According to the estimation of Money Services Businesses Report in 2022, Money Services Businesses (MSBs) has managed to handle more than $5.38 trillion which included $3.72 trillion in money transmission, $176.57 billion in payment instruments, $1.03 trillion in stored value, $14.06 billion in check cashing, $5.90 billion in currency exchange, and $439.60 billion in virtual currency-related services.Such huge figures shows the importance of Money Services Businesses in international financial operations and the necessity of strict anti money laundering compliance to mitigate with related risks.
Why Is AML Compliance Crucial for MSB Businesses?
Anti money laundering compliance is now required for Money Services Businesses as a compulsion in an era where financial crimes are becoming more complex. Money Services Businesses are obliged to put strong systems in place in order to identify, track, and report suspicious activity to comply with strict rules like the USA PATRIOT Act and the EU’s AML requirements respectively.
In the MSB business model, AML compliance entails:
Customer Due Diligence (CDD): The obligation of performing customer due diligence requires verification of the identities of customers in order to stop fraud activity or scam as well.
Transaction Monitoring: the act of transferring money monitoring can be a really effective process in order to observe if transaction trends are anomalous or not.
Reporting Obligations: the obligation to report is usually done by the feature of Submitting Suspicious Activity Reports (SARs) in the event if any irregularities are found.
What Does MSB Mean Beyond Banking?
Many people might only think of money transfers and currency exchanges when they talk about the meaning of MSB in business but the scope goes beyond these services, though. MSBs are currently pushing the limits of conventional financial operations simply by entering into the emerging trends such as digital wallets, cryptocurrency exchanges, and cross-border payment services etc.
Additionally, several regions are implementing the feature of MSB in multiple sectors like schools which are making efforts to teach pupils about money services and emphasize financial literacy among them. When it comes to corporate, future corporate leaders are greatly aided by this instruction which cultivates an early awareness of compliance and moral financial behavior.
Is MSB Outsourcing the Smartest Compliance Solution?
There are many companies that are using the feature of MSB outsourcing companies to handle their compliance needs which is a result of complicated laws and growing operational difficulties. Moreover, businesses can use outsourcing to use their specialist knowledge in the following areas while concentrating on their main offerings:
Risk Assessments: The procedure of finding weaknesses in transaction systems is the ultimate goal of risk assessment.
AML Software Integration: the purpose of integrating anti money laundering software can be increasing accuracy by the feature of automation in compliance procedures and overall.
Training Programs: As the time is evolving, teaching employees the most recent AML regulations and procedures can be considered as a must.
Real life case study
The shortcoming of Morgan Stanley’s anti-money laundering (AML) compliance programs resulted in a significant regulatory action against the company in the year of 2018. It took place due to the failure of the company to properly monitor and report suspicious transactions over a five year period and then the Financial Industry Regulatory Authority (FINRA) penalized it $10 million.
How to Perform an MSB Business Search for AML Compliance?
- Check Licensing and Registration
Money service business providers are obliged to register with regulatory agencies, such as the Financial Crimes Enforcement Network (FinCEN) in the United States or equivalent in other countries. This whole procedure can help you to search regulatory databases such as, comprehensive information regarding registered MSBs can be found using the FinCEN MSB Registration Search Tool.
- Review Regulatory History
The practice of examining the MSB’s history of compliance in order to check if a company has made any infractions, penalties, or enforcement proceedings in the past can be quite effective.
- Examine AML Policies and Procedures
The act of asking for proof of the MSB’s anti money laundering rules can particularly help to know how they handle reporting suspicious behavior, transaction monitoring, and customer due diligence (or CDD).
- Perform Reputation Checks
Examining the third party audits, evaluations, and news stories about the MSB can be very effective to know if there is any connection to fraud or financial crimes. Such kind of exposure can lower your risk exposure simply by collaborating with a company that has a solid compliance record.
- Monitor for Ongoing Compliance
Last but not the least, verification of the MSB’s compliance with changing AML rules on a regular basis can prove to be a really good strategy to reduce the risks connected to non compliance.
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