Money service businesses roles issues challenges
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Money Service Businesses Roles, Issues & Challenges. A New York State Perspective: Licensing, Supervision, and Examination. Money Service Businesses (MSBs). Money Transmitters Licensing & Supervision since 1964 72 Licensed Money Transmitters operating through over 25,000 agents

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Money Service Businesses Roles, Issues & Challenges

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Money service businesses roles issues challenges

Money Service BusinessesRoles, Issues & Challenges

A New York State Perspective:

Licensing, Supervision, and Examination

For Discussion Purposes October 24, 2007


Money service businesses msbs

Money Service Businesses(MSBs)

  • Money Transmitters

    • Licensing & Supervision since 1964

    • 72 Licensed Money Transmitters operating through over 25,000 agents

    • Employ 63,000 employees

    • In 2006, processed more that 90 million travelers checks, money orders, official checks and remittances with an aggregate face value of $104 billion in NYS alone

For Discussion Purposes October 24, 2007


Money service businesses msbs1

Money Service Businesses(MSBs)

  • Check Cashers

    • Licensing & Supervision since 1944

    • 200+ check cashing companies operating through over 900 locations

    • Employing 4,000 people

    • In 2006, cashed more than 32 million checks with an aggregate face value of $17.0 billion

For Discussion Purposes October 24, 2007


How the industry is configured

How the Industry is Configured

  • Banks

    • A money transmitter/check casher must still use a bank to enter the financial system

  • Money Transmitter/Check Casher

    • Licensed

    • Unlicensed

  • Agent

    • Agent of Licensed Money Transmitter

    • Agent of Unlicensed Money Transmitter

  • Customers

    • Regular remittance of $200-$300 used 8-10 times per year

    • To money launder funds

For Discussion Purposes October 24, 2007


Msb transaction flow chart

MSB Transaction Flow Chart

For Discussion Purposes October 24, 2007


Nys top down approach

NYS Top Down Approach

  • Licensing & Supervision Standards

    • Licensing standards

      • Character & Fitness standards

      • Inclusive of a BSA/AML program at time of licensing

    • Supervision

      • Safety and Soundness Standards via FILM(S) rating, inclusive of “raising the bar” to give banks confidence in working with Money Transmitters/Check Cashers

For Discussion Purposes October 24, 2007


Nys top down approach1

NYS Top-Down Approach

  • Licensing Requirements (A sample):

    • Background report prepared by the NYS licensed investigator on every partner, officers, directors and substantial stockholders.

    • Management and supervisory experience in the MSB business.

    • Financial documentation: both corporate and personal information

For Discussion Purposes October 24, 2007


Nys top down approach2

NYS Top-Down Approach

  • Licensing Requirements:

    • BSA/AML Policies and Procedures – requires the basic elements of Section 352 of U.S.A. PATRIOT Act

      • Policies and procedures submitted for review

      • Designated compliance officer (with experience)

      • Training program identified

      • Understanding (via an affidavit) that an independent review will be conducted within one year.

For Discussion Purposes October 24, 2007


Nys top down approach3

NYS Top-Down Approach

  • Examinations at Licensee Level

    • Financial Condition

    • Safety and Soundness of the conduct of business

    • Policies of Management

    • Compliance with laws – BSA/AML

    • Whether Policies and Procedures are sufficient to control activities

For Discussion Purposes October 24, 2007


Nys top down approach examination procedures

NYS Top-Down ApproachExamination Procedures

  • Examinations of Licensee

    • Visitation within six months of operations, inclusive of BSA/AML implementation

    • Examination Frequency

      • Money Transmitters annually

      • Check Cashers once every two years

For Discussion Purposes October 24, 2007


Rating system components films

Rating System – ComponentsFILMS

  • Financial Condition

  • Internal Controls and Auditing

  • Legal and Regulatory Compliance

  • Management

  • (S) Systems and Technology

    Component/Composite ratings range from “1”-strong to “5” - unsatisfactory

For Discussion Purposes October 24, 2007


Nys top down approach examination procedures1

NYS Top-Down ApproachExamination Procedures

  • BSA/AML Examination includes:

    • Four Elements of U.S.A. PATRIOT ACT Section 352

    • Transaction Testing

    • MT: Visitation of sample selection of agents

      • Geographic concentration

      • Agents of multiple licensees

    • MT: Review of agent file documentation

      • Selection

      • Monitoring

      • Termination

    • CC: Transaction testing

      • with focus on completeness of recordkeeping and patterns of customer checks

For Discussion Purposes October 24, 2007


Law enforcement s bottom up approach

Law Enforcement’sBottom-Up Approach

  • Dovetails very well with our Top-Down Approach

  • Identify patterns of activity at the “street level” that may be flowing through both licensed and unlicensed entities

  • Successful partnership to shut down unlicensed activity

For Discussion Purposes October 24, 2007


Participants roles

Participants/Roles

  • Customers

  • Money Service Businesses

  • Banks

  • Regulators:

    • MSB and Bank regulators

    • State and Federal regulators

  • Law Enforcement

For Discussion Purposes October 24, 2007


Issues

Issues

  • Clarity of the definition of MSB

    • Section 103.11 (uu): $1,000 single or aggregate transactions in one day

  • Knowing MSB regulatory framework

  • De-Banking of MSBs

  • Concentration of MSB account servicing within banking industry, inclusive of credit unions

  • Customer Awareness

For Discussion Purposes October 24, 2007


Challenges

Challenges

  • Evaluation of MSB Definition

  • Convergence of Regulatory Standards via Information-sharing

  • Concentrations within Banking Industry

  • Communication and Education of Industries (both Banking and MSB industries), regulators, and law enforcement

  • Consumer Education

For Discussion Purposes October 24, 2007


Summary

Summary

  • Communication on various levels with various partners

    • The regulators, industries (banking & MSB), law enforcement

  • Importance of flow of information for clarification of guidance, supervision and examination for consistency of approach

For Discussion Purposes October 24, 2007


Summary1

Summary

  • Most important:

    • The banking and MSB industries have to continue to communicate with each other and with their respective regulators

  • We all share common goals:

    • Ensuring customers have access to financial services

    • Keeping the MSB industry viable and above ground.

For Discussion Purposes October 24, 2007


Questions

Questions ????

For Discussion Purposes October 24, 2007


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