The Impact of AML/CFT Regulations in the US for MTOs/MSBs: Our Banking Crisis!. Presented by: David Landsman, Executive Director National Money Transmitters Association, Inc . at the World Bank FPDFI Roundtable on AML/CFT Washington D.C. January 23, 2007. Money Services Businesses.
David Landsman, Executive Director
National Money Transmitters Association, Inc.
World Bank FPDFI Roundtable on AML/CFT
January 23, 2007
1. Corporate Information and Documents
Certified copy of Certificate of Incorporation
Copy of By-laws
Certificate of Good Standing
List all shareholders
List all names
Provide compliance officer
Certificate of Authority to Conduct Business as Foreign Corporation
Copy of IRS MSB registration acknowledgment letter
Audited Financial Statements for last 3 years
Recent unaudited financial statement not less than 60 days old
Pro-forma financial statement for 1st year of operation
Corporate history from inception to present
Business plan for jurisdiction applying to
List of all agent and branch locations in jurisdiction
List of all services to be provided
Operations Manual detailing all normal business procedures
Agent Procedures manual
BSA/AML Compliance manual
OFAC Compliance procedures
Corporate Bond – amount varies between $25,000 up to over $1,000,000 per state
Net Worth requirement – amount varies between $25,000 up to over $1,000,000 depending on state calculation methods.
Permissible Investment requirement – amount varies depending on state calculation methods.
Copy of receipt to be issued.
Copy of authorized delegate agreement to be used.
Information regarding any formal or informal regulatory proceedings, past or present.
Disclose and describe businesses of all corporate parents, subsidiaries and affiliates.
Provide list of all jurisdictions where licenses already held and bonds provided therein.
2. Personal information required for all Officers, Directors and Shareholders
Biographical Information forms
Prior Addresses, SSN, Education and Employment history, criminal history, bankruptcy history, immigration status, tax history, litigation history, and regulatory history.
Personal Financial Statements
Full balance sheets showing all assets and liabilities.
Full Income and expense statements showing all income and expenses.
Background Investigation Report
Personal credit reports
3. Bank Account information
Name, address, account number and contact person at all banks where transmission funds will be deposited.
4. Foreign Correspondents
Proof of licensing or no licensing required in all foreign jurisdictions where located.
Copies of all agreements with Foreign Correspondents.
Dec. 14, 2004.
…..and so on…..
But nothing has helped….
But mostly, the ‘guidance’ in the BSA Examination Manual that was supposed to clarify things, only served to make regulatory expectations seem high, and made us look riskier. Here was all this new stuff to learn, new stuff that was expected. And we just happened to fall into most of the risk categories listed in the new manual, to wit….
Correspondent accounts (domestic and foreign)
MSBs (or NBFIs)
Checks, wires and money orders (monetary instruments)
Cross-border transmittal of funds
Privately owned automated teller machines
We send money to foreign jurisdictions of high money laundering concern with lax money laundering controls.
We deal with nonresident aliens and foreign individuals
Third-party payment processors (agents)
Brokered deposits (agent deposits)
The Risk-Based Approach: Too over-generalized to be useful?
"Experience over the last decade has shown that ARS (Alternative Remittance Systems) can be misused for illegal purposes, including for both money laundering (ML) and terrorist financing (TF). Although the alternative remittance sector is largely composed of legitimate operators, some categories of ARS have nevertheless been involved in the transfer of funds related to illegal activities – or are themselves operating without proper authorisation from an oversight authority. The FATF has focussed (sic) on ARS activity in a number of previous typologies exercises. ARS continue to be the source of concern as far as their vulnerability to misuse for ML or TF purposes; however, increasingly other considerations have also become more evident, such as balancing the prevention of misuse with the need to ensure that flows of legitimate funds are not unnecessarily interrupted or pushed underground. The FATF has thus once again decided to examine the subject so as to provide a basis for further discussion of AML/CFT policy implications."(Emphasis added.)
FATF Money Laundering & Terrorist Financing Typologies, 2004-2005, 10 June 2005
6. Licensing means a requirement to obtain permission from a designated competent authority in order to operate a money/value transfer service legally.
7. Registration in this Recommendation means a requirement to register with or declare to a designated competent authority the existence of a money/value transfer service in order for the business to operate legally.
8. The obligation of licensing or registration applies to agents. At a minimum, the principal business must maintain a current list of agents which must be made available to the designated competent authority. An agent is any person who provides money or value transfer service under the direction of or by contract with a legally registered or licensed remitter (for example, licensees, franchisees, concessionaires)......
Licensing or Registration and Compliance
11. Jurisdictions should designate an authority to grant licenses and/or carry out registration and ensure that the requirement is observed. There should be an authority responsible for ensuring compliance by money/value transfer services with the FATF Recommendations (including the Eight Special Recommendations). There should also be effective systems in place for monitoring and ensuring such compliance. This interpretation of Special Recommendation VI (i.e., the need for designation of competent authorities) is consistent with FATF Recommendation 26." (Emphasis added.)
Paragraphs 6, 7, 8 and 11 of FATF'sInterpretative Note to Special Recommendation VI: Alternative Remittance
Title I: Remove onus from banks by carving out license exemption
Title II: Start voluntary, non-preemptive, AML-only federal certification of MSBs
Title III: Formal role for self-regulatory organizations
Title IV: Re-organize those parts of Treasury responsible for MSBs
Title I: To Mitigate the Danger of Regulatory Uncertainty
This is all a banker really should have to do to bank a licensed MSB.
Title I continued: To Mitigate the Danger of Prosecutorial Uncertainty
ML prosecutions of any sort against depository institutions will require consent from FinCEN, USDOJ and the institution’s primary federal regulator, before they can proceed.