Presented by: David Landsman Executive Director National Money Transmitters Association, Inc .

1. Banking a Licensed Money Transmitter Safely: How to Absolutely Mitigate the Risk Down to Zero Presented by: David LandsmanExecutive DirectorNational Money Transmitters Association, Inc.

2. Put Your Own BSA House in Order • No fine has ever been handed down as a result of banking a licensed money transmitter; see to non-MSB issues… • Don’t let this presentation scare you • Maintain list of MSB customers, constantly • Have an MSB Procedure / Scoring Method / Checklist; document, implement, review procedures; play to the audit; Board involvement / approval. • Use existing official checklists; steep yourself in compliance culture; 3rd party / outside reviews. • Sensitize your front line personnel • Seek prior comment from your auditors.

3. Know Your State’s License Requirements • Know method and where LMT operates. • Study state law and regs (ask customer.) • Study state application and audit procedures • Contact SBD for info • If not licensed, look for sufficient legal protection and do extra diligence, or take a pass (Chase / Beacon Hill example)

4. Initial Due Diligence • Verify ownership, owner’s identity, corporate existence, TIN, background check, personal / business financials, FinCEN Registration (see state MT application) • Site visit, review MSB’s major relationships • Start a folder / establish control and review • Relationship manager is point of control • Relationship manager is subject to oversight and audit

5. More Initial Due Diligence • Get compliance manual, audit report and NMTA certification • Consult others, internally and externally • Scoring method / special risk factors (country, product, agent, adequacy issues, mitigators, net risk) • Pop-quiz and interview the applicant

6. Leverage the MSB’s Existing Audit • MSBs must have independent audits anyway, according to Sec 352 of the Patriot Act (‘independent usually means ‘outside’) • Enhance the existing audit with further questions, proofs and outside certification (ACAMS, references) • Renew annually

7. Elements to Look for in a BSA Audit • Scope and standards commensurate with size • Check auditor qualifications / resume • Section 352 four points • Compliance Officer • Training program • Written policies beyond the manual • Independent audit • Special risk factors • Risk scoring • Actual control being implemented • Adequacy of systems

8. More Elements to Look for in a BSA Audit • CTR, SAR review… • Stress testing of agents, employees

9. Non-BSA Elements of an Audit • OFAC procedures • General business legal compliance • Escheatment procedures

10. Best Practices • Range of adequate solutions • Compare to others in the industry • Room for improvement • Follow up on audit recommendations

11. Know the Major Risk: The Agent • Structuring at the agent level • Facilitation or initiation of structuring • Multiple licensees, extra danger • Agent’s own non-licensed channels • ID Thresholds • Remember, the agent is a financial institution under the BSA (the agent review) • Make the agent your customer • Agent supervision exercised by licensee

12. Ongoing Due Diligence • Look at dollar levels once a month • Analyze inflows and outflows • Amounts expected • Where are they going • Do they tie out? • Periodically review transaction database • Periodically review agent folders • Rely on independent reviews • Audit at 6 month intervals for the first year • 1 year intervals thereafter

13. Basic Elements of BSA Compliance Applied to MSBs • The opposite of willful blindness is due care; due care is your shield. • Determine the level of knowledge you should have (reasonable assumptions, red flags…) • The same presumption of innocence as other business customers. • The same treatment as other types of customers.

14. What Must Bankers Do? • Not clairvoyance, mind reading or perfection; • Reasonably verify the customer knows and is following the law. Means to ‘forget’ most of this presentation. Whatever policies you set, you must follow. • Do so at a profit (Hint: we will pay.) • The same thing we must do: build systems and procedures that are reasonably designed to prevent, detect and report money laundering.

15. In General • Understand the money transfer business • Understand the licensee / agent model • Understand modes of operation • Transaction models • Computer and telecom systems • Settlement and cash flow issues • Understand expected patterns • Understand you state’s supervision • Follow up on deviations

16. Conclusion MSB licensees are good customers who not only obey, but also uphold the law. The compliance costs of having MSB customers are recouped. The compliance risks are easy to manage safely and with certainty. MSB licensees perform an irreplaceable function in society. MSB licensees are the kind of customers you should have!