December 2, 2016

Guidance on Existing AML Program Rule Compliance Obligations for MSB Principals with Respect to Agent Monitoring


This guidance reiterates the anti-money laundering (AML) program obligations on
the principals of money services businesses (MSBs) to understand and appropriately
account for the risks associated with their agents, as broadly set forth by FinCEN
in 2004 guidance primarily focused on foreign agents and counterparties.

FinCEN is reiterating its guidance on this issue to complement recent guidance from states
addressing MSB principal-agent relationships, and consistent with the purposes of
the Money Remittances Improvement Act to encourage coordination between Federal
and state regulators on such issues.

MSBs serve important functions, including  by facilitating remittances, and providing other financial services. This guidance is  intended to provide clarity so that MSB principals and their agents can more easily understand how to comply with AML requirements while providing important
financial services.

The Bank Secrecy Act (BSA) requires all MSBs, both principals and their agents, to establish and maintain an effective written AML program reasonably designed to prevent the MSB from being used to facilitate money laundering and the financing of terrorist activities.

To establish effective AML procedures and controls, an MSB principal’s program requirements properly include agent monitoring policies and procedures sufficient to allow the principal to understand and account for associated risks.

Although principals and agents may contractually allocate responsibility for  developing policies, procedures and internal controls, both the principal and its agents remain liable under the rules for the existence of these respective policies, procedures, and controls. Moreover, each MSB remains independently and wholly responsible for implementing adequate AML program requirements.

Accordingly, neither the agent nor the principal can avoid liability for failing to establish and maintain an effective AML program by pointing to a contract assigning this responsibility to another party
(whether the agent or principal).
Under 31 CFR § 1022.210, an MSB’s AML program must, at a
  •  Incorporate policies, procedures, and internal controls reasonably designed to assure compliance with the BSA and its implementing regulations
  • Designate a person to assure day to day compliance with the program and the BSA and its implementing regulations
  • Provide education and training of appropriate personnel concerning their responsibilities under the program, including training in the detection of suspicious transactions to the extent that the money services business is required to report such transactions under the BSA
  • Provide for independent review to monitor and maintain an adequate program
An MSB principal is exposed to risk when an agent engages in transactions that create a risk for money laundering, terrorist financing, or other financial crime. In order to reduce exposure to such risks, for example, the MSB principal must have procedures in place to identify those agents conducting activities that appear to lack commercial purpose, lack justification, or otherwise are not supported by verifiable documentation. The principal must implement risk-based procedures to monitor the agents’
transactions to ensure that they are legitimate. The procedures must also ensure that, if  the agents’ transactions trigger reporting or record keeping requirements, the principal handles the information in accordance with regulatory reporting and record keeping obligations. In addition, the MSB principal should implement procedures for handling non-compliant agents, including agent contract terminations.