I have reviewed a business that is a registered MSB with our organization. This was my normal due diligence review. In the review I noticed that the business was cashing checks over $10,000.00. I called the business and asked them if they are filing CTR's when they cash a check for over $10,000.00. The owner told me they are not and did not know that he had to.

I sent him a brochure on what his responsibilities are as a MSB.

My questions are this.

1. Is our bank liable in anyway that he doesn't file CTR's. When we first knew he was a MSB we sent him a letter telling him the website to go to and register as a MSB. In the letter it told him to review this website and it will tell him his responsibilities.

2. Does he use the same CTR form as a bank uses?

Thanks

The business uses a different form to report cash over $10,000. The form is used by car dealers and others; I believe it is form 8300 (but that's just from memory).

I think your only liability (my opinion) is if you don't file a SAR to report this.

Your bank isn't liable for your customer's nonfiling of CTRs. The federal regulators issued a joint statement in 2005 explicitly saying that the BSA does not require, and neither FinCEN nor the federal banking agencies expect, banks to serve as the de facto regulator of MSBs. So you are off the hook there.

As for the CTR form used by an MSB, it's the same as that used by banks, i.e., FinCEN Form 104, f/k/a Form 4789. In the instructions for that form, it defines the entities that should use it as follows:

"Generally, financial institutions are defined as banks,
other types of depository institutions, brokers or dealers
in securities, money transmitters, currency exchangers,
check cashers, and issuers and sellers of money orders
and traveler’s checks. Should you have questions, see
the definitions in 31 CFR Part 103." AR.

Thanks for the information. Should I file a SAR since the business has not filed any CTR's

No. As AR said, that's not your job. You're not their regulator.

I might have to disagree. They admitted that they were not filing CTRs which is a violation of Federal law. Since this MSB is cashing checks over $10,000 I would classify them as a high risk MSB account and therefor apply some or all of the EDD procedures set forth at the bottom of page 279 of the Examination Manual. If during the EDD process, specifically the review of their BSA/AML program (which sounds like it happened to some extent) and it appeared that they are violating the law, I think the bank is more than justified to file a SAR.

I also find it hard to believe that an MSB today would not know his filing requirements.
I would file the SAR and I would give him 30 days to prove that he has backfiled and put appropriate procedures in place.

I've been pondering rlcarey's last post on this string. I agree with all his points, but the SAR thing needs some clarification.

The bank MAY file a SAR on this, but isn't required to. Further, given the regulatory guidance on this and the specific statement that banks aren't expected to be defacto BSA police for their customers, failure to file a SAR in this case should not result in examiner criticism. While the bank has knowledge of the MSB's nonfiling, that doesn't involve a transaction involving the bank, per se. (See 31 CFR 103.18(a)(2))

So, the bank's responsibilities on this include having reasonable systems to identify and report large cash transactions brought to it by the MSB, and suspicious activities surrounding business transacted through the bank by the MSB.

While filing the SAR can be debated, I think the better response for the bank, given its knowledge of the customer, would be to close the account. AR.

While I agree that it is not your job to be defacto BSA police for your customers, I see several problems with not reporting this. First, you now know you are doing business with a customer that is violating the BSA. Second, if you don't report it, who is going to explain to the examiners that you know this and still continue to do business with them? I know this is a real stretch, but when you get right down to it, your bank is providing the customer with the funds they are using to fund the unreported check cashings. I'm not saying you are required to file a SAR because that is your decision, but I would seriously consider the possible consequences for ignoring this situation.

I agree with Retread and would most definitly file a SAR and also close the account. You have knowledge that the customer is not complying with BSA. AM South paid a very hefty fine for not filing SARs on activity that they came to know was improper.