ALEXANDRIA, Va. (12/29/14)--The National Credit Union Administration has sent a supervisory letter to federally insured credit unions that provides guidance on dealing with money services businesses (MSBs).
The letter is intended to provide field staff with guidance on evaluating credit unions that provide services to such businesses.
MSBs are defined by the U.S Treasury's Financial Crimes Enforcement Network (FinCEN) as: dealers in foreign exchange; check cashers; issuers and sellers of traveler's checks or money orders; providers of prepaid access; money transmitters; or sellers of prepaid access. The U.S. Postal Service is also considered an MSB.
"MSBs can provide necessary and valued services to a community, and a credit union may consider providing services to MSBs that operate within its field of membership," the letter reads. "However, like any third party, MSBs can expose credit unions to certain risks, and NCUA expects credit unions to consider, monitor and mitigate those risks."
According to the agency, the risk posed by an MSB depends on the nature and scope of the operation. An MSB can be a large international money transmitter or a small business that offers financial services as a complementary business component.
"In general, larger MSBs may present off-balance-sheet risks by generating significant transaction volumes that could overwhelm smaller credit unions. Credit unions with only a few million dollars of assets could end up processing billions of dollars' worth of money services transactions," the letter reads. "Some MSBs even raise heightened risks of money laundering for drug cartels and terrorist groups."
The NCUA expects credit unions, as part of their due diligence process, to:
"To ensure compliance with the BSA regulations, credit unions are expected to assess the risks posed by each individual MSB account on a case-by-case basis, monitor and report any unusual activities and implement appropriate controls to manage any risk exposure," the letter reads.