Money Service Businesses are classified as high risk business due to their business model. Those who operate legally and hold a license, they transfer funds across borders. However, a small percentage of businesses perform illegal activities such as money laundering, terrorism financing etc. According to National Crime Agency’s report, money laundering worth £1.5 billion took place to and from the United Kingdom through MSBs.
When banks provide such MSBs with money service business bank accounts, not only is their reputation is at stake, but their operations are under scrutiny as well. If found guilty, heavy penalties are imposed, and some are even banned by the regulatory authorities. Thus, to stay away from all such hassles, banks de-risk themselves and close down all MSB bank accounts. Some do not offer money service business bank accounts at all.
However, this has led to financial exclusion of all money service businesses. MSBs then turn to unconventional banking methods, which makes things much more worse. A proper solution would be to offer money service business bank accounts to all MSBs, but with proper check and balance. Transparency should be the top most priority. All money service businesses should share their operational information with regulatory authorities. Lastly, regulatory burden should not increase significantly, as it will discourage MSBs to follow them.
To know more about MSB bank account rejection, read the publication, Money Service Businesses in the UK: Improving the Conditions for Effective Financial Crime Supervision and Investigations