Lax Business Relationships with MSBs Could Fuel Financial Exclusion, Warns Experts
A lack of proper risk assessment and mitigation measures in business relationships with Money Services Businesses (MSBs) could have devastating consequences, including increased financial exclusion, experts warn.
Failure to Implement Adequate Measures
According to a recent report by the Financial Action Task Force (FATF), Combating Proliferation Financing: A Status Report on Policy Development and Consultation 2010, failure to implement adequate measures in MSB relationships could lead to customers being diverted towards riskier services and channels that are not properly regulated. This, in turn, may push businesses underground, taking them outside the scope of regulatory oversight.
What Are Money Services Businesses?
Money Services Businesses refer to financial services that involve the acceptance of cash, cheques, or other monetary instruments and payment of a corresponding sum in cash or another form to a beneficiary through various means.
Definition of MSBs
The Money Services Business Act, 2010 defines MSBs as activities such as:
- Transmission of money or monetary value
- Cheque cashing
- Currency exchange
- Issuance of money orders or traveller’s cheques
To operate in the Commonwealth of Dominica, MSBs must be licensed by the Financial Services Unit (FSU) after satisfying specific requirements.
Duties of Vigilance for MSBs
Experts stress that MSBs have a duty of vigilance, which includes:
- Determining the true identity of customers
- Recognizing and reporting suspicious transactions to the Financial Intelligence Unit
- Keeping records for the prescribed period
- Establishing internal controls to prevent money laundering and terrorist financing
- Training key staff
Consequences of Failure
Failure to implement these measures can lead to criminal prosecution not only for employees but also for MSB directors, members, managers, or other senior officers. The consequences of failure in vigilance are likely to be commercial:
- MSBs that fail to implement proper risk assessment and mitigation measures may face reputational damage, loss of customers, and even criminal prosecution.
Urgent Need for Robust Risk Management Systems
In light of these warnings, experts urge MSBs to prioritize the implementation of robust risk management systems to prevent money laundering and terrorist financing, and to ensure compliance with regulatory requirements.
“The stakes are high, and MSBs must take their responsibility seriously,” said another expert. “Failing to do so can have severe consequences for both the business and the financial system as a whole.”