Can a bank legally refuse to open an account for a MSB based simply on the fact that they are a MSB?

Yes - I know of no law that requires a bank to open any account at all!

Ditto. You are not required to do business with any and all comers. If you feel you do not have the staff/expertise/etc. to handle MSBs, then you are not required to do so.

Just make sure that you know how to apply such a policy. I have found several banks that have adopted this policy; however, upon review I generally find that they are actively opening MSB accounts and really meant to exclude only those MSBs that have to register with FinCEN. But technically they are in violation of their own policy.

When questioned about the purpose of the policy, it is inevitably to avoid CDD issues. This policy will not, in reality, remove us from all CDD responsibilities. MSBs are not the only high risk types of customers that are subject to due diligence. We may not want to bank a major money order issuer, but are we going to decline to open accounts for the small agents, or other potentially high risk entities like investment companies, jewelers, securities companies, insurance companies, etc?

It is very definitely a whole new BSA world out there now, isn't it?

Here's another question....if you DO choose to provide MSBs with banking services can you count this in your Community Development Services?

Just to repeat the obvious here -- Each financial institution has its own risk tolerance level. Those that claim to seek to limit risk to "zero" should close the shutters and cash out their investment in the industry. Banking is about managing risk, and every customer brings a risk to the table.

Bankers are used to managing risk on the lending side of the house. They've been doing that for centuries. Risk has always been there on the deposit side, too, but the risks are now becoming more actively managed. And the risk of money laundering by MSBs has come into focus in the last few years. Bankers are beginning to figure out ways to manage their risks when banking MSBs.

We prohibit accounts for MSBs that are payday lenders, title lenders, and whose primary business is check cashing, money transmitting, or providing other financial services. We allow accounts to be opened for other MSBs, even those that must register with FinCEN, provided they register with FinCEN within 60 days of account opening. We first wouldn't open an account for an MSB that is required to register with FinCEN until they actually registered, but FinCEN will not register them until they obtain a bank account. Therefore, we made it an immpossibility for them to either register and/or open an account.

Our bank has just gone through a OCC exam and they are wanting us to develop a policy addressing MSB's. Do any of you have a policy that you would mine sharing with me. If not where could I find a sample of a policy to go by.

Thanks for your help.

Your policy should follow what your Board and senior management wants to do.

By this time, virtually every bank has policies regarding MSBs. What the OCC wants is for you to write them down.

Do you know what MSBs are? Some of the businesses referred to above are not MSBs. Do you open their accounts? If not, you must have procedures that identify them at account inception. Do you attempt to identify MSBs from within your existing customer base? What do you do if they are identified?

If you do open accounts for them, does your policy require enhanced customer due diligence procedures in regard to documentation and monitoring? Does your required risk assesment reflect regulatory guidance? Do you mandate procedures that say how often the risk assessment would be updated?

Having a policy isn't about having a piece of paper. It's about deciding how you will handle something. Writing it down and and obtaining board approval are for the purpose of making the policy "official" and communicating it to others, but the policy exists whether it is written down or not.

Thanks for your comments. This will help me alot. We have procedures in place and have them in writing but not in policy format.

Thanks for your help.