Money Service Business Compliance Auditor

Federal law requires MSBs to establish effective AML procedures and controls, which includes agent and AD monitoring policies and procedures. At a minimum, these procedures should cover contracts; consumer disclosures; on and off-site reviews; risk assessment; credit reviews; background investigations; escalation and termination policies for ADs and agents; transaction monitoring; and, BSA training. As such, file documentation presented for review should support the license holder’s adherence to its agent and AD policies and procedures regarding conducting initial (on-boarding) due diligence and periodic (on-going) monitoring.
PURPOSE
In addition, it is the intent to offer general guidance for AD and agent file content and structure in order to facilitate more efficient and effective regulatory review, to improve MSB compliance, and to reduce the demands on limited license holder resources.
DOCUMENTING COMPLIANCE
The most frequently noted examination issues observed by examiners include the untimely delivery of AD and agent files for review, deficiencies in the documentation provided to support compliance with agent and AD oversight (due diligence), and difficulty locating specific documents within the files. More often than not, these deficiencies are the result of the absence of established file documentation procedures or protocols, and are further augmented when the files are not centrally managed. Examiners have noted that MSBs face difficulties in demonstrating compliance when relevant file documents are maintained in different departments or in locations different from where the examination is conducted. Examples of de-centralized file management include credit review documents that are maintained within the credit department; AD and agent applications that are maintained within regional offices; and, contracts that are maintained within the general counsel’s Upgrade to see actual info order for a MSB to adequately demonstrate compliance, it is recommended that all corresponding documentation be centrally maintained.
Agent and AD File Content
The Department understands that the documentation of on-boarding and on-going due diligence will vary among license holders. Nevertheless, the Department has identified the following types of document content that tends to support effective agent and AD due diligence:
On-boarding due diligence documents
•On-boarding approval checklist, if applicable
•Agent and AD BSA policies and procedures
•Evidence of agent due diligence over subagents (e.g. subagent lists, reviews conducted by
Supervisory Memorandum 1040 – Recommended File Documentation For Money Services Business Holders
•Approval by foreign regulators to conduct money transmission, including documentationdemonstrating compliance with applicable foreign country regulations
•Application for Agency Appointment
•Signed Agency/AD Contract (Trust Agreement) and addendums
•Background on owners and principals (e.g. OFAC/WorldCheck/LexusNexus), includingverification of identity (e.g. photo IDs, social security numbers, etc.)
•Credit review and approval documents (e.g. financials, credit reports, Dun & Bradstreet,income tax returns, etc.)
•Funds settlement documents (ACH and Pre-Authorized Draft Authorization Agreement)
•Secretary of State/local legal filings and corporate ownership information legal filings
•Initial BSA review and risk rating
•Evidence of initial AML/BSA training
•Evidence of receipt of AML/BSA policies and procedures and other information requiredto be provided to ADs by license holder, see Sections 151.402(b)(1);151.402(c)(9); and151.402(c)(10) of the Texas Finance Code
On-going due diligence documents
•Copies of periodic on-site and off-site program reviews, including findings and licenseholder follow-up actions (remediation, escalation, termination), updated risk assessmentsand supporting documents
•Confirmation procedures for payouts by foreign agents and counterparties
•Current lists of foreign agents’ subagents
•Documentation to support on-going foreign agent monitoring and due diligence over itssubagents
•Evidence to support periodic (on-going) BSA training
•Evidence to support the license holder’s review of updated BSA/AML Program policiesand procedures
•Evidence to support agent compliance with independent AML review requirements
•Updated credit review
•If applicable, reports of foreign regulators for agents (violations, fines, penalties)
•Updated owner/principal due diligence (including change of ownership and other structural changes, OFAC). License holders subscribing to negative news services should include or reference negative items detected by the service and management actions taken