In the money transfer industry, the Money Service Business (MSB) takes the responsibility of sending, safely and securely, an individual’s money to the individual’s intended beneficiary. To protect the individual’s funds and ensure that no fraudulent activities are taking place with those funds, the regulators and central banks have to enforce policies and procedures on compliance, risk and security.

Hence, the MSBs have to keep compliance at the heart of their business.

At the very minimum, new and existing MSBs must adhere to the following:

Onboard a Money Laundering Reporting Officer 

First and foremost, all MSBs must have a dedicated Money Laundering Reporting Officer (MLRO) who is responsible for managing all compliance activities within the organisation. Depending upon the type and size of the MSB, there could be one or more members within the compliance team.  

Aside from the MLRO, it is important that the stakeholders such as Directors, Senior Managers and even Shareholders familiarise themselves with the Payment Services and AML regulations within the MSB’s jurisdiction.

AML and Compliance Software

MSBs must have a robust AML policy and a sophisticated Compliance software in place. There are several Money Transfer Systems that come with a built-in Know Your Customer (KYC), Anti Money Laundering (AML) and compliance module. Some of these systems can also integrate with third-party ID verification providers, sanctions and PEP list providers.  

MSBs need to ensure that the system also covers areas related to Customer Identification or Know-Your-Customer (KYC), Customer Due Diligence (CDD), Enhanced Due Diligence (EDD), sanctions screening, transaction monitoring and Suspicious Activity Reporting (SAR).  

The MLROs are responsible for ensuring that the system acquired in the organisation is in line with the local and international regulations, as well as ensuring required changes are being implemented based on regulatory needs. 

Reporting 

The MSBs must understand their reporting obligations to their regulators and central banks. There are several bodies that the MSB might have to report to based on where they are based. 

Annual Compliance Review 

MSBs must have an annual review of their compliance policies and procedures. For new entrants, this can be performed as an internal function; however, it is strongly recommended to have annual compliance audits by reputed third party Auditors.

Training 

The individuals – such as Directors, Senior Managers, MLROs and Operations Managers who deal with customers and transactions – responsible for managing the MSBs must undergo appropriate AML and compliance training. 

There are several institutions such as ACAMS and International Compliance Association that provide various types of courses based on the target audience. The MLRO is also responsible to conduct training sessions periodically with all other members engaged in dealing with customers and transactions within the MSB. 

Risk-Based Approach 

MSBs need to adapt to a Risk-Based Approach (RBA) within their businesses. This means that the organisation first identifies the greatest compliance risks to the business and then makes it a priority to address them by putting in place appropriate controls and implementing stringent policies and procedures.  

The MLRO plays a key role in defining the parameters to ensure a Risk-Based Approach. One such example could be classifying customers based on where they remit funds. Some countries might not have an adequate AML program in place and can be classified as “high-risk”. This means the compliance personnel along with the systems in place should be able to classify the risks and perform enhanced due diligence on customers and transactions.

To summarise, compliance is an ongoing journey and not a destination. Although this article outlines the fundamental compliance-related requirements for an MSB, compliance should be taken as an ongoing journey by any MSB and not treated as a one-off exercise or a simple checklist ticking off activity. Compliance would not only safeguard the MSB’s reputation but also protect our society, in general, from criminals who intend to breach these regulations. 

RemitONE provides proven compliance products for MSBs and Central Banks. 

For more information, advice and support, please email marketing@remitone.com or call +44 208 099 5795.

We are here to help!