# Presentation: 817243

## “Money Services Businesses- Access to the Banking System”

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

**“****Money Services Businesses- Access to the Banking System”**
**Presented to**
**The FDIC Committee on Economic Inclusion**

- October 24, 2007

- Tom Haider
- MoneyGram International

## MoneyGram International

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

**MoneyGram International**
**Our Purpose:**
**“****To help people and businesses by providing affordable, reliable and convenient payment services.”**

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## MoneyGram International

_**Table of Contents**_
- Company Overview
- Security vs. Economic Inclusion –
-         Are they Mutually Exclusive?
- Bank Discontinuance
- Next Steps

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram International

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

**MoneyGram International**

-    Payment services company conducting business in 170 countries through more than 138,000 locations
-    Core products
-   Money transfers
-   Money orders
-   Official checks
-    Publicly traded on NYSE
-     $2 billon market cap
-    Founded in 1940 as Travelers Express – a money order company
-   Merged with MoneyGram in 1998
-   MoneyGram started by American Express in 1989
-   Headquartered in Minneapolis

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## MoneyGram International

_**Money Transfers**_
**Consumers**
- Recent immigrants who want to send money home to their families
- Debtors who need to pay overdue loan to avoid collection action
- People who need funds in an emergency
- Average industry transaction is $300
**Sellers**
- MoneyGram’s services are sold through a network of “agent” locations
- Agents include banks, supermarkets, convenience stores, post offices, and “mom and pop” retailers
- 138,000+ agent locations in 170 countries
**  ****Fees**
- Consumers can send up to $1,000 to many countries for a flat fee of about $10
- A foreign exchange between 1 to 2% is applied to most currency conversions

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Global Agent Partners

**Global Agent Partners**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram International

_**Money Orders**_
**Definition**
- Payment instrument used in lieu of a personal check to pay regular bills, like rent and utilities
- Average face amount is $150
**Consumers**
- Low and fixed income
- Individuals who cannot maintain a bank account
- Renters whose landlords require payment by money order
- Small merchants who convert cash to money orders to reduce crime
**  ****Sellers**
- Many of the same entities that sell money transfers
- 55,000 retail locations in all 50 states
-   **Fees**
- Fee is determined by the seller
- Retail average is less than $1

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## How can the two interests be brought into balance to better achieve everyone’s goals?

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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**Security / Anti - Money Laundering vs. Economic Inclusion**

**Economic Inclusion**

**Security / ****Anti-Money Laundering**

## Security / Anti – Money Laundering vs. Economic Inclusion

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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_**Key Constituencies**_
- Law enforcement agencies
- Regulators
- Elected officials
_**Key Issues for MSBs**_
- Compliance and training
- Transaction analysis and reporting
- Licensing and regulation

_**Key Constituencies**_
-    Consumer groups
-    International development programs
-    Elected officials
_**Key Issues for MSBs**_
-    Reduce cost of service
-    Consumer disclosures
-    Increase agent network to       make service more easily      available and expand      service delivery methods

** **_**Security/Anti-Money Laundering**_**	**** **_**Economic Inclusion**_

## Security / Anti – Money Laundering

_**MoneyGram Action**_
- Know Your Agent
- Background screening of all agent applicants
- Ongoing training and testing of all agents
-  In-person reviews of select agents
-  On-line, computer based refresher training
-  Compliance Program set-up
- Continuous investment in technology and staffing
-  Multi-million $ transaction analysis and OFAC screening systems
-  5% of global workforce dedicated to compliance/regulatory issues

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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##  MoneyGram Action

Licensed and regulated by 48 State Banking Departments

IRS is primary regulator for Bank Secrecy Act compliance
 MoneyGram and agents examined by States and IRS

 Close cooperation with law enforcement
 38,000+ SARs/year
 4,000+ CTRs/year 
 4,500+ information requests/year
 Regular joint-training programs

- Licensed and regulated by 48 State Banking Departments
- IRS is primary regulator for Bank Secrecy Act compliance
-  MoneyGram and agents examined by States and IRS
-  Close cooperation with law enforcement
-  38,000+ SARs/year
-  4,000+ CTRs/year
-  4,500+ information requests/year
-  Regular joint-training programs

**Security / Anti – Money Laundering**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram Anti-Money Laundering Tools

- Tools from MoneyGram to Agent

**MoneyGram Anti-Money Laundering Tools**

**Background Checks**

**Training**

**Compliance Program Set-up**

**On-Site Reviews**

- MGITransaction Analysis and OFAC Screening

**Agent**

**Agent**

**Agent**

**Agent**

- Transaction Information

- Transaction Information

- Transaction Information

- Transaction Information

- Tools from MoneyGram to Agent

- Tools from MoneyGram to Agent

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## How Do MSBs Detect Suspicious Activity?

**How Do MSBs Detect Suspicious Activity?**

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**MoneyGram**

- = Individual structuring transactions in small amounts at multiple locations. MoneyGram will detect and file SAR/CTR

- = Individuals working together to structure transactions may be detected by agent. Regardless whether agent detects, MoneyGram will detect and communicate with agent to ensure filing of SAR/CTR

**Agent**

**Agent**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

**Agent**

**Consumers**

**Bad Guy**

**Bad Guy**

**Bad Guy**

## CHALLENGE – Regulatory Compliance

Complexity of complying with different interpretations of Federal anti-money laundering laws - Bank Secrecy Act, OFAC Regulations and USA Patriot Act - by 48 State Banking Departments

- Complexity of complying with different interpretations of Federal anti-money laundering laws - Bank Secrecy Act, OFAC Regulations and USA Patriot Act - by 48 State Banking Departments

**Security/Anti – Money Laundering**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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##  SOLUTION – Federal Licensing

Establish an optional Federal regulator for MSBs that can provide uniformity and efficiencies in compliance

-  _**SOLUTION – **__Federal Licensing_
- Establish an optional Federal regulator for MSBs that can provide uniformity and efficiencies in compliance

**Security/Anti – Money Laundering**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## CHALLENGE - MSB Definitions

Anti-money laundering laws treat all MSBs the same

Who’s the MSB?

MoneyGram
American Express
Hilton Hotels
Carlson Wagonlit Travel
Albertsons
Jackson Hewitt Tax Service
Bob’s Deli

 Objective standards are now overshadowed by complex
    and often confusing risk-based, subjective requirements

- Anti-money laundering laws treat all MSBs the same
- Who’s the MSB?
- MoneyGram
- American Express
- Hilton Hotels
- Carlson Wagonlit Travel
- Albertsons
- Jackson Hewitt Tax Service
- Bob’s Deli
-  Objective standards are now overshadowed by complex
-     and often confusing risk-based, subjective requirements

**Security/Anti – Money Laundering**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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##    SOLUTION - Re-define MSB 

Re-define MSBs to facilitate compliance by agents

Treasury Secretary Paulson and FinCEN Director Fries have stated their intent to re-examine the MSB definition

Treasury should adopt a “rules based” approach – not “principles based” – for smaller agents

Rules will improve compliance if MSB service is only an ancillary part of agents’ business

Policies and procedures should not be the priority

- Re-define MSBs to facilitate compliance by agents
- Treasury Secretary Paulson and FinCEN Director Fries have stated their intent to re-examine the MSB definition
- Treasury should adopt a “rules based” approach – not “principles based” – for smaller agents
- Rules will improve compliance if MSB service is only an ancillary part of agents’ business
- Policies and procedures should not be the priority

**Security/Anti – Money Laundering**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Security / Anti – Money Laundering vs. Economic Inclusion

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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_**Key Constituencies**_
- Law enforcement agencies
- Regulators
- Elected officials
_**Key Issues for MSBs**_
- Compliance and training
- Transaction analysis and reporting
- Licensing and regulation

_**Key Constituencies**_
-    Consumer groups
-    International development programs
-    Elected officials
_**Key Issues for MSBs**_
-    Reduce cost of service
-    Consumer disclosures
-    Increase agent network to       make service more easily      available and expand      service delivery methods

** **_**Security/Anti-Money Laundering**_**	**** **_**Economic Inclusion**_

##  MoneyGram Action

Consumer Cost

 Fees and exchange rates have dropped
    significantly  

Simplified pricing has replaced multiple pricing tiers with a flat fee of $9.99 for transactions up to $1000 for Mexico and Latin America, and up to $500 to most other destinations

***Consumer Cost***
-  Fees and exchange rates have dropped
-     significantly
- Simplified pricing has replaced multiple pricing tiers with a flat fee of $9.99 for transactions up to $1000 for Mexico and Latin America, and up to $500 to most other destinations

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram’s Average Fee Per Transaction

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram’s Average Foreign Exchange Rate to Mexico

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Transaction Volume Growth Trends to Mexico

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Consumer Cost

Fees are about as low as they can go without regulatory streamlining

- Fees are about as low as they can go without regulatory streamlining

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Economic Inclusion

**	**
***Consumer Disclosures and Services***
**  **Senders receive a receipt showing
-  Amount paid
-  Transaction fee
-  Exchange rate
-  Amount of local currency their recipient will be paid
- Senders receive free calling card to notify recipient
-  Receivers can pick up transaction within minutes after sent
-  Free, multi-lingual customer service available 24x7

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram Action

Service Availability

 MoneyGram’s agent network rapidly expanding globally to provide greater consumer convenience

Network is the key to providing consumers with service when and where they want it

Network provides consistency in pricing – MoneyGram receivers are never charged a fee

Network provides consumers certainty that funds will be available
 Amount is guaranteed 
 Funds can be picked up within minutes of being sent

***Service Availability***
** **MoneyGram’s agent network rapidly expanding globally to provide greater consumer convenience
- Network is the key to providing consumers with service when and where they want it
- Network provides consistency in pricing – MoneyGram receivers are never charged a fee
- Network provides consumers certainty that funds will be available
-  Amount is guaranteed
-  Funds can be picked up within minutes of being sent

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## MoneyGram’s Global Network Expansion

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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- MoneyGram has invested heavily in building a high-quality agent network

## Global Network Expansion

**Global Network Expansion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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##  MoneyGram Action

Service Availability

	Partnering with banks around the world

U.S.
2,500+ US Bancorp locations

International

Standard Bank in Africa; ICBC in China; Bank Pekao 
    in Poland; Bank of Ireland; Privat Bank in Romania;
    Rosbank in Russia; etc.

***Service Availability***
**	**Partnering with banks around the world
- U.S.
- 2,500+ US Bancorp locations
- International
- Standard Bank in Africa; ICBC in China; Bank Pekao
-     in Poland; Bank of Ireland; Privat Bank in Romania;
-     Rosbank in Russia; etc.

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## South American Banking Relationships

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Central American Banking Relationships

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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##      Bank Discontinuance

Solving the Bank Discontinuance problem will improve the availability of MSB services

MSB industry - working with bank trade groups - has drafted legislation to address the problem 

Regulatory support of legislation will increase the chance of success

Why is legislation needed?

Guidance issued in April 2005 by FinCEN and Federal Banking Agencies did not solve the problem

FFIEC’s BSA/AML Examination Manual does not provide clear examples of when banks do not need to review an MSB’s BSA/AML program

- Solving the Bank Discontinuance problem will improve the availability of MSB services
- MSB industry - working with bank trade groups - has drafted legislation to address the problem
- Regulatory support of legislation will increase the chance of success
- Why is legislation needed?
- Guidance issued in April 2005 by FinCEN and Federal Banking Agencies did not solve the problem
- FFIEC’s BSA/AML Examination Manual does not provide clear examples of when banks do not need to review an MSB’s BSA/AML program

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Banks and MSBs Working Together

MoneyGram seeking opportunities to partner with more banks

Money Orders
Money Transfers

Regulators can help by reducing banks’ concerns with MSB accounts

Money transfers can help migrants become banked consumers

- MoneyGram seeking opportunities to partner with more banks
- Money Orders
- Money Transfers
- Regulators can help by reducing banks’ concerns with MSB accounts
- Money transfers can help migrants become banked consumers

**Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Economic Inclusion

- Steps for migrants to become banked

- New
- Migrant
- Arrives in US

- Migrant
- Becomes
- Employed

- Migrant
- Becomes
- Remitter

- Migrant
- Becomes
- Banked and
- Remits at
- Bank which is
- now a
- MoneyGram
- Agent

**Bank/MoneyGram Agent**

**MoneyGram Agent**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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## Security/Anti – Money Laundering vs. Economic Inclusion

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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**Security/Anti – Money Laundering vs. Economic Inclusion**

_**MGI recommends the Committee on Economic Inclusion**_
- Seek greater uniformity, consistency, and clarity in the regulation of MSBs by allowing MSBs to opt for a federal license
- Encourage Treasury to revise the definition of MSBs to facilitate compliance by agents, focusing on a rules-based approach for smaller agents
- Encourage greater partnerships and linkages between MSBs        and banks
- Address the critical issue of MSB banking relationships through further regulatory guidance or Congressional action

## Conclusion

MSBs provide vital services to consumers

MSBs work with banks around the world

Money transfer fees have dropped significantly

The regulatory environment influences the ability of MSBs to serve consumers

A balance is needed between ensuring that our nation’s interests are protected through strong AML regulation, while at the same time making sure MSBs are able to serve their consumers

- MSBs provide vital services to consumers
- MSBs work with banks around the world
- Money transfer fees have dropped significantly
- The regulatory environment influences the ability of MSBs to serve consumers
- A balance is needed between ensuring that our nation’s interests are protected through strong AML regulation, while at the same time making sure MSBs are able to serve their consumers

**Security/Anti – Money Laundering vs. Economic Inclusion**

- MoneyGram Proprietary & Confidential. © 2007 MoneyGram.  All rights reserved.

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