Money Service Business: Money Transmitters Check Cashers

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Money Service Business Money TransmittersCheck
Cashers

• New York State Banking Department Integrated
  ApproachLicensing, Examination and Supervision

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How the Industry is Configured

• Banks
• A money transmitter/check casher must still use a
  bank to enter the financial system
• Money Transmitter/Check Casher
• Licensed
• Unlicensed
• Agent
• Agent of Licensed Money Transmitter
• Agent of Unlicensed Money Transmitter
• Customers
• Regular remittance of 200-300 used 8-10 times
  per year
• To money launder funds

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MSB Transaction Flow Chart
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NYS Top-Down ApproachExamination Procedures

• BSA/AML Examination includes
• Four Elements of U.S.A. PATRIOT ACT Section 352
• Transaction Testing
• MT Visitation of sample selection of agents
• Geographic concentration
• Agents of multiple licensees
• MT Review of agent/correspondent file
  documentation
• Selection
• Monitoring
• Termination
• CC Transaction testing
• with focus on completeness of recordkeeping and
  patterns of customer checks

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Successful BSA/AML compliance program
implementation

• Three Elements
• Management
• Internal Control Environment
• BSA/AML Program

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BSA/AML Examinations

• BSA Specialist for all Money Transmitters and
  large check cashers
• Pre-examination planning
• Access CTRs and SAR filings
• Transaction Testing
• Work Product Template

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Red Flags

• Money Transmitter Account
• MSB or agent not on the ground floor or not in a
  commercial area
• Agent using the account for own transmission
  business 10 to transmitter and 90 own
  business
• Easy to detect as the transfers are not going to
  the transmitter but directly to oversea
  correspondents
• Multiple high producing agents in the same
  geographic area question of whether the
  neighborhood can support that activity

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Red Flags - Continued

• Check Cashers
• Buying cash off the street
• Customers traveling over great distances to use a
  check casher not local checks or residents
• Large checks (over 15,000)
• Frequent customer that cashes large amount of
  checks in short-period of time (over 50,000 over
  a year)

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Can a Check Casher Launder Money? - Yes

• Buy 50,000 off the street and pocket 5,000
• Accounting Entries
• Entry 1
• Dr. Cash on Hand
• Cr. Suspense
• Entry 2
• Dr. Cash in Bank (for cashed checks)
• Cr. Cash on Hand

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Can a Check Casher Launder Money?

• Now to get the money back to source
• Dr. Suspense
• Cr. Cash in Bank (Write a check)
• Write the check to the following
• Cash or a Fictitious Company
• How can a bank find this?
• The amount of checks deposited in the account
  will far exceed the currency draws of the check
  casher
• Too many Cash checks or checks written to
  companies that a CC would not use, e.g.
  landscaping

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Law EnforcementsBottom-Up Approach

• Dovetails very well with our Top-Down Approach
• Identify patterns of activity at the street
  level that may be flowing through both licensed
  and unlicensed entities
• Successful partnership to shut down unlicensed
  activity

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Communication

• Coordination with Law Enforcement
• Supervisory regulatory powers can be helpful to
  law enforcement
• Identify effective and ineffective BSA/AML
  compliance programs
• Regulators oversee to ensure the correction of
  and penalty for violations
• Law enforcement prosecutes for criminal behavior

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Cases War Stories

• Rodriguez
• Vietnam Services, Inc.
• Vina USA
• U.S. vs. Elfgeeh
• Western Express
• U.S. vs. Prima Check Cashing
• Medicare Fraud
• Other
• Packing Cash

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Summary

• Communication on various levels with various
  partners
• The regulators, industries (banking MSB), law
  enforcement
• Importance of flow of information for
  clarification of guidance, supervision and
  examination for consistency of approach

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Proposed Action

• Unlicensed MSBs
• Partnering with Law Enforcements Bottom-Up
  Approach
• Information sharing of patterns in both licensed
  and unlicensed activity
• Referrals to law enforcement agencies of
  unlicensed MSB activities
• Increased penalties for unlicensed MSB activity

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Questions ????