1 Recent Regulatory Guidance Regarding the Banking of Remittance Companies Compilation of Relevant Documents Prepared by Viamericas Corporation, January 2015 With emphasis added
2 Table of Contents 1. U.S. Department of Treasury blog: Treasury s Work to Support Money Transmitters, October 8, FinCEN Statement: Providing Banking Services to MSBs, November 10, OCC Bulletin: Banking Money Services Businesses, November 19, FDIC Statement: Providing Banking Services, January 28, FDIC Memorandum to Supervisory Staff: Requirements for Deposit Account Terminations, January 28, 2015
3 U.S. Department of Treasury Treasury s Work to Support Money Transmitters Blog Article by Daniel L. Glaser, Asst. Sect. for Terrorist Financing at the U.S. Dept. of the Treasury October 8, 2014 Compilation of Relevant Documents Item 1 of 5 Prepared by Viamericas Corporation, January 2015 With emphasis added
4 Treasury Notes Horne» Connect with Us» Treasury Notes Blog» Treasury's Work to Support Money Transmitters Treasury's Work to Support Money Transmitters By: Daniel L. Glaser 10/8/2014 Each year millions of Americans use money services businesses (MSBs) to pay bills, cash checks, exchange currency, and send funds to family members and friends. Both domestically and abroad, money transmitters, one type of MSB, also serve the unbanked and under-banked. Ensuring that money transmitters continue to be able to send funds through legitimate and transparent channels requires an approach that balances the complementary goals of financial inclusion and financial transparency. Money transmitters and remittances play an essential role in financial inclusion; over onequarter of U.S. households use non-bank financial institutions, including money transmitters. Yet, money transmitters can also be vulnerable to abuse by money launderers and terrorist financiers. There have been a number of enforcement actions against money transmitters for the movement of drug trafficking, fraud, and human trafficking proceeds. There is also a long history of terrorist financing that has occurred via money transmitters. In our effort to foster financial inclusion and combat money laundering and terrorist financing, Treasury has led inter-governmental efforts over the last 15 years to establish domestic and international standards for the regulation and supervision of money transmitters. Our efforts have helped create international standards and a domestic regulatory framework that protect consumers, expand financial access, and curtail money transmitter abuse by criminal actors and terrorist financiers. Due to these efforts, record volumes of remittances are being transmitted through legitimate and transparent channels. We take seriously concerns that some money transmitters are having difficulty obtaining or maintaining bank accounts and that some banks are no longer providing banking services to money transmitters, regardless of risk. Such a development can erode both financial inclusion and financial transparency and work against the efficiency of financial systems. To address these concerns, Treasury will continue to actively reach out and provide guidance to the private sector. We have conducted extensive outreach to money transmitters and the communities they serve to explain anti-money laundering/counterterrorist financing (AMUCFT) obligations. We have also conducted outreach to banks to reiterate that providing services to a wide range of MSBs - even those deemed high-risk -
5 is possible while still remaining in compliance with the Bank Secrecy Act. Additionally, we have worked with state governments to help achieve greater transparency and consistent oversight of the industry. It is our view that financial institutions that establish and maintain appropriate risk-based anti-money laundering controls and compliance programs will be well-positioned to appropriately manage such accounts, prevent illicit transactions and avoid enforcement actions. In August, the President signed the "Money Remittances Improvement Act of 2014." This legislation should improve the oversight of money transmitters by explicitly allowing the Financial Crimes Enforcement Network (FinCEN), and the IRS, to rely on examinations by states of these institutions. This, in turn, should allow for better allocation of state and federal resources, better targeting of higher risk MSBs, and improved AMLlCFT compliance across the industry. Moving forward, we at Treasury see four essential components necessary to improve the banking access of money transmitters: improve the clarity of our expectations for banks, strengthen money transmitter AMLlCFT controls and compliance, further enhance money transmitter AMLlCFT oversight, and continue ongoing outreach to financial institutions and the customers they serve. Treasury is working with the federal banking agencies to update guidance to make clear that banks should not be treating all money transmitters as high-risk and that with sufficient controls, banks can effectively manage high-risk money transmitters. To that end, we are working bilaterally - such as our recent meetings with United Kingdom financial officials - to address issues surrounding money transmitter accounts and we are also working multilaterally, including with the World Bank and G-20, to support a global survey on money transmitter account closures, and underscore the importance of effective supervision of money transmitters. Finally, we are working with counterparts at the Financial Action Task Force to provide guidance to governments on effective supervision over financial institutions regarding these issues and to financial institutions on effectively identifying and managing the risks associated with MSB accounts. This issue will remain a high priority for the Treasury Department. We believe our efforts to engage industry stakeholders, clarify expectations for banks, and further enhance AMLlCFT compliance will help money transmitters continue to be able to send remittances through legitimate and transparent banking channels at record levels. Daniel L. Glaser is the Assistant Secretary for Terrorist Financing at the U.S. Department of the Treasury. Posted in: Category 1 (p SHARE 11 ># l8j...j
6 Financial Crimes Enforcement Network (FinCEN) Statement on Providing Banking Services to MSBs November 10, 2014 Compilation of Relevant Documents Item 2 of 5 Prepared by Viamericas Corporation, January 2015 With emphasis added
7 November 10, 2014 FinCEN Statement on Providing Banking Services to Money Services Businesses The Financial Crimes Enforcement Network ( FinCEN ), as the agency primarily responsible for administering the Bank Secrecy Act, is issuing this Statement to reiterate expectations regarding banking institutions obligations under the Bank Secrecy Act for money services businesses. Money services businesses ( MSBs ), 1 including money transmitters important to the global flow of remittances, are losing access to banking services, which may in part be a result of concerns about regulatory scrutiny, the perceived risks presented by money services business accounts, and the costs and burdens associated with maintaining such accounts. MSBs play an important role in a transparent financial system, particularly because they often provide financial services to people less likely to use traditional banking services and because of their prominent role in providing remittance services. FinCEN believes it is important to reiterate the fact that banking organizations can serve the MSB industry while meeting their Bank Secrecy Act obligations. 2 Currently, there is concern that banks are indiscriminately terminating the accounts of all MSBs, or refusing to open accounts for any MSBs, thereby eliminating them as a category of customers. Such a wholesale approach runs counter to the expectation that financial institutions can and should assess the risks of 1. FinCEN has defined MSBs to include the U.S. Postal Service and six distinct types of financial services providers: (1) dealers in foreign exchange; (2) check cashers; (3) issuers and sellers of traveler s checks or money orders; (4) providers of prepaid access; (5) money transmitters; and (6) sellers of prepaid access. 31 CFR (ff). 2. See Interagency Interpretative Guidance on Providing Banking Services to Money Services Businesses Operating in the United States (Apr. 26, 2005) available at Prepared Remarks of FinCEN Director Jennifer Shasky Calvery delivered at the 2014 Mid-Atlantic AML Conference (Aug.12, 2014) available at Remarks of Comptroller of the Currency Thomas J. Curry delivered at the Association of Certified Anti-Money Laundering Specialists Conference (Mar. 17, 2014) available at See also Testimony of Daniel P. Stipano, Deputy Chief Counsel Office of the Comptroller of the Currency, before the Subcomm. on Oversight and Investigations, H. Comm. on Financial Services (Jul. 15, 2014) available at and Testimony of Scott G. Alvarez, General Counsel of the Board of Governors of the Federal Reserve System, before the Subcomm. on Oversight and Investigations, H. Comm. on Financial Services (Jul 15, 2014) available at 1
8 FINCEN STATEMENT customers on a case-by-case basis. Similarly, a blanket direction by U.S. banks to their foreign correspondents not to process fund transfers of any foreign MSBs, simply because they are MSBs, also runs counter to the risk-based approach. Refusing financial services to an entire segment of the industry can lead to an overall reduction in financial sector transparency that is critical to making the sector resistant to the efforts of illicit actors. This is particularly important with MSB remittance operations. FinCEN, the IRS, and state regulators have all taken steps to increase the effectiveness of their oversight of MSB Bank Secrecy Act compliance. In 2005, FinCEN issued guidance to MSBs to explain their Bank Secrecy Act regulatory obligations and to notify them of the type of information that they may be expected to produce to a bank in the course of opening or maintaining an account. In 2008, FinCEN, working with the Internal Revenue Service and the states, issued an examination manual for MSB examiners to strengthen the examination process and make it more consistent nationally. In 2010, the Federal Financial Institution Examination Council BSA/AML Examination Manual provided updated information in connection with the examination of banks for, among other things, providing services to money services businesses. 3 In addition, state efforts to coordinate supervision and examination practices have increased. States have expanded their use of the Nationwide Multistate Licensing System and Registry (NMLS) for collecting and storing information on MSBs. 4 FinCEN and the IRS will continue to work with state regulators, consistent with the Money Remittances Improvement Act of 2014, to strengthen examination and oversight of the MSB industry with respect to Bank Secrecy Act compliance by leveraging appropriate state efforts. FinCEN does not support the wholesale termination of MSB accounts without regard to the risks presented or the bank s ability to manage the risk. As noted, MSBs present varying degrees of risk, and not all money services businesses are high-risk. Therefore, when deciding whether to provide services to an MSB customer, financial institutions should assess the risks associated with that particular MSB customer. A financial institution s risk assessment should include considering whether customer risks can be managed appropriately and the financial institution should maintain levels of controls commensurate with the customer risks presented. Banks that can 3. See Federal Financial Institution Examination Council, Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, available at https://www.ffiec.gov/bsa_aml_infobase/documents/bsa_aml_man_2010.pdf. 4. NMLS is the system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam. In these jurisdictions, NMLS is the official system for certain companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through NMLS by 61 state or territorial governmental agencies. NMLS itself does not grant or deny license authority. NMLS was created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. Operations began in January 2008 and the system currently retains records on over 17,000 non-depository companies, almost 10,000 banks, and over 400,000 mortgage loan originators, entities and individuals. In 2012, the states expanded NMLS to other non-depository entities, including MSBs. NMLS is the legal system of record for non-depository, financial services licensing or registration for participating state agencies, including the District of Columbia and U.S. Territories. 24 states currently use NLMS for the licensing and/or registration of MSBs. As of July 1, 2014, 737 companies held an MSB license in one or more states. These companies had registered over 95,000 agent locations. NMLS is available at 2
9 FINCEN STATEMENT properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to MSB customers, regardless of any MSB s specific business model. A banking organization s due diligence should be commensurate with the level of risk presented by the MSB customer as identified in the bank s risk assessment. If a banking organization s risk assessment indicates a heightened risk of money laundering or terrorist financing, then the organization should conduct further due diligence in a manner commensurate with the heightened risk. A bank needs to know and understand its MSB customer. To do so, it should understand the MSB s business model and the general nature of the MSB s own customer base, but it does not need to know the MSB s individual customers to comply with the Bank Secrecy Act. This is no different from requirements applicable to any other business customer. Banking organizations are expected to manage the risk associated with all accounts, including MSB accounts. However, the Bank Secrecy Act does not require, and neither does FinCEN expect, banking institutions to serve as the de facto regulator of the money services business industry any more than of any other industry. FinCEN recognizes that, as a practical matter, it is not possible for a bank to detect and report all potentially illicit transactions that flow through an institution. 5 But where an institution follows existing guidance and establishes and maintains an appropriate risk-based program, the institution will be well-positioned to appropriately manage such accounts, while generally detecting and deterring illicit transactions. In summary, FinCEN, as the agency primarily responsible for administering the Bank Secrecy Act, expects banking organizations that open and maintain accounts for MSBs to apply the requirements of the Bank Secrecy Act, as they do with all accountholders, based on risk. Banking organizations must have appropriately designed policies and procedures to assess an MSB s money laundering and terrorist financing risks. As with any category of accountholder, the levels of risk will vary; therefore, MSBs should be treated on a case-by-case basis. FinCEN and its regulatory colleagues will continue to monitor trends with respect to the provision of banking services to MSBs and are committed to taking steps to address the wholesale debanking of an important part of the financial system. Any questions with respect to this document or existing guidance should be directed to FinCEN s Resource Center at or (703) (telephone) or ( .). 5. See FFIEC Examination Manual; supra note 3, at 67. 3
10 Office of the Comptroller of the Currency Bulletin , Banking Money Services Businesses November 19, 2014 Compilation of Relevant Documents Item 3 of 5 Prepared by Viamericas Corporation, January 2015 With emphasis added
11 1/16/2015 OCC: Banking Money Services Businesses: Statement on Risk Management OCC BULLETIN Subject: Banking Money Services Businesses Date: November 19, 2014 To: Chief Executive Officers of All National Banks, Federal Savings Associations, Federal Branches and Agencies of Foreign Banks, Department and Division Heads, All Examining Personnel, and Other Interested Parties Description: Statement on Risk Management Summary The Office of the Comptroller of the Currency (OCC) is issuing the Statement on Risk Management Associated With Money Services Businesses to provide clarification to national banks, federal savings associations, and federal branches and agencies of foreign banks (collectively, banks) on the agency s supervisory expectations with regard to offering banking services to money services businesses (MSB). Note for Community Banks The principles contained in the statement below are applicable to all OCC supervised banks. Highlights As detailed in the statement below, the OCC does not direct banks to open, close, or maintain individual accounts, nor does the agency encourage banks to engage in the termination of entire categories of customers without regard to the risks presented by an individual customer or the bank s ability to manage the risk. MSBs present varying degrees of risk. banks are expected to assess the risks posed by an individual MSB customer on a case by case basis and to implement controls to manage the relationship commensurate with the risks associated with each customer. Statement on the Risk Management Associated With Money Services Businesses In carrying out the agency s mission, the OCC requires OCC supervised banks to manage their risks appropriately, to meet the needs of their communities, to comply with laws and regulations, and to provide fair access to financial services and fair treatment of their customers. As a general matter, the OCC does not direct banks to open, close, or maintain individual accounts, nor does the agency encourage banks to engage in the termination of entire categories of customer accounts without regard to the risks presented by an individual customer or the bank s ability to manage the risk. The OCC has always taken the position that banks must apply the requirements of the Bank Secrecy Act based on their own assessment of risk for all customer accounts. A bank s risk assessment should take into account the products and services it offers the customer as well as the customer s individual circumstances. The safety and soundness of an institution can be threatened when a bank lacks appropriate risk management systems and controls for the products or activities it provides or the customers it serves. Moreover, the failure to implement and maintain such controls can provide money launderers, fraudsters, terrorists, and other criminals with access to our financial system. MSBs present varying degrees of risk to an institution. Not all MSBs should be considered high risk. In keeping with the OCC s mission and commitment to ensuring all customers have fair access to financial services, the agency expects OCC regulated banks to assess the risks posed by each MSB customer on a case by case basis and to implement appropriate controls to manage the relationship commensurate with the risks associated with each customer. Further Information Please contact Grovetta N. Gardineer, Deputy Comptroller for Compliance Operations and Policy, at (202) Grovetta N. Gardineer Deputy Comptroller for Compliance Operations and Policy issuances/bulletins/2014/bulletin html 1/1
12 Federal Deposit Insurance Corporation Statement on Providing Banking Services January 28, 2015 Compilation of Relevant Documents Item 4 of 5 Prepared by Viamericas Corporation, January 2015 With emphasis added
13 Federal Deposit Insurance Corporation th Street NW, Washington, D.C Financial Institution Letter FIL January 28, 2015 Statement on Providing Banking Services Summary: The FDIC is issuing this statement to encourage institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers. Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter applies to all FDIC-supervised institutions. Distribution: FDIC-Supervised Banks (Commercial and Savings) Highlights: Suggested Routing: Chief Executive Officer Chief Financial Officer Chief Operating Officer Chief Risk Officer BSA Compliance Officer Related Topics: Risk Management Customer Due Diligence Contact: Suzy Gardner, Senior Examination Specialist, at or (202) Note: FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at https://www.fdic.gov/news/news/financial/2015/. To receive FILs electronically, please visit Paper copies may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E- 1002, Arlington, VA ( or ). The FDIC encourages insured depository institutions to serve their communities and recognizes the importance of services they provide. The FDIC encourages institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers without regard to the risks presented by an individual customer or the bank s ability to manage the risk. Individual customers within broader customer categories present varying degrees of risk. Institutions are expected to assess the risks posed by an individual customer on a case-by-case basis and to implement controls to manage the relationship commensurate with the risks associated with each customer.
14 Statement on Providing Banking Services Financial Institution Letter FIL January 28, 2015 The FDIC encourages insured depository institutions to serve their communities and recognizes the importance of the services they provide. Individual customers within broader customer categories present varying degrees of risk. Accordingly, the FDIC encourages institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers, without regard to the risks presented by an individual customer or the financial institution s ability to manage the risk. Financial institutions that can properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customer operating in compliance with applicable state and federal law. The FDIC is aware that some institutions may be hesitant to provide certain types of banking services due to concerns that they will be unable to comply with the associated requirements of the Bank Secrecy Act (BSA). The FDIC and the other federal banking agencies recognize that as a practical matter, it is not possible for a financial institution to detect and report all potentially illicit transactions that flow through an institution. 1 Isolated or technical violations, which are limited instances of noncompliance with the BSA that occur within an otherwise adequate system of policies, procedures, and processes, generally do not prompt serious regulatory concern or reflect negatively on management s supervision or commitment to BSA compliance. When an institution follows existing guidance and establishes and maintains an appropriate riskbased program, the institution will be well-positioned to appropriately manage customer accounts, while generally detecting and deterring illicit financial transactions. Any FDIC-supervised institution concerned that FDIC personnel are not following the policies laid out in this statement may contact the FDIC s Office of the Ombudsman (OO) at the following dedicated toll-free number, , or dedicated address, Communications with the OO are confidential. The FDIC also has an independent Office of Inspector General (OIG) that is charged with addressing allegations of waste, fraud, and abuse related to the programs and operations of the FDIC. Individuals or institutions may contact the FDIC OIG through its Web site at by using the Hotline button, by phone at , or by at Doreen R. Eberley Director Division of Risk Management Supervision 1 See page 67 of the Federal Financial Institution Examination Council, Bank Secrecy Act/Anti-Money Laundering Examination Manual, available at https://www.ffiec.gov/bsa_aml_infobase/documents/bsa_aml_man_2010.pdf.
15 FDIC Memorandum to Supervisory Staff Subject: Requirements for Deposit Account Terminations January 28, 2015 Compilation of Relevant Documents Item 5 of 5 Prepared by Viamericas Corporation, January 2015 With emphasis added
16 Text of Memorandum to all FDIC Supervisory Staff SUBJECT: Requirements for Deposit Account Terminations 1. Purpose. This Memorandum establishes a policy for documenting and reporting instances where FDIC personnel recommend or require insured depository institutions (IDIs) to terminate deposit account relationships. 2. Background. RMS and DCP examiners review IDIs' deposit account opening and maintenance policies and practices for compliance with laws, rules, and guidance regarding Bank Secrecy Act/Anti-Money Laundering, consumer protection, and general safety and soundness. The FDIC's supervisory approach focuses on assessing whether financial institutions are adequately overseeing activities and transactions that flow through their bank and appropriately managing and mitigating related risks. The FDIC's policy is that financial institutions that properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing financial services to customers, regardless of the customers' business models, provided they are operating in compliance with applicable state and federal law. Under current policy, in those instances where examiners find that IDIs are not properly managing risks associated with deposit accounts, the examiner-in-charge (EIC) would identify exceptions to bank management, and, if judged necessary, recommend a supervisory action to the regional office. Such findings would be set forth in the Report of Examination (ROE) as part of the Examiner Comments and Conclusions or Matters Requiring Board Attention, and if supervisory action is judged necessary, the recommendations or requirements would also be set forth in a memorandum from the EIC recommending supervisory action. 3. Policy. The following procedures are being established to provide for tracking and documentation of recommendations for terminating deposit accounts and for documenting criticisms of an IDl's management or mitigation of risk associated with deposit accounts. Recommendations or requirements for termination of deposit accounts should not be made through informal suggestions. Further, criticisms of an IDl's management or mitigation of risk associated with deposit accounts that do not rise to the level of a recommendation or requirement for termination of accounts should also not be made through informal suggestions. Rather, any RMS and DCP examiner criticisms of an IDl's management or mitigation of risk associated with deposit accounts must be made in writing in the ROE. Recommendations or requirements for terminating deposit accounts must be made in writing and must be approved in writing by the Regional Director before being provided to and discussed with IDI management and the board of directors. Also, before such findings are included in the ROE or supervisory actions are pursued, they must be thoroughly vetted with regional office and legal staff. Supervisory actions include board resolutions, memoranda of understanding, or cease and desist orders. In each case, the EIC's recommendation should include the supervisory basis for recommending or requiring account termination, including any specific laws or regulations the examiner believes are being violated, if applicable.
17 Recommendations for terminating deposit account relationships cannot be based solely on reputational risk to the IDI. By the 15th day after each quarter end, Regional Directors will provide quarterly reports to both the FDIC Board of Directors and the Division Directors regarding requests or requirements to banks to terminate deposit account requests, along with the basis for such action. 4. Effective Date. This Memorandum is effective immediately. 5. Distribution. This Memorandum should be distributed to RMS and DCP personnel.