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Identifying Higher Risk Customers using Keyword Searches

Financial institutions are facing increased regulatory pressure on Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) procedures, particularly regarding inherently higher-risk customer types. CDD is critical to identifying and monitoring customers involved in higher-risk activities. Identification of higher-risk customers starts at account opening and your account opening procedures should incorporate this due diligence. Some of the more challenging aspects of identifying potentially higher-risk customers are those that do not self-identify accurately at account opening or existing customers who line of business or activities change over time. This potentially leaves you with unidentified high-risk customers and potential risk to your BSA Program. What can you do?

Implementing periodic keyword searches of your existing customer database and ACH transaction files is a great tool to find these types of higher-risk customers and activity. Many automated BSA/AML software solutions offer a way to perform these searches automatically by entering keyword search strings. If you are not running an automated solution, query reports can often be written using “keywords” to search your ACH and customer files. Searching for Privately Owned ATMs, Video Gaming Operators, Money Service Businesses, and Virtual Currency are highly recommended. Each of the business types and activities presents unique risks for money laundering or illicit activity.

At the conclusion of this article, TCA has included some commonly known keywords by inherent risk customer type. Once you have identified these higher-risk customers, what due diligence documentation should you consider? That will depend on the type of inherently higher risk customer and the risks they present.

Independent Automated Teller Machine Owners or Operators

The Risks Associated with Money Laundering and Terrorist Financing section of the FFIEC BSA/AML Examination Manual on Independent Automated Teller Machine Owners or Operators (2021), formerly known as customers with privately owned ATMs, states that the following information may be useful for a bank in understanding the nature and purpose of the customer relationship and risk profile of ISO or independent ATM owner or operator customers:

  • Organizational structure, including key principals and management.
  • Information pertaining to the operating policies, procedures, and internal controls of the ATM owner or operator.
  • ATM currency servicing arrangements, contracts, and responsibilities (e.g., cash vault services, third-party providers, and self-service).
  • Information regarding the source of funds if the bank account is not used to replenish the ATM. Sources of cash may include proceeds generated by the core retail business of the owner, proceeds from a loan or revolving credit line, or cash originating from an account maintained at another bank.
  • Location where the independent ATM owner or operator customer is organized, and where they maintain their places of business, including locations of owned or operated ATMs.
  • Description of expected and actual ATM activity levels, including currency transactions.
  • Information to better understand whether ATM operations are generally ancillary to other retail operations or the primary business of the independent ATM owner or operator customer.

Money Service Businesses (MSB)

FinCEN defines MSBs as doing business in one or more of the following capacities:

  • Dealer in foreign exchange
  • Check casher
  • Issuer or seller of traveler’s checks or money orders
  • Money transmitter
  • Provider of prepaid access
  • Seller of prepaid access
  • U.S. Postal Service

MSB Due Diligence Expectations

Based on existing BSA requirements applicable to banks, the minimum due diligence expectations associated with opening and maintaining accounts for any MSB are:

  • Apply the bank’s CIP
  • Confirm FinCEN registration, if required
  • Confirm compliance with state or local licensing requirements, if applicable
  • Confirm agent status, if applicable
  • Conduct a basic BSA/AML risk assessment to determine the level of risk associated with the account and whether further due diligence is necessary.

If the bank determines that the MSB customer presents a higher level of money laundering or terrorist financing risk, EDD measures should be conducted in addition to the minimum due diligence procedures. Depending on the level of perceived risk, and the size and sophistication of the MSB, banking organizations may pursue some or all of the following actions as part of an appropriate EDD review:

  • Review the MSB’s BSA/AML program.
  • Review results of the MSB’s independent testing of its AML program.
  • Review written procedures for the operation of the MSB.
  • Conduct on-site visits.
  • Review list of agents, including locations, within or outside the United States, which will be receiving services directly or indirectly through the MSB account.
  • Determine whether the MSB has performed due diligence on any third-party servicers or paying agents.
  • Review written agent management and termination practices for the MSB.
  • Review written employee screening practices for the MSB.

Administrators and Exchangers of Virtual Currency

FinCEN’s regulations define currency as “the coin and paper money of the United States or of any other country that is designated as legal tender; and that circulates; and is customarily used and accepted as a medium of exchange in the country of issuance.” In contrast, “virtual” currency is a medium of exchange that operates like a currency in some environments but does not have legal tender status in any jurisdiction. Virtual currency must be converted into U.S. dollars through the services of an administrator or exchanger prior to deposit into the banking system. An administrator or exchanger of virtual currency is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. BSA requirements and supervisory expectations for providing banking services to administrators or exchangers of virtual currencies are the same as money transmitters. 

Your keyword searches may turn up consumers engaging in virtual currency. Keep in mind a user of virtual currency is not subject to the same requirements of an exchanger or administrator of virtual currency; however, it could be appropriate to conduct an investigation. Is the virtual currency activity reasonable for the anticipated activity for the customer? If not, follow your investigative procedures as you would for any other potentially suspicious activity investigation.

Video Gaming Operators

CDD is critical to identifying and monitoring customers involved with video gaming machines. Institutions in states that have legalized video gambling may consider adding a question to CDD forms inquiring if businesses own, rent space, operate or service video gambling machines. If due diligence procedures require a site visit or Google Earth internet search, checklists can be updated to include a review for video gambling machines or signage. Like due diligence procedures for privately owned ATMs, institutions should consider requesting copies of state licensing from the business owner, terminal operator, distributor, or manufacturer to ensure they are operating in accordance with state law. Although TCA cannot opine upon state law, TCA recognizes these machines present the potential for being cash intensive businesses and pose BSA/AML risks. Risk Assessment, policy, and procedures should address video gaming, as applicable.

Electronic Monitoring Keyword Searches

Note: This is not an exhaustive list and can change at any time. These are common companies known as of April 2022.

ATM Keywords
MVNTFDC Star SystemEfundsCDS
ATM SettleATM GlobalSwitchFirst Data
MSB Keywords
DolExGreenDotcheckfreepayGlobal Money Express
MoneyGramOrder ExpressRemitlyRia
SigueWestern UnionWorld’s Money ExchangeMoneyOrder
RemittanceTransferPaymentPaysendCurrencies Direct
Virtual Currency Keywords
PolkadotTetherBinance CoinSolana
GeminiCoincheckFTX USBithumb
OKXHuobi GlobalLiquidCoinone
UpbitPaxos TrustZero HashUphold
Enigma SecuritiesDV ChainOKCoinEtoro
coinsquareCEX.IOPrime TrustRipple
BitMEXCumberland DRWStellarShiba Inu
PolygonBitcoin CashXRPChainlink
USD CoinTerraAvalanche 

The below list (not all inclusive) of video gaming terminal operators comes from the Illinois Gaming Board which lists the licenses and applications on their website. Other states that allow video gaming include Oregon, Rhode Island, Delaware, New York, Ohio, West Virginia, Louisiana, Maryland, and Montana. Laws vary in each state, which types of businesses may install video gaming machines and what licenses are required. Check to see if your states may also have this information publicly available.

Video Gaming Operators
777 GamingAccel EntertainmentAces Up Gaming LLCAction Video Gaming
American Video GamingAndy’s Video GamingAngelle & Green GamingAP Gaming
Arkadian GamingAshiq GamingAwesome Hand ServicesB & B Amusement
B&B Amusement of IllinoisCCFVG, Inc.Compact Disc AmusementsDonico Gaming
DK GamingEmpire GamingFair Share GamingG.F.M. Gaming
G3 GamingGaming & Entertainment ManagementGold Rush AmusementsGolden Route Operations-Illinois
Great Lakes VendingHeck GamingHyperactive GamingIllinois Gaming and Coin-Op
Illinois Gaming InvestorsIllinois Gaming EntertainmentIllinois Gold RushIllinois Video Slot Management
Illinois Video GamingIllinois Video Slot ManagementJ & J Ventures GamingJHey Enterprises
Lattner EntertainmentLeisure Time Gaming & AmusementsLucky Lincoln GamingLucky Street Gaming
Maya GamingMidwest Electronics GamingMidwest SROMississippi Gaming & Amusements
Pocket Aces GamingQuad GamingRenville GamingRCW Gaming
Sinbad’s Castle ArcadeSkybox Gaming GroupSparrow GamingSunrise Gaming
Top Notch EntertainmentT’s GamingUnited Gaming OperatorVelasquez Gaming
Veterans VGTWAMI GamingWinner’s Choice GamingWinners Depot

As always, TCA is here to help with A Better Way to answer all your regulatory questions. Contact us at [email protected] or at 800-934-7347.

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