Financial compliance is an ever-changing stream of risk, regulation, and mitigation. At National Check & Currency, we have our eyes on both bank-facing and MSB-facing compliance. As a result, our financial institutions and our money service businesses can enjoy complete peace of mind through top tier compliance.
To date, we have an unmarred track record for compliance success. How do we do it? We stay way ahead of the curve and implement compliance solutions before new regulations are officially handed down from their governing bodies. This requires a firm understanding of why the relevant financial regulations exist, and what they are meant to guard against. Secondly, this requires the ability to swiftly pivot when new rules and laws are drafted.
There are a few core financial regulations that shape the compliance landscape for both MSB banks and money service businesses. In 2001, President Bush signed an Act of Congress into law, the USA Patriot Act. The Act was a response to the September 9/11 terrorist attacks, which brought terrorist financing into the spotlight. The USA PATRIOT seeks to put the United States and its financial institutions in a better position for identifying, investigating, and prosecuting international money laundering and other financial crimes related to terrorism.
Specifically, Title III of the USA PATRIOT Act addresses anti-money laundering (AML) efforts as a means to prevent terrorism. The three subtitles under Title III deal with strengthening AML banking rules, improving communication between law enforcement and financial institutions, and the expansion of record-keeping requirements. Most pertinent to money service businesses and the banks that serve them, the USA PATRIOT Act requires members of the financial services industry to report suspicious money laundering activity.
Before the USA PATRIOT Act, the Bank Secrecy Act of 1970 (BSA) was passed to require U.S. financial institutions to communicate with the U.S. government. The BSA is still the framework used to encourage and require communication to help combat money laundering and other financial crimes. For MSBs and check cashers, the BSA requires financial institutions to keep records of all cash purchase of negotiable instrument and to file reports of cash transactions exceeding $10,000 per person per day. How do these two Acts work together? The USA PATRIOT Act amends the BSA into the AML program that we adhere to today. Both MSBs and the MSB banking industry have to keep a sharp eye out for new regulatory trends and shifting risk.
Banks have several compliance obligations to balance. First, they must ensure that the financial transactions of their direct clients are compliant with all financial regulations. Second, they must ensure that the financial transactions of their clients’ clients are compliant. For the purpose of this article, we will discuss the second type of compliance. For banks who work with MSBs, staying compliant requires transparent and expeditious communication between the bank and the money service businesses they serve.
For the bank, primary concerns center around customer identification and Know Your Customer (KYC) obligations, thorough vetting of new customers, and rigorous record-keeping. When MSBs gather the necessary KYC data, check the data against national databases when necessary, and record transaction details, the bank is able to see a complete picture of the financial interaction. This complete picture allows the bank’s compliance team to stay on top of trends and identify compliance discrepancies before they become fraud.
For MSBs, comprehensive compliance programs help reduce fraud, which in turn helps the MSB maintain a reliable MSB bank account. As MSBs face derisking and the abrupt loss of their bank accounts, staying compliant is not a choice, it is a necessity. The derisking trend is the result of banks shedding perceived risk to simplify their compliance programs. Many of our current MSB clients were once victims of this indiscriminate derisking.
What does it look like? One of our clients learned that his 20 plus year banking relationship would be terminated in 30 days via letter. When he reached out to his longstanding banker, he could not ascertain any further information or explanation. Luckily, NCC was able to keep his business up and running by providing a reliable bank account.
In the face of derisking, MSBs can make themselves more attractive to MSB friendly banks by implementing and recording a strong compliance program. Regulated MSBs should operate in accordance with the BSA and the USA PATRIOT Act, as outlined by FinCEN. It is important to note that not all MSBs are subject to regulation. Unregulated money service business include check cashers who cash less than $1,000 per person per day. The aforementioned regulations apply to regulated MSBs, or those who cash more than $1,000 per person per day. That said, a compliance program can help all MSBs reduce their risk for fraud.
The NCC team brings MSB industry veterans and former federal agents together to create a solution that helps both banks and MSBs stay compliant, efficient, and profitable. First and foremost, NCC provides MSB bank accounts for compliant money service businesses. In order to provide real check cashing bank accounts, NCC works with a network of reliable financial institutions. Our high compliance standards ensure that both our MSB clients and our partner banks benefit from a mutually beneficial relationship.
To simplify the check cashing process for check cashers and MSB owners, NCC offers proprietary POS check cashing technology to all of their clients. This streamlines new customer vetting and intake, record keeping, and reporting. Additionally, our clients receive 24/7 expert customer service and supported MSB services. These services include late deposit deadlines, quick turnaround of cash, and compliance systems.