To the Editor:
In the June 15 story "
Whose liability should it be, then - the banks? Why have a licensing regime at all?
In fact, why should it be anyone's liability, except the MSB's? It is exactly this type of "guilt-by-association" thinking that has caused the situation we face today: too much due diligence responsibility imposed on the banks, and drastic consequences to the banks for any failure, no matter how technical.
This is based on three false premises: that even licensed MSBs are risky (we are not); that banks can, should, and must sniff out evildoers in advance, no matter how much time and expense it takes; and that if the bank fails to anticipate the MSB's bad behavior, the bank itself becomes somehow "tainted."
Reviewing qualifications to engage in the money transfer business is a job the government is already doing. Why should the bank have to repeat it, and then be held to a higher standard than even the state must meet, retrospectively applied? Some states, like New York, do a great job of vetting and examining licensees.
Why should government then, after going to so much trouble to have a licensing program, give the mixed message that "This MSB is good enough for a license, but still perhaps not good enough to be banked, and therefore, in order to vet and monitor the customer, the bank must do even more extensive examinations than the state has seen fit to do in its licensing procedure."
Is the bank the MSB's keeper? Regulators say no but could then hold the bank responsible for facilitating money laundering if there is so much as a hiccup of a problem. Such is the risk-focused bank examination.
But if responsibility for supervising the MSB belongs with anyone, it belongs with government. What is the purpose of a license? One purpose is to give prima facie proof of acceptability that third parties can rely on when getting a haircut, or hiring a plumber, for example.
If MSBs are dangerous, so are 3,000 pounds of steel traveling at 60 mph. Let us look at the driver's license.
When one gets into an accident for driving badly, the DMV is not liable for any consequences of having issued the driver's license, which it did under prescribed procedures. You took a written test and a road test, you fulfilled the requirements for a license, and a license was issued. Neither the automaker nor the highway authority (read: the banks) is held responsible for the accident. If it is a true accident, even the driver is not held responsible.
Why should either the banks or the Banking Department bear any of the blame if a money transmitter licensee does something wrong? Were the licensing procedures deficient? Were the bank's intake procedures deficient? Clearly, those are separate questions and have nothing to do with direct blame after the fact. What sort of standard are we using for this prior responsibility … clairvoyance?
We are well aware that this problem emanates from the federal government's AML guidelines for banks. But it is high time that state regulators stand up and defend the valuable work they do. States have always led the way in licensing; now they should lead the way to solving this problem by getting the license the weight it deserves, where it will do some good.
Under the proposed law, banks will still be able to close your account for any reason or no reason at all, except for compliance reasons, without showing the Banking Department good cause. Some banks will no doubt still close MSB accounts for compliance reasons and not admit to doing so. They still would not have to explain themselves. This cannot be helped.
But the real effect of the law will come when their examiners insinuate that a licensed MSB account should be closed for compliance reasons. Bankers who choose to bank licensed MSBs will have a response, a shield. They will be able to point to the law and rightly respond that the state has already passed judgment on the entity's fitness to operate, including its AML compliance program, and that, by law, must be the end of any criticism of the bank's due diligence, beyond checking for a license and remaining alert for red flags, as usual.
In her May 8th comment on Fincen's ANPR, Ms. Taylor reports that, according to her own survey, 42% of her licensees' banking relationships are concentrated at only two banks. If this situation does not get intervention by the state (and the state agency) that regulates both sectors, then the ranks of licensed MSBs will be decimated. I hardly think this result would be in the public interest.
David Landsman
Executive director
National Money Transmitters Association Inc.
Great Neck, N.Y.
