US Banks Receive Guidance On Working With Money-Service Providers

by Glen Shapiro, LawAndTax-News.com, New York

03 May 2005

Federal regulators including the Financial Crimes Enforcement Network (FinCen), the Federal Reserve, and the Office of the Comptroller of the Currency last week issued guidance to banks on providing banking services to money-service businesses such as check cashers and money transmitters.

The guidance was issued as a response to moves by certain financial institutions to cut such providers off from banking services, over fears that they are vulnerable to money laundering and terrorist financing activity.

In it, the federal regulators made clear that not all money-service providers represent the same level of risk, explaining that a check casher that refuses to accept out of state or third party checks should probably be viewed as a low risk provider, whilst a money-transfer business undertaking transactions to countries deemed vulnerable to money laundering would likely represent a high risk customer.

Providers of services such as check cashing and money transfer were also urged to register with the relevant federal authorities and comply with state licensing requirements, with the regulators warning that they could face legal action against them and the loss of their bank accounts if they do not.

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