FinCEN Highlights Existing AML Program Obligations on MSB Principal-Agent Relationships

Anti-Money Laundering FinCEN Bank Compliance

On March 11, FinCEN issued FIN-2016-G001 to provide clarity to money services business (MSB) principals regarding the risks associated with foreign agents’ AML compliance. FinCEN’s guidance, which complements recently issued state guidance, encourages coordination among Federal and state regulators on issues related to MSBs’ AML program obligations. FinCEN emphasizes that an MSB “remains independently and wholly responsible for implementing adequate AML program requirements,” noting, therefore, that “neither the agent nor the principal can avoid liability for failing to establish and maintain an effective AML program by pointing to a contract assigning this responsibility to another party (whether the agent or principal).” According to FinCEN’s guidance and pursuant 31 CFR § 1022.210, an effective AML program must, at a minimum, (i) incorporate policies, procedures, and internal controls reasonably designed to ensure BSA compliance; (ii) designate an individual responsible for monitoring day-to-day BSA compliance; (iii) provide adequate training to the appropriate personnel regarding their responsibilities under the program; and (iv) provide for independent testing of the program to ensure there are no material weaknesses. In addition, FinCEN reminds MSB principals that, when conducting monitoring of their agents, they must (i) identify the owners of the MSB’s agents; (ii) continually evaluate agents’ operations; and (iii) evaluate agents’ implementation of policies, procedures, and controls. Finally, the guidance advises MSB principals to consider certain risk factors when conducting agent monitoring, including, but not limited to, (i) whether the agent has an established and adhered to AML program; (ii) whether the owners are known or suspected to be linked to criminal conduct or terrorism; (iii) the nature of the markets the agent serves and whether money laundering or terrorist financing are associated risks of the markets; (iv) the anticipated level of activity of the agent’s services; and (v) the nature and duration of the relationship.