“Are You Throwing Out the Good with the Bad?” Successfully Banking MSBs in the age of De-Risking

David Ryan

What does it mean exactly that banking Money Services Businesses (“MSBs”) should be risk-based? The phenomenon of “de-risking” has come to mean the wholesale closure of MSB accounts without taking into account the subtleties of the risk presented within the MSB industry. If FinCEN has stated that banking MSBs should be based upon risk,1 as have all the other banking regulators,2 then why have banks continued to categorically close all of their MSB accounts? The FFIEC’s definition of high-risk accounts that includes all MSBs in no way prohibits additional discrimination within the high-risk category. The techniques presented here will help a bank perform high-risk discrimination that will allow it to tailor its account portfolio to fit within its chosen risk assessment. The resulting portfolio will in turn provide the bank fee income that is well above and beyond the costs associated with the underwriting and monitoring of the portfolio.

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