MSB Definition

Question: We have customers who run a "Mom and Pop" store in a little, southern, rural town. The main street is just two blocks long. They cash checks for their customers who buy groceries. They are NOT a check casher. They'll only cash checks that are split for groceries. One of the payroll checks they split was for $1,001.00. Fed, in their pre-examination at our bank, says that makes them a MSB and they have to register. Is that really true?

Answer: Our experts came back with a split opinion on this question. One said that he has seen discussions on MSB trigger points, where it's been noticed that the customer only pulls the trigger if the transaction involves more than $1000 in cash. The examples given were furniture stores that cashed a check for over $1,000, but only gave back $200, the $825 balance being the purchase of furniture. The store is OK being considered NOT a MSB if it can document - and the bank can document - that the cash amount was actually less than $1,000.

The problem is, of course, that this sort of documentation is an ongoing need. Each time the store deposits a customer check for over $1,000, they'll have to document how much the purchase was and how much was taken in cash.

On the other hand - another of our compliance experts came back with the MSB definition, where, in part, it says (2) Check Casher - A person engaged in the business of a check casher (other than a person who does not cash checks in an amount greater than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions.) (http://www.msb.gov/pdf/31CFR10311.pdf)

If they are "in the business" of cashing checks, they are a check casher, and, based on the amount - a MSB. Can you really argue that they are not "in this business"? I think it might be tough to explain away.

Both our compliance advisors thought that applying the MSB definition on one occurrence as being way over the top too strict. However, we all realized the examiners are under too much pressure on BSA related items to be depended on to use common sense.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 12, 1/05