Navigating AML compliance in 2023: A detailed guide for MSBs


Money Service Businesses (MSBs) have emerged as a crucial part of the financial ecosystem, bridging a gap that once only traditional banks would fill.

In a recent post by Alessa, the company provided a simple AML checklist for money service businesses.

These businesses are incredibly varied, encompassing everything from local currency exchanges to global payment processors. However, the essential functions they provide also make them a prime target for financial criminals.

As a response, MSBs are bound by a series of anti-money laundering (AML) regulations, such as the Bank Secrecy Act (BSA) and regulations set forth by the Financial Crimes Enforcement Network (FinCEN). Ensuring adherence to these rules is vital, as non-compliance could lead to severe repercussions.

To assist MSBs in their compliance journey, this article presents an accessible checklist that adheres to AML best practices and regulations.

Understanding whether your business qualifies as an MSB is foundational to ensuring compliance with AML regulations. MSBs include organisations or individuals involved in money conversion and transmission, a category which separates them from traditional banks. Importantly, several modern digital banking services might fall under this category. Additionally, certain cryptocurrency businesses and exchanges, including those handling stablecoins, are considered MSBs.

MSBs can offer various financial services, such as cashing checks, foreign currency exchange, issuing travellers’ checks, and more. Being classified as an MSB depends on handling transactions exceeding $1,000 per person, per day, or engaging in transmitting funds, regardless of volume.

Ensuring compliance with AML regulations requires MSBs to follow a series of steps. This guide, though not exhaustive, covers the main components of an MSB AML compliance programme.

  1. Register with FinCEN: U.S. MSBs must register within 180 days of establishment and renew this every two years.
  2. Appoint an Individual or Team with AML Responsibilities: Designating responsible personnel is crucial for accountability within the organisation.
  3. Create and Implement FinCEN Reporting Policies: Form 112 must be filed for transactions over $10,000, and a Suspicious Activity Report (SAR) for those deemed suspicious above $2,000.
  4. Create and Implement KYC Policies: Identifying customers during onboarding through the Know Your Customer (KYC) process helps to mitigate fraud.
  5. Adopt Transaction Monitoring Procedures: Monitoring is required to identify suspicious activity that may indicate money laundering.
  6. Train Personnel with AML Responsibilities: Training keeps staff updated and aware of their responsibilities.
  7. Invest in AML Tools: Software solutions can automate aspects of AML compliance, making the process more efficient and accurate.

Following this checklist will assist MSBs in reducing money laundering risk while staying compliant with AML regulations.

Read the full post here.

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