Money Laundering Prevention

A Money Services Business Guide

Financial Crimes Enforcement NetworkU.S. Department of the TreasuryWashington, DC

MONEYLAUNDERINGPREVENTION

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Your business may be an MSB (Money Services Business) if…The business offers one or more of the following services:■ money orders■ traveler’s checks■ check cashing ■ currency dealing or exchange■ stored value

-AND-

The business:■ Conducts more than $1,000 in money services business activity with the same person (in one

type of activity) on the same day.

-OR-

The business:■ Provides money transfer services in any amount.

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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Background on Money Laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Bank Secrecy Act (BSA) Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

Summary of Certain BSA Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Registration Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Filing Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Agent Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Supporting Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Civil and Criminal Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

MSBs Can Help Fight Money Laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-24Establish Anti-Money Laundering Compliance Programs . . . . . . . . . . . . . . . . . . . . . . . . . 10Establish Customer Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11File Suspicious Activity Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12What is “Suspicious Activity?”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Red Flags . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16What Should MSBs Look For? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

MSBs Can Help In Other Ways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-28File Currency Transaction Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Keep Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Table of Contents

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Reports That Can Help MSBs Identify Suspicious Transactions . . . . . . . . . . . . . . . . . . . . . 29-31Cash-In and Cash-Out of Large Transaction Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Kiting Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Money Transfer Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29$3,000 Instrument “Log” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Clearance Records/Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30$3,000 Funds Transfer Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Customer Activity Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Some Money Laundering Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 International Money Laundering Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Country Advisories and Economic Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Table of Contents(Cont.)

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Money is “laundered” to conceal illegalactivity, including the crimes that generatethe money itself, such as drug trafficking.Money laundering conceals the source ofillegal proceeds so that the money can beused without detection of its criminal source.

Financial institutions — including theexpanding network of money services businesses (MSBs) — have been both wittingand unwitting participants in launderingactivities. Banks have been major targets inlaundering operations because they providea variety of services and instruments,including cashier’s checks, traveler’s checks,and wire transfers, which can be used toconceal the source of illicit proceeds.Similarly, criminals use MSBs — establishmentsthat provide money orders, traveler’s checks,money transfers, check cashing, currencyexchange, and stored value services — tohide or disguise the origin of funds derivedfrom illegal activity.

In order to protect themselves, and to support national and international effortsagainst financial crime, it is important thatMSBs know how money laundering schemescan operate.

This guide provides some basic background information on money laundering laws, discusses actions taken inthe international arena, describes severalschemes that have involved financial institutions, and gives examples of certainwarning signs that may help MSBs protectthemselves against money launderers andother criminals.

Introduction

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Money laundering can be a complexprocess. It involves three different, andsometimes overlapping, stages:

Placement involves physically placing illegally obtained money into the financialsystem or the retail economy. Money ismost vulnerable to detection and seizureduring placement.

Layering involves separating the illegallyobtained money from its criminal source bylayering it through a series of financialtransactions, which makes it difficult totrace the money back to its original source.

Integration involves moving the proceedsinto a seemingly legitimate form.Integration may include the purchase ofautomobiles, businesses, real estate, etc.

An important factor connecting the threestages of this process is the "paper trail"generated by financial transactions.Criminals try to avoid leaving this “papertrail” by avoiding reporting and recordkeeping requirements.

One way money launderers avoid reportingand recordkeeping requirements is by"structuring" transactions, coercing or bribing employees not to file proper reportsor complete required records, or by establishing apparently legitimate "front"businesses to open accounts or establishpreferred customer relationships.

Background on MoneyLaundering

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In recent years, more countries have implemented laws to combat money laundering. Financial service regulators andenforcement agencies around the world areworking to improve communications andshare information in anti-money launderingefforts.

In this guide, you will find a summary ofthese international initiatives, as well asefforts the government has taken to combat money laundering in the UnitedStates. You will also find ways you can helpcombat money laundering and make yourcommunity — and your country — a saferplace to live and work.

Background on MoneyLaundering

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The Financial Crimes Enforcement Network(FinCEN), a bureau of the U.S. Department ofthe Treasury, administers and issues regulations pursuant to the Bank SecrecyAct (BSA). Through certain BSA reportingand recordkeeping requirements, paper trailsof transactions are created that law enforcement and others can use in criminal,tax and regulatory investigations.

The reporting and recordkeeping provisionsof the BSA apply to banks, savings andloans, credit unions and other depositoryinstitutions (collectively referred to as"banks") and to other businesses defined asfinancial institutions, including casinos, brokers and dealers in securities, and moneyservices businesses (collectively referred toas "non-banks").

BSA regulations require certain MoneyServices Businesses (MSBs) to register withFinCEN and prepare and maintain a list ofagents, if any. In addition, BSA regulationsrequire certain MSBs to report suspiciousactivity to FinCEN.1

Summary of Certain BSA Regulations1. Registration — each business that meetsthe definition of an MSB must register,except for the following:

■ A business that is an MSB solely because it serves as an agent of another MSB;

■ A business that is an MSB solely as an issuer, seller, or redeemer of stored value;

■ The U.S. Postal Service and agencies of the U.S., of any State, or of any political subdivision of any State.

1 See 31 CFR103.20

Bank Secrecy Act(BSA) Regulations

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■ A branch office of an MSB is not required to file its own registration form.

2. Agent List — ■ MSBs that are required to register must

prepare and maintain a list of their agents, if any, each January 1 for the preceding 12-month period.

■ Upon request, MSBs must make their listof agents available to FinCEN and any other appropriate law enforcement or supervisory agencies (including the IRS in its capacity as BSA examination authority).

3. Suspicious Activity Report (SAR) —MSBs required to file SARs are:

■ MSBs serving as money transmitters;

■ Currency dealers or exchangers;

■ Issuers, sellers, or redeemers of money orders;

■ Issuers, sellers, or redeemers of traveler’s checks; and

■ U.S. Postal Service.

MSBs must maintain a copy of all SARs filedas well as the original or business recordequivalent of any supporting documentation for a period of five yearsfrom the date of the report. Supportingdocumentation must be identified as such,and, although it is not to be filed with thereport, supporting documentation isdeemed to have been filed with the report.Upon request, MSBs must make all supporting documentation available toFinCEN and any other appropriate lawenforcement or supervisory agencies(including the IRS in its capacity as BSAexamination authority).


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Summary of Certain BSA Regulations (cont.)4. Anti-Money Laundering (AML)Compliance Program — all MSBs, includingissuers, sellers, or redeemers of stored value,are required to develop and implement anAML compliance program as required bysection 352 of the USA PATRIOT Act andimplemented by regulation at 31 CFR103.125.

5. Currency Transaction Report (CTR) —MSBs must file CTRs on transactions in currency involving more than $10,000, ineither cash-in or cash-out, conducted by,through, or to the MSB on any one day byor on behalf of the same person.

6. Monetary Instrument “Log” — MSBsmust maintain certain information on thesale of monetary instruments — such asmoney orders or traveler’s checks — from$3,000 to $10,000, inclusive.

7. Funds Transfer Rules — MSBs mustmaintain certain information for fundstransfers, such as sending or receiving apayment order for a money transfer, of$3,000 or more, regardless of the method of payment.

8. Currency Exchange Record — MSBsmust maintain certain records for each currency exchange in excess of $1,000.

9. Record Retention — All BSA recordsmust be retained for a period of five yearsand must be filed or stored in such a way asto be accessible within a reasonable periodof time.

Registration RequirementsBSA regulations require certain MSBs tohave registered with FinCEN by December31, 2001. An MSB established after thatdate must register by the end of the 180-dayperiod beginning on the day after the date


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it was established. A branch or an agent of an MSB is not required to file its ownregistration form. The U.S. Postal Serviceand Federal or State government agenciesare not required to register. Also, MSBsthat provide only stored value services arenot required to register at this time.

MSBs are required to renew their registration every two years by December31 at the end of the two-calendar year period following their initial registration. Inaddition, MSBs that are required to registerare also required to prepare and maintain alist of agents, if any, each January 1 for thepreceding 12-month period.

Filing InstructionsMSBs must register by filing Form TD F 90-22.55, Registration of Money ServicesBusiness, which is available at www.msb.gov

or by calling the IRS Forms DistributionCenter at 1-800-829-3676. Registration isthe responsibility of the owner or controlling person of the MSB, who mustsign and file the completed registration form.

Agent ListsAn MSB that is required to register and thathas agents must prepare and maintain a listof those agents. This list must be updatedby January 1 of each year. An MSB mustmake its list of agents available to FinCEN,as well as other appropriate law enforcement agencies, including the IRS,upon request. Generally, the agent list mustinclude:

■ Name: The name of the agent, includingany trade names or doing-business-asnames.


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http://www.fincen.gov/financial_institutions/msb/

Agent Lists (cont.)

■ Address: The address of the agent,including street address, city, state, andZIP code.

■ Type of Services: The type of MSB services the agent provides on behalf of the MSB maintaining the list.

■ Gross Transaction Amount: A listing ofthe individual months in the 12 monthspreceding the date of the agent list inwhich the agent’s gross transactionamount, for financial products or servicesissued by the MSB maintaining the agentlist, exceeded $100,000.

■ Depository Institution: Name andaddress of any depository institution atwhich the agent maintains a transactionaccount for any of the funds received in or for the MSB services the agentprovides on behalf of the MSB maintaining the list.

■ Year Became Agent: The year in whichthe agent first became an agent of the MSB.

■ Branches: The number of branches andsub-agents the agent has, if any.

Supporting DocumentationSupporting documentation, including acopy of the filed registration form, an estimate of business volume, informationregarding ownership or control, and theagent list must be retained by the MSB fora period of five years.


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Civil and Criminal PenaltiesCivil and criminal penalties can be imposedfor violations of anti-money launderinglaws and regulations. Penalties can result insubstantial fines and in prison terms. AnyMSB that fails to comply with BSA reporting and record keeping requirementsfaces possible civil penalties of up to $500for negligent violations and the greater ofthe following two amounts for willful violations: the amount involved in thetransaction (up to $100,000) or $25,000.Under certain circumstances, businesses canalso be held criminally liable for the acts oftheir employees. The maximum criminalpenalty for violating a BSA requirement is afine of up to $500,000 or a term of imprisonment of up to 10 years, or both.

It is therefore important that employees arethoroughly trained on how to comply withBSA regulations and that a system is inplace to ensure that employees are

following all anti-money laundering lawsand regulations.

MSBs can do a great deal to help the federal government in its anti-money laundering efforts. At a minimum, MSBsshould file all BSA reports accurately and ina timely fashion, create and maintain accurate BSA records for the requisite timeperiod, establish and maintain appropriatecompliance programs and follow allTreasury Department guidance related to the BSA.


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Establish Anti-MoneyLaundering ComplianceProgramsEach MSB is required by law to have aneffective anti-money laundering (AML)compliance program. The regulation requiringMSBs to develop and maintain an AMLcompliance program is contained in 31 CFR103.125. Each program must be commensurate with the risks posed by thelocation, size, nature and volume of thefinancial services provided by the MSB. Forexample, a large money transmitter with ahigh volume of business located in the LosAngeles area is at higher risk than a smallcheck casher with a low volume of businesslocated in Boise. Therefore, the largeCalifornia money transmitter would beexpected to have a more complex AMLcompliance program, commensurate withits higher risk, than the smaller Idaho

check casher, who is at lower risk of beingused to facilitate money laundering. Aneffective program is one designed to prevent the MSB from being used to facilitate money laundering.

Each AML compliance program must be inwriting and must:

■ Incorporate policies, procedures andinternal controls reasonably designed toassure compliance with the BSA;

■ Designate a compliance officer responsiblefor day-to-day compliance with the BSAand the compliance program;

■ Provide education and/or training ofappropriate personnel; and

■ Provide for independent review to monitorand maintain an adequate program.

MSBs Can Help FightMoney Laundering

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Strong management commitment to theAML compliance program promotes ongoingcompliance and helps prevent the MSBfrom being used by money launderers.

FinCEN further encourages MSBs to adoptpolicies and procedures that incorporate theBasel Committee Statement of Principles onMoney Laundering, which urges:

■ Proper identification of all persons conducting financial transactions withthe financial institution.

■ High ethical standards in financial transactions and compliance with lawsand regulations governing financialtransactions.

■ Cooperation with law enforcement.

■ Information and training for staff toensure that they can and do carry outthese principles.

Establish CustomerRelationshipsStrict customer identification and verificationpolices and procedures can be a financialinstitution’s most effective weapon againstmoney laundering. Requiring appropriateidentification and verifying information incertain cases, and being alert to unusual orsuspicious transactions can help an MSBdeter and detect money laundering schemes.

A customer identification and verificationpolicy tailored to the operations of a particular business:

■ Helps detect suspicious activity in atimely manner.

■ Promotes compliance with all state andfederal laws applicable to MSBs.

■ Promotes safe and sound business practices.


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Establish CustomerRelationships (Cont.)■ Minimizes the risk that the MSB will be

used for illegal activities.

■ Reduces the risk of government seizureand forfeiture of funds associated withcustomer transactions (such as outstanding money orders/traveler’s checks and outstanding money transfers) when the customer is involved in criminal activity.

■ Protects the reputation of the MSB.

File Suspicious Activity ReportsSuspicious Activity Reports (SARs) areamong the government’s main weapons inthe battle against money laundering andother financial crimes. Such reports arealso a key component of an effective anti-money-laundering compliance program.

Many MSBs are required to file SARs whenthey suspect that potentially illegal activityhas occurred and when the activity has metthe relevant reporting threshold.

The types of MSBs that are currently coveredby the MSB SAR requirements are:

■ Money transmitters,

■ Currency dealers or exchangers,

■ Money order — issuers, sellers orredeemers,

■ Traveler’s checks — issuers, sellers, orredeemers,

■ U.S. Postal Service

MSBs that provide only check cashing orstored value services are not required toreport suspicious activity at this time.

Refer to www.msb.gov for updates on whichMSBs are required to file SARs.


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A SAR must be filed by an MSB when atransaction is both:

■ Suspicious, and

■ $2,000 or more ($5,000 or more forissuers reviewing clearance records).

A SAR must be filed within 30 days ofdetection of the suspicious transaction bythe MSB.

MSBs that are not currently covered by theSAR rule — check cashers, and issuers, sellers,or redeemers of stored value — may voluntarily file SARs. Any MSB may alsovoluntarily file SARs for suspicious activitybelow the reporting threshold.

It is illegal to tell any person involved in a transaction that a SAR has been filed.Maintaining the confidentiality of SARs will prevent suspected individuals involvedin criminal activity from structuring theiractivity in such a way as to evade detectionby law enforcement. It also will help

protect the MSB filing the report. A SARand/or the information contained in a SARmust only be provided to FinCEN or anappropriate law enforcement or supervisoryagency when requested.

Some suspicious transactions require immediate action. If the MSB has reason to suspect that a customer’s transactionsmay be linked to terrorist activity againstthe United States, the MSB should immediately call the Financial InstitutionsHotline, toll-free at: 1-866-556-3974.

Similarly, if any other suspected violations —such as ongoing money-laundering schemes —require immediate attention, the MSBshould notify the appropriate law enforcement agency. In any case, the MSBmust also file a SAR if the MSB is subject tomandatory reporting. A BSA provision(called a “safe harbor”) provides broad protection from civil liability to MSBs andtheir employees that file SARs or otherwisereport suspicious activity.


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What is “Suspicious Activity?”A SAR must be filed by a covered MSBwhen the MSB knows, suspects or has reasonto suspect that the transaction or patternof transactions is suspicious and involves$2,000 or more. A suspicious transaction isone or more of the following:

■ Involves funds derived from illegalactivity, or is intended or conducted inorder to hide or disguise funds or assetsderived from illegal activity.

■ Is designed to evade BSA requirements,whether through structuring or othermeans.

■ Appears to serve no business orapparent lawful purpose, and the MSBcan determine no reasonable explanation for the transaction afterexamining all available facts.

■ Involves use of the money services business to facilitate criminal activity.

All MSBs should have a system or procedureto ensure that SARs are filed when appropriate. When an MSB employee suspects a person is laundering money, conducting transactions to evade BSArequirements, or conducting a transactionthat has no apparent lawful purpose andfor which no reasonable explanation can bedetermined, or involves use of the moneyservices business to facilitate criminal activity, the employee should report thatactivity to his/her manager or to the MSBcompliance officer. Then, if the MSB determines that a SAR should be filed, itmust file the SAR and keep a copy of it forfive years. Any supporting documentation,such as transaction records, must be maintained with the copy of the filed formand also kept for five years from the date of filing the report.


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What are “Funds Derived fromIllegal Activity?”The phrase “funds derived from illegalactivity” means the monetary proceeds of acriminal act.

Example. A drug trafficker sells drugs to auser for $500. The money received fromthe drug purchaser, the $500, is proceeds ofthe drug sale and is "funds derived fromillegal activity.”

What is a transaction that “IsDesigned to Evade BSARequirements?”Example. A customer conducting an$11,000 cash transaction attempts to bribean MSB employee not to file a CTR.

What is a Transaction that“Serves No Business orApparent Lawful Purpose?”Some transactions may be conducted insuch a way that they appear unusual orsuspicious. However, additional facts, ifknown by the reporting business, might disclose a reasonable basis for what, at first,appears unusual or suspicious.

Example. A customer, a retired teacher,frequently sends and receives money transfers of more than $2,000 to and frommany different people. The MSB might atfirst conclude that these transactions aresuspicious because they appear to “serve nobusiness or apparent lawful purpose” andbecause there does not seem to be a legalsource for these funds. However, with moreinformation, the MSB might conclude thata business purpose exists. For example, the retired teacher might be regularly usingan Internet auction site to buy and sellantique jewelry.


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What is a transaction that“Involves Use of the MSB toFacilitate Criminal Activity?”

Example. An MSB suspects that a customeris sending a money transfer in order to funda terrorist organization.

It is important to note that size alone, suchas a large cash transaction or money transfer,should not be a determining factor in thedecision to file a SAR. Factors that shouldcontribute to that decision, however,include the following: the size, frequencyand nature of the transactions; the MSB’sexperience with the customer and otherindividuals or entities associated with thetransaction (if any); and the norm for suchtransactions within the MSB’s line of business and geographic area.

Red FlagsWhen a single factor signals that a

transaction is unusual and possibly “suspicious,” it is called a “red flag.”

Examples of Some Common RedFlags:

Customer ID or Information■ Customer uses false ID.

■ Two/more customers use similar IDs.

■ Customer alters transaction upon learning that he/she must show ID.

■ Customer alters spelling or order ofhis/her full name.

Transactions Below Reporting orRecordkeeping ThresholdsCustomer conducts transactions just belowrelevant thresholds:

■ Currency exchanges just under $1,000.

■ Cash sales of money orders or traveler’schecks of just under $3,000.


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Multiple Persons or Locations■ Two or more customers working together

to break one transaction into two ormore transactions in order to evade the BSA reporting or recordkeepingrequirement.

■ Customer uses two or more locations or cashiers in the same day in order tobreak one transaction into smaller transactions and evade the BSA reporting or recordkeeping requirement.

Overt Illegal Customer Conduct■ Customer offers bribes or tips.

■ Customer admits to criminal conduct.

An MSB that correctly verifies and documents a customer’s identity is morelikely to recognize suspicious activity thatshould be reported.

What Should MSBs Look For? Money laundering schemes can vary widely.Federal action to curtail money launderingactivities once focused heavily on identification and documentation of largecurrency transactions. More recently, anti-money laundering efforts have focusedon the use of money transfers, boththrough bank and non-bank money transfersystems, and other means of moving funds.Today, as money launderers become moresophisticated, all types of financial transactions are facing greater scrutiny.

The following situations may indicatemoney laundering or other illegal activity.These lists are not comprehensive, but theymay help MSBs recognize ways launderersand other criminals may try to use them tolaunder money.

Attempts to Evade BSA Reporting orRecordkeeping Requirements Customers may try to keep their transactions


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What Should MSBs Look For?(Cont.)just below the reporting or recordkeepingthresholds, such as:

■ A customer or group of customers whoattempt to hide the size of a large cashtransaction by breaking it into multiple,smaller transactions by, for example,conducting the smaller transactions—

– At different times on the same day.

– With different MSB cashiers on thesame day or different days.

– At different branches of the sameMSB on the same or different days.

■ A customer or group of customers whoconduct several similar transactions overseveral days, staying just under reportingor recordkeeping limits each time. Forexample, the customer may:

– Purchase money orders with cash justunder $3,000 over several days.

– Purchase traveler’s checks with cashjust under $3,000 over several days.

– Initiate multiple money transfers tothe same receiver, each transfer in anamount under $3,000, over severaldays.

■ A customer who is reluctant to provideinformation needed for a reporting orrecordkeeping requirement, whetherrequired by law or by company policy.

■ A customer who is reluctant to proceed with a transaction after being informed that a report must be filed or a record made.


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■ A customer who breaks down a singlelarge transaction into smaller transactions after being informed that areport must be filed or a record made.

■ A customer who presents different identification each time a transaction isconducted.

■ A customer who spells his/her name differently or uses a different name eachtime he/she initiates or receives a moneytransfer or purchases traveler’s checks.

■ Any individual or group that bribes orattempts to bribe an MSB employee notto file any required reporting forms ornot to create a record entry required bylaw or company policy.

■ Any individual or group that forces orattempts to force an MSB employee notto file any required reporting forms orcreate a record required by law or company policy.

■ A customer who receives payment ofmultiple money transfers that appear tohave been purchased in a "structured"manner – organized in a way to evadereporting and recordkeeping requirements.

– By the same send customer, eachtransfer in an amount just under$3,000 (or other relevant threshold).

– By multiple send customers initiatedat one MSB location within minutesof each other, each transfer in anamount just under $3,000 (or otherrelevant threshold).

■ A customer cashing multiple instruments(money orders, traveler’s checks, cashiers’checks, foreign drafts) that appear to have been purchased in a structured manner (e.g. each in an amount below $3,000).


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What Should MSBs Look For?(Cont.)

Customers Who Provide Insufficientand/or Suspicious InformationIndividual and business customers may tryto evade providing required identification,such as:

■ An individual customer who is unwillingor unable to provide identification orinformation.

■ An individual customer who provides different identification or informationeach time he or she conducts a transaction.

– Different name or different spelling ofname.

– Different address or different spellingor numeration in address.

– Different identification types.

■ An individual customer without a local-address, who appears to reside locally because he or she is a repeat customer.

■ A legitimate ID that appears to havebeen altered.

■ An identification document in which thedescription of the individual does notmatch the customer’s appearance (e.g.different age, height, eye color, sex).

■ An expired identification document.

■ An individual customer who presentsany unusual or suspicious identificationdocument or information.

■ A business customer that is reluctant toprovide complete information regarding:the type of business, the purpose of thetransaction, or any other informationrequested by the MSB.

■ A prospective business customer thatrefuses to provide information to qualifyfor a business discount (or other preferred customer program offered by the MSB).


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Activity Not Consistent With theCustomer’s Business or OccupationLook for examples of inconsistent customeractivity, such as:

■ An individual customer conducts MSBtransactions in large amounts inconsistent with the income generatedby the individual’s stated occupation.

■ A business customer engages in transactions that frequently use largebills when the nature of the customer’sbusiness activity does not justify suchuse.

■ An individual or business customer cashes large numbers of third partychecks.

■ A customer makes cash purchases ofmoney orders, traveler’s checks, or otherinstruments inconsistent with the customer’s business or occupation.

■ A business customer uses a means ofpayment inconsistent with general business practices (e.g., pays for MSBservices with traveler’s checks, moneyorders, or third party checks).

■ A business customer sends or receivesmoney transfers to/from persons inother countries without an apparentbusiness reason or gives a reason inconsistent with the customer’s business.

■ A business customer sends or receivesmoney transfers to or from persons inother countries when the nature of thebusiness would not normally involveinternational transfers.


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Unusual Characteristics or ActivitiesNotice any unusual characteristics, such as:

■ An individual customer purchases products/services on a regular basis butseems neither to reside nor work in theMSB’s service area.

■ A customer pays for MSB products/services using musty bills that have anunusual or chemical-like odor.

■ A customer pays for MSB products/services using money orders or traveler'schecks without relevant entries on theface of the instrument. (e.g., for moneyorders — no payee, and for traveler’schecks — no signature or countersignature).

■ A customer pays for MSB products/services using money orders or traveler'schecks with unusual symbols, stamps orwritten annotations (such as initials)that appear either on the face or on theback of the instruments.

■ A customer purchases money transfers,money orders, traveler’s checks, etc.,with large amounts of cash when theMSB does not require payment in cash.

■ An individual or business customer asksto purchase traveler’s checks or moneyorders in large bulk orders.

■ A customer purchases a number ofmoney transfers, money orders, or traveler’s checks for large amounts orjust under a specified threshold withoutapparent reason.

■ A customer starts frequently exchangingsmall bills for large bills, or vice versa, when the customer does not normallyuse cash as a means of payment.


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■ A customer sends and receives moneytransfers in equal amounts at or aboutthe same time.

■ A customer receives a number of smallmoney transfers and the same day, orwithin several days, initiates one or moresend money transfers to a person inanother city or country in about thesame amount.

■ A customer sends or receives frequent orlarge volumes of money transfers to orfrom persons located in foreign countries, especially countries listed asnon-cooperative jurisdictions.

■ A customer receives money transfers andimmediately purchases monetary instruments prepared for payment to a third party.

Changes in Transactions or Patternsof Transactions

Be alert for changes in activity, such as:

■ Major changes in customer behavior, forexample:

– An individual money order customerbegins to make weekly purchases ofmoney orders in the same amounts(when previously he or she only purchased money orders on pay dayfor rent, utilities, etc.).

– An individual customer begins tobring in large amounts of cash (whenpreviously he or she cashed his or herpaycheck to purchase instruments ortransfers).

■ Sudden and inconsistent changes in money transfer send or receive transactions.


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■ Rapid increase in size and frequency ofcash used by a particular customer.

EmployeesWatch out for employee behavior, such as:

■ An MSB employee whose lifestyle cannotbe supported by his/her salary, whichmay indicate receipt of tips or bribes.

■ An employee who is reluctant to take avacation, which may indicate he/she hasagreed, or is being forced, to provideservices to one or more customers inviolation of law or company policy.

■ An employee who is associated withunusually large numbers of transactionsor transactions in unusually largeamounts, which may indicate he/she hasagreed, or is being forced, to provide

services to one or more customers inviolation of law or company policy.

Situations like those described in this section often will be found, upon further examination, to be completely legitimate.By the same token, other situations notmentioned here might be suspicious if theyare inconsistent with the normal activity ofa particular customer or employee. As anMSB or MSB employee, you must make areasonable judgement.


24


MSBs must comply with other BSA reportingand recordkeeping regulations. The follow-ing outlines certain of these requirements.

File Currency TransactionReports (CTRs)An MSB must file a report of each currencytransaction involving cash-in or cash-out ofmore than $10,000 conducted by, through,or to the MSB on any one day by or onbehalf of the same person.2

Therefore, a CTR is required when a transaction meets all of the following conditions:

■ In currency,

■ Greater than $10,000 in either cash-inor cash-out,

■ By, or on behalf of, the same person,and

■ Occurs on one business day.

AggregationMultiple transactions conducted by or onbehalf of the same person on the same dayare considered to be one transaction forCTR purposes. In other words, the MSBmust file a CTR if it knows the customer’saggregate cash-in or cash-out transactionstotal more than $10,000 in one day.

Cash-in and Cash-outCash-in transactions must be added together with cash-in transactions andcash-out transactions must be addedtogether with cash-out transactions todetermine whether the CTR threshold(greater than $10,000) has been met in anyone business day.

CTR FilingThe CTR is IRS Form 4789, CurrencyTransaction Report, and is available onwww.msb.gov or by calling the IRS Forms

MSBs Can Help InOther Ways

252 See 31CFR103.22



File Currency TransactionReports (CTRs) (Cont.)Distribution Center at 1-800-829-3676. The form must be filed within 15 days fromthe date of the transaction(s).

The CTR requirement requires an MSB to:

■ Verify and record customer ID,

■ Obtain transaction information,

■ Complete and file the CTR,

■ Retain a copy of the CTR for five yearsfrom the date of filing the report.

Keep RecordsMonetary Instrument “Log” — for Cash Purchases of Money Orders,Travelers Checks, Other Instruments

An MSB that sells money orders, traveler’s

checks , or other instruments for cash mustverify the identity of the customer andcreate and maintain a record of each purchase when the purchase involves cashbetween $3,000 and $10,000, inclusive.3

Thus, a record is required when:

■ Cash-in of $3,000-$10,000, inclusive,and

■ Cash-in is for the purchase of moneyorders, traveler’s checks, or other monetary instruments.

The Monetary Instrument "Log"requirement requires an MSB to:■ Verify and record customer ID,

■ Record transaction information (for eachmoney order, traveler’s check, or otherinstrument purchased: amount, serialnumber, and date sold),

■ Retain the record for five years from thedate of the transaction.


26 3 See 31CFR103.29


Funds Transfer Rules For Senders of Money Transfers

An MSB that accepts an instruction to senda money transfer of $3,000 or more mustverify the identity of the send customer andcreate and maintain a record of the moneytransfer, regardless of the method ofpayment.4

In addition, certain information must "travel,”that is, the MSB must send on certain information, to the next MSB or financialinstitution processing the transfer.

For Receivers of Money TransfersAn MSB that accepts an instruction to paya money transfer of $3,000 or more mustverify the identity of the receiving customerand create and maintain a record of themoney transfer, regardless of the method ofpayment.

The requirement to record fundstransfers requires a money transmitter to: ■ Verify customer ID,

■ Record customer information,

■ Record transaction information,

■ Send information to receiving MSB,


Currency Exchange Record Each currency exchanger must create andmaintain a record of each exchange of currency in excess of $1,000.5 The currency exchange may be either domesticor foreign currency, or it may be both.Thus, a currency exchange record is requiredwhen:

■ Currency-in greater than $1,000, or

■ Currency-out greater than $1,000.


274 See 31CFR103.33(f)5 See CFR103.37


Keep Records (Cont.)Example. A customer wishes to exchange$3,000 in Canadian dollars for its equivalent in U.S. dollars, or a customer wishes toexchange $1,500 in $20 bills for $1,500 in$100 bills.

In each case, the transaction must berecorded.

The requirement to record currencyexchanges includes the following — thecurrency exchanger must:

■ Record customer ID and information,

■ Record transaction information,


MSBs Can Help In Other Ways

28


The following list of reports can be used tolook for possible money laundering activityin MSBs.

Cash-In and Cash-Out of LargeTransaction ReportsMany MSBs prepare, or have systems thatgenerate, reports of cash-in and cash-out.Often these reports include transactionsthat exceed a certain threshold. Manymoney transmitters, for example, haveestablished identification requirements atlevels below the $3,000 threshold. Suchreports can help identify customers whomay be structuring transactions to evadeBSA reporting and recordkeeping requirements or who are engaging in otherunusual activity.

Kiting ReportsIssuers of traveler’s checks and moneyorders and money transfer companies oftenprepare, or have systems that generate,reports that identify transactions that mayinvolve kiting. Kiting is depositing anddrawing checks between accounts at two ormore banks and thereby taking advantageof the float — that is, the time it takes thebank of deposit to collect from the payingbank. Reports that indicate kiting may alsodisclose other unusual patterns of activitypossibly associated with money laundering.

Money Transfer ReportsMoney transfer companies prepare, or havesystems that generate, daily transactionreports and other reports that identify different groupings of transfer activityprocessed through their systems (e.g., corridor reports showing all transfers from

Reports That Can Help MSBsIdentify SuspiciousTransactions

29


Money Transfer Reports (Cont.) country A to country B in a specific timeperiod). These reports can help identifyunusual patterns that may suggest possiblemoney laundering.

Depending on the type of report and thefrequency, these reports can help identifyunusual customer behavior. Such reportsalso may help identify unusual behavior ofbusinesses serving as agents of moneytransfer companies.

$3,000 Instrument “Log”Reports of cash sales of instruments between$3,000 - $10,000, inclusive, required by BSAregulations, can help MSBs identify possiblecurrency structuring patterns. Recordedinformation can, for example, help identifycustomers who may be structuring transactions to evade the BSA reporting andrecordkeeping requirements.

Clearance Records/ReceiptsIssuers of money orders and traveler’schecks prepare, or have systems that generate, daily records of items that havebeen presented for payment against theissuer’s bank account. Many issuers havedesigned programs to identify unusual patterns of cleared instruments. Suchreports can be extremely useful in the identification of items that may have beenused for illicit purposes.

$3,000 Funds Transfer Records These records, required by BSA regulations,can help money transmitters identify possible structuring patterns. Records of$3,000 or more in money transfers regardless of the method of payment mayhelp identify customers who could be structuring transactions to evade BSAreporting and recordkeeping requirements.


30


Customer Activity ReportsSome MSBs use customer reward programsto encourage repeat use by customers.Reports generated to monitor individualcustomer responses or general customeractivity can be useful in identifying unusualtransactions or patterns of transactions.


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The following descriptions are intended tohelp MSBs identify activities that criminalsuse to launder money. They are alsointended to reinforce the need for strictcustomer identification programs. Finally,although these examples are of landmarkinvestigations that primarily involve banks,they provide lessons to be learned by MSBsas well.

Operation Polar Cap

Two banks reported suspicious activities related to changes in operations by customers. Those two reports and an analysisof CTRs by the U.S. Customs Service helpedbring together a national investigation.

At one bank, an employee noticed that acustomer, a jewelry broker, was makinglarge cash deposits ($25 million over threemonths) that did not seem commensuratewith his usual business. In addition to filing

the CTRs required for cash transactions bythis customer of more than $10,000 in abusiness day, one bank also notified the IRSCriminal Investigation Division (IRS-CID).

At the other bank, an observant employeebecame suspicious when a customer, whoran a grocery store and check cashing service, stopped taking cash back for thechecks he deposited in the bank. Thischange led the banker to notify lawenforcement authorities.

Together, these two suspicious bankshelped uncover and disrupt an operationthat had laundered about $1.2 billion overtwo years. More than 127 people werearrested, a foreign bank was indicted, andone ton of cocaine was seized. Numerousconvictions resulted.

Some MoneyLaundering Schemes

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Operation C-Chase

A Luxembourg-based bank, two of its subsidiaries, nine bank officials, and 75other individuals in several countries wereindicted for possible involvement in aworldwide money laundering scheme.Convictions were obtained in a significantnumber of cases. The operation relied onthe launderers’ associates picking up cashfrom drug activities in cities around the

United States and, either through fundstransfers or by physically transporting thecash, depositing it into undercover accountsin a U.S. bank.

The associates signed blank checks drawnon the undercover accounts, and after acash pickup occurred, the head of the laundering operation would enter theamount onto one of the blank checks andforward it to the owner of the funds or sellit on the currency black market.

As the operation expanded, the head of theoperation developed several variants onthat process. Some funds from the undercover accounts were wired to similaraccounts in a Central American bank to further disguise their origin. Others weretransferred through another U.S. bank to aforeign bank.

In both instances, the funds transferred tothe foreign bank were placed in 90-day certificates of deposit and used as collateralon loans made by the Central Americanbank to its associates. The loan proceedswere then deposited in undercover accountsin the bank and forwarded through thechain as before.

At a later date, funds wired through twoforeign banks were used to purchase certificates of deposit at a second foreignbank. The certificates were then used ascollateral on loans made at a third foreignbank, the proceeds of which were wired


33


Operation C-Chase (Cont.)back to the undercover accounts at the U.S.banks, and transferred from there to theowner’s account in South America. Theorganizers of this ring were careful to warnparticipants that transactions should behandled in varying combinations to avoiddeveloping a pattern. They used manylegitimate businesses, such as hotels andrestaurants, to originate funds transfers tothe undercover accounts. Together, thenetwork was able to absorb about $10 million per month in drug proceeds.

Bank of Credit and CommerceInternational (BCCI)Established in the 1970s, the Bank of Creditand Commerce International emerged in the1980s as one of the world’s largest privatelyowned financial institutions, with operations in over 70 countries. During the

years of its operations, BCCI employees werefound to have engaged in a number ofillicit activities, including money laundering.BCCI was financially distressed in the 1970sbecause of troubled shipping loans, butthrough an intricate shell game, it shuttledassets and liabilities among its subsidiaries,giving the appearance of being a well-capitalized financial institution.

Investigations resulted in the 1991 seizureof BCCI’s operations by regulators in sevencountries. BCCI points out a number ofimportant issues for financial institutions:financial institutions should be carefulabout knowing other institutions withwhich they do business. They should carefully screen potential major owners orshareholders, pay attention to the qualityand extent of supervision that foreign institutions receive in their home countries, and be aware that asset


34


forfeiture laws put institutions at risk ofhaving assets, including bank accounts andoutstanding instruments and money transfers, frozen or seized.

Operation Green IceLaw enforcement agencies in eight nationscooperated in a sting operation whichresulted in the arrest of 167 people and theseizure of $54 million in cash and otherassets. Operation Green Ice led to the arrestof several high-ranking financial officers ofcocaine cartels, and ultimately their conviction. Accounts at banks around theworld were frozen after receiving transfersand cash deposits of laundered funds. Inthe United States, bank accounts werefrozen and seized in San Diego, Los Angeles,Chicago, Houston, Miami and New York.

The U.S. banks that received the cashdeposits in this case cooperated with agentsof the Drug Enforcement Agency and continued to file detailed CTRs, which provided further evidence. Intermediarybanks had less access to information andwere more at risk of unwittingly being usedas part of the money laundering chain.

This case points out the need for institutions to be aware of such risks and toprotect themselves by noting frequenttransfers of substantial sums sent to personsor accounts in drug source countries.


35


Over the years, Congress has passed manylaws to combat money laundering. Perhapsthe most significant of these are the BankSecrecy Act of 1970, the Money LaunderingControl Act of 1986, the Anti-Drug AbuseAct of 1988, the Annunzio–Wylie Act of1992, the Money Laundering SuppressionAct of 1994, the Money Laundering andFinancial Crimes Strategy Act of 1998 andthe USA PATRIOT Act of 2001.

The Bank Secrecy Act of 1970 (P.L. 91-508)was designed to:

■ Prevent tax evasion and provide tools tofight organized crime.

■ Create an investigative "paper trail" forlarge currency transactions by establishing reporting standards andrequirements (e.g. the CurrencyTransaction Report requirement).

■ Verify the identity of customers andkeep certain basic records of customertransactions, including cancelled checksand debits, signature cards, and statements of account.

■ Impose civil and criminal penalties fornoncompliance with its reportingrequirements.

■ Improve detection and investigation ofcriminal, tax, and regulatory violations.

The Money Laundering Control Act of1986 (P.L. 99-570), part of the Anti-DrugAbuse Act of 1986, made money launderinga federal crime. It created three new criminal offenses for money launderingactivities by, through, or to a financial institution. These offenses are:

■ Knowingly helping launder moneyderived from criminal activity.

Legislation

36


■ Knowingly (including being willfullyblind) engaging in a transaction of morethan $10,000 that involves property orfunds derived from criminal activity.

■ Structuring transactions to evade BSAreporting requirements.

The Anti-Drug Abuse Act of 1988 (P.L.100-690) reinforced anti-money laundering efforts in several ways. The Act:

■ Significantly increases in civil and criminal penalties for money launderingand other BSA violations, including forfeiture of any property, real or personal, involved in a transaction orattempted transaction in violation oflaws relating to the filing of CurrencyTransaction Reports, money launderingor structuring transactions.

■ Requires strict identification and recording of cash purchases of certain

monetary instruments, including moneyorders and traveler’s checks between$3,000 and $10,000, inclusive.

■ Permits the Department of the Treasuryto require certain financial institutionsin specific geographic or "target" areasto file additional BSA reports of currency transactions in amounts lessthan $10,000 by use of "GeographicTargeting Orders."

■ Directs the Department of the Treasuryto negotiate bilateral internationalagreements covering the recording oflarge U.S. currency transactions and the sharing of such information.

■ Increased the criminal sanction for taxevasion when money from criminalactivity is involved.

Legislation

37


The Annunzio-Wylie Anti-MoneyLaundering Act of 1992 (P.L. 102-550)strengthened penalties for financial institutions found guilty of money laundering. Annunzio-Wylie required theSecretary of the Treasury to:

■ Adopt a rule requiring all financial institutions, both banks and non-banks(including MSBs), to maintain records ofdomestic and international funds transfers, which can be used in lawenforcement investigations.

■ Establish a BSA Advisory Group (BSAAG),comprised of representatives from theDepartment of the Treasury andDepartment of Justice, Office ofNational Drug Control Policy and otherinterested persons and financial institutions, including MSBs. TheBSAAG, established in 1994, meets twiceper year and informs representatives of

the financial services industry about newregulatory developments and howreported information is used.

Annunzio-Wylie also permitted theSecretary of the Treasury to:

■ Require any financial institution, or anyfinancial institution employee, to reportsuspicious transactions relevant to anypossible violation of law or regulation.

■ Require any financial institution toadopt an anti- money laundering program.

In addition, Annunzio-Wylie:

■ Makes it illegal for a financial institution,or an employee of a financial institution,to disclose to anyone involved in a suspicious transaction when a SuspiciousActivity Report (SAR) has been filed.

Legislation

38


■ Protects any financial institution, andany director, officer, employee, or agentof a financial institution, from civil liability for reporting suspicious activity.

■ Makes it a federal crime to operate anillegal money transmitting business (i.e.operating a money transmitting businesswithout a state license in a state wheresuch license is required under state law.)

The Money Laundering Suppression Act(MLSA) of 1994 (P.L. 103-325)specifically addressed MSBs. The MLSA:

■ Requires each MSB to be registered byan owner or controlling person of theMSB.

■ Requires every MSB to maintain a list ofbusinesses authorized to act as agents inconnection with the financial servicesoffered by the MSB.

■ Makes operating an unregistered MSB a federal crime.

■ Recommended that states adopt uniformlaws applicable to MSBs.

The Money Laundering and FinancialCrimes Strategy Act of 1998 (P.L. 105-310)requires:

■ The President, acting through theSecretary of the Treasury and in coordination with the Attorney General,to develop a national strategy for combating money laundering and related financial crimes and to submitsuch strategy each February 1st toCongress.

■ The Secretary of the Treasury, upon consultation with the Attorney General,to designate certain areas—by geographical area, industry, sector orinstitution—as being vulnerable to moneylaundering and related financial crimes.(Certain areas were subsequently designated as High Intensity FinancialCrime Areas (HIFCAs).

Legislation

39


The USA PATRIOT Act of 2001 (P.L. 107-56),which is the United and StrengtheningAmerica by Providing Appropriate ToolsRequired to Intercept and ObstructTerrorism Act of 2001, requires:

■ Establishment of anti-money launderingcompliance programs by all financialinstitutions. At minimum each programmust include: policies procedures andcontrols; designation of a complianceofficer; training; and an independentaudit function.

■ Establishment of a confidential communication system between government and the financial servicesindustry.

■ Implementation of customer identification procedures for newaccounts.

■ Enhanced due diligence for correspondent and private bankingaccounts maintained for non-U.S. persons.

■ Establishment of a highly secure network by FinCEN for electronic filingof BSA reports.

Legislation

40


The United States is not alone in the fightagainst financial crimes. Many countrieshave enacted significant anti-money laundering legislation. A number of international organizations and regionalgroups have adopted anti-money laundering rules and regulations as well.

Basel CommitteeThe Basel Committee consists of representatives of central banks and supervisory authorities of Belgium, Canada,France, Germany, Italy, Japan, Luxembourg,the Netherlands, Spain, Sweden,Switzerland, the United Kingdom and theUSA. In 1988 the Basel Committee published a "Statement of Principles" onmoney laundering, which generally recommended obtaining proper identification from customers and complying with laws and regulations governing financial transactions.

United Nations (UN)The UN Convention Against Illicit Traffic inNarcotic Drugs and PsychotropicSubstances (the Vienna Convention) callson signatories to criminalize money laundering, to assure that bank secrecy isnot a barrier to criminal investigations,and to promote removal of legislative barriers to investigation, prosecution, andinternational cooperation.

Financial Action Task Force (FATF)FATF was created at the Economic Summitof the major industrialized countries in1989. It issued a report in which it made40 recommendations, consistent with theVienna Convention, for implementing andcoordinating money laundering laws inmember countries. They also formed thebasis of money laundering rules and regulations established by the CaribbeanFinancial Action Task Force and theOrganization of America States.

International MoneyLaundering Efforts

41


Financial Action Task Force (FATF)(Cont.)Another report FATF has issued on non-cooperative countries and territories identifies countries with detrimental rulesand practices that obstruct international cooperation in the fight against moneylaundering.

European Union (EU)In 1991, the EU issued a directive on moneylaundering, compatible with the original 40FATF recommendations. It requires mandatory reporting of suspicious transactions and identification of beneficialowners and customers of financial transactions and accounts.

International MoneyLaundering Efforts

42


FinCEN AdvisoriesFinCEN has issued country advisories urgingenhanced scrutiny of financial transactionswith countries that had deficient anti-money laundering controls. Advisories canbe viewed at: www.fincen.gov underPublications/Advisories.

Office of Foreign Assets Control(OFAC) List The U.S. Department of the Treasury’s Officeof Foreign Assets Control (OFAC) issues theSpecially Designated Nationals and BlockedEntities List (SDN List). OFAC regulationsrequire businesses to identify and freeze theassets of targeted countries, terrorists, drugcartels and other specially designated persons. For these lists and specific instructions regarding what businesses mayor may not do under OFAC regulations,refer to the OFAC website at:www.ustreas.gov/ofac.

Country Advisoriesand Economic andTrade Sanction Lists

43


AgentA business that an issuer authorizes,through written agreement or otherwise, tosell its instruments or, in the case of fundstransmission, to sell its send and receivetransfer services.

AggregationAdding together multiple transactions thatan MSB knows have been conducted by oron behalf of the same person on the sameday, for BSA reporting and recordkeepingpurposes. For example, the MSB must file aCTR if it knows a customer’s aggregatecash-in or cash-out transactions during oneday totals more than $10,000.

BranchAn owned location of either an issuer oragent at which financial services are sold.

IssuerThe business ultimately responsible for payment of money orders or traveler’schecks as the drawer of such instruments,or a money transmitter that has the obligation to guarantee payment of amoney transfer.

Money LaunderingA process by which criminals seek to disguisethe true source of their illegally obtainedfunds or proceeds of crime. It involves threedifferent, and sometimes overlapping, stages:

Placement — Physically placing criminalproceeds into the financial system.

Layering — Separating the proceeds ofcriminal activity from their origins throughlayers of financial transactions.Integration — Moving the proceeds of crimeinto a "final" form that provides an apparently legitimate explanation for theillegally obtained funds.

Glossary

44


Money Services Business (MSB)Any person doing business, whether or noton a regular basis or as an organized business concern, providing one or more ofthe following services:

■ money orders■ traveler’s checks■ check cashing■ currency dealing or exchange■ stored value

-AND-

■ Conducts more than $1,000 in moneyservices business activity– with one person– in one or more transactions (in one

type of activity)– on any one day.

OR

■ Provides money transfers in any amount.

Money TransmitterA person that engages as a business in thetransfer of funds through a financial institution is a money transmitter and anMSB, regardless of the amount of transferactivity. Generally, the acceptance andtransmission of funds as an integral part ofa transaction other than the funds transmission itself (for example, in connection with a sale of securities or otherproperty), will not cause a person to be amoney transmitter.

RedeemerA business that accepts instruments inexchange for currency or other instrumentsfor which it is not the issuer is a redeemer.For example, a hotel that provides a customer with $1,500 in cash in exchangefor the customer’s $1,500 money order(issued by another MSB) is a redeemer. TheMSB definition in 31 CFR 103.11(u)(4)extends to "redeemers" of money orders and

Glossary

45


Redeemer (Cont.)traveler's checks only insofar as the instruments involved are redeemed for monetary value — that is, for currency ormonetary or other negotiable or otherinstruments. The taking of the instrumentsin exchange for goods or general services isnot redemption under BSA regulations.

StructuringA term used in reference to any conductengaged in to evade a reporting or recordkeeping threshold and the corresponding BSA reporting or recordkeeping requirement (e.g. $1,000 forcurrency exchange and $3,000 for fundstransfer records or more than $10,000 incurrency for filing CTRs). Structuring is afederal crime.

Examples of Structuring1. One person breaks a large transactioninto two or more smaller transactions —

A customer wishes to conduct a $10,500cash transaction on one day. However,knowing that the threshold for filing a CTR(more than $10,000 cash transaction) wouldbe met, he conducts two $5,250 cash transactions, thereby trying to evade theCTR reporting requirement/threshold.

2. A large transaction is broken into twoor more smaller transactions conductedby two or more persons —

A customer wishes to send $10,000 to afriend in London. The customer and threeothers each purchase a $2,500 moneytransfer to London, thereby evading theFunds Transfer Rule recordkeeping requirement/threshold of $3,000.

Glossary

46


BSA Forms

To Download: FinCEN website at: www.fincen.govMSB website at: www.msb.govIRS website at: www.irs.gov

To Order:IRS Forms Distribution Center at: 1-800-829-3676

Free MSB Information andGuidance Materials

To Order: MSB Web site at: www.msb.govMoney Services Business Outreach Office at:1-800-386-6329

Answers to Questions aboutFiling BSA Forms

IRS-Detroit Computing CenterHotline1-800-800-2877

Interpretation of BSARegulations

Financial Crimes Enforcement NetworkRegulatory Helpline1-800-949-2732

Report Terrorist RelatedFinancial Activity

Financial Institutions Hotline1-866-556-3974

Request More Information




Financial Crimes Enforcement NetworkU.S. Department of the TreasuryWashington, DC

A publication of the Financial Crimes Enforcement Network (FinCEN) U.S. Department of the Treasury


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Money Laundering Prevention

Education