Why Regulators and Banks Expect MSBs to Take a Risk-Based Approach to Compliance

Money Service Businesses (MSBs) play a crucial role in the financial system, providing essential services such as check cashing, money transfers, and prepaid access. However, due to their susceptibility to financial crimes, regulators and banks expect MSBs to adopt a risk-based approach (RBA) to Anti-Money Laundering (AML) compliance. This expectation is rooted in both regulatory requirements and banking industry standards, making it essential for MSBs to proactively assess and mitigate risks.

The Origin of the Risk-Based Approach Requirement

The concept of a risk-based approach in AML compliance originates from the Bank Secrecy Act (BSA) and has been reinforced by subsequent regulations under Title 31 of the U.S. Code. Specifically, 31 U.S.C. §5311 and 31 C.F.R. Part 1022 require MSBs to develop AML programs tailored to their risk exposure. Additionally, the Financial Action Task Force (FATF), an international standard-setting body, emphasizes an RBA to AML compliance, which has been adopted in the U.S. regulatory framework.

The Federal Financial Institutions Examination Council (FFIEC) BSA/AML Manual also underscores that financial institutions, including MSBs, must implement a compliance program that is commensurate with their risk profile.

What Risks Must MSBs Address?

MSBs must evaluate various types of risks when implementing their AML compliance programs, including:

1. Customer Risk – Assessing the type of customers an MSB serves, including corporate check cashing customers who may present heightened risks due to large transactions.
2. Geographic Risk – Considering whether the business operates in high-risk jurisdictions or regions known for financial crime.
3. Product and Service Risk – Identifying whether certain offerings, such as high-dollar money orders or cross-border transactions, pose increased AML risks.
4. Transaction Risk – Monitoring transaction volume, frequency, and unusual patterns to detect suspicious activity.
5. Regulatory Risk – Ensuring compliance with federal, state, and local AML regulations to avoid penalties and regulatory scrutiny.

How ComplyCheck Helps MSBs Mitigate Risk

At ComplyCheck, we specialize in helping MSBs navigate these regulatory expectations by offering tailored risk assessment services. Our expertise ensures that your compliance framework aligns with both regulatory and banking industry standards, reducing the likelihood of de-risking by financial institutions.

ComplyCheck provides:

• Comprehensive Risk Assessments for MSBs – We evaluate the overall risk profile of your business, identifying vulnerabilities and recommending best practices.
• Risk Assessments for Corporate Check Cashing Customers – Given the heightened scrutiny banks place on MSBs, we conduct due diligence on corporate check cashing customers to ensure compliance and minimize risks to your business.
• Customized AML Program Development – Our team helps design and implement a risk-based AML program that meets Title 31 requirements and enhances your bankability.
• Ongoing Compliance Support – We assist MSBs in maintaining compliance through continuous monitoring, training, and regulatory updates.

The Bottom Line

Regulators and banks expect MSBs to take a risk-based approach to their AML compliance programs, tailoring policies to their specific risk exposure. Failure to do so can result in regulatory penalties, loss of banking relationships, and reputational harm. By partnering with ComplyCheck, MSBs can strengthen their compliance programs, ensure regulatory adherence, and maintain the trust of their banking partners.

To learn more about how ComplyCheck can help your MSB stay compliant, contact us today.