Fear: “A distressing emotion aroused by impending danger, whether real or imagined…”
Money transmitters and other MSBs experience real fear of derisking while banks and credit unions experience what could be imagined fear of banking MSBs. We know money transmission can be higher risk from an anti-money laundering perspective, but with the right compliance culture and systems, depositories can profitably bank MSBs without unreasonable business or regulatory risk.
Why would a bank go “out on a limb” to enter a business relationship with a money transmitter?
There are two very good reasons.
- The relationship can be profitable to the bank.
- Money transmitters serve traditionally underbanked populations who would otherwise be subject to exorbitant fees and potential fraud going outside the traditional banking system.
How can a bank understand and limit its risk (a/k/a, be convinced that the risk is quantifiable and reasonable vs. the benefit of the relationship)?
The bank must be assured to the greatest reasonable extent that their MSB customer has the willingness and the ability to comply with BSA/AML regulations. This means (1) a best practice system of risk management (risk assessment, transaction monitoring, investigation practice, and audit/verification) much of which you are already doing and (2) TRANSPARENCY.
If you are a money transmitter willing and able to follow best AML practice, then proving it to a financial institution is critical to opening banking relationship doors.
“Proof,” we believe, is in systematic risk management that starts with an up-to-date, compliant risk assessment that gives the bank transparency into your risk profile including where you do business, what business you do, who you do business with, and how you manage BSA compliance.
Technology can help and in future installments of this series we’ll discuss best practice solutions for ongoing, compliant risk assessment and communication that will help you open and maintain banking relationships.
Note: This paper is republished from a series originally available at http://amlservices.us
About the Author
Mark Stetler is CEO of RegSmart. He has a BBA in Finance from Baylor University (cum laude, 1985) and a law degree from the University of Texas (with honors, 1988). Mark has worked in the financial services industry for 30 years as an attorney and entrepreneur. Mark previously co-owned one of the nation’s largest firms specializing in forensic financial audits. He is a Certified Anti-Money Laundering Specialist and a chief architect of RegSmart’s anti-money laundering risk assessment and audit SaaS.
About RegSmart
RegSmart offers the best-in-class automated BSA/AML risk assessment. Supported by subject matter experts, RegSmart collects data with intuitive wizards and stores that data for regulatory compliance and change management. RegSmart delivers complete, plain language reports with actionable intelligence. Please visit us at www.beregsmart.com.
If you would like to see a demonstration of our best-in-class automated BSA/AML risk assessment and audit applications, please contact us at 214.919.4670, or email John Ravita at jrravita@beregsmart.com or Mark Stetler at mstetler@beregsmart.com. We look forward to visiting with you.