The Basics

Bank Secrecy Act Compliance Basics for MSBs

Money Services Businesses play a vital role in providing financial services to the “unbanked” and “self-banked” in communities across the United States. Click on the headings below to learn more!


What is an MSB?

Money Services Businesses (MSBs) are a type of financial institution under the law. They are subject to regulatory oversight by the Internal Revenue Service and various state banking departments. They must comply with the Bank Secrecy Act as well as various state laws and regulations.

Your business may be an MSB if…

The business offers one or more of the following services:

  • money orders
  • traveler’s checks
  • check cashing
  • currency dealing or exchange
  • stored value

— AND —

The business:

  • Conducts more than $1,000.00 in money services business activity with the same person (in one type of activity) on the same day

— OR —

The business:

  • Provides money transfer services in any amount.

Challenges

MSBs provide necessary services to their clients such as check cashing, money transfer, money orders, and prepaid value cards at convenient times and competitive rates. MSBs operate within the law as excellent citizens in order to protect their business, their customers, their communities, and our nation from criminal money laundering and terrorist financing activities. They vary in size and scope from small operations offering financial services as a minor side business to multi-national corporations offering financial services as their core business. And…like all financial institutions, MSBs are potentially at risk of being used to facilitate money laundering and/or terrorist financing.

As the nation continues its efforts to guard against potential terrorist activities and its efforts to protect communities from illegal activities, the expectations for compliance by MSBs and the institutions serving them are continuing to increase. Civil and criminal penalties for non-compliance can be substantial. Unnecessary fear of the risk of doing business with MSBs has made it difficult for MSBs to maintain existing banking relationships or to find new relationships when necessary.

It is more important than ever for MSBs to have sound, risk-based policies and procedures in place and to actively manage their banking relationships. MSB Compliance can help your business do just that.

FinCEN Registration

A Principal MSB must register with the Financial Crimes Enforcement Network (FinCEN) and maintain certain records regarding its Agent and/or foreign counterparty relationships.

An MSB may provide a variety of financial services as a Principal, as the Agent of another MSB, or as both Principal and Agent. A Principal must perform appropriate due diligence of any agents, maintain agent files documenting their contractual relationships with agents and must register with the Financial Crimes Enforcement Network (FinCEN). A registration form must be completed accurately and then be mailed to the IRS’ Detroit Computing Center. Registrations may need to be updated periodically depending upon certain triggering events and must be renewed by the second December 31st following initial registration and every two years thereafter.

State Registration

Most state governments require registration or licensing of firms providing check cashing, check sales or money transmittal; such requirements are in addition to those under Federal law.

It is important for each MSB to ensure that it obtains and maintains appropriate state registration(s) and licensing in addition to registration with FinCEN as an MSB. Banks are required to confirm that their MSB customers have obtained necessary state licenses as part of managing their BSA risk. State law often contains specific requirements outside the scope of the Bank Secrecy Act such as record keeping, pricing and marketing constraints. A best practice is for the Independent Review for BSA compliance to also review and confirm compliance with state requirements for the MSB’s financial services.

Name BSA Officer

Each financial institution (including MSBs) must designate an appropriate employee to be responsible for compliance with the Bank Secrecy Act, i.e. a “BSA Officer”.

The person should have sufficient knowledge, training and authority to ensure the MSB’s risks are managed appropriately. The person should be named in a manner appropriate to the type of entity with the appointment renewed annually.

Risk Assessment

Each money services business should identify and assess the money laundering risks that may be associated with its unique products, services, customers, and geographic locations.

Regardless of where risks arise, money services businesses must take reasonable steps to manage them. Each money services business should focus resources on the areas of its business that management believes pose the greatest risks, and the level of sophistication of the associated internal controls should be appropriate for the size, structure, risks, and complexity of the money services business.

Policies and Procedures

All MSBs are expected to develop written, risk-based policies, procedures and controls covering their responsibilities under the Bank Secrecy Act. Operations should then be managed to conform to the written compliance policies and tested periodically via the Independent Review process.

MSB Compliance helps you comply by evaluating your risks and providing a written Risk Assessment. The risk assessment is then used to help tailor a written BSA/AML and OFAC policies and procedures document. We can also review and update your existing procedures for you. Businesses may also choose to do the “tailoring” themselves starting with the templates provided with the MSB BSA/AML Compliance Guide package. This option can help an MSB to get compliant quickly at low cost.

Periodic Training

MSBs are required to provide appropriate training for their employees annually. Such training helps the MSB to ensure an effective implementation of its policies and procedures thereby helping to protect the business, community and nation from the ill effects of money laundering and terrorist financing.

FinCEN provides some free training resources to MSBs through their MSB.gov website. Principal MSBs typically provide training and materials to their Agents too, that should be used. Please see the Compliance Products tab for compliance materials available from MSB Compliance Inc. at a fee and MoneyServicesBusiness.com for additional free information.

The main thing is that your employees need to have sufficient knowledge to understand their responsibilities and accurately follow your written compliance procedures. Training should be documented to demonstrate that an MSB is meeting the training requirement.

MSB Compliance can provide compliance training and coaching during consulting engagements. We are also available to assist larger MSBs in developing tailored training programs.

Independent Review

The Bank Secrecy Act requires money services businesses to establish anti-money laundering programs that include “an independent audit function to test programs.” The primary purpose of the independent review is to monitor the adequacy of the money services business’ anti-money laundering program. The review should determine whether the business is operating in compliance with the requirements of the Bank Secrecy Act and of the business’ own policies and procedures.

Inquire at this link for assistance in performing your company’s Independent Review.

MSB Compliance, Inc. can help you to comply with the BSA and maintain your vital banking relationship.

We are dedicated to helping MSBs meet their Bank Secrecy Act compliance obligations, protect their communities, and maintain their vital banking relationships through effective Bank Secrecy Act Anti-Money Laundering programs, guidance and best practices.

MSB Compliance, Inc. – We help you protect your business, your community and our nation!

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Finally, an outstanding guidebook to help MSBs understand and comply with the Bank Secrecy Act. The book comes with templates, forms and guidance to help you tailor an effective compliance program to the needs of your business.

Click on the image to learn more then order from the Products page.