Problem: An account for a small retail business that was started less than a year ago was opened. It is owned by one individual who lists the address of the business as an office on the second floor of an building on a highway. The owner has the proper paperwork and is a sole proprietor with a valid certificate from the state and a driver's license with picture ID. A deposit account is opened, and the business is also signed up for online banking including bill pay and electronic funds transfer.
- What steps would you take to make sure the business is legitimate?
- What questions would you ask?
A few months later, the internal auditors find that this business is a money service bureau, which your bank has a policy against.
- What were some of the red flags that you should have looked for after the account was opened that could have been suspicious?
- What risk-based assessment did the auditors probably use?
- Is this the type of activity a start-up small business would have?
- If this was suspected from the beginning, how should it have been escalated?
- Discuss the regulatory issues for banks that do allow money service bureaus to become customers.