Please help me!! I have been reading up on MSBs this morning and if we have any of these accounts at our bank how do I comply with the due diligence requirements? I mean, how do I know if they comply with OFAC regulations. What customers are targeted? This is so badddddd!!!!

How do other banks comply with this stuff!!

Here is what our bank did when we discovered we had two convenience stores operating as MSBs. We sent them a letter stating that their transactions qualified them as a Money Services Business under the Bank Secrecy Act Section 103.41. We enclosed a copy of the "Registration of Money Services Business" form (TD F 90-22.55 -- found at Fincen's website www.fincen.gov/reg_bsaforms.html) We requested that they fill out the form and register with the Department of the Treasury. We added that we would not be able to retain their account if they were not registered and we had a confirmation of their registration in our files.

They both closed out their accounts within the week. Make certain that their activity does qualify them as an MSB. Our customers were cashing checks for individuals "in an amount greater than $1,000 in currency or negotiable instrument, for any person on any day, in one or more transactions."

In addition to FinCEN's MSB website, the OCC also issued an Advisory Letter on 06/04/2004, HERE that provides banks with due diligence recommendations in regards to MSBs.

So, does this mean that if we have any accounts with convenience stores that cashes checks or sell money orders, or wires money, we want to close those accounts?

lds,

I don't know if you necessarily need to close these accounts, but proper due diligence is required to ascertain if they are MSBs. This seems to create quite a hardship, not to mention increased costs. If you determine that these businesses are MSBs, you need to get them to register. Otherwise...close 'em out.

I'm feeling just as stupid right now about MSBs. How did you determine a convenience store was operating as an MSB. did you call them? Go in? Come right out and ask them???
I have four or five gas station/conveninece stores that may or may not be MSBs.

Ours just happened to come in the bank this afternoon and I had the teller to ask if they cashed checks and up to how much, if they sold money orders and up to how much and how often, and if they wired money and how much and how often.

Most of our identified MSB's wire money for their customers so we knew. In addition, the other ones, we came right out and asked and yes, even went to visit one store that said no but has a sign posted in their window how much their money orders cost. I feel your pain, MSB's and determining who they are and what to do about them was one of the biggest thorns in my side last year.

Here's what we did earlier in 2004 (both based upon what we had been reading about in terms of what had to be done and what our examiners - OCC - expected to see when they came out and did a BSA exam this year):

1. We conducted a lot of training with our Operations Managers on AML and specifically what the definition was for MSB.

2. We looked at a listing of our entire customer base. Each branch was responsible for reviewing the section of the report that pertained to their branch to locate any customers that had the potential to be an MSB (i.e. by name - were they a grocery store, jewelry store, check casher, etc.). All customers identified as potential MSBs were to be reported to the BSA Officer.

3. Ops. Manager was also to train all staff on MSBs, but give extra training to the merchant tellers. Merchant tellers were asked to identify more customers that had the potential to be MSBs (i.e. if you have a convenience store that has 3rd party checks in their deposits, they are probably cashing those checks).

4. The BSA Officer then reviewed account activity on all of those identified as potential MSBs to determine - she found that most were definitely MSBs just because they had cashed a check for one person over $1,000 - and this really didn't take a lot of time on her part, but it did take some.

5. We created a letter that was sent to all customers that we had identified as having activity on the account that made them appear to be an MSB. Also, if the branch simply knew they were an MSB (i.e. a check casher or via site visit), then those customers were also sent the letter. The letter indicates that we want all the information outlined in the OCC advisory (i.e. copy of registration, copy of AML policy & procedure, etc.), gives them a date to submit it by, and lets the customer know we will close them out if we don't have the information by that date.

6. For those customers where they just had the potential to be an MSB but didn't show activity yet that confirmed it (i.e. a grocery store that cashes checks but we hadn't yet seen one over $1,000), then we continue to monitor their deposits and other account activity.

7. For those MSBs that did everything we requested, we do a lot of account monitoring on a monthly basis of deposits, wires, etc. At some point, we will probably make the determination that those accounts are costing us too much money to monitor and we will close them out, but for now, we are allowing them to stay open and we monitor them closely.

8. We DO NOT open any new accounts for MSBs, even for MSBs that have existing accounts with us.

This has been a very time consuming process. The most frustrating part is that many of these customers will not be able to open accounts anywhere else if we close them out, and frankly, we don't want to close them out - wtih some exceptions of course (i.e. the one we have where it's the only grocery store in a low/mod income area and they have a fair amount on deposit with us - it's not right to close them out - they gave us everything we requested and have been very cooperative). We just hope that sometime soon a different solution is found, but it's not looking like that is going to happen. Right now we are simply trying to do a careful balancing act of retaining those MSB customers that we really don't want to lose, but being sure to do everything our regulator is expecting us to with these customers.

Flamingo Gal,
Nice post.

Thank you. I'm trying to get brave about posting answers instead of just questions all the time. This is one area that consumed much of our time this past year, and now will for 2005 since we were purchased by another institution who has just started this process.

Would anyone be willing to share a draft of their letter? I'd rather not reinvent the wheel. I just found out about all this and have examiners coming in less than one month, please help. Thanks!

I would really appreciate a copy of a letter if someone is willing to share! Thanks!

I am more than happy to share. Note: on our letter, there are checkboxes in front of the requested documentation so that the BSA Officer can check what is needed, this way you are not requesting documentatation that you already have.

Dear _______:


A recent internal review detected activity on your account that is representative of that of a Money Services Businesses (“MSBs”). Under Federal Regulation, we are required to conduct due diligence of our customers who are MSBs, and this due diligence includes obtaining certain documents from you. Without this documentation, we can no longer maintain an account for you. To find out more information regarding what makes a business a MSB and what the regulatory requirements are for MSBs, you can go to www.msb.gov, or call FinCEN direct at (800) 800-8277. FinCEN is the Federal agency directed by the US Department of the Treasury to oversee and implement policies to prevent and detect money laundering.

We are requesting that you submit to us all documentation checked below no later than _________.

____ Verification of current state licensing and Federal registration as an MSB, including any restrictions (registration with FinCEN required every two years);
____ A copy of your anti-money laundering program, policies, procedures and controls;
____ Updated information regarding all owners of the business (i.e. who they are, their percent of ownership, nature of participation in the business)
____ Current articles of incorporation, or fictitious business name statement (valid for 5 years), depending on the type of business.
____ Last fiscal year end financial statements (i.e. tax returns, CPA prepared statements, etc.)

Failure to submit the requested documents to the bank by the date indicated above will result in closure of your account on that date. Please send the requested documents to _________.

Thank you for your prompt attention to this matter. Should you have any questions, please feel free to contact me at __________.

Sincerely,

Are FDIC examiers expecting the same as the OCC?

In theory, yes. In practice, I sincerely doubt that the agencies have yet achieved that level of unanimity.

Thank you FlamingoGal.
We are in the middle of the struggle and I now see what may be a light at the end of the tunnel. It also may be a train.

During a recent interagency training session (which included both the OCC and the FDIC) we were told that we must obtain the following from a Money Services Business: (1)a copy of their acknowledgement notice indicating they had registered; (2)a copy of the state registeration (if applicable); (3)a copy of their Anti-Money Laudering Policy; and (4)a copy of their independent review (the independent reviewer should attest to the fact that they are following their policy.

Thank you so much. I'm going to get this out TODAY on our one MSB . . . Examiners here in two weeks and counting

Be very afraid of BSA

After you have identified a customer as an MSB and they have complied with your request to register as an MSB, does this satisfy regulatory requirements or must you continue to monitor the account? If you must continue to monitor, what are you monitoring?

Would a convenience store be considered a MSB if they only perform Western Union? Wouldn't Western Union be the MSB and the convenience store an agent?

Our regulator (OCC) had the expectation that you will continually monitor all MSB accounts. It was our understanding that they wanted you to monitor several things:

• Account activity to ensure it remained "normal" for that business
• Cash activity and Wire activity (much like you monitor other cash and wire activity for suspicious activity)
• Periodically pull deposits and look at items being deposited into the account - i.e. checks
• Ensure that you have the customer give you updated documentation when the registration or check cashing permits expire
• Ensure that you maintain current documentation on the customer - current list of officers, signers, etc., current financials, current articles of incorp., etc.

I think this is why you see so many banks simply closing these out - it's too expensive to maintain these accounts and to know how much monitoring is enough. Another alternative, of course, is to simply charge them higher fees to make up for the cost of monitoring.

An agent of an MSB does not have to register if they are only conducting MSB transactions that they are authorized to do under their agency agreement.

However, if they conduct other MSB transactions that are not covered under their agency agreement, then they fall into the requirement.

This happened with us. We had a customer who was an agent of a registered money transmitter. However, the customer also cashed checks and went in excess of the $1,000 per customer/per day limit.

And yes, we had a hard time convincing the customer that they had to register. They thought they were fine since they were only an agent. Needless to say, the account had to go bye-bye.

R Lee - I will second your notion:

Be afraid of BSA, be very afraid.

I can't even imagine the economic cost to this country, and I wonder if the economic cost is offset by any appreciable degree to the actual money laundering activities that have been stopped or caught.

My gut tells me we are not even close, and a lot of legitimate business is being thrown out like the proverbial baby with the bathwater.