WASHINGTON – Banks are receiving guidance to help them better gauge whether check cashers, money transmitters and other people who use their services may be vulnerable to money-launderers or terrorist financiers.
The federal regulators' guidance, issued Tuesday, is aimed at resolving the problem of some check cashers, money transmitters and others being cut off from banking services.
Some banks are closing the accounts of such "money-services" businesses out of fear they might run afoul of regulations designed to catch money-launderers and terrorist financiers. Banks as well as money-services businesses have asked federal regulators for help.
The regulatory guidance makes clear that not all money-services businesses pose the same level of risk and that banks should tailor their due diligence accordingly.
To help banks determine the level of risk a money-services business poses, the guidance offers some examples of what may be indicative of "lower" or "higher" risk. For instance, a check casher that doesn't accept out-of-state or third-party checks is a potentially lower risk, while a money-transfer business that does only international transactions to countries with suspected money-laundering abuse poses a potentially higher risk.
The guidance was issued by the Financial Crimes Enforcement Network, Federal Reserve (search), Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Office of Thrift Supervision and the National Credit Union Administration.
The American Bankers Association (search) welcomed the guidance.
"It is helpful because it gives you an outline to assess risk," said John Byrne (search), director of the association's center for regulatory compliance. "It gives you something we haven't seen before — a roadmap to compliance."
In general, money-services businesses are subject to a range of federal provisions to combat financial crimes, money-laundering and bankrolling terrorist activities. Some of the businesses must register with federal authorities. Many states also have regulations and registration requirements for such businesses.
The regulators also provided guidance to money-services businesses. They stressed that such businesses that fail to take basic steps such as registering with federal authorities or complying with state licensing requirements may face regulatory action by the government and could lose access to their bank account.
"We remain committed to ensuring that money-services businesses that comply with the law have appropriate access to banking services," said William Fox, director of the Financial Crimes Enforcement Network, dubbed FinCen.
A "fact-finding" meeting earlier this year found that money-services businesses of all types and sizes were losing their bank accounts "at an alarming rate" even when they appeared to be complying with federal and state regulations, Fox said.