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Presented by Greg Baldwin Holland & Knight LLP July 25, 2005. CONCERNS OF BANKS IN SERVICING MSBs. Disclaimer:.

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presented by greg baldwin holland knight llp july 25 2005
Presented by

Greg Baldwin

Holland & Knight LLP

July 25, 2005

CONCERNS OF BANKS IN SERVICING MSBs

disclaimer
Disclaimer:

The information and materials provided during this program present general information and should not be used or relied on as legal advice when analyzing and resolving a specific legal issue. Each fact situation is different; the laws are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult with competent legal counsel about your specific facts and the specific laws that apply.

bankers concern in servicing the industry
BANKERS’ CONCERN IN SERVICING THE INDUSTRY

HIGHDEGREE OF RISK AND EXPOSURE ASSOCIATED WITH MSBs

► Large amounts of cash associated with MSBs

► Unknown or vague sources of that cash

► Ability of criminals to abuse MSBs

► Difficulty in effectively monitoring MSB activities by Banks

slide4
THIS CREATES:

POOR LAW ENFORCEMENT PERCEPTION OF MSB INDUSTRY

and

COMPLEX REGULATORY RULES AND ISSUES

(MSB Licensing Issues; BSA Compliance Issues)

THAT DIRECTLY IMPACT BANKS

slide5
RESULTING IN HIGH POTENTIAL COST AND EXPENSE TO BANKS

Heightened BSA Supervision

Law Enforcement Action

Reputational Risk to Bank

Associated Costs Involved Can Easily Outweigh Potential Profit

mitigating banks concerns
MITIGATING BANKS’ CONCERNS

UNDERSTAND WHAT IS EXPECTED OF THE BANKS

►Effective Compliance Programs to supervise and monitor MSBs requires Banks to –

• have your BSA policies and procedures

• have your Articles of Incorporation or other organizational or chartering documents

• have your current By-Laws or their equivalent

understand what is expected of the banks
UNDERSTAND WHAT IS EXPECTED OF THE BANKS

• know the identity of your owners (including beneficial owners) and source of wealth

•know the identity of your chief officers

• make an on-site visit to your administrative headquarters and/or operational center of MSB

• have an assessment of foreign government oversight of your MSB (if appropriate)

understand what is expected of the banks8
UNDERSTAND WHAT IS EXPECTED OF THE BANKS

• ensure your MSB has an annual independent review from an auditor on the Bank’s approved auditor list

• periodically update the above information, and retain the information if the account is closed

• Have a written description explaining how your MSB operates, where you obtain the funds you deposit into the Bank, and how you process those funds

• Take steps to verify the description of your MSB

understand what is expected of the banks9
UNDERSTAND WHAT IS EXPECTED OF THE BANKS

• Obtain a certification from you that your MSB, your agents and affiliates operate in conformity with applicable federal and state laws

• for each person who transacts MSB business with the Bank:

documents establishing their scope of authority and their biographical information

• unaudited financial statement for most recent fiscal quarter and most recent fiscal year

recommendations on how to deal with banks concerns
RECOMMENDATIONS ON HOW TO DEAL WITH BANKS’ CONCERNS

DISCLOSE YOUR BSA COMPLIANCE PROGRAM

►don’t wait to be asked◄

►introduce your Compliance Officer◄

►show records of your employee education◄

►offer copies of latest audit of the Program◄

►stress your SAR reporting◄

recommendations on how to deal with banks concerns11
RECOMMENDATIONS ON HOW TO DEAL WITH BANKS’ CONCERNS

BE PREPARED IN ADVANCE TO

►have all documentation immediately available◄

►answer all questions openly◄

►give reasonable answers to all questions◄

►designate one person to deal with the Bank◄

recommendations on how to deal with banks concerns12
RECOMMENDATIONS ON HOW TO DEAL WITH BANKS’ CONCERNS

BE PROACTIVE WITH YOUR BANK

►provide changes in relevant documentation◄

►give advance notice ofchanges in business◄ (in operation; in ownership; in management or key personnel)

►send audits without being asked◄

►explain unusual transactions in advance◄

recommendations on how to deal with banks concerns13
RECOMMENDATIONS ON HOW TO DEAL WITH BANKS’ CONCERNS

IMPOSE REASONABLE LIMITS ON YOUR BUSINESS

►limit size and number of checks cashed◄

►limit size and frequency of wire transfers◄

►limit number of money orders per customer◄

►rules and restrictions on who you deal with◄

presented by greg baldwin holland knight llp july 25 200514
Presented by

Greg Baldwin

Holland & Knight LLP

July 25, 2005

CONCERNS OF BANKS IN SERVICING MSBs