FINCEN Director’s Remarks at AML Conference on August 12, 2014

Remarks of Jennifer Shasky Calvery, Director of the Financial Crimes Enforcement Network (FINCEN) at the 2014 Mid-Atlantic AML Conference in Washington, DC on August 12, 2014

I have extracted a large section of FINCEN’s Director remarks a week ago at this compliance conference, because I feel it is important that everyone in the industry reads the message that FINCEN is sending to Banks with respect to banking MSBs, in our case Money Transfer Companies. If you still have a Banking Account is important that you share this message with their Compliance Team (a formal letter with the attached pdf highlighting some parts of the remarks) and even set-up a meeting to talk about the issue and ask what else you can do, as a company, for the bank to feel confident of your ever improving compliance practices.
Hugo Cuevas-Mohr

Here is the text:
Recently, we have been hearing about instances of “de-risking,” where money services
businesses (MSBs) are losing access to banking services because of perceived risks with this category of customer and concerns about regulatory scrutiny. Some financial institutions also state that the costs associated with maintaining these accounts outweigh the benefits. But just because a particular customer may be considered high risk does not mean that it is “unbankable” and it certainly does not make an entire category of customer unbankable. Banks and other financial institutions have the ability to manage high risk customer relationships.
It is not the intention of the AML regulations to shut legitimate business out of the financial system. I think we can all agree that it is not possible for financial institutions to eliminate all risk. Rather, the goal is to provide banking services to legitimate businesses by understanding the applicable risks and managing them appropriately.
MSBs play a vital role in our economy and provide valuable financial services, especially to individuals who may not have easy access to the formal banking sector. In fact, FinCEN and our regulatory partners first addressed this issue in 2005 when we learned that MSBs were having difficulty maintaining bank account relationships. In response, FinCEN and the Federal Banking Agencies issued joint guidance to assist banking organizations assess and minimize risks posed by providing banking services to MSBs. This guidance, which I would like to emphasize still remains in effect today, states:
“While recognizing the importance and diversity of services provided by money services businesses, the guidance to banking organizations specifies that FinCEN and the Federal Banking Agencies expect banking organizations that open and maintain accounts for money services businesses to apply the requirements of the Bank Secrecy Act, as they do with all accountholders, on a risk-assessed basis… Through the interpretive guidance, FinCEN and the Federal Banking Agencies confirm that banking organizations have the flexibility to provide banking services to a wide range of money services businesses while remaining in compliance with the Bank Secrecy Act.”
FinCEN is joined by the Federal Banking Agencies in continuing to support the applicability of this guidance. Recently, officials from both the Federal Reserve Board and Office of the Comptroller of the Currency underscored in Congressional testimony that the joint guidance issued in 2005 remains in effect today. Scott Alvarez, the Federal Reserve Board’s General Counsel, stated: “That [the] guidance confirms that banking organizations may provide banking services to MSBs that operate lawfully. The guidance is intended to assist banks in the decision to open and maintain accounts for legitimate businesses by identifying the programs and procedures they should have in place to perform customer due diligence and monitoring of these customers for suspicious activity.”

It is worth noting that with limited exceptions, MSBs are subject to the full range of BSA
regulatory controls, including the anti-money laundering program rule, suspicious activity and currency transaction reporting rules, and various other identification and recordkeeping rules.
Additionally, existing FinCEN regulations require certain money services business principals to register with FinCEN. As a result, MSBs play an important role in implementing procedures to thwart serious illicit activity that, left unchecked, could jeopardize the U.S. financial system. MSBs also play an important role in providing crucial reporting used to combat a wide range of criminal and security threats.

In fact, MSBs submit to FinCEN a significant number of Suspicious Activity Reports (SARs). In 2013 alone, MSBs filed more than 490,000 SARs, compared to 713,000 filed by depository institutions. And while I am not able to discuss specifics, I can say that the BSA reporting provided by MSBs contains some of the most valuable counterterrorism information we receive.

As with all of our regulated financial institutions, where particular MSBs fail to meet their BSA responsibilities, the organization and its individual partners, directors, officers, and employees are subject to possible civil and criminal penalties. FinCEN has the authority to bring civil actions in such circumstances and will continue to do so where we see pervasive and systemic, or egregious, failures. In fact, just last month, FinCEN assessed a civil money penalty against an MSB in Georgia in response to repeated violations of the BSA that persisted even after notification of the violations by examiners. As financial institutions, MSBs cannot ignore either their AML responsibilities or their examiners. They should also realize that banks will be more willing to do business with those MSBs that take their BSA obligations seriously While we are hearing reports of de-risking, we do not yet know how widespread it is, and we are still working to gauge the impact. FinCEN continues to meet informally with industry representatives and other experts to explore additional ways to gather feedback on the issue.

We are also hearing that some within the financial industry are working independently to study and scope the problem. One idea that has been discussed is the possibility of MSBs, depository institutions, and their respective trade associations coming together and developing a set of industry best practices, which if adopted by an MSB, could provide a depository institution with more comfort in offering banking services. We are also considering the merits of updating the 2005 guidance to banks on providing services to MSBs. And we are looking forward to exploring how the Money Remittances Improvement Act of 2014, which was signed into law by the President last week and authorizes FinCEN to rely on examinations of financial institutions conducted by State supervisory agencies, can positively impact this issue.

All this is to say that a risk-based approach is not black and white. A key aspect of FinCEN’s mission is to collect reporting from financial institutions and get this information into the hands of our law enforcement and regulatory partners. The only way we can do our job is if businesses actually have bank accounts and their transactions are monitored and reported to FinCEN, as appropriate. This is critical to what we do, because of the indisputable value the BSA reporting provides to investigations. And for those of you who are not sure that the value BSA reporting provides to investigations is indisputable, hold that thought, because I will be returning to that topic in a moment.

While we need financial institutions to provide us with transparency, we also ask financial institutions to help us keep dirty money from contaminating not only their institutions, but our financial system as a whole. I can appreciate that these two messages are at odds with each other, but we need to find a balance between the two; a balance where we receive valuable BSA reporting, but where a financial institution also feels it has effectively managed its risk in making decisions about maintaining a relationship with its customers.
For the full text of the remarks see the pdf here: http://1.usa.gov/1veeb2O