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Anti-Money Laundering Checklist for Money Service Businesses (MSBs)

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Money service businesses (MSBs) play a critical role in the financial system, often taking on responsibilities that would once have been the reserve of banks. Many different types of business fall under the MSB rubric, ranging from local currency exchanges to multi-national payment processors.   However, in addition to providing valuable services to consumers, MSBs are also a persistent target of money launderers and other financial criminals. That’s why they are required to comply with a range of anti-money laundering (AML) regulations, including the Bank Secrecy Act (BSA) and AML regulations issued by the Financial Crimes Enforcement Network (FinCEN).    Non-compliance with AML regulations poses a significant risk for MSBs. In this article, we provide an easy-to-understand checklist MSBs can use to verify that their operations follow AML best practices and regulations.      

What Is an MSB, and Is Your Business One?

Understanding whether your business falls under the MSB category is the first step towards compliance with AML regulations. Once you recognize that your business is an MSB, you can implement the necessary procedures and safeguards to prevent money laundering and comply with AML regulations.   Money service business is a legal term used to describe organizations or individuals involved in money conversion and transmission. It differentiates these businesses from traditional banks, so it’s important to understand that MSBs are not banks but businesses that provide financial services without meeting the legal definition of a bank. However, many bank-like companies, such as those offering modern digital banking services, may be considered MSBs.    Some less traditional businesses also fall under the MSB category, such as certain cryptocurrency businesses and exchanges, including those dealing with stablecoins.   An MSB might provide a variety of financial services. These include cashing checks, offering foreign currency exchange services, selling money orders, issuing travelers’ checks, and so on. The crucial condition for an entity to be considered an MSB under these provisions is that they handle transactions exceeding $1,000 per person, per day. In addition to these services, a business is considered an MSB if it engages in the business of facilitating the transmission of funds, irrespective of the volume.      

MSB AML Checklist

To ensure compliance with AML regulations, MSBs need to implement AML policies and make sure they are followed.    Here’s a checklist to help you stay on top of these requirements. Note that this checklist does not provide a complete overview of AML compliance requirements but, rather, is intended to be used as a helpful guide to the main components of an MSB AML compliance program requirements.     

1. Register with FinCEN

In the United States, MSBs are required to register with FinCEN within 180 days of the date the business is established. This registration requirement is mandated by the BSA and its implementing regulations, and needs to be renewed every two years.    

2. Appoint an Individual or Team with AML Responsibilities

MSBs are required to designate a person or team to handle AML compliance and oversee the effective implementation of AML policies. They are responsible for ensuring that there is accountability for compliance within the organization.    

3. Create and Implement FinCEN Reporting Policies

MSBs must file a FinCEN Form 112, also known as a Currency Transaction Report (CTR), for cash-in or cash-out transactions exceeding $10,000 in one business day for any single person. If a transaction or series of transactions amounting to $2,000 or more is deemed suspicious, they must file a Suspicious Activity Report (SAR).    

4. Create and Implement KYC Policies

The Know Your Customer (KYC) process is a vital component of AML compliance. During the customer onboarding process, an MSB must identify and verify the identity of customers to mitigate fraud and illicit activities. KYC regulations stipulate that MSBs must collect information to identify individuals and businesses,  such as their full name, date of birth, address, and official documents, such as passports or driver’s licenses. To streamline this process, many businesses choose to implement identity verification and KYC solutions for MSBs.    

5. Adopt Transaction Monitoring Procedures

MSBs are required to monitor transactions for suspicious activity and to document and report transactions that may indicate money laundering or financial crime. Transaction monitoring involves a thorough analysis of transactions, looking for patterns or behaviors that deviate from the norm.     

6. Train Personnel with AML Responsibilities

MSBs are mandated to provide AML training to their compliance staff and relevant employees to ensure that they are up to date with the rules and procedures and understand their roles and responsibilities in adhering to AML regulations.    

7. Invest in AML Tools

AML regulations place MSBs under a significant burden. Handling reporting and KYC processes manually is expensive, time-consuming, and error-prone. Fortunately, there exist AML software solutions to automate some aspects of AML compliance, including KYC identity verification, transaction monitoring and screening, and regulatory reporting.   Following this checklist will help MSBs minimize money laundering risk while complying with AML regulations. To learn how Alessa’s MSB AML compliance software can help your organization streamline and automate AML compliance, schedule a free demonstration.

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