The recent high-profile action taken against Sigue Corp., a California-based money services business (MSB), underscores the continued regulatory focus on MSBs. In January, Sigue entered into a deferred prosecution agreement with the Department of Justice on charges of failing to maintain an effective anti-money-laundering (AML) program, undoubtedly spurring the ongoing debate in the industry about banking MSBs, and how to manage the AML risk associated with them--especially since Sigue maintained accounts with several well-known and reputable banks.
MSBs in the U.S. and abroad have been struggling to maintain banking relationships since a June 2004 letter from the Treasury's office of the comptroller of the currency identified MSBs as presenting a high risk for money laundering. After this classification was publicized, several top-tier banks exited their banking relationships with MSBs, sometimes without considering the individual risk levels of MSB customers. Mid-tier banks shortly followed suit, making it almost impossible for MSBs to maintain U.S. banking relationships on an ongoing basis and raising concerns among regulatory agencies that money transmitting businesses will be driven underground.
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