best practices for banking msbs anti-money laundering association chicago, illinois may 15, 2009...

Best Practices for Banking MSBsAnti-Money Laundering AssociationChicago, IllinoisMay 15, 2009

Michelle Hassen-Hemerley – Corus BankFirst Vice President, BSA/AML Officer

INTRODUCTION

• MSB Definition • FinCEN Registration & Acknowledgment• Deciding Your Bank’s Policy• New Account Due Diligence• Enhanced Due Diligence• Ongoing Monitoring• Reminders• MSB Guidance Resources

MSB DEFINITION

A business is an MSB if it conducts more than $1,000 cash activity with one person in one or more transactions on the same day in one or more of the following services:

Money orders and/or traveler’s checks

Check cashing and/or payday lending

More

MSB DEFINITION

Currency Dealer/Currency Exchanger

Stored Value Cards OR

Money Transfer services in any dollar amount

FINCEN REGISTRATION• Registration with FinCEN NOT required if:

The business is “solely an agent,” or The business NEVER goes over $1,000 limitation

(except for money transmitters), or The business is solely an issuer or seller of

stored value cards & does no other MSB activity

NOTE: Registration must be renewed by 12/31 of the second calendar year from the date of initial registration and renewed every 24 months by 12/31.

NEW REGISTRATION FORM• Revised MSB Registration Form 107 dated 8/08

• Available at www.msb.gov

• As of January 1, 2009, the MSB must use the new form or the form will be sent back to them and they will not be registered

• As of January 1, 2009, the MSB must complete all required fields or the form will be sent back to them and they will not be registered

LETTER OF ACKNOWLEDGMENTPer FinCEN, the list of registered MSBs on FinCEN’s website is NOT definitive proof

Obtaining a copy of the IRS Letter of Acknowledgment is the only proof

The IRS Letter has the “Date of Notice” and “Date of Filing” but does not list an expiration date

Review IRS Letter to ensure customer registered the correct activity

Deciding Your

Bank’s Policy

Best Practices for Banking MSBs

THINGS TO CONSIDER

• Assume you have MSBs (not always obvious)

• Risk rate based on the MSB’s activity

• Analyze your monitoring systems capabilities

• Decide the approach for monitoring the activity

• Determine the potential FTE impact

New Account

Due Diligence

Best Practices for Banking MSBs

INITIAL ACCOUNT OPENINGObtain the following documents:

Identification in accordance with CIP

Confirmation of FinCEN Registration

Confirmation of License with (DFPR) Department of Financial & Professional Regulation

Adequate BSA/AML Compliance Program

Confirmation of Money Transfer Agent Status

Annual Financial Report submitted to DFPR

On-site visit (if brand new store)

COMPLIANCE PROGRAM REVIEW

Requirements of Compliance Program BSA/AML Policies & Procedures Designated Compliance Officer Training Independent Test

Note: The Compliance Officer cannot be the same person that conducts the Independent Test

ACCOUNT OPENING AND CLOSING• Do not open account if the owner cannot provide all

required documentation including an adequate Compliance Program

• Send Anti-Money Laundering Questionnaire and call to discuss requirements if the Compliance Program is not adequate

• Run all owners through OFAC list

• Terminate relationship if poses too much BSA risk

New Account Due Diligence

For Secondary MSBs

Best Practices for Banking MSBs

SECONDARY MSB ACTIVITY

• Some banks define any business conducting MSB activity as an MSB even if registration not required

• Obtain standard CIP for opening account

• If registration required, obtain Compliance Program or signed Anti-Money Laundering Questionnaire

• If registration not required, obtain signed MSB Activity Certification

• Some banks obtain collateral for businesses cashing third-party checks to reduce risk

Enhanced Due Diligence and Ongoing Monitoring

Best Practices for Banking MSBs

ASSESSING THE MSB’s RISK

Questions to ask: Are MSB services primary or secondary? How long has the MSB been in business? Is the MSB an agent of a well known MSB? Have SARs been filed on the MSB? Have any subpoenas been received related to

MSB? Does the MSB have a compliance program?

MONITORING THE MSB

Customer Due Diligence – All MSBs Review Cash Review Wires Review Money Orders Review Large Checks Deposited

Enhanced Due Diligence Conduct analysis of all services provided Conduct detailed on-site visit

ANNUAL REVIEW

• Obtain and review account documentation

• Re-calculate risk analysis of each MSB • Perform onsite visit for high-risk MSBs• Obtain IRS Letter of Acknowledgment and

State License • Obtain or review Compliance Program or

AML Questionnaire

Reminders, Challenges, and Opportunities

Best Practices For Banking MSBs

REMINDERS • Complete SARs on MSB customer’s customers

If you have knowledge of unusual or suspicious activity – you should file a SAR

You can’t know for sure if the MSB is filing a SAR because it is confidential

• Can ask the MSB for a copy of the CTR filed by the MSB to be sure they are filing when necessary.

• Obtain and review compliance programs for now…. Potential legislative changes

INITIAL CHALLENGES

• Discovering the “not so obvious” existing MSB customer

• Overcoming customer concerns with long term customers while enforcing new policies

• Language barriers

• Training issues on the importance of watching for MSBs and follow-up

OPPORTUNITIES

• Help customers understand the FinCEN registration requirements and the AML responsibilities

• Give branch employees the tools and knowledge to help educate the customers

• Inform customers of endorsement standards for third-party checks and 3 year risk of return

New MSB

Exam Manual

Best Practices For Banking MSBsBest Practices For Banking MSBs

Best Practices For Banking MSBs

NEW EXAM MANUAL

• Ensures that examinations are consistent and examiners are using the same guidelines

• Contains specific examinations procedures for CTRs, SARs, recordkeeping, AML Compliance Program – similar to Bank BSA Exam Manual

• Appendices contain helpful information Sample interview questions (Appendix G) Chart of recordkeeping requirements (Appendix I) Records commonly found at MSBs (Appendix J)

RISK ASSESSMENT• MSB should identify and assess money laundering

risks associated with their unique combination of products, services, customers, geographic location

• MSBs not “required” to create written risk assessment but “encouraged” to document risk assessment in writing

• If no written risk assessment, examiner will determine MSB’s risk profile (Don’t want that!)

• Appendix J contains a Risk Matrix to assist MSBs

MSB

Guidance Resources

Best Practices For Banking MSBs

WEBSITES AND HOTLINE

• www.msb.gov (Now at FinCEN.gov – Guidance for your MSB customers (materials in 9 languages)

• www.FinCEN.gov• FinCEN Regulatory Helpline: 800-949-2732

for BSA/MSB policy and interpretation of BSA regulations

• www.cia.gov• www.occ.treas.gov• www.treas.gov

MSB RULINGS AND GUIDANCE• Interagency MSB Guidelines for bankers

(FinCEN Advisory Issue #38, 4/6/2005)• FinCEN Guidance 2007-G006 (12/3/07) – Clarifies

that owners of Privately Owned ATMs are not MSB service providers

• FinCEN Ruling 2002-2 – Definition of a Payday Lender adds Payday Lending to the list of MSB activities

• FinCEN Guidance 2006-G005 (3/31/06) – Clarifies that a business that cashes its own paychecks is NOT an MSB check casher

Best Practices for Banking MSBs

Questions?