Enhanced Due Diligence on a 34 Act Company MSB?

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Question:

Per the BSA, an MSB does not include a bank, nor shall it include a person registered with, and regulated by the SEC or the Commodity Futures Trading Commission. Does this mean that I do not have to perform any enhanced due diligence on an MSB that is a 34 Act company? By enhanced due diligence, I mean determining whether the business has procedures to comply with applicable BSA requirements, whether the company has proper controls to monitor for suspicious activity and whether the company has procedures to ensure compliance with OFAC regulations

Answer:

Under the definition section of the reg, MSB rules do not apply to these entities and you would not have to perform enhanced due diligence. These entities are already being monitored by a regulatory agency (e.g. OCC, OTS, SEC) that is responsible for ensuring they have the appropriate BSA programs in place. However, if you were to detect suspicious activity through your monitoring programs involving ones of these entities - then you would be obligated to take the necessary steps to identify, document and report the activity in a SAR if necessary.

First published on BankersOnline.com 4/18/05