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Our ultimate goal with our MSB community is to be a resourceful partner in compliance. We want to see you succeed and see your customers succeed. In this article we’ll cover the very important topic of passing a state exam or an audit. We want to help you understand how to approach it and steps you can take to be successful.
Be Organized
This may seem at first like the simplest approach, but we see MSBs everyday who don’t have their business and paperwork in order. They don’t have foundational systems in which they run their business and it shows in their disorganization. Most of the time not having a formal process that your team can work from begins to disrupt all kinds of other aspects of your business.
Making the choice to get organized is of high value when it comes to passing any state exam or audit. Knowing you can put your hands on any documents that are requested is a good feeling and excellent way to know what is happening at any time in your business. Scrambling last minute to find information usually results in undue stress on you and your team and inevitably creates bigger problems as one event leads to another.
Be Aware of What’s Required
The great part of any state exam or audit is that it is not a mystery. Everything that is required of you is available online. If you want to build a process around a successful exam, take a look at the appropriate resources and prepare accordingly.
Below is the link to the FinCEN MSB Exam manual. This is what FinCEN uses when conducting an exam on a MSB. Studying this document is like getting a copy of the test before you take it.
https://www.fincen.gov/sites/default/files/shared/MSB_Exam_Manual.pdf
There are all the resources you need to comply with the agency who will be examining your business. The bottomline is that you and your team just have to do the front end work of studying them so you can organize your process around them.
Be Respectful
Having helped many MSBs for many years, we’ve seen the potential for some of them to not respect the position or authority of the examiner and the role they play in keeping the industry regulated. As an MSB, it is important for you to do your part in complying with the regulators.
Regulators are just normal people that put on their pants on one leg at a time, just like we do. So treating them with respect and not having a confrontational relationship with them typically leads to them not making you have a bad day. This is very similar to your interaction with a police officer. When you get pulled over, it’s better to just cooperate with their requests (license, registration etc) rather than being disrespectful.
In summary, our best advice is to do the right thing every day. Then it’s not going to feel like you’ve got two years worth of weight on your shoulders trying to get ready for an exam.
If you would like more information on this topic or any topic that is related to running a successfully compliant business, reach out to our BSA team at www.mysuretybank.com/msb.
Durable Medical Equipment (DME) is defined as any medical equipment used in the home to aid in a better quality of living. The term includes wheelchairs, knee braces, hospital beds, nebulizers, walkers, etc. DME is a benefit included in most insurances including Medicare Part B which covers medically necessary DME that is prescribed by a physician for use in a patient’s home.
According to an AARP Bulletin titled “Medicare Under Assault From Fraudsters”, “roughly 10 cents of every dollar budgeted for the giant health insurance program is stolen or misdirected before it helps any enrollee. Malcom Sparrow, a Harvard University professor and leading expert on health care fraud, says the true amount lost to fraud, abuse or improper payments could be 20 percent, or even as high as 30 percent.” See below a graphic that puts the scale of Medicare fraud into perspective.
As you can see, DME fraud has become a huge business for criminals, and they are increasingly using MSBs to provide illegal kickbacks to physicians, launder their illegal proceeds, and take advantage of fraud victims. This behavior should disgust any American taxpayer, if not morally, think about how much of our hard-earned money over the years goes straight into these fraudsters’ pockets.
How it works:
See below an excerpt from a February 4, 2021, Department of Justice Press release titled “Florida Businesswoman Pleads Guilty to Criminal Health Care and Tax Fraud Charges and Agrees to $20.3 Million Civil False Claims Act Settlement”
[According to court documents, Wolfe and her conspirators used Regency to establish dozens of DME supply companies — or, rather, DME fronts — using trickery and deception. The scheme involved placing the DME fronts in the names of straw owners. By concealing the true ownership, Wolfe’s conspirators secretly gained control of multiple companies. With such control, they collectively submitted well over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. The conspirators claimed that the unusually high volume of claims reflected the use of telemedicine procedures, when, in fact, they had simply bribed doctors to approve them. Almost always, the doctors had no telehealth interaction with the beneficiaries.]
As you can see Wolfe established multiple shell companies and submitted over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. Another crucial element of the scheme is she bribed doctors to approve these fraudulent invoices stating they conducted telehealth services for the beneficiaries. The illegal kickbacks to doctors is what check cashing MSBs will encounter. A pattern we have picked up on is checks from companies with “Medical Equipment, DME, Braces, Devices, etc.” made payable to individuals that turn out to be physicians or money mules are likely illegal kickbacks to doctors for signing off on fraudulent DME claims.
Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]
The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.
Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.
Other Examples:
Red flags we have identified relating to DME fraud kickbacks are as follows:
• Maker names related to medical equipment writing checks out to individuals. The dollar amount can be random, but we see a lot in the $2,000 – $9,000 range. Less sophisticated actors will structure these payments to remain under the $10,000 CTR threshold.
• When you look up the registered agents of these DME companies on publicly available databases such as Sunbiz.org in Florida, they often control several other companies related to medical equipment that have been recently established. This is indicative of shell companies just like we saw in the above example from the DOJ press release.
• A payee that comes into the check cashing store and regularly cashes checks made payable from DME related companies. You may want to conduct and internet search of these individuals and determine if they are a physician.
What to do if you suspect DME fraudsters are taking advantage of your business to facilitate payments?
If you suspect a potential customer or customer is involved in DME fraud you should investigate to determine if any of the above red flags are involved. As always, you should ask yourself does this activity make sense given the nature of the alleged business? If you determine an existing customer is involved in DME fraud and has conducted transactions aggregating over the SAR dollar volume threshold, file a SAR. As always if you suspect a customer is involved in illegal activity you need to block them from doing business with you. No matter how profitable the relationship is, it’s not worth being fined, losing your license, or ending up in a Department of Justice press release.
Sources:
https://www.aarp.org/money/scams-fraud/info-2018/medicare-scams-fraud-identity-theft.html
https://oig.hhs.gov/compliance/physician-education/01laws.asp
Better Monitoring
Per federal and state guidelines, MSBs are required to monitor their customers’ transactions for suspicious and illegal activity.
Over the past year and a half, the Federal and State governments have issued a huge amount of money to individuals and businesses in the form of Covid-19 stimulus packages. Criminals have been exploiting this situation by committing financial crimes at an unprecedented rate. See a few examples below.
“IRVINE, Calif. (KABC) — An Irvine man allegedly obtained about $5 million in federal coronavirus-relief loans for his fake businesses and then spent the funds on himself, including buying Ferrari, Bentley and Lamborghini sports cars, according to federal authorities.”
“BOSTON — The owner of a Massachusetts pizza parlor lied about the number of employees he had to fraudulently obtain more than $660,000 in federal coronavirus relief funds, then used some of the money to buy and stock an alpaca farm in Vermont, federal prosecutors said Tuesday.”
“According to the report by the Times, Abidemi Rufai, of Lekki, Nigeria, was charged Saturday in federal court with using the identities of more than 100 Washington residents to steal more than $350,000 in unemployment benefits from the Washington state Employment Security Department (ESD) during the COVID-19 pandemic last year.”
How can you improve your quality of monitoring?
Here are some tips on how to get better:
Better Reporting
Reporting should be a natural extension of your monitoring practices. If you are making your monitoring a high priority, good reporting will naturally flow from those activities.
It is very important to file CTRs on a timely basis, within 15 days.
If you are using your check cashing software fully, it will help with the practice of reporting. Especially with CTRs, when a suspicious activity is identified, your software will trigger a CTR. In addition, it will aggregate the data on a customer, pulling all their transactions together if they have made multiple transactions at different times of the day.
Investing in additional features like these and learning how to use them minimizes mistakes.
For example, if a customer comes in three separate times during a day and cashes a $5,000 check each time, will your employees know to aggregate all of those transactions? If not, this is where the software can minimize mistakes.
We understand that your team is most likely not trying to intentionally ignore possible suspicious activity. However, if they get busy and are rushed, without these extra measures in place to catch mistakes they are more likely to make a human error that could cost you.
Our Commitment to You
One of our highest priorities and commitments to you is to make sure our BSA staff is highly qualified and properly trained.
As we seek to be a resource for you, we hold ourselves to the highest standard as well. We are in the business of compliance, so we take employee training, monitoring, and reporting very seriously.
If you have questions for our team and would like to connect, you can reach us here.
In this article we want to answer the major questions surrounding proper employee training so you can use this as a tool to improve the performance of your business.
Why you should train your employees
Most mistakes that MSBs make in their businesses are directly related to their lack of employee training.
Many mistakes can be avoided, and your business doesn’t have to suffer by being held back. But it takes a little bit of time and energy invested into best practices to create an environment that is geared towards training.
We see some MSBs focusing their time and attention in other places too often which leaves their employees unsure about how to handle certain situations. The result can come in the form of fines, slowed growth, losing your MSB license and even losing their banking relationship.
Another major reason to train employees is to fully utilize your resources and assets. For example, you are using a software for check cashing. Are you using just the surface level features or are you using it to its fullest potential? This software offers a lot of features that can make your employees’ jobs much easier and can create efficiencies that map to profitability. This asset alone could bring improvements that impact your business tremendously in the short and long term.
Employee training should be held as a high priority and taken seriously. If so, the result is a smooth operation, less drag on resources and time spent fixing mistakes and less worry about being in business in the coming months or years.
Taking employee training seriously is the first step to sustainable growth in your MSB business. It’s the foundation of everything you do and the bedrock of your business.
How to train your employees
One of the four pillars of BSA is required employee training.
Naturally, if training is not considered a high priority in your business, employees will find ways to fulfill this requirement without becoming more knowledgeable or getting better in their role. People are generally going to take the path of least resistance when it is offered to them unless you are creating an environment with a higher standard.
Taking a basic test online to fulfill training requirements isn’t always going to achieve the desired result. You’re not doing training just to say you completed it. The purpose of completing the training is to stay compliant, get better and avoid costly mistakes that can put you out of business.
Besides completing a standardized test to confirm your knowledge of the subject, employee training best practices include several other factors. We’ve listed some of them here.
Stay up to speed on current events that are happening in your industry, in your part of the region and in the world. This will give you context to trends you should be aware of and things to consider as suspicious activity.
Keeping yourself updated on topics like anti-money laundering, terrorist financing is a great place to spend some time once a week, reading articles and staying aware.
Looking up fines that other MSBs have had recently is a great way to stay on top of activities you should look out for in your business. Learning from others mistakes is a great mindset for protecting your business, not just staying compliant.
The WSJ has a section titled “compliance”. This is a great resource for keeping track of current day activities and what to look out for in your business.
The bottom line is that you should want to be the best at being compliant, because it’s a huge component to the business you’re in. To be the best, you have to seek out knowledge and resources to get better and instill that mentality in all of your employees.
As we seek to be the best in what we do, we want to be one of those resources and extend that knowledge to you so you can grow wisely.
If you have questions about employee training, please reach out to our team.
Resources for Training:
Anti-Money Laundering – https://www.acams.org/en
https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets/advisories
https://www.fincen.gov/news-room/enforcement-actions
Suspicious activity reporting (SAR) enables law enforcement to initiate or supplement money laundering or terrorist financing investigations as well as other criminal cases. SARs also provide FinCEN and other federal agencies in identifying trends and patterns associated with financial crimes.
The Federal Financial Institution Examinations Council (FFIEC) website states that the most important factors for effective SAR monitoring and reporting include five key components:
• Identification or alert of unusual activity (which may include employee identification, law enforcement inquiries, other referrals, and transaction and surveillance monitoring system output).
• Managing alerts.
• SAR decision making.
• SAR completion and filing.
• Monitoring and SAR filing on continuing activity.
An effective SARs must be complete, sufficient, and filed timely. The most critical part of the SAR is the narrative. The narrative should identify the five essential elements of information (who? what? when? where? and why?) for the suspicious activity being reported. The method of operation (or how?) is also important and should be included in the narrative. Remember, you need to grab the reader’s attention with the first paragraph!
We are proud to say that we have an entire BSA Department dedicated to assist our MSB customers with questions regarding SAR filing.
Over the last decade we have worked hard to provide the absolute best and highest quality support for our MSB customers, and it has proven to support them with a high level of compliance in their businesses.
As we continue to build our banking services around our MSB customers, we look at the most important factors for sustainability and compliance and make those our goal for growth.
If you have any questions about SAR best practices or would like to speak with a BSA representative, contact us at mysuretybank.com
As a partner to many MSBs throughout the country, Surety Bank has a lot of practical knowledge to share that can help you grow a better business. We take our role seriously and want to provide you with all the resources you need for growth and compliance.
As you know, for any cash transaction above $10,000 in cash, a bank, Money Service Business or any financial institution is required to file a CTR on the individual or entity that is conducting the transaction. The CTR is a form where you will enter the information requested about the person or entity in which you are filing. Then you will upload that information within 15 days. You can find more information about this time frame and answers to many other questions at the link below:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
In this article we’ll be covering how you should think about the process of filing a Currency Transaction Report (CTR). This is one of the most routine tasks you may have in your business, but getting it wrong could result in major complications to your business. So, let’s get into the top two reasons you may want to improve your process of filing a CTR.
For example, if you’re a Money Service Business in Miami and you have hundreds of customers that are coming in every day. A lot of those customers could be construction companies that are cashing checks over $10,000 on a daily basis. As an MSB, you would have to file a lot of CTRs. This can get overwhelming as it presents more work for your staff on top of your normal workload for your customers. However, overlooking details can cause a lot of trouble in the future.
Where you can get into trouble here is by skipping steps in the process or leaving out any necessary information on each customer. We see MSBs getting into trouble when they don’t take the time to properly fill out and submit the form for each of their customers. Missing information can cause red flags when getting audited.
At Surety Bank, we use software to help us automate a large amount of the work and make sure it is getting done correctly. When a customer comes in deposits $12,000, it would automatically notify us and then would auto fill their information. We would just have to send it in within the given amount of time. Some MSBs are still handling their CTRs manually. If this is you, we would highly recommend getting software to help automate your work and make the reporting more accurate.
As an MSB, you have a 15 day window from the time of the transaction to file an accurate CTR on time. It’s gotta be accurate. We’ve seen that some MSBs completely miss the 15 day window and it results negatively on them and their businesses.
A big part of MSBs missing their window or not filing at all for some customer transactions is due to a lack of oversight on specific account activity. For example, let’s say a customer comes in three times in one day and deposits $4,000 each time. That total deposited is $12,000. This requires a CTR on that customer and their transactions. Having software in place would help you catch this while handling this manually will result in many more human errors.
In Summary
If you want to be in business many years from now, our recommendation is to make compliance your competitive advantage. Just like keeping accurate tax records, filing accurate and timely CTRs is the kind of work that will keep you in business for the long haul.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
As an MSB, you are probably aware that you have to file a suspicious activity report (SAR) if you detect any kind of facts that point to suspicious financial activity. This is a necessary requirement that can either create a layer of work that detracts from your focus of growth or can become an integral part of your business and fuel growth.
Similar to a Currency Transaction Report (CTR), a SAR reports the information of the customer in question but then gives as much information about the actual suspicious activity found by your team.
Depending on the activity, some customers can fly under the radar if your team isn’t trained to spot subtle actions that add up over time or point to some larger issue. Unlike a CTR, suspicious activity is not always as noticeable. Having a team that is defaulting to a mindset of watching for suspicious activity versus trying to catch things that have already happened is a good start to making this a priority.
Here is a good example of the not so obvious suspicious activity:
Frank Smith comes into your business and asks for 12 money orders in the amount of $1000.00 each. The cash Frank hands over consists of mostly large bills. When you ask him for additional information to complete your CTR he gets defensive and is wondering why you are asking him so many questions. He asks you how much money he can deposit without having to provide additional information. He gets irritated and decides to cancel the transaction and take all his cash back.
https://www.fincen.gov/resources/statutes-regulations/...
This is an example of structuring.
Structuring is the breaking up of transactions for the purpose of evading the Bank Secrecy Act reporting and record keeping requirements and, if appropriate thresholds are met, should be reported as a suspicious transaction under 31 C.F.R. § 103.18.
Why should you make your SAR a priority?
Besides the obvious negative results that will come at some point, making your SAR process a priority puts you in the driver’s seat in your business. You are choosing to stay on top of something that will inevitably blow up if not paid significant attention.
By making this a priority you are also choosing to say no to certain less than desirable customers who might actually be a good source of revenue. As an MSB, at times you can be incentivized to ignore some types of suspicious activity. The trade off between servicing and not reporting customers who bring you revenue or not servicing those customers, is a decision that will keep you in business for many years and allow you to sleep soundly at night. Just remember that one bad customer can put you out of business.
How to properly approach SAR filing:
Use compliance as your competitive advantage. We see MSBs go out of business all the time because they aren’t prioritizing the efforts that make up the fundamentals of their business.
Have a set process for how your team identifies and reports suspicious activity. Build this into your culture. Hiring people who want to help you run a business that’s above board and giving them a solid process, means you don’t have to manage them as closely and can still get the same result.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
Durable Medical Equipment (DME) is defined as any medical equipment used in the home to aid in a better quality of living. The term includes wheelchairs, knee braces, hospital beds, nebulizers, walkers, etc. DME is a benefit included in most insurances including Medicare Part B which covers medically necessary DME that is prescribed by a physician for use in a patient’s home.
According to an AARP Bulletin titled “Medicare Under Assault From Fraudsters”, “roughly 10 cents of every dollar budgeted for the giant health insurance program is stolen or misdirected before it helps any enrollee. Malcom Sparrow, a Harvard University professor and leading expert on health care fraud, says the true amount lost to fraud, abuse or improper payments could be 20 percent, or even as high as 30 percent.” See below a graphic that puts the scale of Medicare fraud into perspective.
As you can see, DME fraud has become a huge business for criminals, and they are increasingly using MSBs to provide illegal kickbacks to physicians, launder their illegal proceeds, and take advantage of fraud victims. This behavior should disgust any American taxpayer, if not morally, think about how much of our hard-earned money over the years goes straight into these fraudsters’ pockets.
How it works:
See below an excerpt from a February 4, 2021, Department of Justice Press release titled “Florida Businesswoman Pleads Guilty to Criminal Health Care and Tax Fraud Charges and Agrees to $20.3 Million Civil False Claims Act Settlement”
[According to court documents, Wolfe and her conspirators used Regency to establish dozens of DME supply companies — or, rather, DME fronts — using trickery and deception. The scheme involved placing the DME fronts in the names of straw owners. By concealing the true ownership, Wolfe’s conspirators secretly gained control of multiple companies. With such control, they collectively submitted well over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. The conspirators claimed that the unusually high volume of claims reflected the use of telemedicine procedures, when, in fact, they had simply bribed doctors to approve them. Almost always, the doctors had no telehealth interaction with the beneficiaries.]
As you can see Wolfe established multiple shell companies and submitted over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. Another crucial element of the scheme is she bribed doctors to approve these fraudulent invoices stating they conducted telehealth services for the beneficiaries. The illegal kickbacks to doctors is what check cashing MSBs will encounter. A pattern we have picked up on is checks from companies with “Medical Equipment, DME, Braces, Devices, etc.” made payable to individuals that turn out to be physicians or money mules are likely illegal kickbacks to doctors for signing off on fraudulent DME claims.
Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]
The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.
Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.
Other Examples:
Red flags we have identified relating to DME fraud kickbacks are as follows:
• Maker names related to medical equipment writing checks out to individuals. The dollar amount can be random, but we see a lot in the $2,000 – $9,000 range. Less sophisticated actors will structure these payments to remain under the $10,000 CTR threshold.
• When you look up the registered agents of these DME companies on publicly available databases such as Sunbiz.org in Florida, they often control several other companies related to medical equipment that have been recently established. This is indicative of shell companies just like we saw in the above example from the DOJ press release.
• A payee that comes into the check cashing store and regularly cashes checks made payable from DME related companies. You may want to conduct and internet search of these individuals and determine if they are a physician.
What to do if you suspect DME fraudsters are taking advantage of your business to facilitate payments?
If you suspect a potential customer or customer is involved in DME fraud you should investigate to determine if any of the above red flags are involved. As always, you should ask yourself does this activity make sense given the nature of the alleged business? If you determine an existing customer is involved in DME fraud and has conducted transactions aggregating over the SAR dollar volume threshold, file a SAR. As always if you suspect a customer is involved in illegal activity you need to block them from doing business with you. No matter how profitable the relationship is, it’s not worth being fined, losing your license, or ending up in a Department of Justice press release.
Sources:
https://www.aarp.org/money/scams-fraud/info-2018/medicare-scams-fraud-identity-theft.html
https://oig.hhs.gov/compliance/physician-education/01laws.asp
Better Monitoring
Per federal and state guidelines, MSBs are required to monitor their customers’ transactions for suspicious and illegal activity.
Over the past year and a half, the Federal and State governments have issued a huge amount of money to individuals and businesses in the form of Covid-19 stimulus packages. Criminals have been exploiting this situation by committing financial crimes at an unprecedented rate. See a few examples below.
“IRVINE, Calif. (KABC) — An Irvine man allegedly obtained about $5 million in federal coronavirus-relief loans for his fake businesses and then spent the funds on himself, including buying Ferrari, Bentley and Lamborghini sports cars, according to federal authorities.”
“BOSTON — The owner of a Massachusetts pizza parlor lied about the number of employees he had to fraudulently obtain more than $660,000 in federal coronavirus relief funds, then used some of the money to buy and stock an alpaca farm in Vermont, federal prosecutors said Tuesday.”
“According to the report by the Times, Abidemi Rufai, of Lekki, Nigeria, was charged Saturday in federal court with using the identities of more than 100 Washington residents to steal more than $350,000 in unemployment benefits from the Washington state Employment Security Department (ESD) during the COVID-19 pandemic last year.”
How can you improve your quality of monitoring?
Here are some tips on how to get better:
Better Reporting
Reporting should be a natural extension of your monitoring practices. If you are making your monitoring a high priority, good reporting will naturally flow from those activities.
It is very important to file CTRs on a timely basis, within 15 days.
If you are using your check cashing software fully, it will help with the practice of reporting. Especially with CTRs, when a suspicious activity is identified, your software will trigger a CTR. In addition, it will aggregate the data on a customer, pulling all their transactions together if they have made multiple transactions at different times of the day.
Investing in additional features like these and learning how to use them minimizes mistakes.
For example, if a customer comes in three separate times during a day and cashes a $5,000 check each time, will your employees know to aggregate all of those transactions? If not, this is where the software can minimize mistakes.
We understand that your team is most likely not trying to intentionally ignore possible suspicious activity. However, if they get busy and are rushed, without these extra measures in place to catch mistakes they are more likely to make a human error that could cost you.
Our Commitment to You
One of our highest priorities and commitments to you is to make sure our BSA staff is highly qualified and properly trained.
As we seek to be a resource for you, we hold ourselves to the highest standard as well. We are in the business of compliance, so we take employee training, monitoring, and reporting very seriously.
If you have questions for our team and would like to connect, you can reach us here.
In this article we want to answer the major questions surrounding proper employee training so you can use this as a tool to improve the performance of your business.
Why you should train your employees
Most mistakes that MSBs make in their businesses are directly related to their lack of employee training.
Many mistakes can be avoided, and your business doesn’t have to suffer by being held back. But it takes a little bit of time and energy invested into best practices to create an environment that is geared towards training.
We see some MSBs focusing their time and attention in other places too often which leaves their employees unsure about how to handle certain situations. The result can come in the form of fines, slowed growth, losing your MSB license and even losing their banking relationship.
Another major reason to train employees is to fully utilize your resources and assets. For example, you are using a software for check cashing. Are you using just the surface level features or are you using it to its fullest potential? This software offers a lot of features that can make your employees’ jobs much easier and can create efficiencies that map to profitability. This asset alone could bring improvements that impact your business tremendously in the short and long term.
Employee training should be held as a high priority and taken seriously. If so, the result is a smooth operation, less drag on resources and time spent fixing mistakes and less worry about being in business in the coming months or years.
Taking employee training seriously is the first step to sustainable growth in your MSB business. It’s the foundation of everything you do and the bedrock of your business.
How to train your employees
One of the four pillars of BSA is required employee training.
Naturally, if training is not considered a high priority in your business, employees will find ways to fulfill this requirement without becoming more knowledgeable or getting better in their role. People are generally going to take the path of least resistance when it is offered to them unless you are creating an environment with a higher standard.
Taking a basic test online to fulfill training requirements isn’t always going to achieve the desired result. You’re not doing training just to say you completed it. The purpose of completing the training is to stay compliant, get better and avoid costly mistakes that can put you out of business.
Besides completing a standardized test to confirm your knowledge of the subject, employee training best practices include several other factors. We’ve listed some of them here.
Stay up to speed on current events that are happening in your industry, in your part of the region and in the world. This will give you context to trends you should be aware of and things to consider as suspicious activity.
Keeping yourself updated on topics like anti-money laundering, terrorist financing is a great place to spend some time once a week, reading articles and staying aware.
Looking up fines that other MSBs have had recently is a great way to stay on top of activities you should look out for in your business. Learning from others mistakes is a great mindset for protecting your business, not just staying compliant.
The WSJ has a section titled “compliance”. This is a great resource for keeping track of current day activities and what to look out for in your business.
The bottom line is that you should want to be the best at being compliant, because it’s a huge component to the business you’re in. To be the best, you have to seek out knowledge and resources to get better and instill that mentality in all of your employees.
As we seek to be the best in what we do, we want to be one of those resources and extend that knowledge to you so you can grow wisely.
If you have questions about employee training, please reach out to our team.
Resources for Training:
Anti-Money Laundering – https://www.acams.org/en
https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets/advisories
https://www.fincen.gov/news-room/enforcement-actions
Suspicious activity reporting (SAR) enables law enforcement to initiate or supplement money laundering or terrorist financing investigations as well as other criminal cases. SARs also provide FinCEN and other federal agencies in identifying trends and patterns associated with financial crimes.
The Federal Financial Institution Examinations Council (FFIEC) website states that the most important factors for effective SAR monitoring and reporting include five key components:
• Identification or alert of unusual activity (which may include employee identification, law enforcement inquiries, other referrals, and transaction and surveillance monitoring system output).
• Managing alerts.
• SAR decision making.
• SAR completion and filing.
• Monitoring and SAR filing on continuing activity.
An effective SARs must be complete, sufficient, and filed timely. The most critical part of the SAR is the narrative. The narrative should identify the five essential elements of information (who? what? when? where? and why?) for the suspicious activity being reported. The method of operation (or how?) is also important and should be included in the narrative. Remember, you need to grab the reader’s attention with the first paragraph!
We are proud to say that we have an entire BSA Department dedicated to assist our MSB customers with questions regarding SAR filing.
Over the last decade we have worked hard to provide the absolute best and highest quality support for our MSB customers, and it has proven to support them with a high level of compliance in their businesses.
As we continue to build our banking services around our MSB customers, we look at the most important factors for sustainability and compliance and make those our goal for growth.
If you have any questions about SAR best practices or would like to speak with a BSA representative, contact us at mysuretybank.com
As a partner to many MSBs throughout the country, Surety Bank has a lot of practical knowledge to share that can help you grow a better business. We take our role seriously and want to provide you with all the resources you need for growth and compliance.
As you know, for any cash transaction above $10,000 in cash, a bank, Money Service Business or any financial institution is required to file a CTR on the individual or entity that is conducting the transaction. The CTR is a form where you will enter the information requested about the person or entity in which you are filing. Then you will upload that information within 15 days. You can find more information about this time frame and answers to many other questions at the link below:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
In this article we’ll be covering how you should think about the process of filing a Currency Transaction Report (CTR). This is one of the most routine tasks you may have in your business, but getting it wrong could result in major complications to your business. So, let’s get into the top two reasons you may want to improve your process of filing a CTR.
For example, if you’re a Money Service Business in Miami and you have hundreds of customers that are coming in every day. A lot of those customers could be construction companies that are cashing checks over $10,000 on a daily basis. As an MSB, you would have to file a lot of CTRs. This can get overwhelming as it presents more work for your staff on top of your normal workload for your customers. However, overlooking details can cause a lot of trouble in the future.
Where you can get into trouble here is by skipping steps in the process or leaving out any necessary information on each customer. We see MSBs getting into trouble when they don’t take the time to properly fill out and submit the form for each of their customers. Missing information can cause red flags when getting audited.
At Surety Bank, we use software to help us automate a large amount of the work and make sure it is getting done correctly. When a customer comes in deposits $12,000, it would automatically notify us and then would auto fill their information. We would just have to send it in within the given amount of time. Some MSBs are still handling their CTRs manually. If this is you, we would highly recommend getting software to help automate your work and make the reporting more accurate.
As an MSB, you have a 15 day window from the time of the transaction to file an accurate CTR on time. It’s gotta be accurate. We’ve seen that some MSBs completely miss the 15 day window and it results negatively on them and their businesses.
A big part of MSBs missing their window or not filing at all for some customer transactions is due to a lack of oversight on specific account activity. For example, let’s say a customer comes in three times in one day and deposits $4,000 each time. That total deposited is $12,000. This requires a CTR on that customer and their transactions. Having software in place would help you catch this while handling this manually will result in many more human errors.
In Summary
If you want to be in business many years from now, our recommendation is to make compliance your competitive advantage. Just like keeping accurate tax records, filing accurate and timely CTRs is the kind of work that will keep you in business for the long haul.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
As an MSB, you are probably aware that you have to file a suspicious activity report (SAR) if you detect any kind of facts that point to suspicious financial activity. This is a necessary requirement that can either create a layer of work that detracts from your focus of growth or can become an integral part of your business and fuel growth.
Similar to a Currency Transaction Report (CTR), a SAR reports the information of the customer in question but then gives as much information about the actual suspicious activity found by your team.
Depending on the activity, some customers can fly under the radar if your team isn’t trained to spot subtle actions that add up over time or point to some larger issue. Unlike a CTR, suspicious activity is not always as noticeable. Having a team that is defaulting to a mindset of watching for suspicious activity versus trying to catch things that have already happened is a good start to making this a priority.
Here is a good example of the not so obvious suspicious activity:
Frank Smith comes into your business and asks for 12 money orders in the amount of $1000.00 each. The cash Frank hands over consists of mostly large bills. When you ask him for additional information to complete your CTR he gets defensive and is wondering why you are asking him so many questions. He asks you how much money he can deposit without having to provide additional information. He gets irritated and decides to cancel the transaction and take all his cash back.
https://www.fincen.gov/resources/statutes-regulations/...
This is an example of structuring.
Structuring is the breaking up of transactions for the purpose of evading the Bank Secrecy Act reporting and record keeping requirements and, if appropriate thresholds are met, should be reported as a suspicious transaction under 31 C.F.R. § 103.18.
Why should you make your SAR a priority?
Besides the obvious negative results that will come at some point, making your SAR process a priority puts you in the driver’s seat in your business. You are choosing to stay on top of something that will inevitably blow up if not paid significant attention.
By making this a priority you are also choosing to say no to certain less than desirable customers who might actually be a good source of revenue. As an MSB, at times you can be incentivized to ignore some types of suspicious activity. The trade off between servicing and not reporting customers who bring you revenue or not servicing those customers, is a decision that will keep you in business for many years and allow you to sleep soundly at night. Just remember that one bad customer can put you out of business.
How to properly approach SAR filing:
Use compliance as your competitive advantage. We see MSBs go out of business all the time because they aren’t prioritizing the efforts that make up the fundamentals of their business.
Have a set process for how your team identifies and reports suspicious activity. Build this into your culture. Hiring people who want to help you run a business that’s above board and giving them a solid process, means you don’t have to manage them as closely and can still get the same result.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
Our ultimate goal with our MSB community is to be a resourceful partner in compliance. We want to see you succeed and see your customers succeed. In this article we’ll cover the very important topic of passing a state exam or an audit. We want to help you understand how to approach it and steps you can take to be successful.
Be Organized
This may seem at first like the simplest approach, but we see MSBs everyday who don’t have their business and paperwork in order. They don’t have foundational systems in which they run their business and it shows in their disorganization. Most of the time not having a formal process that your team can work from begins to disrupt all kinds of other aspects of your business.
Making the choice to get organized is of high value when it comes to passing any state exam or audit. Knowing you can put your hands on any documents that are requested is a good feeling and excellent way to know what is happening at any time in your business. Scrambling last minute to find information usually results in undue stress on you and your team and inevitably creates bigger problems as one event leads to another.
Be Aware of What’s Required
The great part of any state exam or audit is that it is not a mystery. Everything that is required of you is available online. If you want to build a process around a successful exam, take a look at the appropriate resources and prepare accordingly.
Below is the link to the FinCEN MSB Exam manual. This is what FinCEN uses when conducting an exam on a MSB. Studying this document is like getting a copy of the test before you take it.
https://www.fincen.gov/sites/default/files/shared/MSB_Exam_Manual.pdf
There are all the resources you need to comply with the agency who will be examining your business. The bottomline is that you and your team just have to do the front end work of studying them so you can organize your process around them.
Be Respectful
Having helped many MSBs for many years, we’ve seen the potential for some of them to not respect the position or authority of the examiner and the role they play in keeping the industry regulated. As an MSB, it is important for you to do your part in complying with the regulators.
Regulators are just normal people that put on their pants on one leg at a time, just like we do. So treating them with respect and not having a confrontational relationship with them typically leads to them not making you have a bad day. This is very similar to your interaction with a police officer. When you get pulled over, it’s better to just cooperate with their requests (license, registration etc) rather than being disrespectful.
In summary, our best advice is to do the right thing every day. Then it’s not going to feel like you’ve got two years worth of weight on your shoulders trying to get ready for an exam.
If you would like more information on this topic or any topic that is related to running a successfully compliant business, reach out to our BSA team at www.mysuretybank.com/msb.
Durable Medical Equipment (DME) is defined as any medical equipment used in the home to aid in a better quality of living. The term includes wheelchairs, knee braces, hospital beds, nebulizers, walkers, etc. DME is a benefit included in most insurances including Medicare Part B which covers medically necessary DME that is prescribed by a physician for use in a patient’s home.
According to an AARP Bulletin titled “Medicare Under Assault From Fraudsters”, “roughly 10 cents of every dollar budgeted for the giant health insurance program is stolen or misdirected before it helps any enrollee. Malcom Sparrow, a Harvard University professor and leading expert on health care fraud, says the true amount lost to fraud, abuse or improper payments could be 20 percent, or even as high as 30 percent.” See below a graphic that puts the scale of Medicare fraud into perspective.
As you can see, DME fraud has become a huge business for criminals, and they are increasingly using MSBs to provide illegal kickbacks to physicians, launder their illegal proceeds, and take advantage of fraud victims. This behavior should disgust any American taxpayer, if not morally, think about how much of our hard-earned money over the years goes straight into these fraudsters’ pockets.
How it works:
See below an excerpt from a February 4, 2021, Department of Justice Press release titled “Florida Businesswoman Pleads Guilty to Criminal Health Care and Tax Fraud Charges and Agrees to $20.3 Million Civil False Claims Act Settlement”
[According to court documents, Wolfe and her conspirators used Regency to establish dozens of DME supply companies — or, rather, DME fronts — using trickery and deception. The scheme involved placing the DME fronts in the names of straw owners. By concealing the true ownership, Wolfe’s conspirators secretly gained control of multiple companies. With such control, they collectively submitted well over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. The conspirators claimed that the unusually high volume of claims reflected the use of telemedicine procedures, when, in fact, they had simply bribed doctors to approve them. Almost always, the doctors had no telehealth interaction with the beneficiaries.]
As you can see Wolfe established multiple shell companies and submitted over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. Another crucial element of the scheme is she bribed doctors to approve these fraudulent invoices stating they conducted telehealth services for the beneficiaries. The illegal kickbacks to doctors is what check cashing MSBs will encounter. A pattern we have picked up on is checks from companies with “Medical Equipment, DME, Braces, Devices, etc.” made payable to individuals that turn out to be physicians or money mules are likely illegal kickbacks to doctors for signing off on fraudulent DME claims.
Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]
The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.
Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.
Other Examples:
Red flags we have identified relating to DME fraud kickbacks are as follows:
• Maker names related to medical equipment writing checks out to individuals. The dollar amount can be random, but we see a lot in the $2,000 – $9,000 range. Less sophisticated actors will structure these payments to remain under the $10,000 CTR threshold.
• When you look up the registered agents of these DME companies on publicly available databases such as Sunbiz.org in Florida, they often control several other companies related to medical equipment that have been recently established. This is indicative of shell companies just like we saw in the above example from the DOJ press release.
• A payee that comes into the check cashing store and regularly cashes checks made payable from DME related companies. You may want to conduct and internet search of these individuals and determine if they are a physician.
What to do if you suspect DME fraudsters are taking advantage of your business to facilitate payments?
If you suspect a potential customer or customer is involved in DME fraud you should investigate to determine if any of the above red flags are involved. As always, you should ask yourself does this activity make sense given the nature of the alleged business? If you determine an existing customer is involved in DME fraud and has conducted transactions aggregating over the SAR dollar volume threshold, file a SAR. As always if you suspect a customer is involved in illegal activity you need to block them from doing business with you. No matter how profitable the relationship is, it’s not worth being fined, losing your license, or ending up in a Department of Justice press release.
Sources:
https://www.aarp.org/money/scams-fraud/info-2018/medicare-scams-fraud-identity-theft.html
https://oig.hhs.gov/compliance/physician-education/01laws.asp
Better Monitoring
Per federal and state guidelines, MSBs are required to monitor their customers’ transactions for suspicious and illegal activity.
Over the past year and a half, the Federal and State governments have issued a huge amount of money to individuals and businesses in the form of Covid-19 stimulus packages. Criminals have been exploiting this situation by committing financial crimes at an unprecedented rate. See a few examples below.
“IRVINE, Calif. (KABC) — An Irvine man allegedly obtained about $5 million in federal coronavirus-relief loans for his fake businesses and then spent the funds on himself, including buying Ferrari, Bentley and Lamborghini sports cars, according to federal authorities.”
“BOSTON — The owner of a Massachusetts pizza parlor lied about the number of employees he had to fraudulently obtain more than $660,000 in federal coronavirus relief funds, then used some of the money to buy and stock an alpaca farm in Vermont, federal prosecutors said Tuesday.”
“According to the report by the Times, Abidemi Rufai, of Lekki, Nigeria, was charged Saturday in federal court with using the identities of more than 100 Washington residents to steal more than $350,000 in unemployment benefits from the Washington state Employment Security Department (ESD) during the COVID-19 pandemic last year.”
How can you improve your quality of monitoring?
Here are some tips on how to get better:
Better Reporting
Reporting should be a natural extension of your monitoring practices. If you are making your monitoring a high priority, good reporting will naturally flow from those activities.
It is very important to file CTRs on a timely basis, within 15 days.
If you are using your check cashing software fully, it will help with the practice of reporting. Especially with CTRs, when a suspicious activity is identified, your software will trigger a CTR. In addition, it will aggregate the data on a customer, pulling all their transactions together if they have made multiple transactions at different times of the day.
Investing in additional features like these and learning how to use them minimizes mistakes.
For example, if a customer comes in three separate times during a day and cashes a $5,000 check each time, will your employees know to aggregate all of those transactions? If not, this is where the software can minimize mistakes.
We understand that your team is most likely not trying to intentionally ignore possible suspicious activity. However, if they get busy and are rushed, without these extra measures in place to catch mistakes they are more likely to make a human error that could cost you.
Our Commitment to You
One of our highest priorities and commitments to you is to make sure our BSA staff is highly qualified and properly trained.
As we seek to be a resource for you, we hold ourselves to the highest standard as well. We are in the business of compliance, so we take employee training, monitoring, and reporting very seriously.
If you have questions for our team and would like to connect, you can reach us here.
In this article we want to answer the major questions surrounding proper employee training so you can use this as a tool to improve the performance of your business.
Why you should train your employees
Most mistakes that MSBs make in their businesses are directly related to their lack of employee training.
Many mistakes can be avoided, and your business doesn’t have to suffer by being held back. But it takes a little bit of time and energy invested into best practices to create an environment that is geared towards training.
We see some MSBs focusing their time and attention in other places too often which leaves their employees unsure about how to handle certain situations. The result can come in the form of fines, slowed growth, losing your MSB license and even losing their banking relationship.
Another major reason to train employees is to fully utilize your resources and assets. For example, you are using a software for check cashing. Are you using just the surface level features or are you using it to its fullest potential? This software offers a lot of features that can make your employees’ jobs much easier and can create efficiencies that map to profitability. This asset alone could bring improvements that impact your business tremendously in the short and long term.
Employee training should be held as a high priority and taken seriously. If so, the result is a smooth operation, less drag on resources and time spent fixing mistakes and less worry about being in business in the coming months or years.
Taking employee training seriously is the first step to sustainable growth in your MSB business. It’s the foundation of everything you do and the bedrock of your business.
How to train your employees
One of the four pillars of BSA is required employee training.
Naturally, if training is not considered a high priority in your business, employees will find ways to fulfill this requirement without becoming more knowledgeable or getting better in their role. People are generally going to take the path of least resistance when it is offered to them unless you are creating an environment with a higher standard.
Taking a basic test online to fulfill training requirements isn’t always going to achieve the desired result. You’re not doing training just to say you completed it. The purpose of completing the training is to stay compliant, get better and avoid costly mistakes that can put you out of business.
Besides completing a standardized test to confirm your knowledge of the subject, employee training best practices include several other factors. We’ve listed some of them here.
Stay up to speed on current events that are happening in your industry, in your part of the region and in the world. This will give you context to trends you should be aware of and things to consider as suspicious activity.
Keeping yourself updated on topics like anti-money laundering, terrorist financing is a great place to spend some time once a week, reading articles and staying aware.
Looking up fines that other MSBs have had recently is a great way to stay on top of activities you should look out for in your business. Learning from others mistakes is a great mindset for protecting your business, not just staying compliant.
The WSJ has a section titled “compliance”. This is a great resource for keeping track of current day activities and what to look out for in your business.
The bottom line is that you should want to be the best at being compliant, because it’s a huge component to the business you’re in. To be the best, you have to seek out knowledge and resources to get better and instill that mentality in all of your employees.
As we seek to be the best in what we do, we want to be one of those resources and extend that knowledge to you so you can grow wisely.
If you have questions about employee training, please reach out to our team.
Resources for Training:
Anti-Money Laundering – https://www.acams.org/en
https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets/advisories
https://www.fincen.gov/news-room/enforcement-actions
Suspicious activity reporting (SAR) enables law enforcement to initiate or supplement money laundering or terrorist financing investigations as well as other criminal cases. SARs also provide FinCEN and other federal agencies in identifying trends and patterns associated with financial crimes.
The Federal Financial Institution Examinations Council (FFIEC) website states that the most important factors for effective SAR monitoring and reporting include five key components:
• Identification or alert of unusual activity (which may include employee identification, law enforcement inquiries, other referrals, and transaction and surveillance monitoring system output).
• Managing alerts.
• SAR decision making.
• SAR completion and filing.
• Monitoring and SAR filing on continuing activity.
An effective SARs must be complete, sufficient, and filed timely. The most critical part of the SAR is the narrative. The narrative should identify the five essential elements of information (who? what? when? where? and why?) for the suspicious activity being reported. The method of operation (or how?) is also important and should be included in the narrative. Remember, you need to grab the reader’s attention with the first paragraph!
We are proud to say that we have an entire BSA Department dedicated to assist our MSB customers with questions regarding SAR filing.
Over the last decade we have worked hard to provide the absolute best and highest quality support for our MSB customers, and it has proven to support them with a high level of compliance in their businesses.
As we continue to build our banking services around our MSB customers, we look at the most important factors for sustainability and compliance and make those our goal for growth.
If you have any questions about SAR best practices or would like to speak with a BSA representative, contact us at mysuretybank.com
As a partner to many MSBs throughout the country, Surety Bank has a lot of practical knowledge to share that can help you grow a better business. We take our role seriously and want to provide you with all the resources you need for growth and compliance.
As you know, for any cash transaction above $10,000 in cash, a bank, Money Service Business or any financial institution is required to file a CTR on the individual or entity that is conducting the transaction. The CTR is a form where you will enter the information requested about the person or entity in which you are filing. Then you will upload that information within 15 days. You can find more information about this time frame and answers to many other questions at the link below:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
In this article we’ll be covering how you should think about the process of filing a Currency Transaction Report (CTR). This is one of the most routine tasks you may have in your business, but getting it wrong could result in major complications to your business. So, let’s get into the top two reasons you may want to improve your process of filing a CTR.
For example, if you’re a Money Service Business in Miami and you have hundreds of customers that are coming in every day. A lot of those customers could be construction companies that are cashing checks over $10,000 on a daily basis. As an MSB, you would have to file a lot of CTRs. This can get overwhelming as it presents more work for your staff on top of your normal workload for your customers. However, overlooking details can cause a lot of trouble in the future.
Where you can get into trouble here is by skipping steps in the process or leaving out any necessary information on each customer. We see MSBs getting into trouble when they don’t take the time to properly fill out and submit the form for each of their customers. Missing information can cause red flags when getting audited.
At Surety Bank, we use software to help us automate a large amount of the work and make sure it is getting done correctly. When a customer comes in deposits $12,000, it would automatically notify us and then would auto fill their information. We would just have to send it in within the given amount of time. Some MSBs are still handling their CTRs manually. If this is you, we would highly recommend getting software to help automate your work and make the reporting more accurate.
As an MSB, you have a 15 day window from the time of the transaction to file an accurate CTR on time. It’s gotta be accurate. We’ve seen that some MSBs completely miss the 15 day window and it results negatively on them and their businesses.
A big part of MSBs missing their window or not filing at all for some customer transactions is due to a lack of oversight on specific account activity. For example, let’s say a customer comes in three times in one day and deposits $4,000 each time. That total deposited is $12,000. This requires a CTR on that customer and their transactions. Having software in place would help you catch this while handling this manually will result in many more human errors.
In Summary
If you want to be in business many years from now, our recommendation is to make compliance your competitive advantage. Just like keeping accurate tax records, filing accurate and timely CTRs is the kind of work that will keep you in business for the long haul.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
As an MSB, you are probably aware that you have to file a suspicious activity report (SAR) if you detect any kind of facts that point to suspicious financial activity. This is a necessary requirement that can either create a layer of work that detracts from your focus of growth or can become an integral part of your business and fuel growth.
Similar to a Currency Transaction Report (CTR), a SAR reports the information of the customer in question but then gives as much information about the actual suspicious activity found by your team.
Depending on the activity, some customers can fly under the radar if your team isn’t trained to spot subtle actions that add up over time or point to some larger issue. Unlike a CTR, suspicious activity is not always as noticeable. Having a team that is defaulting to a mindset of watching for suspicious activity versus trying to catch things that have already happened is a good start to making this a priority.
Here is a good example of the not so obvious suspicious activity:
Frank Smith comes into your business and asks for 12 money orders in the amount of $1000.00 each. The cash Frank hands over consists of mostly large bills. When you ask him for additional information to complete your CTR he gets defensive and is wondering why you are asking him so many questions. He asks you how much money he can deposit without having to provide additional information. He gets irritated and decides to cancel the transaction and take all his cash back.
https://www.fincen.gov/resources/statutes-regulations/...
This is an example of structuring.
Structuring is the breaking up of transactions for the purpose of evading the Bank Secrecy Act reporting and record keeping requirements and, if appropriate thresholds are met, should be reported as a suspicious transaction under 31 C.F.R. § 103.18.
Why should you make your SAR a priority?
Besides the obvious negative results that will come at some point, making your SAR process a priority puts you in the driver’s seat in your business. You are choosing to stay on top of something that will inevitably blow up if not paid significant attention.
By making this a priority you are also choosing to say no to certain less than desirable customers who might actually be a good source of revenue. As an MSB, at times you can be incentivized to ignore some types of suspicious activity. The trade off between servicing and not reporting customers who bring you revenue or not servicing those customers, is a decision that will keep you in business for many years and allow you to sleep soundly at night. Just remember that one bad customer can put you out of business.
How to properly approach SAR filing:
Use compliance as your competitive advantage. We see MSBs go out of business all the time because they aren’t prioritizing the efforts that make up the fundamentals of their business.
Have a set process for how your team identifies and reports suspicious activity. Build this into your culture. Hiring people who want to help you run a business that’s above board and giving them a solid process, means you don’t have to manage them as closely and can still get the same result.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
Durable Medical Equipment (DME) is defined as any medical equipment used in the home to aid in a better quality of living. The term includes wheelchairs, knee braces, hospital beds, nebulizers, walkers, etc. DME is a benefit included in most insurances including Medicare Part B which covers medically necessary DME that is prescribed by a physician for use in a patient’s home.
According to an AARP Bulletin titled “Medicare Under Assault From Fraudsters”, “roughly 10 cents of every dollar budgeted for the giant health insurance program is stolen or misdirected before it helps any enrollee. Malcom Sparrow, a Harvard University professor and leading expert on health care fraud, says the true amount lost to fraud, abuse or improper payments could be 20 percent, or even as high as 30 percent.” See below a graphic that puts the scale of Medicare fraud into perspective.
As you can see, DME fraud has become a huge business for criminals, and they are increasingly using MSBs to provide illegal kickbacks to physicians, launder their illegal proceeds, and take advantage of fraud victims. This behavior should disgust any American taxpayer, if not morally, think about how much of our hard-earned money over the years goes straight into these fraudsters’ pockets.
How it works:
See below an excerpt from a February 4, 2021, Department of Justice Press release titled “Florida Businesswoman Pleads Guilty to Criminal Health Care and Tax Fraud Charges and Agrees to $20.3 Million Civil False Claims Act Settlement”
[According to court documents, Wolfe and her conspirators used Regency to establish dozens of DME supply companies — or, rather, DME fronts — using trickery and deception. The scheme involved placing the DME fronts in the names of straw owners. By concealing the true ownership, Wolfe’s conspirators secretly gained control of multiple companies. With such control, they collectively submitted well over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. The conspirators claimed that the unusually high volume of claims reflected the use of telemedicine procedures, when, in fact, they had simply bribed doctors to approve them. Almost always, the doctors had no telehealth interaction with the beneficiaries.]
As you can see Wolfe established multiple shell companies and submitted over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. Another crucial element of the scheme is she bribed doctors to approve these fraudulent invoices stating they conducted telehealth services for the beneficiaries. The illegal kickbacks to doctors is what check cashing MSBs will encounter. A pattern we have picked up on is checks from companies with “Medical Equipment, DME, Braces, Devices, etc.” made payable to individuals that turn out to be physicians or money mules are likely illegal kickbacks to doctors for signing off on fraudulent DME claims.
Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]
The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.
Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.
Other Examples:
Red flags we have identified relating to DME fraud kickbacks are as follows:
• Maker names related to medical equipment writing checks out to individuals. The dollar amount can be random, but we see a lot in the $2,000 – $9,000 range. Less sophisticated actors will structure these payments to remain under the $10,000 CTR threshold.
• When you look up the registered agents of these DME companies on publicly available databases such as Sunbiz.org in Florida, they often control several other companies related to medical equipment that have been recently established. This is indicative of shell companies just like we saw in the above example from the DOJ press release.
• A payee that comes into the check cashing store and regularly cashes checks made payable from DME related companies. You may want to conduct and internet search of these individuals and determine if they are a physician.
What to do if you suspect DME fraudsters are taking advantage of your business to facilitate payments?
If you suspect a potential customer or customer is involved in DME fraud you should investigate to determine if any of the above red flags are involved. As always, you should ask yourself does this activity make sense given the nature of the alleged business? If you determine an existing customer is involved in DME fraud and has conducted transactions aggregating over the SAR dollar volume threshold, file a SAR. As always if you suspect a customer is involved in illegal activity you need to block them from doing business with you. No matter how profitable the relationship is, it’s not worth being fined, losing your license, or ending up in a Department of Justice press release.
Sources:
https://www.aarp.org/money/scams-fraud/info-2018/medicare-scams-fraud-identity-theft.html
https://oig.hhs.gov/compliance/physician-education/01laws.asp
Better Monitoring
Per federal and state guidelines, MSBs are required to monitor their customers’ transactions for suspicious and illegal activity.
Over the past year and a half, the Federal and State governments have issued a huge amount of money to individuals and businesses in the form of Covid-19 stimulus packages. Criminals have been exploiting this situation by committing financial crimes at an unprecedented rate. See a few examples below.
“IRVINE, Calif. (KABC) — An Irvine man allegedly obtained about $5 million in federal coronavirus-relief loans for his fake businesses and then spent the funds on himself, including buying Ferrari, Bentley and Lamborghini sports cars, according to federal authorities.”
“BOSTON — The owner of a Massachusetts pizza parlor lied about the number of employees he had to fraudulently obtain more than $660,000 in federal coronavirus relief funds, then used some of the money to buy and stock an alpaca farm in Vermont, federal prosecutors said Tuesday.”
“According to the report by the Times, Abidemi Rufai, of Lekki, Nigeria, was charged Saturday in federal court with using the identities of more than 100 Washington residents to steal more than $350,000 in unemployment benefits from the Washington state Employment Security Department (ESD) during the COVID-19 pandemic last year.”
How can you improve your quality of monitoring?
Here are some tips on how to get better:
Better Reporting
Reporting should be a natural extension of your monitoring practices. If you are making your monitoring a high priority, good reporting will naturally flow from those activities.
It is very important to file CTRs on a timely basis, within 15 days.
If you are using your check cashing software fully, it will help with the practice of reporting. Especially with CTRs, when a suspicious activity is identified, your software will trigger a CTR. In addition, it will aggregate the data on a customer, pulling all their transactions together if they have made multiple transactions at different times of the day.
Investing in additional features like these and learning how to use them minimizes mistakes.
For example, if a customer comes in three separate times during a day and cashes a $5,000 check each time, will your employees know to aggregate all of those transactions? If not, this is where the software can minimize mistakes.
We understand that your team is most likely not trying to intentionally ignore possible suspicious activity. However, if they get busy and are rushed, without these extra measures in place to catch mistakes they are more likely to make a human error that could cost you.
Our Commitment to You
One of our highest priorities and commitments to you is to make sure our BSA staff is highly qualified and properly trained.
As we seek to be a resource for you, we hold ourselves to the highest standard as well. We are in the business of compliance, so we take employee training, monitoring, and reporting very seriously.
If you have questions for our team and would like to connect, you can reach us here.
In this article we want to answer the major questions surrounding proper employee training so you can use this as a tool to improve the performance of your business.
Why you should train your employees
Most mistakes that MSBs make in their businesses are directly related to their lack of employee training.
Many mistakes can be avoided, and your business doesn’t have to suffer by being held back. But it takes a little bit of time and energy invested into best practices to create an environment that is geared towards training.
We see some MSBs focusing their time and attention in other places too often which leaves their employees unsure about how to handle certain situations. The result can come in the form of fines, slowed growth, losing your MSB license and even losing their banking relationship.
Another major reason to train employees is to fully utilize your resources and assets. For example, you are using a software for check cashing. Are you using just the surface level features or are you using it to its fullest potential? This software offers a lot of features that can make your employees’ jobs much easier and can create efficiencies that map to profitability. This asset alone could bring improvements that impact your business tremendously in the short and long term.
Employee training should be held as a high priority and taken seriously. If so, the result is a smooth operation, less drag on resources and time spent fixing mistakes and less worry about being in business in the coming months or years.
Taking employee training seriously is the first step to sustainable growth in your MSB business. It’s the foundation of everything you do and the bedrock of your business.
How to train your employees
One of the four pillars of BSA is required employee training.
Naturally, if training is not considered a high priority in your business, employees will find ways to fulfill this requirement without becoming more knowledgeable or getting better in their role. People are generally going to take the path of least resistance when it is offered to them unless you are creating an environment with a higher standard.
Taking a basic test online to fulfill training requirements isn’t always going to achieve the desired result. You’re not doing training just to say you completed it. The purpose of completing the training is to stay compliant, get better and avoid costly mistakes that can put you out of business.
Besides completing a standardized test to confirm your knowledge of the subject, employee training best practices include several other factors. We’ve listed some of them here.
Stay up to speed on current events that are happening in your industry, in your part of the region and in the world. This will give you context to trends you should be aware of and things to consider as suspicious activity.
Keeping yourself updated on topics like anti-money laundering, terrorist financing is a great place to spend some time once a week, reading articles and staying aware.
Looking up fines that other MSBs have had recently is a great way to stay on top of activities you should look out for in your business. Learning from others mistakes is a great mindset for protecting your business, not just staying compliant.
The WSJ has a section titled “compliance”. This is a great resource for keeping track of current day activities and what to look out for in your business.
The bottom line is that you should want to be the best at being compliant, because it’s a huge component to the business you’re in. To be the best, you have to seek out knowledge and resources to get better and instill that mentality in all of your employees.
As we seek to be the best in what we do, we want to be one of those resources and extend that knowledge to you so you can grow wisely.
If you have questions about employee training, please reach out to our team.
Resources for Training:
Anti-Money Laundering – https://www.acams.org/en
https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets/advisories
https://www.fincen.gov/news-room/enforcement-actions
Suspicious activity reporting (SAR) enables law enforcement to initiate or supplement money laundering or terrorist financing investigations as well as other criminal cases. SARs also provide FinCEN and other federal agencies in identifying trends and patterns associated with financial crimes.
The Federal Financial Institution Examinations Council (FFIEC) website states that the most important factors for effective SAR monitoring and reporting include five key components:
• Identification or alert of unusual activity (which may include employee identification, law enforcement inquiries, other referrals, and transaction and surveillance monitoring system output).
• Managing alerts.
• SAR decision making.
• SAR completion and filing.
• Monitoring and SAR filing on continuing activity.
An effective SARs must be complete, sufficient, and filed timely. The most critical part of the SAR is the narrative. The narrative should identify the five essential elements of information (who? what? when? where? and why?) for the suspicious activity being reported. The method of operation (or how?) is also important and should be included in the narrative. Remember, you need to grab the reader’s attention with the first paragraph!
We are proud to say that we have an entire BSA Department dedicated to assist our MSB customers with questions regarding SAR filing.
Over the last decade we have worked hard to provide the absolute best and highest quality support for our MSB customers, and it has proven to support them with a high level of compliance in their businesses.
As we continue to build our banking services around our MSB customers, we look at the most important factors for sustainability and compliance and make those our goal for growth.
If you have any questions about SAR best practices or would like to speak with a BSA representative, contact us at mysuretybank.com
As a partner to many MSBs throughout the country, Surety Bank has a lot of practical knowledge to share that can help you grow a better business. We take our role seriously and want to provide you with all the resources you need for growth and compliance.
As you know, for any cash transaction above $10,000 in cash, a bank, Money Service Business or any financial institution is required to file a CTR on the individual or entity that is conducting the transaction. The CTR is a form where you will enter the information requested about the person or entity in which you are filing. Then you will upload that information within 15 days. You can find more information about this time frame and answers to many other questions at the link below:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
In this article we’ll be covering how you should think about the process of filing a Currency Transaction Report (CTR). This is one of the most routine tasks you may have in your business, but getting it wrong could result in major complications to your business. So, let’s get into the top two reasons you may want to improve your process of filing a CTR.
For example, if you’re a Money Service Business in Miami and you have hundreds of customers that are coming in every day. A lot of those customers could be construction companies that are cashing checks over $10,000 on a daily basis. As an MSB, you would have to file a lot of CTRs. This can get overwhelming as it presents more work for your staff on top of your normal workload for your customers. However, overlooking details can cause a lot of trouble in the future.
Where you can get into trouble here is by skipping steps in the process or leaving out any necessary information on each customer. We see MSBs getting into trouble when they don’t take the time to properly fill out and submit the form for each of their customers. Missing information can cause red flags when getting audited.
At Surety Bank, we use software to help us automate a large amount of the work and make sure it is getting done correctly. When a customer comes in deposits $12,000, it would automatically notify us and then would auto fill their information. We would just have to send it in within the given amount of time. Some MSBs are still handling their CTRs manually. If this is you, we would highly recommend getting software to help automate your work and make the reporting more accurate.
As an MSB, you have a 15 day window from the time of the transaction to file an accurate CTR on time. It’s gotta be accurate. We’ve seen that some MSBs completely miss the 15 day window and it results negatively on them and their businesses.
A big part of MSBs missing their window or not filing at all for some customer transactions is due to a lack of oversight on specific account activity. For example, let’s say a customer comes in three times in one day and deposits $4,000 each time. That total deposited is $12,000. This requires a CTR on that customer and their transactions. Having software in place would help you catch this while handling this manually will result in many more human errors.
In Summary
If you want to be in business many years from now, our recommendation is to make compliance your competitive advantage. Just like keeping accurate tax records, filing accurate and timely CTRs is the kind of work that will keep you in business for the long haul.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
As an MSB, you are probably aware that you have to file a suspicious activity report (SAR) if you detect any kind of facts that point to suspicious financial activity. This is a necessary requirement that can either create a layer of work that detracts from your focus of growth or can become an integral part of your business and fuel growth.
Similar to a Currency Transaction Report (CTR), a SAR reports the information of the customer in question but then gives as much information about the actual suspicious activity found by your team.
Depending on the activity, some customers can fly under the radar if your team isn’t trained to spot subtle actions that add up over time or point to some larger issue. Unlike a CTR, suspicious activity is not always as noticeable. Having a team that is defaulting to a mindset of watching for suspicious activity versus trying to catch things that have already happened is a good start to making this a priority.
Here is a good example of the not so obvious suspicious activity:
Frank Smith comes into your business and asks for 12 money orders in the amount of $1000.00 each. The cash Frank hands over consists of mostly large bills. When you ask him for additional information to complete your CTR he gets defensive and is wondering why you are asking him so many questions. He asks you how much money he can deposit without having to provide additional information. He gets irritated and decides to cancel the transaction and take all his cash back.
https://www.fincen.gov/resources/statutes-regulations/...
This is an example of structuring.
Structuring is the breaking up of transactions for the purpose of evading the Bank Secrecy Act reporting and record keeping requirements and, if appropriate thresholds are met, should be reported as a suspicious transaction under 31 C.F.R. § 103.18.
Why should you make your SAR a priority?
Besides the obvious negative results that will come at some point, making your SAR process a priority puts you in the driver’s seat in your business. You are choosing to stay on top of something that will inevitably blow up if not paid significant attention.
By making this a priority you are also choosing to say no to certain less than desirable customers who might actually be a good source of revenue. As an MSB, at times you can be incentivized to ignore some types of suspicious activity. The trade off between servicing and not reporting customers who bring you revenue or not servicing those customers, is a decision that will keep you in business for many years and allow you to sleep soundly at night. Just remember that one bad customer can put you out of business.
How to properly approach SAR filing:
Use compliance as your competitive advantage. We see MSBs go out of business all the time because they aren’t prioritizing the efforts that make up the fundamentals of their business.
Have a set process for how your team identifies and reports suspicious activity. Build this into your culture. Hiring people who want to help you run a business that’s above board and giving them a solid process, means you don’t have to manage them as closely and can still get the same result.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
Our ultimate goal with our MSB community is to be a resourceful partner in compliance. We want to see you succeed and see your customers succeed. In this article we’ll cover the very important topic of passing a state exam or an audit. We want to help you understand how to approach it and steps you can take to be successful.
Be Organized
This may seem at first like the simplest approach, but we see MSBs everyday who don’t have their business and paperwork in order. They don’t have foundational systems in which they run their business and it shows in their disorganization. Most of the time not having a formal process that your team can work from begins to disrupt all kinds of other aspects of your business.
Making the choice to get organized is of high value when it comes to passing any state exam or audit. Knowing you can put your hands on any documents that are requested is a good feeling and excellent way to know what is happening at any time in your business. Scrambling last minute to find information usually results in undue stress on you and your team and inevitably creates bigger problems as one event leads to another.
Be Aware of What’s Required
The great part of any state exam or audit is that it is not a mystery. Everything that is required of you is available online. If you want to build a process around a successful exam, take a look at the appropriate resources and prepare accordingly.
Below is the link to the FinCEN MSB Exam manual. This is what FinCEN uses when conducting an exam on a MSB. Studying this document is like getting a copy of the test before you take it.
https://www.fincen.gov/sites/default/files/shared/MSB_Exam_Manual.pdf
There are all the resources you need to comply with the agency who will be examining your business. The bottomline is that you and your team just have to do the front end work of studying them so you can organize your process around them.
Be Respectful
Having helped many MSBs for many years, we’ve seen the potential for some of them to not respect the position or authority of the examiner and the role they play in keeping the industry regulated. As an MSB, it is important for you to do your part in complying with the regulators.
Regulators are just normal people that put on their pants on one leg at a time, just like we do. So treating them with respect and not having a confrontational relationship with them typically leads to them not making you have a bad day. This is very similar to your interaction with a police officer. When you get pulled over, it’s better to just cooperate with their requests (license, registration etc) rather than being disrespectful.
In summary, our best advice is to do the right thing every day. Then it’s not going to feel like you’ve got two years worth of weight on your shoulders trying to get ready for an exam.
If you would like more information on this topic or any topic that is related to running a successfully compliant business, reach out to our BSA team at www.mysuretybank.com/msb.
Durable Medical Equipment (DME) is defined as any medical equipment used in the home to aid in a better quality of living. The term includes wheelchairs, knee braces, hospital beds, nebulizers, walkers, etc. DME is a benefit included in most insurances including Medicare Part B which covers medically necessary DME that is prescribed by a physician for use in a patient’s home.
According to an AARP Bulletin titled “Medicare Under Assault From Fraudsters”, “roughly 10 cents of every dollar budgeted for the giant health insurance program is stolen or misdirected before it helps any enrollee. Malcom Sparrow, a Harvard University professor and leading expert on health care fraud, says the true amount lost to fraud, abuse or improper payments could be 20 percent, or even as high as 30 percent.” See below a graphic that puts the scale of Medicare fraud into perspective.
As you can see, DME fraud has become a huge business for criminals, and they are increasingly using MSBs to provide illegal kickbacks to physicians, launder their illegal proceeds, and take advantage of fraud victims. This behavior should disgust any American taxpayer, if not morally, think about how much of our hard-earned money over the years goes straight into these fraudsters’ pockets.
How it works:
See below an excerpt from a February 4, 2021, Department of Justice Press release titled “Florida Businesswoman Pleads Guilty to Criminal Health Care and Tax Fraud Charges and Agrees to $20.3 Million Civil False Claims Act Settlement”
[According to court documents, Wolfe and her conspirators used Regency to establish dozens of DME supply companies — or, rather, DME fronts — using trickery and deception. The scheme involved placing the DME fronts in the names of straw owners. By concealing the true ownership, Wolfe’s conspirators secretly gained control of multiple companies. With such control, they collectively submitted well over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. The conspirators claimed that the unusually high volume of claims reflected the use of telemedicine procedures, when, in fact, they had simply bribed doctors to approve them. Almost always, the doctors had no telehealth interaction with the beneficiaries.]
As you can see Wolfe established multiple shell companies and submitted over $400 million in illegal DME claims to Medicare and the Civilian Health and Medical Program of the VA. Another crucial element of the scheme is she bribed doctors to approve these fraudulent invoices stating they conducted telehealth services for the beneficiaries. The illegal kickbacks to doctors is what check cashing MSBs will encounter. A pattern we have picked up on is checks from companies with “Medical Equipment, DME, Braces, Devices, etc.” made payable to individuals that turn out to be physicians or money mules are likely illegal kickbacks to doctors for signing off on fraudulent DME claims.
Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]
The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.
Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.
Other Examples:
Red flags we have identified relating to DME fraud kickbacks are as follows:
• Maker names related to medical equipment writing checks out to individuals. The dollar amount can be random, but we see a lot in the $2,000 – $9,000 range. Less sophisticated actors will structure these payments to remain under the $10,000 CTR threshold.
• When you look up the registered agents of these DME companies on publicly available databases such as Sunbiz.org in Florida, they often control several other companies related to medical equipment that have been recently established. This is indicative of shell companies just like we saw in the above example from the DOJ press release.
• A payee that comes into the check cashing store and regularly cashes checks made payable from DME related companies. You may want to conduct and internet search of these individuals and determine if they are a physician.
What to do if you suspect DME fraudsters are taking advantage of your business to facilitate payments?
If you suspect a potential customer or customer is involved in DME fraud you should investigate to determine if any of the above red flags are involved. As always, you should ask yourself does this activity make sense given the nature of the alleged business? If you determine an existing customer is involved in DME fraud and has conducted transactions aggregating over the SAR dollar volume threshold, file a SAR. As always if you suspect a customer is involved in illegal activity you need to block them from doing business with you. No matter how profitable the relationship is, it’s not worth being fined, losing your license, or ending up in a Department of Justice press release.
Sources:
https://www.aarp.org/money/scams-fraud/info-2018/medicare-scams-fraud-identity-theft.html
https://oig.hhs.gov/compliance/physician-education/01laws.asp
Better Monitoring
Per federal and state guidelines, MSBs are required to monitor their customers’ transactions for suspicious and illegal activity.
Over the past year and a half, the Federal and State governments have issued a huge amount of money to individuals and businesses in the form of Covid-19 stimulus packages. Criminals have been exploiting this situation by committing financial crimes at an unprecedented rate. See a few examples below.
“IRVINE, Calif. (KABC) — An Irvine man allegedly obtained about $5 million in federal coronavirus-relief loans for his fake businesses and then spent the funds on himself, including buying Ferrari, Bentley and Lamborghini sports cars, according to federal authorities.”
“BOSTON — The owner of a Massachusetts pizza parlor lied about the number of employees he had to fraudulently obtain more than $660,000 in federal coronavirus relief funds, then used some of the money to buy and stock an alpaca farm in Vermont, federal prosecutors said Tuesday.”
“According to the report by the Times, Abidemi Rufai, of Lekki, Nigeria, was charged Saturday in federal court with using the identities of more than 100 Washington residents to steal more than $350,000 in unemployment benefits from the Washington state Employment Security Department (ESD) during the COVID-19 pandemic last year.”
How can you improve your quality of monitoring?
Here are some tips on how to get better:
Better Reporting
Reporting should be a natural extension of your monitoring practices. If you are making your monitoring a high priority, good reporting will naturally flow from those activities.
It is very important to file CTRs on a timely basis, within 15 days.
If you are using your check cashing software fully, it will help with the practice of reporting. Especially with CTRs, when a suspicious activity is identified, your software will trigger a CTR. In addition, it will aggregate the data on a customer, pulling all their transactions together if they have made multiple transactions at different times of the day.
Investing in additional features like these and learning how to use them minimizes mistakes.
For example, if a customer comes in three separate times during a day and cashes a $5,000 check each time, will your employees know to aggregate all of those transactions? If not, this is where the software can minimize mistakes.
We understand that your team is most likely not trying to intentionally ignore possible suspicious activity. However, if they get busy and are rushed, without these extra measures in place to catch mistakes they are more likely to make a human error that could cost you.
Our Commitment to You
One of our highest priorities and commitments to you is to make sure our BSA staff is highly qualified and properly trained.
As we seek to be a resource for you, we hold ourselves to the highest standard as well. We are in the business of compliance, so we take employee training, monitoring, and reporting very seriously.
If you have questions for our team and would like to connect, you can reach us here.
In this article we want to answer the major questions surrounding proper employee training so you can use this as a tool to improve the performance of your business.
Why you should train your employees
Most mistakes that MSBs make in their businesses are directly related to their lack of employee training.
Many mistakes can be avoided, and your business doesn’t have to suffer by being held back. But it takes a little bit of time and energy invested into best practices to create an environment that is geared towards training.
We see some MSBs focusing their time and attention in other places too often which leaves their employees unsure about how to handle certain situations. The result can come in the form of fines, slowed growth, losing your MSB license and even losing their banking relationship.
Another major reason to train employees is to fully utilize your resources and assets. For example, you are using a software for check cashing. Are you using just the surface level features or are you using it to its fullest potential? This software offers a lot of features that can make your employees’ jobs much easier and can create efficiencies that map to profitability. This asset alone could bring improvements that impact your business tremendously in the short and long term.
Employee training should be held as a high priority and taken seriously. If so, the result is a smooth operation, less drag on resources and time spent fixing mistakes and less worry about being in business in the coming months or years.
Taking employee training seriously is the first step to sustainable growth in your MSB business. It’s the foundation of everything you do and the bedrock of your business.
How to train your employees
One of the four pillars of BSA is required employee training.
Naturally, if training is not considered a high priority in your business, employees will find ways to fulfill this requirement without becoming more knowledgeable or getting better in their role. People are generally going to take the path of least resistance when it is offered to them unless you are creating an environment with a higher standard.
Taking a basic test online to fulfill training requirements isn’t always going to achieve the desired result. You’re not doing training just to say you completed it. The purpose of completing the training is to stay compliant, get better and avoid costly mistakes that can put you out of business.
Besides completing a standardized test to confirm your knowledge of the subject, employee training best practices include several other factors. We’ve listed some of them here.
Stay up to speed on current events that are happening in your industry, in your part of the region and in the world. This will give you context to trends you should be aware of and things to consider as suspicious activity.
Keeping yourself updated on topics like anti-money laundering, terrorist financing is a great place to spend some time once a week, reading articles and staying aware.
Looking up fines that other MSBs have had recently is a great way to stay on top of activities you should look out for in your business. Learning from others mistakes is a great mindset for protecting your business, not just staying compliant.
The WSJ has a section titled “compliance”. This is a great resource for keeping track of current day activities and what to look out for in your business.
The bottom line is that you should want to be the best at being compliant, because it’s a huge component to the business you’re in. To be the best, you have to seek out knowledge and resources to get better and instill that mentality in all of your employees.
As we seek to be the best in what we do, we want to be one of those resources and extend that knowledge to you so you can grow wisely.
If you have questions about employee training, please reach out to our team.
Resources for Training:
Anti-Money Laundering – https://www.acams.org/en
https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets/advisories
https://www.fincen.gov/news-room/enforcement-actions
Suspicious activity reporting (SAR) enables law enforcement to initiate or supplement money laundering or terrorist financing investigations as well as other criminal cases. SARs also provide FinCEN and other federal agencies in identifying trends and patterns associated with financial crimes.
The Federal Financial Institution Examinations Council (FFIEC) website states that the most important factors for effective SAR monitoring and reporting include five key components:
• Identification or alert of unusual activity (which may include employee identification, law enforcement inquiries, other referrals, and transaction and surveillance monitoring system output).
• Managing alerts.
• SAR decision making.
• SAR completion and filing.
• Monitoring and SAR filing on continuing activity.
An effective SARs must be complete, sufficient, and filed timely. The most critical part of the SAR is the narrative. The narrative should identify the five essential elements of information (who? what? when? where? and why?) for the suspicious activity being reported. The method of operation (or how?) is also important and should be included in the narrative. Remember, you need to grab the reader’s attention with the first paragraph!
We are proud to say that we have an entire BSA Department dedicated to assist our MSB customers with questions regarding SAR filing.
Over the last decade we have worked hard to provide the absolute best and highest quality support for our MSB customers, and it has proven to support them with a high level of compliance in their businesses.
As we continue to build our banking services around our MSB customers, we look at the most important factors for sustainability and compliance and make those our goal for growth.
If you have any questions about SAR best practices or would like to speak with a BSA representative, contact us at mysuretybank.com
As a partner to many MSBs throughout the country, Surety Bank has a lot of practical knowledge to share that can help you grow a better business. We take our role seriously and want to provide you with all the resources you need for growth and compliance.
As you know, for any cash transaction above $10,000 in cash, a bank, Money Service Business or any financial institution is required to file a CTR on the individual or entity that is conducting the transaction. The CTR is a form where you will enter the information requested about the person or entity in which you are filing. Then you will upload that information within 15 days. You can find more information about this time frame and answers to many other questions at the link below:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
In this article we’ll be covering how you should think about the process of filing a Currency Transaction Report (CTR). This is one of the most routine tasks you may have in your business, but getting it wrong could result in major complications to your business. So, let’s get into the top two reasons you may want to improve your process of filing a CTR.
For example, if you’re a Money Service Business in Miami and you have hundreds of customers that are coming in every day. A lot of those customers could be construction companies that are cashing checks over $10,000 on a daily basis. As an MSB, you would have to file a lot of CTRs. This can get overwhelming as it presents more work for your staff on top of your normal workload for your customers. However, overlooking details can cause a lot of trouble in the future.
Where you can get into trouble here is by skipping steps in the process or leaving out any necessary information on each customer. We see MSBs getting into trouble when they don’t take the time to properly fill out and submit the form for each of their customers. Missing information can cause red flags when getting audited.
At Surety Bank, we use software to help us automate a large amount of the work and make sure it is getting done correctly. When a customer comes in deposits $12,000, it would automatically notify us and then would auto fill their information. We would just have to send it in within the given amount of time. Some MSBs are still handling their CTRs manually. If this is you, we would highly recommend getting software to help automate your work and make the reporting more accurate.
As an MSB, you have a 15 day window from the time of the transaction to file an accurate CTR on time. It’s gotta be accurate. We’ve seen that some MSBs completely miss the 15 day window and it results negatively on them and their businesses.
A big part of MSBs missing their window or not filing at all for some customer transactions is due to a lack of oversight on specific account activity. For example, let’s say a customer comes in three times in one day and deposits $4,000 each time. That total deposited is $12,000. This requires a CTR on that customer and their transactions. Having software in place would help you catch this while handling this manually will result in many more human errors.
In Summary
If you want to be in business many years from now, our recommendation is to make compliance your competitive advantage. Just like keeping accurate tax records, filing accurate and timely CTRs is the kind of work that will keep you in business for the long haul.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
As an MSB, you are probably aware that you have to file a suspicious activity report (SAR) if you detect any kind of facts that point to suspicious financial activity. This is a necessary requirement that can either create a layer of work that detracts from your focus of growth or can become an integral part of your business and fuel growth.
Similar to a Currency Transaction Report (CTR), a SAR reports the information of the customer in question but then gives as much information about the actual suspicious activity found by your team.
Depending on the activity, some customers can fly under the radar if your team isn’t trained to spot subtle actions that add up over time or point to some larger issue. Unlike a CTR, suspicious activity is not always as noticeable. Having a team that is defaulting to a mindset of watching for suspicious activity versus trying to catch things that have already happened is a good start to making this a priority.
Here is a good example of the not so obvious suspicious activity:
Frank Smith comes into your business and asks for 12 money orders in the amount of $1000.00 each. The cash Frank hands over consists of mostly large bills. When you ask him for additional information to complete your CTR he gets defensive and is wondering why you are asking him so many questions. He asks you how much money he can deposit without having to provide additional information. He gets irritated and decides to cancel the transaction and take all his cash back.
https://www.fincen.gov/resources/statutes-regulations/...
This is an example of structuring.
Structuring is the breaking up of transactions for the purpose of evading the Bank Secrecy Act reporting and record keeping requirements and, if appropriate thresholds are met, should be reported as a suspicious transaction under 31 C.F.R. § 103.18.
Why should you make your SAR a priority?
Besides the obvious negative results that will come at some point, making your SAR process a priority puts you in the driver’s seat in your business. You are choosing to stay on top of something that will inevitably blow up if not paid significant attention.
By making this a priority you are also choosing to say no to certain less than desirable customers who might actually be a good source of revenue. As an MSB, at times you can be incentivized to ignore some types of suspicious activity. The trade off between servicing and not reporting customers who bring you revenue or not servicing those customers, is a decision that will keep you in business for many years and allow you to sleep soundly at night. Just remember that one bad customer can put you out of business.
How to properly approach SAR filing:
Use compliance as your competitive advantage. We see MSBs go out of business all the time because they aren’t prioritizing the efforts that make up the fundamentals of their business.
Have a set process for how your team identifies and reports suspicious activity. Build this into your culture. Hiring people who want to help you run a business that’s above board and giving them a solid process, means you don’t have to manage them as closely and can still get the same result.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: rjames@mysuretybank.com.
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