The Perfect Blend of Compliance and Politics

March 16, 2016 at 9:01 am Leave a comment

Good morning.  Today’s blog contains what I humbly believe is the perfect blend of compliance and a little politics.  Here goes.

FinCEN Issues Further MSB Guidance

Mishandled MSB accounts have resulted in high profile disasters for credit unions.  Consequently, for those of you who continue to have Money Service Business accounts or may open them, take a look at this recent guidance issued by FinCEN.

Money Service Businesses (MSB) are exactly what they are called.  They are basically businesses that specialize in handling money such as check cashers and money transmitters.  Because they are such cash intensive businesses and they provide money services for a wide range of individuals, they present special BSA/AML risks for credit unions and banks that open accounts for them.  One of these challenges is the way larger ones tend to be structured.  There may be a single principal money transmitter but with several agents acting on its behalf.  This is a model you see, for example, with many money transmitters down in New York City.

The guidance released by FinCEN is directed at MSB principals.  It stresses that to establish effective AML policies and procedures, principals must monitor the procedures and practices of their agents.  They simply can’t rely on contract language making their agents responsible for engaging in BSA compliant activities.

Now I know some of the more observant compliance brethren out there are wondering how this applies to them.  After all, as NCUA has expressed in its own MSB guidance, it expects credit unions to manage risks associated with all accounts, “including MSB accounts.  However, credit unions are not responsible for their members’ compliance with BSA and other applicable federal and state laws and regulations.”

Well, this is just my opinion, but the fact that businesses are responsible for their own BSA compliance will be scant consolation for those credit unions that find themselves holding high volume MSB accounts administered by businesses that aren’t complying with basic regulatory requirements.  Depending on the size and complexity of the MSB, I would certainly subject them to greater due diligence before opening their account.  That due diligence should be ongoing and include an assessment of what steps the business is taking to ensure proper agent oversight.

The Better Angels of Our Mercy?

I don’t know if Abraham Lincoln is rolling over in his grave or on the edge of his seat watching the reality TV show called the Republican Primary.  I do know that last night’s results provide some good news for New York Republicans.  The primary is normally an afterthought on the political calendar, but the State’s 96 delegates are now a very tempting target for Republican candidate John Kasich, whose plans of keeping Trump from getting the nomination before the Republican convention are predicated on winning West and East Coast primaries where Republicans are believed to be more responsive to his moderate brand of Conservatism.  It just so happens that April 19 is the same day on which a special election to fill the seat vacated by convicted former Senate Majority Leader Dean Skelos is taking place.  It is safe to assume that a highly contested primary will bring out more Republican votes.

Incidentally, the battle for control of the State Senate took another interesting twist yesterday with the announcement that Mark Panepinto (D-Buffalo) won’t seek re-election.  He won the seat in 2014 in a highly contested race.

Entry filed under: Compliance, General, New York State, Political. Tags: , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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