10 years may not seem like a long time but in the AML World it’s a lifetime, and for the MSB Industry it seems as though a century has gone by.
What has changed? What have we learned? These are the two most important questions that an MSB can take away when they look at their AML Program.
To begin with, the MSB must understand that 10 years ago, most of the Regulators and law enforcement really had a minimal understanding of the MSB and their customer. Both Regulator’s and law enforcement have become educated on the MSB customer and that customer is no longer the un-banked. It’s the customer who uses the MSB as another financial institution. Yes, money launderers were using the MSB to purchase money orders and send transfers to clean up their funds but it was done in the most basic of systems. As the MSB gained an understanding of its AML obligations, transaction review have become commonplace and a part of the daily ritual of doing business. OFAC checks, customer identification review, SAR filings and transaction monitoring are now done without a second thought by the MSB.
10 years ago, webinars and full day seminars for AML were not on any MSB’s radar. AML training and education was the exception, not the rule.
Today this is embraced, as the MSB, like all financial institutions, tries to stay ahead of the curve.
The independent review of the AML Program is no longer a 1 page checklist. It is a comprehensive report, performed by parties with the requisite AML knowledge and expertise.
If this sounds like a Utopian Society, it is.
The majority of the regulated MSB industry has embraced its regulatory obligations but there exists a percentage of MSB’s who have miserably failed to comply and adopt well rounded AML Programs. These are folks who have given the black eye to an industry that has worked hard on developing and implementing sound AML Programs. There are those in law enforcement that work with MSB’s on a daily basis and find the information they provide about customers and transactions to be invaluable (of course this information is usually provided via subpoena).
Unfortunately we still see the MSB who doesn’t understand that they have a legal obligation to implement an AML Program. These MSB’s tend to be the one-offs, the convenience store or gas station that sells money orders and does the occasional wire transfers as an agent of a licensed money transmitter or sells a handful of prepaid cards each day. They believe the information they received from the parent company is good enough and just leave the documents in a binder under a desk. When a regulator examines a bank and finds fault with the bank because it has MSB accounts, they point to these accounts. When asked why they have never implemented a true AML Program, the MSB responds with “we only do a few transactions and it’s a lot of work.”
But again, it’s important to recognize that these are exceptions, not the rule.
The numbers speak for themselves. A review of the FinCEN website reflects the penalties levied against banks far outweigh those against the MSB for non-compliance.
It is quite usual that the MSB compliance officer has greater knowledge than the auditor or examiner that is performing a regulatory examination. The compliance officer, in a number of cases, has had more training than the auditor and has been in the Industry longer.
So what have we learned? The MSB must always put their best foot forward. They must not just meet the expectations that their regulators have for them; they must exceed them, AND THEY ARE DOING JUST THAT.
Jeff Sklar
Feed Entries