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Financial Services Law Insights and Observations

NYDFS to take action against check cashing companies for BSA/AML violations

State Issues State Regulators NYDFS Enforcement Compliance Anti-Money Laundering Bank Secrecy Act OFAC

State Issues

On February 3, NYDFS announced it intends to take enforcement action through an administrative proceeding against several check cashing entities for alleged violations of New York Banking Law and federal laws and regulations related to the business of check cashing. According to NYDFS, examinations revealed multiple concerns related to the entities’ Bank Secrecy Act/anti-money laundering (BSA/AML) program and transaction monitoring, including (i) inaccurate books and records; (ii) cashing post-dated checks; (iii) insufficient BSA/AML compliance; and (iv) inadequate risk-assessment procedures and customer identification and Know Your Customer programs. NYDFS also stated that management at the identified entities failed to implement effective controls to mitigate and manage BSA/AML compliance programs and Office of Foreign Assets Control risks despite “repeated criticism of the entities’ performance.”

NYDFS conducted a subsequent investigation, which found additional alleged violations that circumvented Federal and state banking laws, such as (i) hiring undisclosed employees who were paid “off the books”; (ii) conducting an unlicensed mobile check-cashing business; and (iii) and engaging in an illegal check-cashing scheme that structured transactions and falsified business records to give the appearance that checks were cashed on multiple dates, when in fact they were all cashed on a single date. The administrative proceeding to revoke the entities’ licenses and seek civil penalties will begin February 24.

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