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    How to Avoid Costly MSB Audit Fines

    C-stores with check cashing, money orders, wire transfer must follow several steps.

    By Robert Frimet, RMF Consulting Group

    Many convenience stores and gas stations take on additional activity within their locations such as check cashing, money orders and wire transfer. As such, there are several requirements one must follow to comply with the U.S. Patriot Act as a Money Service Business (MSB).

    For many, Patriot Act anti-money laundering (AML) compliance can be as confusing as quantum psychics. 

    What defines an MSB?

    Do you cash checks of $1,000 or more for any person in a business day? Do you sell or redeem money orders of $1,000 or more for any one person in a business day? Do you conduct wire transfers in any amount? If you answered yes to any of these questions, you are an MSB.

    In addition, if you cash checks, you must register as an MSB. However, if you happen to send money on behalf of MoneyGram, Western Union or another provider (or sell money orders), you would not need to register as an MSB. 

    Things you need to know as an MSB are:

    • The U.S. government is not out to get you. Long before 9/11, there were various cash-reporting requirements. For obvious reasons, the government has stepped up its efforts to ensure we all do our civic duty in protecting this country. Please keep in mind this is not simply about “terrorism.”
    • Defined quickly, money laundering is taking funds that were received in an illegal manner and attempting to disguise their true nature, origin or ownership by converting them into legitimate funds. Terrorism, tax evasion and drug dealing are examples of money laundering, some of which an MSB could theoretically face when doing business with its customers.
    • If you fail to follow the requirements, the government will get you. Be aware that the “It isn’t going to happen to me” syndrome no longer applies. The government means business and as an MSB doing so much business with so many classes of people, you have a legal and ethical mandate to follow the rules.
    What are the rules? 

    Retailers must file a Currency Transaction Report (CTR) if they are an MSB — or agent of another MSB — if the cash in amount exceeds $10,000 in a business day. CTRs must be filed within 15 days of triggering the $10,000-plus threshold. The transaction must be filed online using the BSA E Filing system at www.fincen.gov. There, retailers can register as an e-filer. 

    C-store retailers must file a Suspicious Activity Report (SAR) if they feel they conducted a transaction that is $2,000 or more and is suspicious. The term suspicious can mean many things, such as if operators feel the customer is breaking up the transaction into multiple transactions to avoid the filing of a form, or retailers believe the customer should not have the means to conduct a transaction or group of transactions (i.e. if a customer earns $500 per week and is sending $2,000 per week in a wire).

    Retailers must retain any sales or redemption on money orders of $3,000 or more in a business day by recording the money order and customer information in a log. This log is not sent in, but is retained onsite.

    What other requirements must retailers follow?

    People often get confused in thinking the only requirement is filling out forms. Regardless if your business fills out 100 CTRs or zero CTRs, you still have several other requirements to follow. In the event of an Internal Revenue Service or state audit, the IRS will be looking closely to see if retailers are in compliance. If not, fines or other penalties can occur.

    Other requirements retailers must follow are: 

    • Operators must have a written policy and procedure in place covering all activity. So, if a retailer does check cashing and wire transfers and only has an AML program from a wire company, it will not suffice.
    • Retailers must provide ongoing staff training and document that training.
    • Retailers must conduct internal monitoring of programs and policies to ensure proper compliance, which must be documented.
    • C-store operators must conduct an independent review annually. This review may be conducted by anyone other than the compliance officer, but keep in mind, allowing someone with no experience in compliance to conduct a review can lead a business to fail catching activity or deficiencies that could cost a retailer dearly in an audit.

    Not only do retailers want to follow the rules to ensure regulatory compliance, but also to promote strong bank health. Banks are exiting relationships left and right with MSBs. The necessity to have a strong anti-money laundering program in place and a suitable independent review in place will go a long way in maintaining a MSB bank account.

    Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.

    By Robert Frimet, RMF Consulting Group
    • About Robert Frimet Robert Frimet is president of RMF Consulting Group and has served the check-cashing and loan industries for 23 years. He is a CAMS certified anti-money laundering specialist and offers consulting services nationwide, including independent reviews, AML programs, and check fraud and compliance seminars. He can be reached at (702) 596-8370 or [email protected]

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