Money service business banks are few and far between in 2017. A collection of economic forces are at fault for the depleted supply. Since 2008, the banking industry is increasingly risk averse and the global trend of derisking is adding fuel to the fire. For money service businesses, access to reliable banking services is becoming more of a dream than a reality.
Why is the money service business banking landscape so bleak? To answer this question, we need to rewind to the 2008 financial crisis. While the money service business industry was not directly associated with the housing bubble, they are now affected by the resulting risk aversion of banks. As banks work to get regulators off their backs, they are shedding risk any way they can. The MSB industry is an easy target as a result of FinCEN’s Operation Choke Point, a list of “risky businesses” published in 2013.
As they shed risk, banks are opting to shut out an entire industry rather than effectively manage the risk through strong compliance and governance. MSB banking relationships are profitable and enjoyable when all parties involved engage in strict compliance, transparent communication, and efficient business systems.
While MSBs are directly affected by the state of MSB banking, their customers and business clients are inadvertently affected as well. Individuals in underbanked communities are left without access to vital financial services. The underbanked and unbanked population in the US relies on alternative financial services to perform routine (and highly necessary) tasks like cashing their payroll checks, paying bills, reloading prepaid debit cards, and transferring money to their families.
Non profits working abroad are left without a cash supply to complete or even continue their missions. As the MSB banking industry shrinks, non profits are unable to send money to their counterparts working around the globe. This is causing project interruptions and, in some cases, Nonprofits are abandoning their efforts all together. These unintended consequences continue to ripple outwards from the money service business where they start.
For MSBs and check cashers who currently have a longstanding banking relationships, you are not out of the woods. Many of NCC’s MSB clients found us after abruptly losing their banking relationship. NCC client Katherine, owner of Loch Raven Check Cashing in Towson, MD, learned this lesson the hard way.
Katherine’s long term bank sent her a termination letter just before Thanksgiving – and the busy holiday season. Her MSB serves its community through Western Union, check cashing, and bill pay. When she received the abrupt notice after a 20 plus year banking relationship, Katherine was in shock. Her initial reaction was one of overwhelm, wondering how she could serve her clients who depend on her during the holiday season to provide for their families.
She immediately started searching for money service business banks online and she found NCC. Katherine recalls calling the business phone number around 11pm at night and being shocked when Andy Benjamin answered the phone. After a frustrating lack of communication from her bank, NCC’s open and helpful approach was a breath of fresh air. The team of MSB banking experts at NCC communicated openly and worked to quickly resolve her problem.
As a result, Katherine was able to avoid a devastating business closure and remain open during her busiest season of the year. Many other MSBs turn to NCC when their banks sever ties with their business. Some of NCC’s clients proactively reached out to NCC before their bank could terminate their MSB business bank account. NCC’s team of MSB industry experts helps MSB owners solve their problems and secure a real bank account. Every bank account is backed by NCC’s network of redundant financial partners – giving you protection from derisking and other banking trends.
A strong compliance program is vital for staying ahead of the curve for both trends and regulation. For MSBs, compliance means identifying potential risk, managing risk levels, and working to stop financial fraud before it happens. MSB regulations are governed by the Financial Crime Enforcement Network, or FinCEN.
Officially, FinCEN is a bureau of the United States Department of the Treasury. In this role, FinCEN collects and analyzes financial transactions to combat financial crimes like terrorist financing, money laundering, and check fraud. FinCEN provides guidance on licensing, compliance, and Bank Secrecy Act (BSA) regulation for money service businesses.
All money service businesses cashing over $1,000 in checks per customer per day must register as a licensed MSB. Smaller check cashing operations cashing less than $1,000 in checks per customer per day are not required the register and may operate as unlicensed check cashing businesses.
For licensed money service businesses, staying compliant is a huge – and vital – part of their operations. The business of identifying, reporting, and stopping suspicious activity is in the spirit of the BSA, which encourages cooperation between financial institutions and law enforcement agencies to fight financial crime.
In the past, running a compliant MSB was all you needed to secure a money service business bank. Now, it’s a bit more complicated. As we discussed with Loch Raven Check Cashing above, maintaining a compliant banking relationships does not guarantee a bank for life. The only safeguard against derisking is to use a network of financial partners to provide a level of redundancy and account security.
NCC provides a redundant network of financial institutions for their clients. What does this mean? Your check cashing business receives a real money service business bank account that is backed by a network of MSB bank accounts. In the event that derisking occurs, you will roll over into a new bank account seamlessly – never missing a beat or having to close your business. NCC also offers supported MSB services like extended deposit times, armored cash delivery, and money transfer to help you run an efficient check cashing business.
If you are ready to experience complete peace of mind and put the MSB experts of NCC to work for your business, reach out to us today.