We are looking into the possibility of offering Health Savings Accounts, first to our employees, then to the general public. I need to look into the risks of having these accounts from a BSA/AML standpoint. Is there any form of guidance anywhere regarding these sorts of accounts? Are there any special risks these accounts pose vs. other accounts? Any help/guidance you can offer would be greatly appreciated!

1) If they go overdrawn it is what is called a deemed taxable distribution and it ceases to be an HSA as of Jan 1. Section 4975.
That makes it a pain in the rear to monitor and keep up with.
2) Also, you will notice they are sole owners only, no joint, so you'll have issues with other parties taking the debit card to pay for things.
3) You also must monitor contribution limits, the bank must stop any transaction that would cause them to go over the family limit for the current year.
4) Due to the nice tax advantages, lots of people horde money in them (which isn't wrong) but they can also reimburse themselves for other purchases that they have made using the HSA. That in and of itself makes layering a very real possibility using an HSA. They can buy stuff with a credit card, deposit cash into their HSA, payoff the credit card and then claim they were just getting "reimbursed" for earlier medical expenses they had to put on their CC.

Chuckchuck, thank you for that info. It's incredibly helpful.

These are really high maintenance accounts and it takes a substantial commitment to training personnel. While the accounts might be profitable in the long run, it is not something that you want to just dangle your feet in. It is a take the entire plunge or don't do it unless you are prepared to have a loss leader on your books forever. You can't just discontinue this product line like a typical deposit account type if you get down the road and find our they are real money losers.

Hi, this thread states the bank must monitor contribution limits and prevent any transaction that would cause the HSA account to exceed the family contribution limit for the current year.

However, this thread - https://www.bankersonline.com/forum/ubbthreads.php/topics/1731176/health-savings-accounts - states the exact opposite (it is older, so perhaps responsibilities have changed).

What exactly is the bank's responsibility to monitor HSA contribution limits, please? If a bank has responsibility for monitoring an HSA account, is a bank only concerned with the family limit or must a bank determine if the account should be following individual limits?

Thank you for your guidance.

What does your HSA custodial agreement say?