Written by Shari R. Pogach, Regulatory Paralegal
The Financial Crimes Enforcement Network (FinCEN) has released not guidance, not an advisory but…….a “statement’ on offering banking services to Money Services Businesses (MSBs). The agency issued the document, FinCEN Statement on Providing Banking Services to Money Services Businesses, to reiterate FinCEN’s expectations for financial institutions’ obligations under the Bank Secrecy Act (BSA) for MSBs.
FinCEN is concerned that MSBs, an important part of the financial system, are losing access to banking services possibly because of increased regulatory scrutiny, the perceived risks presented by MSB accounts, and the costs and burdens associated with maintaining such accounts. Apparently MSB accounts are being indiscriminately terminated or not being opened as an entire category rather than being risk assessed on a case-by-case basis. However, as MSBs provide financial services to people less likely to use traditional banking services and because MSBs play a prominent role in providing global remittance services, FinCEN wants to remind financial institutions that the industry can be served while still meeting BSA obligations. FinCEN’s concern is, “Refusing financial services to an entire segment of the industry can lead to an overall reduction in financial sector transparency that is critical to making the sector resistant to the efforts of illicit actors. This is particularly important with MSB remittance operations.” FinCEN, the Internal Revenue Service and state regulators have all taken steps to increase and strengthen the effectiveness of oversight of MSB BSA compliance with supervision, guidance and examination materials.
The agency does not support the wholesale termination of MSB accounts without regard to the risks presented or the financial institution’s ability to manage the risk as MSBs present varying degrees of risk and not all are high-risk. FinCEN does not expect financial institutions to serve as a regulator of the MSB industry and recognizes it is not possible for an institution to detect and report all potentially illicit transactions that may flow through an institution. FinCEN does expect financial institutions that open and maintain accounts for MSBs to:
Apply the requirements of the BSA, as with all accountholders, based on risk;
- Have appropriately designed policies and procedures to assess an MSB’s money laundering and terrorist financing risk; and
- Treat each MSB on a case-by-case basis, as with any accountholder.
Financial institution’s that can properly manage relationships and effectively mitigate risks are neither discouraged nor prohibited from providing services to MSBs, regardless of its specific business model.