MINNEAPOLIS, Minn.—The number of banks choosing not to serve money services businesses (MSBs) appears to be growing, according to a new report.
As CUToday.info previously reported, many large banks are turning away MSBs not only due to concerns over the regulatory red tape in working with MSBs, but also due to pressure by regulators and the U.S. Department of Justice’s Operation Choke Point not to serve MSBs. Regulators, sources say, are concerned about OFAC, AML and BSA violations among MSBs.
Minutes from the latest monthly board meeting of the Regional Money Service Business Association included comments gathered from RMSBA members from April through mid-November:
- Members stated that they generally feel the situation is worsening.
- MSB companies are either losing agents because the agent had to stop MSB business to maintain their banking relationship, or locate another bank for the agent.
- U.S. Bank continues to force closing of accounts or increase service charges.
- Wells Fargo is dropping many accounts, both in the east and west.
- It appears banks do not want the business of receiving deposits of cash and use regulatory oversight as an excuse.
As a result of the moves by banks, MSBs are moving toward smaller and smaller institutions, sources have stated. While most MSBs are legitimate, well-run businesses, some—with more nefarious purposes—are looking for ways into the financial system. Sources have stated these companies are seeking small institutions with weak Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) controls.
That was the situation at $4-million North Dade North Dade Community Development Credit Union in Miami Gardens, Fla., which was shuttered by NCUA earlier this year. Sources have also suggested that MSBs and money laundering were issues that led to the closing of the $13-million Bethex CU in Bronx, N.Y.