Report: Regulators should improve AML exam procedures related to money transmitters

Examination procedures related to compliance with anti-money laundering (AML) laws by money transmitter businesses should be updated, and examiners should be provided with training, the congressional watchdog recommends (among other things) in a report issued Tuesday.

According to the Government Accountability Office (GAO), money transmitters “play an important role in the financial system, in part because they provide financial services to people less likely to use traditional banking services” domestically or internationally.

However, the GAO pointed out, a number of banks have recently terminated services with at least one money transmitter account for money laundering-related reasons.

GAO found, it said, that the service providers are being dropped by banks because – among common reasons given – customers were not providing information needed to satisfy the banks’ due diligence requirements under Bank Secrecy Act (BSA)/AML regulations and the cost of BSA/AML compliance made the customers unprofitable.

Additionally, GAO said, the banks cited concerns that “these customers drew heightened regulatory oversight; this may indicate ‘derisking,’ the practice of banks limiting services or closing accounts with customers to avoid any perceived regulatory concerns about facilitating money laundering.”

To ensure that money transmitter businesses are receiving proper supervision (and to limit future “de-risking”), the GAO recommended that the federal financial institution regulators – Federal Deposit Insurance Corp. (FDIC), Federal Reserve, National Credit Union Administration (NCUA) and Office of the Comptroller of the Currency (OCC) – each “take steps to improve examiners’ ability to evaluate the effectiveness of banks’ BSA/AML compliance controls with respect to money transmitter accounts. Steps may include providing updates to examination procedures, examiner training, or a combination of methods.”

Bank Secrecy Act: Examiners Need More Information on How to Assess Banks’ Compliance Controls for Money Transmitter Accounts