. The branch is fighting me on this saying there's nothing wrong with lending each other money. I have a real problem with this.

Thoughts appreciated...

I would have a problem with it also and we would not allow it with our MSBs.
We would tell them that all monies have to come from the bank.
It must be very difficult to monitor 100 MSBs and then have activity such as inter-company lending going on.
Are the companies that do the lending related in any way?

I agree with you, if you had them set up separate accounts for their MSB activity, then they should be lending through operating or other general accounts. But the account used is not the main issue here.

The question is WHY? Why do these businesses need to lend to each other. Considering they are transacting it through the same accounts as their MSB activity, I would be very concerned about potential paper trail obsfucation. Have them give you financials and loan agreements. Monitor the payments. Increase their account fees. Or, close them. This does not pass the sniff test.

Also, unless these loans are fully documented with notes, loan agreements, etc., this probably amounts to a significant enough co-mingling of funds that each business is no longer considered independent and a combined CTR filing should be considered.

While the regulators are encouraging banks to bank MSB, with about a 100, you are more than doing your part. If they cannot fully explain these transactions and you don't fully understand them from a logical perspective, I would be looking at getting rid of my problem children.

Thank you all for your input. Very helpful.

Personally, I've encountered this issue with convenience stores who have several shared owners (or at least as stated with the Sec. of State) but often a different primary owner of the business.

When questioned Random Guy B would state that he owns ALL (as in 100% ownership) the stores and is simply paying his related businesses for services rendered/product shipped.

Fortunately in my case many of the checks they were using bounced so I used that info to make their life difficult and put a hold on many of the checks from these entities. This had the affect of harassessing the customer enough that they've stopped the activity.

Additionally, while all of that was going down, I was told by a local FBI agent that many of these C-stores "sell" each other items of cigarettes (i.e. cases upon cases) to pump their monthly numbers up in order to receive a healthy cash rebate.