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Will FinCEN’s Recent MSB Guidance Impact Credit Unions?
Monday, March 28, 2016 6:35 AM

By Colleen Kelly on CUNA CompBlog

Not directly. The Guidance FinCEN issued March 11, FIN-2016-G001, reiterates and provides clarity for money services businesses (MSBs) to comply with their own specific anti-money laundering (AML) requirements. Like credit unions, MSBs must establish and maintain effective written AML programs to prevent being used to facilitate money laundering and finance terrorist activities.

Some MSBs (the principal) authorize other business entities (agents) to sell or distribute the principal-MSB’s instruments or, in the case of funds transmission, to sell its “send and receive” transfer services. Your credit union’s MSB account could be a principal-MSB or an agent-MSB. Note that the minimum due diligence expectations associated with opening an MSB account and the risk assessment of such accounts includes determining the principal/agent status of the account.

This recent guidance clarifies the principal-MSB’s requirements to include agent monitoring policies and procedures sufficient to allow the principal to understand and appropriately account for the risks associated with their agents. In a 2005 Interagency Advisory, federal regulators, including NCUA, identified the lack of such monitoring as an indicator of a higher-risk account.

If you have identified an MSB account as higher-risk, NCUA recommends that you, among other things:

  • Review the list of agents, including locations, within or outside the United States, that will be receiving services directly or indirectly through the money services business account, and
  • Review written agent management and termination practices for the money services business.

Although this guidance does not directly impact your credit union’s BSA/AML policy and procedures, you are not required to be the de facto regulator for your MSB accounts—having a strong understanding of your MSB accounts’ compliance responsibilities will reflect positively on your level of due diligence. NCUA has stated a number of times over the past couple of years that their field staff have been directed to closely scrutinize credit unions’ relationship with MSBs to ensure that credit unions are in compliance with all BSA requirements.

Notable points reiterated in this recent guidance include:

  • Both the principal and the agent are liable for their respective policies, procedures, and controls. Neither party can avoid liability by assigning this responsibility to the other party through a contract or other means;
  • The MSB principal must have procedures in place to identify those agents conducting activities that appear to lack commercial purpose, lack justification, or otherwise are not supported by verifiable documentation;
  • The MSB principal should implement procedures for handling non-compliant agents, including agent contract terminations;
  • Principals must periodically reassess risks associated with their agents and update the principals’ program to address any changing or additional related risks;
  • Principals must take corrective action once becoming aware of any weaknesses or deficiencies in their AML programs;
  • FinCEN expects a principal to have information readily available to demonstrate that it has effectively developed and implemented risk-based policies, procedures, and internal controls to ensure adequate ongoing monitoring of agency activity.

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