Answer:
The regulatory verbiage is focused on deposit customers with references to the account's possible use for laundering money, terrorist financing, etc. I don't see that an MSB as a borrower poses that type of risk. However, in candor, I don't think the assessment of all MSB depositors as "high risk" is reasonable either - that conclusion is mostly a function of the current environment.
With that current environment in mind, I would subject a potential MSB borrower to the same type of analysis and documentation I would use on the deposit side. Obviously, if your borrowing relationship is successful and they decide to open an account with you it would be a bit difficult to explain if, only then, you realized they were not registered or maintaining the appropriate compliance programs.
As far as monitoring, there is very little transaction monitoring that you can do aside from assuring that loan payments are not made in cash and that the loan payments do not exceed the borrower's repayment capacity which you established at the time the loan was made. (You want to make certain they are not paying off the loan from another source of funds which is perhaps illegal.)
First published on BankersOnline.com 5/16/05
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