Regulators Clarify MSB Requirements: Guidance Underlines Risks Attached to Maintaining Accounts

Banking regulators issued joint guidance in late April that clarifies requirements on banks for assessing and minimizing risks associated with providing banking services to money services businesses.

The guidance follows a joint statement issued earlier in April indicating concern that banks were cutting off those businesses because they fear running afoul of money laundering and terrorist regulations.

The joint guidance by the Financial Crimes Enforcement Network (FinCEN), the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency and the Office of Thrift Supervision specifies that banks are expected to apply the same Bank Secrecy Act requirements they apply to other account holders, namely:

Apply the bank's Customer Identification Program
Confirm FinCEN registration
Confirm compliance with state or local licensing requirements
Confirm agent status, and
Confirm basic risk assessment to determine an account's level of risk.

The guidance goes on to give examples of low and high risk within money services business accounts to help banking organizations decide when they need to report known or suspected violations of law. It also addresses the recurring question of when a banking organization must file a suspicious activity report. The guidance states that banking organizations are not required to ensure that customers comply with federal and state laws and regulations.

However, it also says a report should be filed if the financial institution becomes aware that a customer is operating in violation of the registration or state licensing requirements.

The joint guidance was accompanied by an advisory to money services businesses emphasizing the importance of compliance with BSA and outlining the types of information they should be prepared to provide to a banking organization when opening or maintaining an account.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 4, 5/05