Is a property management company or a home owners association considered a professional service provider?

I'm familiar with the FFIEC manual's definition; however, I was looking for more input. I revived an older post. I'm looking to find out what types of businesses others are including as PSPs when providing a list to examiners.

Property management could be, if they're accepting funds from and paying things on behalf of other persons. I wouldn't think an HOA would qualify though. If you keep the "gatekeeper" concept in mind, I find it's easier to classify PSPs.

This is the first time during an exam that I have been requested to provide an actual list of PSPs to examiners. Has anyone had this request? What did they do with the information?

The FFIEC manual lists "professional service providers" as one of the "customers subject to expanded examination overview." Like every other customer on that list, there is a specific examination procedure that asks:

From a review of MIS and internal risk rating factors, determine whether the bank effectively identifies and monitors professional service provider relationships.

Accordingly, in an expanded BSA examination, a bank can be asked to produce lists of each customer type on the list of customers subject to expanded examination overview. If you give them a list that indicates you know what you are doing in identifying professional service providers, you passed the first test. You can read the rest of the relevant exam procedures to find out what they are going to do with your list.

I am aware of the exam procedures. Just wondering if anyone has experienced examiners doing more than just requesting the list. Perhaps, as you stated, they are just looking to see that we have them identified as PSPs, although they could do actual transaction testing as stated in the procedures.

No

In my past 2 BSA exams (one State, one FDIC) I simply provided a list of all business accounts, sorted by NAICS code.
Never heard any negative comments.

I just joined the bank and the NAICS codes are a mess. On too of that, our risk coding system has numerous business types being classified as PSPs that I don't feel qualify, so we have some clean-up to do.

I ran the report of our IOLTAs from the core system using the product code and will be providing them with that as the request specifically identifies those types of accounts.

We'll see what happens.

This seems like a good way to think of it, as I struggle with determining who the PSPs are, other than lawyers and accounts. We have to train branches on this soon, so if anyone knows of a good resource I'd love to hear about it.

Quick question: is there any reason someone in the medical field would be considered a PSP? I came across this recently and I'm struggling to come up with something that would make medical professionals PSPs.

Also, does anyone know if a bailbonds person would be a PSP?

The fundamental characteristic of professional service providers (PSPs) is that they hold other people's money. An attorney with an IOLTA or escrow accounts is a PSP. An attorney without them is not. An accountant with an "impound" account is. An accountant without one is not. An auction house with a consignment account is, An auction house without one is not.

NAICS codes will not help you much; it's about the customer, not the industry.

Thanks, Ken.

I'm thinking now that a bail bondsman wouldn't be a PSP, since they're paying the bail and then their client pays them back (I believe; I haven't had much exposure to them).

I think the challenge in this is that an attorney may not be a PSP when onboarded but subsequently could become one when they open an IOLTA account. Same with the Accountant or the auction house, etc. To complicate things further, they may have their IOLTA or other holding account at another institution.

If I were trying to solve this problem, I would have a list of potential PSPs that are risk rated and scheduled for EDD accordingly. The attorney with no IOLTA may be considered low risk and only be scheduled for a bi-annual review but if something was uncovered by the review, through routine monitoring, or by notification from the new account staff (yeah right!) that would indicate that they opened an IOLTA account, that risk rating would rise and the frequency of EDD would change accordingly.

Since these are separate accounts, I would rely on my due diligence in asking for the purpose of the account to draw any change to my attention.

An attorney doesn't have to have an IOLTA to become a PSP. Attorneys often can hold individual sums on behalf of clients as long as those funds aren't commingled with the attorney's funds. When larger sums that will be held for longer periods are concerned, it's not unusual to set up designated escrow accounts for the benefit of specific clients. At least that's a norm here. Our IOLTA accounts are typically holding smaller sums or sums that are in and out relatively quickly.

One other thing to consider regarding attorneys - depending on the type of law they practice, they present different risks.

An attorney who specializes in Personal Injury claims is most likely not helping a wealthy investor establish off-shore companies although they will most likely be having IOLTA accounts to handle settlements and payments for their clients. I believe the biggest potential for abuse is a dishonest attorney helping him or herself to those funds.

OTOH, an attorney that specializes in helping set up LLC's, trusts and corporations is definitely is working with an entirely different type of client. If the attorney is handling the funds to set those up, those transactions will look a lot different than the IOLTA for someone who was injured in an accident.

With respect to medical doctors, they are not PSPs, but there are some risks for doctors engaging in Medicare/Insurance fraud and illegally selling prescriptions for opioids.

John,
In your opinion is an account set up for an attorney or a law firm a PSP even if it appears they are just providing settlement checks to a plaintiff and that is all?
In other words, does the bank need to call all types of professional services that bank with them a PSP and then determine after they are categorized as such, if there is anything going on to warrant more monitoring or higher risk?