SRC Insights: Second Quarter 2005

Interagency Guidance on the Provision of Banking Services to Money Service Businesses Operating in the United States

by William J. Brown, Senior Examiner

On April 26, 2005, interagency guidance on providing banking services to money service businesses (MSBs) was issued jointly by the Financial Crimes Enforcement Network (FinCEN), the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Office of Thrift Supervision. For the Federal Reserve, this guidance was issued as SR Letter 05-8.¹ Regulators define MSBs as currency dealers or exchangers; check cashers; issuers, sellers or redeemers of traveler’s checks, money orders, or stored value; money transmitters; and the United States Postal Service (subject to certain exclusions).²

The guidance addresses the need for banking organizations to assess the risks associated with conducting business with an MSB. It is expected that banking organizations that open and maintain accounts for MSBs will apply the same Bank Secrecy Act (BSA) requirements that they do with all account holders, on a risk-assessed basis. The guidance states that banking organizations will not have to conduct further due diligence on MSB customers if they complete five specific procedures with satisfactory results. Whether banks will need to perform additional due diligence on a customer will be based on the level of risk posed by the individual customer.

At a minimum banking organizations must:

Apply their own Customer Identification Program to MSB accounts.
Confirm that MSB customers are registered with FinCEN, if registration is required.
Confirm an MSB’s compliance with state or local licensing requirements.
Confirm the MSB’s status as an agent, if applicable.
Conduct a basic BSA risk assessment to assess how much risk the account poses and whether more due diligence is needed.

Also, the guidance addresses the issue of filing a suspicious activity report (SAR) on an MSB that has failed to register with FinCEN or failed to obtain a license under applicable state law. The guidance states that a banking organization should file a SAR if it becomes aware that a customer is operating in violation of the registration or state licensing requirements.

This guidance will be incorporated into the interagency BSA/Anti-Money Laundering examination procedures that are scheduled to be released in mid-year 2005.

If you have any questions on the guidance for MSBs, please contact your primary regulator. If you are supervised by the Federal Reserve Bank of Philadelphia, please contact your institution’s central point of contact or assigned manager at the Reserve Bank. You may also contact William J. Brown at (215) 574-7291.

The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System

¹ SR 05-8, Interagency Interpretative Guidance on the Provision of Banking Services to Money Service Businesses Operating in the U.S..
² 31 CFR, Section 103.11(uu).

The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.

SRC Insights: Second Quarter 2005

Interagency Guidance on the Provision of Banking Services to Money Service Businesses Operating in the United States

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