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#979930 - 06/23/08 03:39 PM Check Cashing at a Social Club-MSB?
renniks Offline
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renniks
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New England
This is probably an elementary question, but I have to take this issue to the Board this week and I want to make sure I have my ducks in a row. We have a Social Club as a customer (some of our Board Members are members!) and I just was made aware of the fact that they cash checks for members and guests on a regular basis. The checks that they cash are usually payroll checks and they have exceed the $1,000 per day person, per day limit on occassion. As a bank it is not our policy to allow MSB's to maintain accounts with us. I think that this account qualifies as an MSB and I would either like to close the account or tell them to discontinue this practice of check cashing.

Am I correct that the Social Club should be registered and is in fact an MSB?

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#979958 - 06/23/08 03:57 PM Re: Check Cashing at a Social Club-MSB? renniks
Ted Dreyer Offline
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To be an MSB as a check casher, they have to be "engaged in the business" of cashing checks. You may need to determine whether they meet that part of the definition.

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#980222 - 06/23/08 07:07 PM Re: Check Cashing at a Social Club-MSB? Ted Dreyer
AuditorK Offline
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Originally Posted By: Ted Dreyer
To be an MSB as a check casher, they have to be "engaged in the business" of cashing checks. You may need to determine whether they meet that part of the definition.


Couldn't that be a way out of being considered an MSB...they just say they do it, but they're not "engaged in the business of such activities". Doesn't the fact that they even do it occasionally make them an MSB?

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#980292 - 06/23/08 07:52 PM Re: Check Cashing at a Social Club-MSB? AuditorK
Ted Dreyer Offline
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If they do it occasionally as a business then they are an MSB. The point that I'm making is that if a person cashes a check of more than $1000 as a favor for a friend or relative that doesn't necessarily make them an MSB. Also, businesses that cash their own checks are not MSBs.
Ruling

I just don't know what the details of this situation are with this "social club".

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#982718 - 06/26/08 02:08 PM Re: Check Cashing at a Social Club-MSB? Ted Dreyer
renniks Offline
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New England
Thanks for the responses.

As for the details, this is a club, with a bar, and customers/members of the club will bring in their paychecks, money orders, etc. and the club will cash them using the cash receipts of the bar. The club will then deposit these checks into their checking account with our bank. This is done on a regular basis and because these checks are generally paychecks, often there will be a case that one person will receive over $1,000 in one day.
Last edited by renniks; 06/26/08 02:09 PM.
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#982748 - 06/26/08 02:22 PM Re: Check Cashing at a Social Club-MSB? renniks
John Burnett Offline
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That sounds a lot like check cashing is done as part of the club's business, or said another way, the club is in the business of cashing checks, whether or not it charges a fee. If it were a liquor store or local pub, instead of a "club," there would be no question: it's an MSB.
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#982778 - 06/26/08 02:36 PM Re: Check Cashing at a Social Club-MSB? John Burnett
renniks Offline
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Thanks John. That's what I thought. I have to present this to the Board tonight and get them to decide whether or not we want to change our policy and do business with check cashers. I will be explaining to them all of the requirements they/we will have to fulfill in order to bank these kinds of accounts.

I hope the outcome is that we will not change policy. We are too small a bank to get into this business!

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#982819 - 06/26/08 03:04 PM Re: Check Cashing at a Social Club-MSB? renniks
Maytagman Offline
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If you keep the account - where does the social club get the cash to be able to cash the checks? Do you understand the source of funds enough to be able to defend it to examiners? It would not be the first time that a golf club/social club was used to facilitate drug-related money laundering.

In my view, you've got a slam-dunk SAR here. They are operating in violation of federal law if they have not registered as an MSB within 180 days of beginning to operate as an MSB. And many states require a license to cash checks. Will you/your bank have your safe harbor if you tell your board about this situation with this customer? Or will nearly every member of the social club know about it by Sunday? Sounds like you need to present another policy change to the board tomorrow: "In the event that the suspicious activity involves a board member, or a family member or close associate of a board member, then the SAR will not be reported to the board but instead to (fill in the blank)."
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#983517 - 06/26/08 11:35 PM Re: Check Cashing at a Social Club-MSB? Maytagman
DebL Offline
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renniks - Perhaps if the decision is made to keep the club, you could propose changing your policy to allow existing customers who are check cashers to stay, while not allowing new MSB accounts to be opened.

Just a thought....
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#983650 - 06/27/08 12:49 PM Re: Check Cashing at a Social Club-MSB? DebL
renniks Offline
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New England
Thanks to all for your suggestions, comments, etc. After I explained all of the pros and cons of banking MSB's my Board decided not to continue this practice. We are notifying the account holders today. I am quite happy with their decision. I guess I scared them enough!!

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#984539 - 06/27/08 10:09 PM Re: Check Cashing at a Social Club-MSB? Ted Dreyer
Justin Case Offline
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Originally Posted By: Ted Dreyer
To be an MSB as a check casher, they have to be "engaged in the business" of cashing checks. You may need to determine whether they meet that part of the definition.


I don't mean to hijack this thread but I have a question that relates to this statement. Say there is an individual with a personal account who works for ABC Construction company. Every other week he has 2-3 ABC payroll checks endorsed over to him by his co-workers. He then endorses the checks and presents them to his bank for cash. The presumption is that this guy then gives the cash to his co-workers. It is also assumed that the individuals to whom the checks are written fall into the "unbankable" category. Would this individual be considered an MSB? Or does that designation apply only to business accounts? I've never been able to get a firm answer on this. Any thoughts would be appreciated!
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#985517 - 07/01/08 02:08 PM Re: Check Cashing at a Social Club-MSB? Justin Case
Ted Dreyer Offline
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Judging by the number and frequency of these, it sounds as though he may be using his personal account as a business account.

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#985966 - 07/01/08 06:29 PM Re: Check Cashing at a Social Club-MSB? Ted Dreyer
DebL Offline
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It sounds to me like a guy doing a favor for his work buddies...unless he's charging them a fee for it.

My concern would be accepting third party checks into an individual account when we have no way of identifying the first endorser. What if the checks are later returned for forged endorsement?
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#985988 - 07/01/08 06:42 PM Re: Check Cashing at a Social Club-MSB? DebL
Ted Dreyer Offline
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If he cashed a check or two that would sound more like a favor. Cashing 2-3 checks every two weeks sounds like he must be getting something out of it. At a minimum some Customer Due Diligence should be done.

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