Presented by: David Landsman Executive Director National Money Transmitters Association, Inc.

1
Presented by David LandsmanExecutive
DirectorNational Money Transmitters Association,
Inc.

• Banking a Licensed Money Transmitter Safely
• How to Absolutely Mitigate the Risk Down to Zero

2
Put Your Own BSA House in Order

• No fine has ever been handed down as a result of
  banking a licensed money transmitter see to
  non-MSB issues
• Dont let this presentation scare you
• Maintain list of MSB customers, constantly
• Have an MSB Procedure / Scoring Method /
  Checklist document, implement, review
  procedures play to the audit Board involvement
  / approval.
• Use existing official checklists steep yourself
  in compliance culture 3rd party / outside
  reviews.
• Sensitize your front line personnel
• Seek prior comment from your auditors.

3
Know Your States License Requirements

• Know method and where LMT operates.
• Study state law and regs (ask customer.)
• Study state application and audit procedures
• Contact SBD for info
• If not licensed, look for sufficient legal
  protection and do extra diligence, or take a
  pass (Chase / Beacon Hill example)

4
Initial Due Diligence

• Verify ownership, owners identity, corporate
  existence, TIN, background check, personal /
  business financials, FinCEN Registration (see
  state MT application)
• Site visit, review MSBs major relationships
• Start a folder / establish control and review
• Relationship manager is point of control
• Relationship manager is subject to oversight and
  audit

5
More Initial Due Diligence

• Get compliance manual, audit report and NMTA
  certification
• Consult others, internally and externally
• Scoring method / special risk factors (country,
  product, agent, adequacy issues, mitigators, net
  risk)
• Pop-quiz and interview the applicant

6
Leverage the MSBs Existing Audit

• MSBs must have independent audits anyway,
  according to Sec 352 of the Patriot Act
  (independent usually means outside)
• Enhance the existing audit with further
  questions, proofs and outside certification
  (ACAMS, references)
• Renew annually

7
Elements to Look for in a BSA Audit

• Scope and standards commensurate with size
• Check auditor qualifications / resume
• Section 352 four points
• Compliance Officer
• Training program
• Written policies beyond the manual
• Independent audit
• Special risk factors
• Risk scoring
• Actual control being implemented
• Adequacy of systems

8
More Elements to Look for in a BSA Audit

• CTR, SAR review
• Stress testing of agents, employees

9
Non-BSA Elements of an Audit

• OFAC procedures
• General business legal compliance
• Escheatment procedures

10
Best Practices

• Range of adequate solutions
• Compare to others in the industry
• Room for improvement
• Follow up on audit recommendations

11
Know the Major Risk The Agent

• Structuring at the agent level
• Facilitation or initiation of structuring
• Multiple licensees, extra danger
• Agents own non-licensed channels
• ID Thresholds
• Remember, the agent is a financial institution
  under the BSA (the agent review)
• Make the agent your customer
• Agent supervision exercised by licensee

12
Ongoing Due Diligence

• Look at dollar levels once a month
• Analyze inflows and outflows
• Amounts expected
• Where are they going
• Do they tie out?
• Periodically review transaction database
• Periodically review agent folders
• Rely on independent reviews
• Audit at 6 month intervals for the first year
• 1 year intervals thereafter

13
Basic Elements of BSA Compliance Applied to MSBs

• The opposite of willful blindness is due care
  due care is your shield.
• Determine the level of knowledge you should have
  (reasonable assumptions, red flags)
• The same presumption of innocence as other
  business customers.
• The same treatment as other types of customers.

14
What Must Bankers Do?

• Not clairvoyance, mind reading or perfection
• Reasonably verify the customer knows and is
  following the law. Means to forget most of this
  presentation. Whatever policies you set, you must
  follow.
• Do so at a profit (Hint we will pay.)
• The same thing we must do build systems and
  procedures that are reasonably designed to
  prevent, detect and report money laundering.

15
In General

• Understand the money transfer business
• Understand the licensee / agent model
• Understand modes of operation
• Transaction models
• Computer and telecom systems
• Settlement and cash flow issues
• Understand expected patterns
• Understand you states supervision
• Follow up on deviations

16
Conclusion

• MSB licensees are good customers who not only
  obey, but also uphold the law.
• The compliance costs of having MSB customers are
  recouped.
• The compliance risks are easy to manage safely
  and with certainty.
• MSB licensees perform an irreplaceable function
  in society.
• MSB licensees are the kind of customers you
  should have!