We have come across our first Money Service Business and I need some guidance. Our customer is a bar that frequently cashes payroll and government checks in excess of $1,000. I've read through some of the regs and believe they would be considered a low-risk MSB. I'm assuming they still need to register as an MSB even though they are low risk? Do they still need to have an AML program in place, or does that only apply to high risk? I guess what I'm trying to find out is what is the duty of the customer now that we know they are an MSB and what are our responsibilities as a bank? Keep in mind this is a low-risk customer.

"I guess what I'm trying to find out is what is the duty of the customer now that we know... "

Their duties have not changed due to the fact that you recognized them as an MSB.

They have to be registered with FinCEN.

They may need State licensing.

They have to have an AML/BSA program.

You need evidence of all or most of this information. Refer to the Exam Manual for expected bank risk mitigation efforts.

If they have been operating as an MSB and have been unregistered - you need to file a SAR.

Certain MSB's have to register with FinCEn regardless of their risk level. I also believe that FinCen requires all MSB's to have an AML Compliance program. This would mean they are subject to some of the same requirements that banks are. For example, CTR's, record retention for Monetary Instruments and funds transfers.

Most FI's will perform a risk based review of their MSB customers and decide if the account is worth opening. I even know of some banks in NY who charge monthly fees ranging from $200-$3,000 for their MSB customers.

So, I'm assuming that we should not be helping the customer prepare their AML program/policy. Is there some information/template that I can pass along to the customer so that they can implement this program/policy? Do you think their accountant would have some info? This is all new to me.

You should refer them to http://www.fincen.gov/financial_institutions/msb/

I do not believe you should help them with their program. As rlcarey says, you may have to file a SAR. If you do, you do not want to be in the position of advising the MSB on how to conduct their business.

Retread is correct, they need to consult their own legal counsel as it is there necks on the line and the bank does not want to be dispensing advice on these issues beside recommending they visit the Site that Retread provided.

Thanks for all the advice. I have given the information to our BSA Officer to pass on to the customer.

Examiners and independent auditors have always asked me for proof of state and FinCEN registration for my MSBs. But they have never asked for a copy of the MSB's BSA policy. Is it the bank's responsibility to ensure its MSBs have a policy and are adhering to it, or is that fully the responsibility of the MSB?

Also, my BSA policy states that the bank will conduct an off-site visit to a MSB should we suspect any suspicious activity. But it does not require a visit otherwise. Again, I have never been questioned or cited by examiners for this. Is the bank required to conduct offsite visits even if there is no suspicious activity? If yes, what should we look for? Is there certain signage that a MSB should have posted? How often would we be required to visit?

You have exhumed a very old thread...

Your bank is required to adhere to Interagency Guidance from April, 2005 if you provide banking services to MSBs. It does require you to verify registration at the federal level and licensure at the state level if applicable. It does not require you to obtain copies of any policies or procedures. Banks generally do that only when they have classified an MSB as "high risk."

Is someone telling you otherwise?

The guidance also indicates that you are not the de facto regulatory agency for MSB customers; i.e. there is no visitation requirement.

Again, is someone telling you otherwise?

Someone is telling me otherwise.....but not an examiner or auditor.....just an employee who obviously doesn't know what he is talking about! Thank you very much for your help!

Just one last thought. Higher risk MSBs require EDD and the FFIEC Exam Manual does state the following:

"If the bank determines that the MSB customer presents a higher level of money laundering or terrorist financing risk, EDD measures should be conducted in addition to the minimum due diligence procedures. Depending on the level of perceived risk, and the size and sophistication of the particular MSB, banking organizations may pursue some or all of the following actions as part of an appropriate EDD review:
•Review the MSB’s BSA/AML program.
•Review results of the MSB’s independent testing of its AML program.
•Review written procedures for the operation of the MSB.
•Conduct on-site visits.
•Review list of agents, including locations, within or outside the United States, which receive services directly or indirectly through the MSB account.
•Determine whether the MSB has performed due diligence on any third-party servicers or paying agents.
•Review written agent management and termination practices for the MSB.
•Review written employee screening practices for the MSB.

FinCEN and the federal banking agencies do not expect banks to uniformly require any or all of the actions identified above for all MSBs."

I can tell you that examiners expect us to do the majority of those steps for High Risk MSBs including an onsite visitation.