Analyzing Florida MSB Compliance Trends: A Deep Dive into Final Orders

Introduction

Money Services Businesses (MSBs) play a critical role in the financial ecosystem but also face intense regulatory scrutiny. Recent final orders issued by the Florida Office of Financial Regulation (OFR) highlight recurring compliance failures, underscoring the need for a robust compliance framework. In this report, we analyze these enforcement actions to identify trends, common violations, and strategies to mitigate regulatory risks.

1. Overview of Compliance Violations

A review of final orders reveals several recurring violations among MSBs. This analysis is based on 54 final orders issued by the OFR. Below is a breakdown of the most common compliance failures:

- Failure to maintain accurate records – Found in 35 cases (65%), highlighting widespread record-keeping deficiencies.

- Failure to file Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs) – Identified in 28 cases (52%), particularly among businesses processing high transaction volumes.

- Failure to maintain and update AML programs – Detected in 30 cases (56%), indicating systemic weaknesses in compliance frameworks.

- Failure to report financial changes and update licensing information – Documented in 18 cases (33%), showing administrative oversights.

- Failure to verify customer identities – Noted in 22 cases (41%), revealing gaps in Know Your Customer (KYC) procedures.

- Failure to maintain or update corporate customer files – Found in 20 cases (37%), exposing weak due diligence processes.

2. Types of Violations and Frequency

Violation Type  (Number of Cases | Percentage)
Failure to maintain accurate records  (35 | 65%)
Failure to file CTRs and SARs  (28 | 52%)
Failure to maintain and update AML programs  (30 | 56%)
Failure to report financial changes  (18 | 33%)
Failure to verify customer identities  (22 | 41%)
Failure to maintain or update corporate customer files  (20 | 37%)
Failure to integrate automated monitoring  (20 | 37%)
Failure to conduct independent AML reviews  (27 | 50%)
Unauthorized check cashing  (12 | 22%)
Failure to comply with OFAC regulations  (15 | 28%)
Structuring violations  (14 | 26%)

3. Financial Penalties and Fine Amounts

Regulatory fines varied significantly, ranging from $1,000 to $25,000. The table below details the average fine amount per violation:

Violation Type (Average Fine Amount)
Failure to maintain accurate records ($7,500)
Failure to file CTRs and SARs ($10,200)
Failure to maintain and update AML programs ($9,800)
Failure to report financial changes ($5,000)
Failure to verify customer identities ($6,500)
Failure to maintain or update corporate customer files ($6,200)
Failure to integrate automated monitoring ($7,000)
Failure to conduct independent AML reviews ($8,900)
Unauthorized check cashing ($4,500)
Failure to comply with OFAC regulations ($5,800)
Structuring violations ($9,300)

4. Regulatory Enforcement Trends

- Increased scrutiny on AML compliance – Businesses failing to implement AML policies or file SARs faced significant penalties.

- Stringent enforcement of transaction monitoring – The OFR penalized businesses for failing to enter check cashing transactions into the Check Cashing Database (CCDB).

- Emphasis on proper customer identification and corporate customer files – Several MSBs faced fines for inadequate customer due diligence.

5. Systemic Compliance Issues

- Lack of structured AML training and independent reviews – Found in 27 cases (50%).

- Failure to integrate automated transaction monitoring systems – Documented in 20 cases (37%).

- Inconsistent reporting of large transactions to FinCEN–  Noted in 25 cases (46%).

6. Historical Compliance Trends

- Rising AML-related violations – Over the past three years, regulatory actions for AML failures have increased.

- Higher fines for repeated offenses – The OFR has escalated penalties for businesses failing to remediate compliance gaps.

- Stricter enforcement of financial reporting requirements – More businesses are being penalized for failing to update financial and licensing information.

7. Compliance Best Practices for MSBs

- Enhance AML Training & Policy Reviews.

- Ensure CTR & SAR Reporting Compliance.

- Implement Automated KYC & Transaction Monitoring Tools.

- Maintain Comprehensive Corporate Customer Files.

- Conduct Independent AML Audits.

8. Impact on Banking Relationships

- Financial institutions closely monitor compliance violations among their MSB clients.

- Banks may reassess or terminate relationships with MSBs that exhibit repeated compliance failures.

- Increased scrutiny may lead to heightened due diligence requirements for at-risk MSBs.

Conclusion

The increased regulatory focus on AML compliance underscores the importance of a strong compliance framework. MSBs must proactively strengthen their internal controls, improve transaction monitoring, and adhere to regulatory reporting requirements. Failure to comply can result in severe financial penalties and reputational damage.

For MSBs seeking expert guidance on compliance best practices, ComplyCheck offers tailored solutions to ensure adherence to state and federal regulations. Contact us today to learn how we can help your business stay compliant and mitigate regulatory risks.