Would You Allow This Customer a Second Chance?

Pawn Shop - $400,000 account. Account opened and customer states "NO" to cashing checks over $1,000 in one day for one customer. Has been in business since 1990 - is not new to pawn shop business nor to banking.

Activity during February AML review finds that he has deposited numerous checks cashed over $1,000 and he structured transactions in February - therefore violating two federal requirements / laws.

Issues:

1. Owner who completed Due Diligence form at account opening not involved with day-to-day activities and possibly answered "NO" to the check cashing question incorrectly by mistake. However they have been in business for over 20 years and they should know MSB regulatory expectations by now so, do I believe them?

2. They also should know CTR thresholds and structuring - they file CTRs in their business on a regular basis when customers of the businss exceed the threshold. Again, should I trust them?

3. President of that Region says customer will sign agreement not to cash checks over $1,000 nor to structure in the future. However, that would require constant monitoring to insure that they are doing what they promised to do.

Based upon above scenario - do you trust them and spend the extra time to monitor their activity just to give them a second chance or do you explain that the account must be closed - since it should have never been opened to begin with because we have a policy to not open new MSB accounts?

If we keep it open, do we require them to register or let them sign a statement?

Is there is a reason that they came to your bank. Do you think that their last bank kicked them to the curb also?? Having a customer sign a statement that they agree to no longer structure currency transactions - really. If they are that stupid to put a signed confession into your hands that could potential land them in jail, do you really want them as a customer???

I think you know the direction in which I lean.

They claim that their last bank made the decision to cease all relationships with pawn shops. I have called under 314b to ask if true and if they had an previous aml concerns about this customer.

And - I am leaning the same direction. :-)

Why would you want to have an account that will

a, have the potential to structure as they have in the past
b. will be reviewed by the regulators
d. more importantly cost you money to service as if President of that Region is involved he most likely does not know how much the BSA servicing is going to cost. If you are lucky, he may know what the cost is on the branch side.

Sample policy revision:

We will not knowing open accounts for customers who are required to register as money service businesses due to check cashing activity. However, if we later discover that they knowingly provided us with false information at account inception, we will allow them to keep the account open in the belief that no one would lie to us twice.

And if your board approves that change ....

I would not be inclined to believe and/or trust any customer (or human for that matter) who willfully breaks the law. But that's just me.

Pawn shop that knowingly structured deposits... Does not have written policy or atleast in place policy regarding amount that customer can cash... and has been in business for twenty years... if it walks like a duck....