WASHINGTON — Years after banks began severing relationships with money-services businesses, their access to banking is still a problem in search of a solution.
The issue came at the forefront once again Wednesday at a meeting of the Federal Deposit Insurance Corp.'s economic inclusion advisory committee. During the panel's all-day session, regulators, bankers, and representatives from money-services businesses agreed that the problem does not appear to be getting resolved.
Moreover, most were struggling to define the extent of the problem in the first place.
"We still don't have all the facts," said Jamal El-Hindi, associate director for regulatory policy and programs at the Financial Crimes Enforcement Network. "We are still working to identify MSBs. When confronted with the problem, we can't even measure some of this."
He attributed the absence of information to the lack of a survey on the number of MSBs and the number of such accounts that banks have dropped.
In 2005 regulators issued guidance requiring banks to ensure that the businesses are registered, and to analyze whether they pose a high or low risk of money laundering. The guidance was meant to reassure bankers, but instead a steadily growing number of banks severed relationships with the businesses.
Mr. El-Hindi said there still has not been much fact finding on the issue, despite outreach efforts from Fincen. It recently translated compliance brochures into seven languages, and it has introduced a registration calculator on its Web site to help the businesses maintain their registration with Fincen. It is also working on an exam manual for MSBs with the IRS.
In 1999, Fincen required MSBs to register with the agency, but many have not complied. As of Sept. 12, there were 35,844 registered ones, but most estimates say there are 150,000 to 200,000 overall.
Three bankers who provide services to check cashers said more bankers have started working with MSBs as they have received more education about the industry. Still, all three said challenges persist.
Terence Keenan, senior vice president of Corus Bank of Chicago, said large money-laundering fines have scared bankers away from the businesses.
"It's an easy decision to not take the risk," he said.
Last month American Express Co. was fined $65 million on charges of Bank Secrecy Act violations. The fines included a $5 million penalty against American Express Travel Related Services Co. Inc., a Salt Lake City money-services business, for failure to file timely suspicious activity reports.
Panelists also complained that the 2005 guidance's definition of an MSB was too vague. Mr. El-Hindi acknowledged that the definition is broad, and he noted that there had been calls to narrow it. In June, Fincen Director James Freis and Treasury Secretary Henry Paulson announced that Fincen would work on narrowing the definition and giving it more of a risk-based focus. That change is expected to be incorporated in a new Bank Secrecy Act exam manual next year.
Members of the FDIC panel suggested distinguishing among the different MSBs — including check cashers and money remitters — rather than lumping them together in one definition.
"Those things have to be segregated," said Elizabeth Warren, a professor at Harvard Business School.
But Manuel Orozco, executive director of the Remittances and Development Program at the Institute for Inter-American Dialogue argued that there are not many differences between the types of MSBs. "When you look carefully into it, the differences are minor. We need to make the risks visible rather than invisible."
