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#703516 - 03/20/07 02:39 PM MSB - Loan Only Relationship
hawkfan Offline
Joined: Feb 2006
Posts: 83
If you take on a MSB only for a loan relationship, is the additional MSB due diligence required? We do not have any of its "MSB" business accounts. Any guidance is helpful. Thanks.

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#703567 - 03/20/07 03:22 PM Re: MSB - Loan Only Relationship hawkfan
Retread Offline
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Joined: Oct 2003
Posts: 2,548
This is my own personal opinion. I believe anytime you have a relationship of any kind with an MSB, you should do the addtional due diligence. Some time ago, I participated with a group of people doing lookbacks. We found that the owner of an MSB had a HELOC at the bank. He was cashing the HELOC convenience checks to fund his MSB daily operations, and also structuring the withdrawals. He was making his payments by check from his personal account at another bank. We found out during the review that the deposits to that account consisted of checks from the MSB account held at yet another bank marked as payroll, bonuses, loans, etc.

I am aware that this is probably an isolated case, but with all of the pressure on banks to monitor MSBs, and all of the difficulty MSBs have finding a banking relationship, I think some of the MSB operators are going to use some creative methods to do their banking.
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#703639 - 03/20/07 04:51 PM Re: MSB - Loan Only Relationship Retread
rlcarey Online
10K Club
Joined: Jul 2001
Posts: 80,353
Galveston, TX
I concur with Retread - the MSB due diligene requirements should be applied for all MSB customer regarless of their specific account type relationship.
The opinions expressed here should not be construed to be those of my employer:

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#704275 - 03/21/07 05:08 PM Re: MSB - Loan Only Relationship rlcarey
Dip Offline
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Joined: Mar 2005
Posts: 6,298
San Diego, CA
we are in a similar situation. when i found out we had an msb, i added it to our monitored high risk list. since it is just a loan customer, i check to see that it is registered on, that we have a copy of the fincen registration confirmation on file, and that loan payments are made in checks (nto negotiable items or cash).
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#704794 - 03/22/07 09:08 AM Re: MSB - Loan Only Relationship hawkfan
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Your requirements for documentation and analysis would be the same for a lending customer as they are for a deposit customer; the Guidance makes no distinctions based on the products and services you provide to the MSB.

However, there will not be any realistic opportunity to monitor activity or conduct a risk assessment if all you have is a lending relationship. I believe it is more than just a “best practice” to require MSBs to centralize their banking relationships; I think it's essential to a prudent decision.

Banks should demand that they get all or none of the MSB's business. If you want the loan, you should want the transaction accounts too. If you don’t want the transaction accounts, maybe you should not want the loan.

Please consider: If this customer maintains an acceptable lending relationship for years and then wants to open a deposit account and you determine that they have been operating in violation of state and federal law for the entire period then what would you do?
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