The High Cost of Compliance Neglect: Why Cutting Corners is a Losing Strategy for MSBs

For many Money Service Businesses (MSBs), compliance can feel like an expensive and time-consuming burden. Some companies, driven by cost concerns, take a “bare minimum” approach—only fulfilling the absolute legal requirements to check the box. Others cut corners even further, hoping to save money in the short term.

But this strategy is a dangerous gamble that can cost far more than it saves. From losing banking relationships to failing state and federal exams—or even facing enforcement actions—ignoring compliance is a recipe for disaster. Here’s why:

Banking Relationships: The Lifeline of MSBs

A strong banking relationship is essential for MSBs, yet financial institutions are increasingly wary of the risks associated with money transmitters, check cashers, and other non-bank financial entities. Banks are subject to strict anti-money laundering (AML) regulations under the Bank Secrecy Act (BSA), and they assess MSBs as high-risk customers.

When banks evaluate an MSB’s compliance program, they look for:
 ✔️ A well-documented AML program

✔️ Proper Know Your Customer (KYC) and transaction monitoring procedures

✔️ Timely and accurate reporting of Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs)

✔️ A proactive approach to regulatory changes

If an MSB is only doing the bare minimum, it’s a red flag for banks. Many financial institutions will choose to exit relationships rather than take on the risk of a non-compliant MSB. The consequences? Loss of banking services, disruptions in operations, and potential closure if alternative banking options aren’t available.

Real-World Example: In 2023, a major MSB in Florida lost its long-standing banking relationship after a routine review exposed weak AML policies. Despite having a compliance program on paper, the MSB failed to conduct proper ongoing monitoring, resulting in its account being terminated. The company struggled for months to secure a new banking partner and ultimately had to shut down several locations due to the disruption.

State and Federal Examinations: Passing the Test Isn’t Enough

Regulatory examinations by state agencies and federal bodies like the Financial Crimes Enforcement Network (FinCEN) are designed to ensure that MSBs are adhering to AML laws, reporting obligations, and state money transmitter rules.

Examiners don’t just check whether an MSB has policies in place; they assess how well they are implemented. Businesses that do the bare minimum often struggle during exams because they lack proper training, internal audits, and consistent record-keeping.

Failure to meet expectations can result in:
 🚨 Hefty fines and penalties

🚨 License suspensions or revocations

🚨 Increased scrutiny in future exams

🚨 Damage to reputation and loss of customer trust

Real-World Example: In 2022, a New York-based check cashing company faced a $1.5 million fine after state regulators found that it had a compliance program in place but failed to enforce it. Employees were not adequately trained, and suspicious transactions were not being reported. The company not only paid the fine but also had to overhaul its entire compliance program under regulatory supervision—costing far more than if they had invested in compliance from the start.

The Long-Term Business Impact of Compliance Neglect

Many MSBs underestimate the long-term impact of compliance failures. While cutting costs on compliance might provide short-term financial relief, the consequences often outweigh the savings:

❌ Loss of competitive edge – Customers trust MSBs that have strong reputations, and regulatory actions can deter both individuals and business partners.
❌ Increased operational costs – Businesses that fall short in compliance often end up spending far more on legal fees, remediation efforts, and damage control.
❌ Risk of criminal liability – Owners and compliance officers can be held personally responsible for willful AML violations, leading to lawsuits, regulatory bans, and even prison time in extreme cases.

The Smarter Strategy: Compliance as a Competitive Advantage

Rather than viewing compliance as a costly burden, successful MSBs see it as an investment in their business’s stability and longevity. Here’s how:

🔹 Build trust with banks – A strong compliance program reassures banks and strengthens banking relationships.
🔹 Streamline operations – Automated compliance solutions reduce manual work and improve efficiency.
🔹 Avoid costly fines and penalties – Staying ahead of regulations prevents the risk of financial losses.
🔹 Enhance reputation – A commitment to compliance signals professionalism and trustworthiness to customers, regulators, and business partners.

Final Thoughts

Cutting corners on compliance might seem like a way to save money, but history has proven that it’s a short-sighted and risky strategy. Between banking difficulties, regulatory penalties, and reputational harm, the true cost of non-compliance far exceeds the investment needed to do it right.

MSBs that prioritize compliance not only survive but thrive in an increasingly scrutinized financial landscape. Investing in a robust compliance program isn’t just about avoiding penalties—it’s about ensuring long-term success.

At ComplyCheck, we help MSBs stay ahead of compliance challenges. Contact us today to learn how we can protect your business, safeguard your banking relationships, and ensure regulatory success.