Obligations for Possible MSB

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Question:

A customer's business is a local convenience store and he is obviously in the business of cashing checks on a regular basis and depositing those checks to his account at our bank. Occasionally, checks are cashed out to the benefit of the same person on the same day in an amount exceeding $1,000. As BSA Officer, I discussed this with the relationship manager and we decided to inform the customer that he might want to make sure he understands the requirements concerning operating as an unregistered MSB. He replied that he was confident that he was doing nothing wrong. Our question: What, if any, obligation do we have to (for instance) file a SAR, instruct him to not deposit checks that are subject to MSB regulations, or any other potential obligations we might have based on what we know about his activities that are subject to MSB regs?

Answer:

The best way to keep this brief is to offer a simple quote from OCC Advisory Letter 2004-7:

If a bank suspects that a customer is an unlicensed or unregistered MSB, it should file a SAR in accordance with OCC regulations and carefully consider the risks of providing services to such an entity. In addition to considering risk to its reputation, the bank should consider the type of activity in the account (e.g., cash transactions or international wires), patterns of activity (e.g., whether it reflects ongoing fraud or other criminal activity), and the volume of activity and transaction amounts.

I regard the advice as generic -- it does not make any difference whether you are a national bank, it applies. I suggest you write to the customer, include a copy of the MSB Q&As and inform him that registration is a condition of continuing to do business with your bank.

I strongly suggest that banks do not attempt to explain MSB responsibilities to their customers, only to provide them with information. The bank's due diligence should provide it with enough information to make a determination of its own and act accordingly.

First published on BankersOnline.com 4/18/05