Monitoring an aml program for msb

In this case, significant portions of the money being laundered through Western Union involved structured payments sent to China that avoided triggering the regulatory reporting requirements of the Bank Secrecy Act BSA.

The payments were from illegal immigrants for services provided by their human smugglers. In another case, Western Union processed hundreds of thousands of transactions for an international scam where people were directed to send money to a fraudster in order to claim a prize or help a relative.

According to authorities, employees often processed the payments in return for a cut of the proceeds. According to U. More at stake than money Every crime that leads people to launder money has had a direct negative impact on society, whether it is drug or human trafficking, terrorist financing, human smuggling, elder abuse or other illicit activity. With changing and growing regulations comes an increasing volume of regulatory reports for MSBs to complete and submit by specific deadlines, and possibly across jurisdictions.

These reports can contain hundreds of fields, with validation rules that make manual completion and filing tedious. While data quality is discussed later in this guide, it has a direct impact on reporting. The inability to group transactions from the same person s because identification data is not exact adds complexity, and risks regulatory noncompliance. Some regulators require that for every currency transaction report CTR , a matching suspicious activity report SAR is also generated.

MSBs may have to include attachments with each report submitted which can be overwhelming, and often requires a dedicated compliance team to handle. Many MSBs operate in retail storefronts, so training a large number of detached, remote employees to properly collect information for regulatory reports and other matters related to AML compliance is not trivial.

What further complicates the task is that retail employees are often cyclical and detecting potentially illicit activity is not part of their core skills. All these factors make it difficult to ensure that employee training is consistently up to date and thorough, putting the MSB at risk. Good margins on transactions volumes is a key business objective for an MSB, but the growing compliance requirements have a direct cost implication, potentially eroding margins.

MSBs who opt to use untrained personnel to maintain compliance or technology solutions designed for other types of financial institutions can quickly erode profits, jeopardize the viability of the business and tarnish their reputation.

Multiple or fake IDs and data entry errors also make it difficult to maintain a complete customer profile across transactions and successfully report suspicious activities. As criminals turn toward small and medium-sized financial institutions such as MSBs as a means to move illicit funds, these companies represent a greater risk to larger financial institutions. To reduce their risks, large financial institutions are applying stricter due diligence or discontinuing their relationship with some MSBs.

This makes it challenging for MSBs to obtain the banking services they need to service their customers. To create a culture of compliance, a governance process must be built on formal policies for key stakeholders across the entire organization, including groups that own, manage and provide independent assurances on risk.

Communication, planning, execution and reporting details should be included. Well-defined and meaningful metrics that provide insights into the risk-taking functions based on aggregation and evaluation of risk data at the enterprise level are also important. The purpose of the hotline is to expedite the delivery of this information to law enforcement.

Financial institutions should immediately report any imminent threat to local-area law enforcement officials. Issued Date. Guidance Subject. Financial Institution. What are the requirements for filing a SAR? Please contact us using the information below. Are you ready to get started? Request Quote. Insurance companies. Loan or finance companies. FinCEN Guidance FINR, Compliance obligations of certain loan or finance company subsidiaries of Federally regulated banks and other financial institutions August 13, , confirms that when a subsidiary loan or finance company is obligated to comply with the AML and SAR regulations that are applicable to its parent financial institution and is subject to examination by the parent financial institution's Federal functional regulator, the loan or finance company is deemed to comply with FinCEN's regulation.

Operators of credit card systems. Other financial institutions e. Risk Factors NBFI industries are extremely diverse, ranging from large multi-national corporations to small, independent businesses that offer financial services only as an ancillary component to their primary business e.

Banks that maintain account relationships with NBFIs may be exposed to a higher risk for potential money laundering activities because many NBFIs: Lack ongoing customer relationships and require minimal or no identification from customers. Maintain limited or inconsistent recordkeeping on customers and transactions. Engage in frequent currency transactions. Are subject to varying levels of regulatory requirements and oversight.

Can quickly change their product mix or location and quickly enter or exit an operation. Sometimes operate without proper registration or licensing. Assess the potential risks posed by the NBFI relationships. Conduct adequate and ongoing due diligence on the NBFI relationships when necessary. Risk Assessment Factors Banks should assess the risks posed by their NBFI customers and direct their resources most appropriately to those accounts that pose a more significant money laundering risk.

Locations and markets served by the NBFI. Anticipated account activity. Purpose of the account. FinCEN defines MSBs as doing business in one or more of the following capacities: Dealer in foreign exchange Check casher Issuer or seller of traveler's checks or money orders Money transmitter Provider of prepaid access Seller of prepaid access U. Postal Service There is a threshold requirement for dealers in foreign exchange, check cashers and issuers or sellers of traveler's checks or money orders.

The exclusions include arrangements that: Provide closed loop prepaid access to funds i. Provide prepaid access solely to funds provided by a government agency. Provide prepaid access to funds for pre-tax flexible spending for health and dependent care, or from Health Reimbursement Arrangements for health care expenses.

There are two types of prepaid access arrangements that have a qualified exclusion.