The Financial Crimes Enforcement Network ("FinCEN") and other federal banking agencies issued a joint statement (the "Statement") on March 30, 2005, regarding the banking industry’s obligations under the Bank Secrecy Act for check cashers, money transmitters, and other money services businesses ("MSBs"). According to the Statement, MSBs are losing access to the banking system because of increased regulatory scrutiny, the perceived risk associated with MSB money transfers (especially abroad), and the costs and burdens of maintaining such accounts. Banks are primarily worried that MSBs present an unacceptably high risk of money laundering or other illicit activity.
The Statement directly addresses these concerns. It describes the valuable financial services that MSBs provide as well as the strict regulatory controls that now govern their operations, most notably the requirement that MSBs establish strict anti-money laundering programs. At the same time, the Statement emphasizes that banking institutions do not serve as the de facto regulator of the MSB industry. Instead, banks that open accounts for MSBs should conduct the same risk assessment as they do for all customers, taking into account the products and services offered and other individual circumstances.
MSBs often work in conjunction with banks to provide their various financial services, so it is essential that this relationship be maintained. At the same time, as banks face increased regulatory pressures themselves, it is not surprising that they have dropped some MSBs, especially those involved in overseas transfers. The Statement notes that additional guidance on account relationships will be issued by FinCEN to further clarify the bank’s supervisory expectations as they relate to MSBs. We will provide further updates on these important compliance issues as they are announced.
This article is presented for informational purposes only and is not intended to constitute legal advice.
