1. Best Practices for Banking MSBs
Anti-Money Laundering Association
Chicago, Illinois
May 15, 2009
Michelle Hassen-Hemerley – Corus Bank
First Vice President, BSA/AML Officer

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

3. 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

4. MSB DEFINITION Currency Dealer/Currency Exchanger
Stored Value Cards OR
Money Transfer services in any dollar amount

5. 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.

6. NEW REGISTRATION FORM Revised MSB Registration Form 107 dated 8/08
Available at
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 6

7. LETTER OF ACKNOWLEDGMENT
Per 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

8. Deciding Your Bank’s Policy
Best Practices for Banking MSBs
Deciding Your
Bank’s Policy

9. 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

10. Best Practices for Banking MSBs
New Account Due Diligence

11. INITIAL ACCOUNT OPENING
Obtain 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)

12. 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

13. 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

14. Best Practices for Banking MSBs
New Account Due Diligence
For Secondary MSBs

15. 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

16. Enhanced Due Diligence and Ongoing Monitoring
Best Practices for Banking MSBs
Enhanced Due Diligence and Ongoing Monitoring

17. 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?

18. 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

19. 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

20. Reminders, Challenges, and Opportunities
Best Practices For Banking MSBs
Reminders, Challenges,
and Opportunities

21. 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

22. 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

23. 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

24. New MSB Exam Manual Best Practices For Banking MSBs

25. 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) 25

26. 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 26

27. MSB Guidance Resources
Best Practices For Banking MSBs
MSB
Guidance Resources

28. WEBSITES AND HOTLINE
(Now at FinCEN.gov – Guidance for your MSB customers (materials in 9 languages)
FinCEN Regulatory Helpline: for BSA/MSB policy and interpretation of BSA regulations

29. 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 – 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

30. Best Practices for Banking MSBs
Questions?