Check Cashing Business Operations

May 04, 2017

Operating a check cashing business is a complex endeavor. When you start your business, you have to choose a location, pick which services to provide, and write a business plan. From there, you need to register and acquire the appropriate licenses, secure a bank account, develop your compliance process, train employees, and flesh out your check cashing protocol. There are a lot of balls in the air and juggling them requires expertise and diligence.
When your check cashing outlet is running smoothly, however, it is all worth it. You become a community center, bringing financial inclusion to those who are excluded from the traditional banking system. Your check cashing business helps families make rent, pay bills, load their prepaid debit card, and perform other household financial transactions. In order to reach this point, you must do the following:

  1. Choose Your Check Cashing Services
  2. Register Your Money Service Business
  3. Secure a Check Cashing Business Bank Account
  4. Evaluate Cashing Risk and Define Compliance Program
  5. Develop Your Check Cashing Business Processes

Choose Your Check Cashing Services

As you outline your check cashing business plan, you will need to choose your check cashing services. In addition to actual check cashing, CCOs offer financial services like prepaid debit cards, short term loans, convenient bill pay, money orders, and wire transfer. Choosing your services will depend on your customer base – and what they need.
Check cashing services are alternative financial services for the underbanked, the unbanked, and even the fully banked. These services bridge the gap in access to traditional banking or a gap in available funds. For the fully banked, check cashing services are still valuable in times when you can’t wait for the bank to release your deposited funds. For the underbanked and the unbanked, check cashing services are vital for everyday life.

Money Service Business Registration

Your check cashing business registration is one of the most important elements of your MSB. Without a proper and current license, you can’t legally operate. But not all check cashing businesses need to register as an MSB.
FinCEN defines an MSB as a business that engages the following services and products:

  1. Check Cashing
  2. Money Orders
  3. Traveler’s Checks
  4. Money Transmission
  5. Currency Exchange
  6. Prepaid Access

Out of these businesses, some do not need a license. Check cashing businesses cashing more than $1,000 per day per customer are required by law to formally register as an MSB. Check cashers cashing less than $1,000 per day per customer are not required to formally register and may operate as unlicensed check cashers.
Stay up to date with the very latest requirements on the FinCEN website.

Check Cashing Business Bank Account

Your check cashing business bank account is another crucial piece of the puzzle. Without a secure bank account, your CCO can’t operate. As a check casher, your entire business model hinges on your ability to deposit and clear funds through a bank account. Finding and maintaining a reliable account through a check cashing bank is harder than ever before thanks to the phenomenon of derisking.
Derisking refers to the trend of banks severing ties with their check cashing clients. Banks engage in derisking by terminating accounts or closing down their check cashing banking departments entirely. Check cashers rarely receive explanation and often learn of their account closure through a generic account termination letter. The trend of derisking started with Operation Choke Point and its effects are felt by check cashers and the clients they serve.

Check Cashing Risk and Compliance

Check cashing compliance is the act of assessing, managing, and reporting the risk associated with your business. As a part of their compliance efforts, licensed check cashers are required by law to comply with the Bank Secrecy Act (BSA). Enacted in 1970, the BSA seeks to encourage cooperation between banks and MSBs for the detection and prevention of money laundering.
The BSA details requirements pertaining to many aspects of your check cashing business, including:

  1. MSB Independent Reviews
  2. MSB Registration
  3. MSB Agent List
  4. MSB Suspicious Activity Reporting
  5. Establishing a written Anti-Money Laundering program
  6. Currency Transaction Report
  7. Record keeping
  8. Processes for foreign located MSBs
  9. Nature of records and retention period

In order to stay on top of these compliance requirements and effectively manage your risk, you need a robust compliance program. The latest POS check cashing technology can help you capture KYC data and communicate all data points to your financial institution and the appropriate reporting channels. Employing a compliance expert will make sure that you stay ahead of new regulations and in compliance with current regulations.

Check Cashing Business Processes

When your business plan, MSB registration, check cashing services, and compliance program are in check, it’s time to focus on your business processes. These include your employee training, your check cashing process, and your protocol for opening and closing your business – among others!
Diligent employee training ensures that all of your employees are aware of potential risk and able to catch red flags before they become full blown fraud. In order to run a compliant and efficient check cashing business, you need to create an employee training process. This process will include a guide, an outline for training all new hires, and a calendar for annual training of existing employees. Your employee training should happen often and should be updated based on new trends in risk management and regulation.
A part of your training revolves around safely opening and closing your business. By creating a protocol for this everyday business activity you can mitigate the threat of burglary. Finally, a written check cashing process will give your employees an outline for vetting customers, cashing checks, and maintaining appropriate records and communication in accordance with the BSA.
Whether you are thinking of starting a check cashing business or you have owned and operating an MSB for over 20 years, it is important to revisit these areas of your business. Becoming complacent or getting stuck in a routine are the enemies of vigilant risk management. By reexamining your business annually or quarterly, you can identify inefficiencies and work to run a profitable and compliant money service business.
If you want a partner for navigating the check cashing industry, reach out to NCC. Our team has extensive experience operating MSBs, navigating regulation, and preventing fraud. NCC also provides real reliable check cashing business bank accounts – so you can cross one item off your list!

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