World Council asks for clearer info on serving MSBs

November 25, 2015

WASHINGTON (11/25/15)--The World Council of Credit Unions (World Council) urged the Financial Action Task Force (FATF) to clarify regulations regarding money services businesses (MSBs) in a letter sent this week. The letter is in response to a request for comment from the FATF.

The World Council said that "clearer 'rules of the road" are needed to determine what are and what are not higher-risk relationships with MSBs. The clarification would serve to reduce unnecessary "de-risking" of member and customer bases domestically and internationally.

Also needed, the World Council writes, is clearer information on supervisory expectations about what circumstances prompt an institution to become subject to an enforcement action or reputational damage. This also will help stem the "de-risking" phenomenon significantly by reducing the perceived anti-money laundering/countering the financing of terrorism (AML/CFT) risks and compliance costs associated with these relationships, the letter reads.

“Clearer rules of the road will make it easier for financial institutions, their supervisors and their examiners to have clear, consistent, and cost-effective approaches to AML/CFT compliance that will succeed in keeping bad actors out of the financial system without also harming the operations of credit unions and other legitimate financial businesses,” it continues.

De-risking occurs when financial institutions are not willing to provide services to certain types of businesses because of perceived AML/CFT compliance risks and costs.

“De-risking affects credit unions in two ways,” the letter reads. “(1) in credit unions’ capacity as service providers to [money or value transfer services] operators and similar money services businesses, or as service providers to other credit unions; and (2) when credit unions have difficulty establishing or maintaining bank accounts that they need to facilitate domestic or cross-border payments activities.”

The World Council referred to a supervisory letter (SL-14-05) issued by the National Credit Union Administration in December 2014, which states expectations, risks and examination procedures regarding serving MSBs.

When it comes to guidance the FATF should issue, the World Council believes more details surrounding AML/CFT expectations would “assist credit unions significantly” in the fight against de-risking.