Foreign Paying Agent Management Policy (Risk Assessment)

This page outlines the due diligence process, ongoing review procedures, and risk rating methodology for managing relationships with foreign paying agents by Money Transfer Operators (MTO). Let us assume a MSB “XYZ”, so this is how the Risk Assessment would look like:

Certainly! Here’s the rewritten article with “MSB XYZ” replacing “GMT”:

Foreign Paying Agents Policy and Procedures for MSB XYZ

A foreign paying agent is a foreign bank, financial institution, or entity that has an established agreement with MSB XYZ to pay out remittances to beneficiaries abroad. MSB XYZ conducts a thorough due-diligence process both at onboarding as well as annually of foreign paying agents. A risk rating is assigned to each foreign paying agent using a risk matrix that assesses various factors gathered during the due diligence and subsequent reviews.

Foreign Paying Agent Due Diligence

During the onboarding process and annually thereafter, MSB XYZ conducts thorough due diligence on foreign paying agents. The initial due diligence includes the following steps:

  1. Background Check:
    • Verify the foreign payer’s status as a legal entity, including incorporation if applicable.
  2. Compliance with Licensing Requirements:
    • Ensure that the foreign payer complies with all licensing requirements in the country where the funds are disbursed.
  3. OFAC Check:
    • Conduct an Office of Foreign Assets Control (OFAC) check on owners and key shareholders of the foreign paying agent to ensure they are not on any sanctions lists.
  4. AML Program Review:
    • Request the foreign payer’s written Anti-Money Laundering (AML) Program, including details on how they comply with AML laws and regulations in their respective countries. Also, check their compliance with the Bank Secrecy Act (BSA) and USA PATRIOT Act for transactions originating in the United States.
  5. Inbound and Outbound Funds List:
    • Obtain and maintain a list of the countries from which the foreign paying agent receives funds and the countries to which it disburses payments.
  6. Due Diligence Questionnaire:
    • The foreign paying agent completes MSB XYZ’s due diligence questionnaire, providing information on various aspects of their business, including:
      • Business name and address
      • History of address changes (if any)
      • Type of identity/business
      • Ownership, shareholder structure, and management changes in the past year
      • Name and title of the foreign paying agent’s legal representative
      • Date of adoption of the most current version of the AML Program Manual
      • Date of the most recent AML training offered to employees
      • Date of the most recent AML independent evaluation of the correspondent’s AML Program
      • Identification documents of the correspondent’s legal representative and Compliance Officer
      • Copy of the most recent AML external audit report
      • Directory of the foreign paying agent (list of main employees by department)
      • Copy of the foreign paying agent’s AML Program Manual
      • Copy of the foreign paying agent’s Organization Chart
      • Copy of the foreign paying agent’s most recent audited financial statements
  7. Board Review:
    • After gathering all initial due diligence requirements, a Compliance Supervisor conducts a review and presents a report to the Board of Directors. The Board determines whether MSB XYZ will engage in business with the foreign payer.

Annual Due Diligence

On an annual basis, MSB XYZ performs a follow-up due diligence on foreign paying agents. This includes:

  1. Compliance with Interpretive Release 2004-1:
    • The foreign payer must demonstrate compliance with all requirements provided by the Compliance Supervisor and/or Analysts. The Compliance Officer reviews and approves this compliance.
  2. Updated Documentation:
    • Provide requested documentation and information similar to the initial due diligence process.
  3. Reporting Changes:
    • The foreign payer must inform MSB XYZ of any relevant changes to their operations, including but not limited to changes in address, ownership, launch of additional business services or products, branch expansion, or changes in the financial status of the business or its owners, as outlined in their agreement with MSB XYZ.
  4. Due Diligence Questionnaire:
    • The Compliance Officer ensures that each foreign paying agent completes the due diligence questionnaire, and cross-checks names against the OFAC Specially Designated Nationals (SDN) list and similar bodies.

Foreign Paying Agent Risk Rating Matrix

To assess the risk associated with each foreign paying agent, MSB XYZ uses a risk rating matrix. This matrix evaluates several criteria to determine the risk level and assign a numeric risk rating grade, with 1 being the least risk and 3 being the highest risk. The risk factors considered are as follows:

Country Located

  • Low risk of ML/Terrorist Financing = 1
  • Medium risk of ML/Terrorist Financing = 2
  • High risk of ML/Terrorist Financing = 3

Type of Financial Entity

  • Banks = 1
  • Money Transmitter = 3
  • Other = 3

Country AML Laws

  • FATF/US Satisfactory = 1
  • Not FATF/US Satisfactory = 3

Outstanding Regulatory Violations

  • No regulatory violation or adverse findings = 1

This risk rating matrix is used by MSB XYZ to identify, evaluate, and document the risk associated with each foreign paying agent, considering factors such as the country’s risk level, the type of financial entity, compliance with AML laws, and any outstanding regulatory violations or adverse findings. The numeric ratings assigned help in categorizing the risk level of each foreign paying agent, with 1 being the lowest risk and 3 being the highest risk.

MSB XYZ’s Commitment to AML and Counter-Terrorist Financing

MSB XYZ is fully committed to preventing, detecting, and deterring money laundering and terrorist financing in all forms. The company maintains a zero-tolerance policy regarding these illicit activities. As part of this commitment, MSB XYZ does not engage in business with any foreign paying agents located in OFAC-sanctioned countries or associated with sanctioned individuals.

This page was last updated on July 29, 2023.

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