If an MSB is required to have AML procedures, be licensed, etc., why do we have to conduct account monitoring if we've performed adequate due diligence at account opening.

Wouldn't it be more appropriate to focus your resources on the high-risk accounts that are not MSB's, such as an NBFI?

Because MSBs are not subject to the regulatory scrutiny that you are as a financial institution. And because just because the MSB has a procedure, you can't assume that it adheres to it.

And since Examiners expect you to give MSB's extra scrunity, then you must.

I thought MSB's were under a different realm of scrutiny by the IRS. The IRS is supposed to audit for the MSB registration, AML policy, etc.

They're supposed to ECM but they don't. I was at a BSA seminar about a year ago and there was a representative from the IRS there and I asked this very question. After he stuttered for a bit, he confessed. They hope to, in the future, be able to audit MSB's etc one they hire more staff, etc. We'll see.

Thanks Queen. I have a feeling that if they're not doing it now, and they see that the financial institutions are staying on top it, why should they start.

The U.S. Money Laundering Threat Assessment contains a lot of information about MSBs. There's more than enough information there to make anyone wonder whether regulators really should have removed the automatic HR from the MSBs'collective chests.

According to the publication, there are about 23,000 registered MSBs. However there is some multiple of that number that are not registered. As far as the IRS's ability to examine, not audit, those businesses:

IRS SB/SE has been delegated authority to examine MSBs for BSA compliance. A staff of several hundred IRS SB/SE full-time BSA examiners evaluates compliance with the reporting and record-keeping requirements of the BSA and Section 6050I of the Internal Revenue Code.

I'm not claiming any insider information, but I was told last summer that the "several hundred" claimed above was actually 200.

The IRS is also actively investigating unlicensed MSBs, maybe that is where some of their resources are currently being utilized.

We have had one of our MSB customers indicate they were reviewed by the IRS. It seemed to be more of a review that an audit; they primarily verified MSB registration and the presence of an AML policy. I believe they may have had limited discussion about employee training, but that was about it.