[House Hearing, 111 Congress]
[From the U.S. Government Printing Office]




 
                 REGULATION OF MONEY SERVICE BUSINESSES

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 10, 2010

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-107



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             THADDEUS G. McCOTTER, Michigan
RON KLEIN, Florida                   KEVIN McCARTHY, California
CHARLES A. WILSON, Ohio              BILL POSEY, Florida
ED PERLMUTTER, Colorado              LYNN JENKINS, Kansas
JOE DONNELLY, Indiana
BILL FOSTER, Illinois
ANDRE CARSON, Indiana
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

                 LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York         JEB HENSARLING, Texas
MELVIN L. WATT, North Carolina       J. GRESHAM BARRETT, South Carolina
GARY L. ACKERMAN, New York           MICHAEL N. CASTLE, Delaware
BRAD SHERMAN, California             PETER T. KING, New York
DENNIS MOORE, Kansas                 EDWARD R. ROYCE, California
PAUL E. KANJORSKI, Pennsylvania      WALTER B. JONES, Jr., North 
MAXINE WATERS, California                Carolina
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
CAROLYN McCARTHY, New York               Virginia
JOE BACA, California                 SCOTT GARRETT, New Jersey
AL GREEN, Texas                      JIM GERLACH, Pennsylvania
WM. LACY CLAY, Missouri              RANDY NEUGEBAUER, Texas
BRAD MILLER, North Carolina          TOM PRICE, Georgia
DAVID SCOTT, Georgia                 PATRICK T. McHENRY, North Carolina
EMANUEL CLEAVER, Missouri            JOHN CAMPBELL, California
MELISSA L. BEAN, Illinois            KEVIN McCARTHY, California
PAUL W. HODES, New Hampshire         KENNY MARCHANT, Texas
KEITH ELLISON, Minnesota             CHRISTOPHER LEE, New York
RON KLEIN, Florida                   ERIK PAULSEN, Minnesota
CHARLES A. WILSON, Ohio              LEONARD LANCE, New Jersey
GREGORY W. MEEKS, New York
BILL FOSTER, Illinois
ED PERLMUTTER, Colorado
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 10, 2010...............................................     1
Appendix:
    March 10, 2010...............................................    29

                               WITNESSES
                       Wednesday, March 10, 2010

Cachey, Joe, Chief Compliance Officer, The Western Union Company.     4
McClain, Scott K., Deputy General Counsel, Financial Service 
  Centers of America (FiSCA).....................................     6
Thoren-Peden, Deborah, Partner, Pillsbury Winthrop Shaw Pittman 
  LLP............................................................     8

                                APPENDIX

Prepared statements:
    Gutierrez, Hon. Luis.........................................    30
    Cachey, Joe..................................................    35
    McClain, Scott K.............................................    41
    Thoren-Peden, Deborah........................................    45


                          REGULATION OF MONEY
                           SERVICE BUSINESSES

                              ----------                              


                       Wednesday, March 10, 2010

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Luis Gutierrez 
[chairman of the subcommittee] presiding.
    Members present: Representatives Gutierrez, Maloney, Watt, 
Sherman, Waters, Hinojosa, Green, Miller of North Carolina, 
Scott, Ellison, Foster; Hensarling, Royce, Marchant, Lee, and 
Paulsen.
    Ex officio present: Representative Bachus.
    Also present: Representative Lynch.
    Chairman Gutierrez. This hearing of the Subcommittee on 
Financial Institutions and Consumer Credit will come to order.
    Good morning and thanks to all of the witnesses for 
agreeing to appear before the subcommittee today.
    Today's hearing will examine how money service businesses 
are regulated under the current Federal and State system and 
examine proposed legislative reforms that have been introduced 
in this Congress.
    We will be limiting opening statements to 10 minutes per 
side, but without objection, the record will be held open for 
all members' opening statements to be made a part of the 
record.
    I yield myself 5 minutes. I ask unanimous consent to submit 
my opening statement for the record. Hearing no objections, it 
is so ordered.
    Mr. Hensarling, you are recognized for 5 minutes.
    Mr. Hensarling. Thank you, Mr. Chairman. I certainly 
appreciate Chairman Gutierrez for holding this hearing on the 
money service businesses, the MSBs, and the positive role they 
can play in our financial sector, particularly for constituents 
without well established banking relationships.
    We have tens of thousands of MSBs ranging from mom and pop 
convenience stores to large international market players. I 
think we recognize that for most of our constituents, they 
provide valuable financial services, providing a vast array of 
options for consumers to determine which best meets their 
individual financial needs.
    Although the money service businesses are subject, as we 
know, to Federal registration and certain anti-money laundering 
provisions, such as the Bank Secrecy Act, they are largely non-
bank institutions that do not have a comprehensive Federal 
regulator, leaving State agencies to enforce State statutes 
governing their operations.
    This decentralized system coupled with frankly the sheer 
number of MSBs in our economy today has raised certain 
questions about the effectiveness of their anti-money 
laundering provisions.
    As a result, Federal financial regulators have proposed new 
compliance rules for institutions doing business with MSBs, and 
regardless of their intent, I believe this has had a perverse 
effect of leading some institutions to frankly just cut their 
ties with the money service businesses rather than deal with 
the increased obligations or scrutiny or indeed, potential 
increased liability.
    FinCEN has correctly stated that, ``An effective AL program 
requires sound risk management,'' a point which I 
wholeheartedly agree with, but we must also be cautious that in 
our pursuit of A&L compliance, we do not use such a heavy hand 
that we end up pushing currently monitored transactions 
underground into a shadowy world of illicit transactions.
    What is ultimately the impact upon many low-income 
citizens, low-income neighborhoods, if we drive MSBs deeper 
into the non-banking sector, I think, is a relevant question 
for this subcommittee.
    As I said before, we know that each and every regulation 
that has been imposed on our banking system seemingly made 
sense at the time, but our challenge is to constantly look at 
the cost of these regulations that are being imposed on our 
economy and our Nation, particularly at a time when so many of 
our fellow citizens remain unemployed in this recession.
    It is important and incumbent upon us to recognize any 
unintended consequences that these regulations may cause.
    That is why last year I was pleased to join with Ranking 
Member Bachus in co-sponsoring our colleague Carolyn Maloney's 
bill, H.R. 2893, which would establish a self-certification 
process for the money service businesses.
    This year, Ranking Member Bachus has once again led the way 
on the MSB issue with his bill, H.R. 4331, the Money Services 
Business Compliance Facilitation Act, co-sponsored by our 
chairman, the gentleman from Illinois, Mr. Gutierrez.
    Ranking Member Bachus' bill would establish the Office of 
Money Services Business Compliance within Treasury and empower 
the director of that office to recognize a self-regulatory 
organization for MSBs and their agents and avoid a burdensome 
regime that could potentially drive participants underground.
    With that, I look forward, Mr. Chairman, to hearing the 
testimony of our witnesses today, and I yield back the balance 
of my time.
    Mr. Miller of North Carolina. [presiding] Thank you, Mr. 
Hensarling. The Chair now recognizes the gentleman from 
Georgia, Mr. Scott, for 2 minutes, or slightly more, if he 
would like.
    Mr. Scott. Thank you, Mr. Chairman. Thanks to our witnesses 
for appearing before us today.
    Money service businesses offer valuable financial services 
to the public, such as money transfers, money orders and check 
cashing. These services, while often vital to the community, 
are regulated by the Internal Revenue Service in an attempt to 
impede any kind of abuse.
    There are reports that persist, that MSBs operate in this 
country without the proper compliance and registration where 
appropriate.
    My home State of Georgia is among 37 States that have some 
form of registration for MSBs. The MSB section of the Non-
Depository Financial Institutions Division is responsible for 
supervising those who are licensed or registered to do business 
in Georgia as a check casher or a money transmitter.
    The department is charged with the supervision and 
examination of their business affairs to ensure that they 
operate in compliance with State law and for the protection and 
interest of consumers who are served by these entities.
    A comprehensive and effective registration and regulation 
system, perhaps resembling the one we have in Georgia, could 
very well provide a benefit on the Federal level in deterring 
money laundering or financial transactions that support 
terrorist activities.
    I anticipate informative testimony from each of the 
witnesses this morning on this very important and timely topic, 
and I look forward to their suggestions on how we in Congress 
can act.
    Thank you, Mr. Chairman.
    Mr. Miller of North Carolina. Thank you, Mr. Scott.
    The ranking member of the full committee, the gentleman 
from Alabama, Mr. Bachus, is not actually a member of this 
subcommittee, but I ask unanimous consent that he be recognized 
for 4 minutes for an opening statement. Hearing no objection, 
Mr. Bachus is recognized for 4 minutes.
    Mr. Bachus. I appreciate that, Mr. Chairman, and I thank 
you for holding this important hearing about an issue that is 
long overdue for a fair and effective solution.
    Money service businesses or MSBs offer a valuable service 
to consumers who may not have access to other financial service 
providers.
    Among other functions, MSBs facilitate global payments and 
allow families to send funds back to their home countries. 
Unfortunately, regulation of money service businesses has not 
kept pace with the volume of their businesses.
    Right now, MSB compliance is a complex patchwork of 
regulations which involves both Federal restrictions on money 
laundering and terrorist financing as well as State consumer 
protection mandates.
    For tens of thousands of MSBs that exist, the Federal 
Government has fewer than 500 people on the regulatory beat.
    Mr. Chairman, failure to devise an effective MSB regulatory 
regime has led to the situation where banks who offer account 
services to MSBs are forced to act as de facto regulators. 
After a series of regulatory actions in which some banks were 
fined heavily in connection with the accounts they offered 
MSBs, most banks felt they had no choice or they had to make a 
choice to either do their own on-site investigation of an MSB 
anti-money laundering compliance or live with the liability.
    Consequently, most banks stopped offering accounts to MSBs. 
When banks discontinue account relationships with MSBs, the MSB 
customers may seek financial services from the underground 
financial system, which could create greater money laundering 
risk and increase costs for MSB customers.
    In response to shortcomings of the current regulation, 
Chairman Frank and I, along with Representatives Maloney, 
Gutierrez, Hensarling and Biggert have tried for several 
Congresses to craft commonsense MSB legislation.
    The House has sent bills to the Senate twice only to have 
them ignored. Last December, I joined Representatives Gutierrez 
and Tiberi in introducing H.R. 4331, the Money Services 
Business Compliance Facilitation Act of 2009, which takes a 
similar approach to Ms. Maloney's bill.
    H.R. 4331 is based on the underlying principle that given 
the right guidance and oversight, industries can self-regulate. 
The legislation would centralize MSB money laundering 
compliance in a small office at Treasury and authorize that 
office to recognize the self-regulatory organization. The 
organization would be similar to the private nonprofit 
financial industry regulatory authority or FINRA, that 
regulates about 170,000 brokers and their branches and more 
than 600,000 of their agents.
    The bill would lead to the uniform registration and 
supervision of MSBs without creating a big, new Federal 
bureaucracy, and without preempting State safety and soundness 
and consumer laws.
    Mr. Chairman, H.R. 4331 is a good solution to make thorough 
uniform and effective national registration and compliance for 
money laundering businesses a reality.
    MSBs will appreciate legislation that gives banks the 
confidence to continue working with them and helps to disrupt 
funding channels used by crooks and terrorists.
    Mr. Tiberi should be commended for his hard work on this 
issue and we look forward to working with the gentleman from 
Illinois and the gentlelady from New York and all other 
interested Members to make this effort a success.
    I thank Mr. Hensarling for his work, and I yield back the 
balance of my time.
    Mr. Miller of North Carolina. Thank you, Mr. Bachus.
    That completes the opening statements. We will have one 
panel this morning. Our panel consists of three witnesses: Mr. 
Joe Cachey, chief compliance officer for The Western Union 
Company; Mr. Scott McClain, deputy general counsel to the 
Financial Service Centers of America; and Ms. Deborah Thoren-
Peden, a partner in the law firm of Pillsbury Winthrop Shaw 
Pittman LLP.
    You will each have 5 minutes for your oral statements. Your 
written statements will be made a part of the record.
    Mr. Cachey, you may begin.

STATEMENT OF JOE CACHEY, CHIEF COMPLIANCE OFFICER, THE WESTERN 
                         UNION COMPANY

    Mr. Cachey. Good morning, Mr. Chairman, and Ranking Member 
Hensarling.
    My name is Joe Cachey. I am chief compliance officer for 
The Western Union Company. Western Union is a leader in global 
payment services with more than 410,000 agent locations in 200 
countries and territories around the world.
    In 2009, Western Union completed 296 million customer-to-
customer transactions worldwide, moving $71 billion of 
principal between those customers and also performed 415 
million business payments, or people sending money to a 
business.
    Interestingly, the majority of Western Union's customers in 
the United States also have bank accounts and use our services 
ancillary to the services they would normally obtain at their 
branch bank and local bank.
    Western Union applauds the committee's efforts to provide a 
more streamlined and efficient regulatory model for money 
service businesses. Western Union does not fully support H.R. 
4331, but looks forward to working with the committee to 
improve the bill or future legislation to improve the 
regulatory structure of money service businesses.
    Currently, MSBs like Western Union are licensed by States 
in which they do business. States are responsible for the day-
to-day regulatory supervision and oversight of our businesses. 
Western Union itself is regulated by 48 States, the District of 
Columbia, and several of the United States territories 
offshore.
    Moreover, MSBs are also subject to Federal laws such as the 
Bank Secrecy Act, the USA Patriot Act, and other relevant 
Federal laws, such as the sanctions programs administered by 
the Department of Treasury's Office of Foreign Assets Control.
    With respect to its obligations under the BSA, Western 
Union is subject to regulatory oversight by FinCEN and as 
mentioned, is examined by the Internal Revenue Service.
    Western Union has several concerns with H.R. 4331. MSBs are 
highly regulated and supervised by both State and Federal 
agencies. However, H.R. 4331 does not create uniform standards 
for safety and soundness.
    Rather than preempting and providing uniform standards for 
companies, H.R. 4331 preserves State laws and State enforcement 
powers, leaving in place the current regulatory chaos that we 
experience and layers on top of that a new Federal regime which 
could potentially be in conflict with our State regulation.
    We encourage the committee to consider creating a single 
regulator for MSBs. This license would grant the Federal 
Government greater oversight over the industry and its related 
issues and would provide the industry with more consistent 
guidance and regulation than it currently receives.
    Federal oversight of compliance with the Bank Secrecy Act 
and the anti-money laundering laws will better serve the 
interests of the United States and the industry in battles 
against terrorism and illegal drugs.
    This structure could provide for an optional Federal MSB 
license that companies could choose if they desire. The license 
would be issued and enforced by a Federal regulator responsible 
for all safety and soundness examinations and enforcement, as 
well as the examination and enforcement of all Federal money 
laundering and terrorist financing laws.
    Western Union appreciates the committee's effort to take a 
first step towards modernization of the MSB regulations and 
looks forward to working with the committee to improve H.R. 
4331 or future legislation to achieve these important goals.
    Thank you again for inviting me to testify. I look forward 
to answering any questions you may have.
    [The prepared statement of Mr. Cachey can be found on page 
35 of the appendix.]
    Mr. Miller of North Carolina. Thank you, Mr. Cachey. You 
used 4 of your 5 minutes. You set an excellent example not only 
for the witnesses, but for members of the committee.
    Mr. McClain is recognized for 5 minutes.

    STATEMENT OF SCOTT K. McCLAIN, DEPUTY GENERAL COUNSEL, 
          FINANCIAL SERVICE CENTERS OF AMERICA (FiSCA)

    Mr. McClain. Thank you. Chairman Miller, Ranking Member 
Hensarling, and esteemed members of the subcommittee, my name 
is Scott McClain. I serve as deputy general counsel to 
Financial Service Centers of America, also known as FiSCA.
    On behalf of the FiSCA membership, we are grateful for this 
opportunity to discuss issues concerning the regulation of 
money services businesses.
    FiSCA is a national trade association representing nearly 
7,000 neighborhood financial service providers operating in the 
United States. Our membership serves millions of customers from 
all walks of life, including those with bank accounts as well 
as the ``unbanked.''
    Our members, which we call ``financial service centers'' or 
``FSCs,'' provide a broad range of financial services and 
products, including check cashing, remittances, money order 
sales, and utility bill payments, to name just a few.
    FSCs make up an economically significant industry that 
conducts more than 350 million transactions each year, 
providing over $100 billion in various products and services to 
over 30 million customers.
    FSCs specialize in delivering retail financial services, 
offering convenient locations, extended hours of operation, and 
transparent and affordable transaction fees.
    Our customers pay only for the services they use with no 
account maintenance fees, no minimum balance requirements, and 
no NSF fees.
    We are proud of recent industry surveys showing that more 
than 90 percent of our customers rate the value and level of 
our services as ``good to excellent.''
    Check cashers and other MSBs are dependent on access to 
depository and banking services for their very survival. Banks 
that service our industry, however, are faced with onerous 
regulatory burdens and are required to expend ever greater 
resources in maintaining customer compliance and monitoring 
systems. As a result, many banks have terminated their MSB 
customers, are refusing new accounts, or placing burdensome 
requirements on the accounts they maintain.
    There is a dangerously small pool of banks willing or able 
to provide services to MSBs. As a result of these trends, check 
cashers and other MSBs are experiencing problems in locating 
and maintaining accounts, banking costs are increasing, and 
would-be entrepreneurs in this area are experiencing barriers 
in opening new businesses.
    Part of the current bank discontinuance problem stems from 
a misperception in the eyes of some regulators and bankers that 
check cashers are inadequately regulated.
    Let me demonstrate how this is not accurate. At the State 
level, check cashers are regulated in most U.S. jurisdictions, 
typically by banking departments or other regulators.
    State regulation typically includes licensing or 
registration requirements, mandatory recordkeeping, 
examinations, financial reporting, regulation of fees and 
consumer protections.
    Virtually every State with any sizable check-casher 
industry has enacted legislation to regulate these businesses.
    Moreover, all check transactions are subject to the Uniform 
Commercial Code adopted in all U.S. jurisdictions.
    In addition, at the Federal level, as of 2001, MSBs have 
been required to register every 2 years with the U.S. 
Department of the Treasury. They must also implement anti-money 
laundering programs, including policies and procedures, 
compliance officers, employee training programs, and 
independent compliance examinations.
    Like banks and other financial institutions, check cashers 
and other MSBs are subject to Bank Secrecy Act reporting 
requirements, including currency transaction reporting and 
suspicious activity reporting for certain types of 
transactions.
    They are also required to maintain detailed records of 
monetary instrument sales and remittance activities at certain 
levels as mandated by the BSA.
    MSB compliance is overseen by the Financial Crimes 
Enforcement Network with the examination function administered 
by the Internal Revenue Service. In a typical Title 31 audit, 
IRS examiners will go on-site to access the level of a check 
casher's compliance, including a review of all reporting and 
recordkeeping functions. The IRS examination process is 
rigorous.
    In short, the perception that the check cashing industry is 
underregulated is simply not accurate.
    FiSCA will continue to work with Members of Congress and 
this subcommittee to help ensure the availability of banking 
services to the industry.
    One solution currently being considered is H.R. 2893, the 
Money Service Business Act of 2009, introduced last year by 
Representative Maloney and co-sponsored by Chairman Gutierrez, 
Ranking Member Hensarling, and Representative Biggert.
    This proposed solution continues to have bipartisan support 
and industry support. We are grateful to the bill's sponsors 
for their continued efforts in this regard. We also appreciate 
the concern of Congress for this problem as demonstrated in 
H.R. 4331, the Money Services Business Compliance Facilitation 
Act of 2009, as introduced by Chairman Gutierrez and Ranking 
Member Bachus.
    As a final point, although the MSB industry continues to 
experience significant problems in access to banking services, 
a number of depositories have seized on this as an opportunity. 
Many banks have found check cashers to be excellent, profitable 
customers whose accounts can be efficiently and safely managed, 
and who can significantly add to the bank's bottom line.
    FiSCA has developed written materials on banking MSBs and 
we will gladly work with any depositories who may want to take 
a second look at our industry.
    In conclusion, FiSCA and its members are committed to 
working with the subcommittee and our industry partners to help 
ensure that MSBs continue to have access to banking services.
    Again, we thank you for the opportunity to present these 
views.
    [The prepared statement of Mr. McClain can be found on page 
41 of the appendix.]
    Mr. Miller of North Carolina. Thank you, Mr. McClain.
    Finally, Ms. Thoren-Peden is recognized for 5 minutes.

STATEMENT OF DEBORAH THOREN-PEDEN, PARTNER, PILLSBURY WINTHROP 
                        SHAW PITTMAN LLP

    Ms. Thoren-Peden. Mr. Chairman, Ranking Member Hensarling, 
and members of the subcommittee, I am very honored to be here 
and thank you for inviting me.
    My name is Deborah Thoren-Peden. I am a partner at the law 
firm of Pillsbury Winthrop. I am on the firm's financial 
institutions team, and I am chair of the privacy team. I am 
also co-chair of the firm's consumer and retail team.
    Prior to joining the firm, I spent 10 years in-house at 
First Interstate Bank in the retail sector, where amongst other 
things I was the Bank Secrecy Act attorney. I have been doing 
Bank Secrecy Act and financial work and payment work since the 
early 1980's, so for almost 25 years.
    I have also been general counsel and a senior executive 
officer and chief privacy officer of an Internet payment 
company, as well as general counsel of a financial subsidiary 
of another Internet company.
    My practice includes representing many different sorts of 
companies in the payment space, ranging from money transmitters 
to check cashers, pre-paid card issuers, distributors, sellers, 
money order issuers, Travelers Checques, etc. I work with a 
broad range of people and companies, and in that regard, I have 
ended up working with most of the regulators in one way or 
another in this space throughout the country.
    One certainly strong opinion that I have is I believe the 
MSB industry is already among the most heavily regulated 
industries. Right now, they have the State regulators in 
virtually every State in which they offer services and licenses 
are required. Those State regulators, by the way, are extremely 
diligent in their duties and their oversight. They care 
tremendously as to whether or not the people, the consumers, 
and companies in their States are properly protected, and they 
are very vigilant in terms of their oversight and examinations, 
and for certain of my clients, what that means is actually they 
will have State examiners in their offices for months, 
literally months, every year, because different State examiners 
come in.
    Just to give you an idea, and this is by way of an example, 
I brought with me the Bank Secrecy Act and AML examination 
manual from FinCEN and the Department of the Treasury. This is 
just one exam manual from one agency. As you can see, it is 
fairly robust.
    The MSB industry has FinCEN oversight, and people at FinCEN 
care deeply about the industry. Also, OFAC has oversight in 
terms of whether or not there is compliance with the economic 
sanctions by the Office of Foreign Assets Control.
    The IRS has the right under the Bank Secrecy Act to examine 
them. All the States have an examination right, and the Federal 
Trade Commission would have rights to oversee the non-bank 
financial institutions as well.
    You have a large number of different entities already in 
place regulating these industries today.
    One thing I know of significance to the committee, with 
which I wholeheartedly agree, is there does need to be more 
protection for the banks in terms of offering accounts to MSBs.
    What has happened today is the risk of banking MSBs has 
been heightened, many of the banks very logically have chosen 
to not take the risk because the risk of their having problems 
or encountering problems later is very possible for them, so it 
does not make it sensible for them to do so.
    I truly believe there needs to be some sort of a safe 
harbor enacted for the banks in terms of banking the MSBs, so 
that the banks cannot be gone after for an MSB's actions.
    Additionally, I think the MSB industry, including the 
prepaid card industry, etc., needs to continue to be nurtured 
and supported because they offer extremely important financial 
services to millions of consumers in the United States, 
including the unbanked and the underbanked, which some estimate 
to be 10 to 15 percent of the population.
    If there is more regulation and more oversight requirements 
that are particularly burdensome, you will find that some 
people currently offering services through convenient 
locations, perhaps some retailers by way of example, will pull 
out of the business because it is simply not worth it to them 
to risk having potential actions brought against them in 
exchange for offering the services through their locations.
    In terms of even additional oversight, I think careful 
thought has to be given to what is going to be the impact of 
additional regulation, especially on some of the retailers, mom 
and pop stores, etc., that offer the products, because you may 
find the products are withdrawn from the marketplace, which I 
think is contrary to everyone's wishes.
    I think one thing everyone can agree upon is no one wants 
these monies and transactions going underground. If they are 
not offered and available conveniently, they may go 
underground, and neither the industry, law enforcement or the 
regulators want that to happen.
    Instead, I think we need to help nurture the industry. 
Thank you very much.
    [The prepared statement of Ms. Thoren-Peden can be found on 
page 45 of the appendix.]
    Mr. Miller of North Carolina. Thank you. We will now have a 
series of questions from the members. Each member will have 5 
minutes. I will begin by recognizing myself for 5 minutes.
    Mr. Cachey, you rejected the Bachus/Gutierrez model, 
although you said you would be happy to continue to work with 
the committee on a proposal, but you did support instead an 
industry self-regulatory model, full Federal regulation of 
MSBs.
    Do you have a notion of how big the price tag will be for 
the examiners it would take for the Federal Government to do it 
as opposed to an industry-based model with Federal supervision, 
which presumably either one will come out of fees charged to 
MSBs? Which do you think will be more expensive?
    Mr. Cachey. The proposal that we are contemplating would 
allow for an MSB to choose in or out to be federally licensed 
and regulated. The idea would be that if you had a smaller MSB 
that maybe did business in one State, they could continue to be 
licensed by that one State.
    But if you had MSBs like Western Union or others that offer 
services throughout the country or maybe a significant region 
of the country, it might prove more efficient for them to opt-
in to a Federal licensing scheme, thereby allowing entities 
where that is advantageous to do that, but not requiring the 
tens of thousands of smaller MSBs, what people commonly refer 
to as the mom and pop's, to have to deal with a Federal 
licensing scheme when it is not suitable to their business 
model.
    Mr. Miller of North Carolina. Ms. Thoren-Peden, you also 
proposed legislation for creating among other reasons an office 
within Treasury to ensure compliance with current regulations.
    Is the current oversight of MSBs by FinCEN and the IRS and 
any of the relevant agencies sufficient that non-compliant MSBs 
are receiving the regulatory oversight that is needed?
    Ms. Thoren-Peden. I certainly think that for MSBs that are 
licensed and are acting appropriately, the current regulatory 
structure is more than sufficient.
    I think there may be some shops out there, probably smaller 
retailers, to be honest, who may engage in activities that they 
do not understand to be money services businesses directly. I 
think some of that has come about because of need, where there 
is need for additional services. People may offer the services 
without being fully aware of the legal requirements.
    I do agree where you have entities that are operating in a 
context where they are subject to licensure and they have not 
been licensed, that is obviously a situation that needs to be 
addressed.
    For anyone who is already licensed, I believe there is a 
significant amount of regulation out there already.
    Mr. Miller of North Carolina. Ms. Thoren-Peden, you 
described your clients who have an interest in this area. By 
way of explaining your interest and your expertise, are you 
representing any of those clients today?
    Ms. Thoren-Peden. I am not.
    Mr. Miller of North Carolina. Is the point of view that you 
have expressed in any way at variance with the point of view of 
your clients?
    Ms. Thoren-Peden. I have not spoken with my clients about 
what my testimony was today. I cannot really speak to that.
    Mr. Miller of North Carolina. The Chair now recognizes Mr. 
Marchant for 5 minutes. I yield back my time.
    Mr. Marchant. Thank you, Mr. Chairman. Mr. McClain, you 
talk about the small and dwindling pool of banks that continue 
to provide account services to MSBs. What separates a bank 
willing to offer services from one that does not?
    Mr. McClain. That is a very good question, Congressman. 
Currently, our industry is served by a handful of large 
national banks and I would say a broader base of smaller 
community banks and even some credit unions.
    There is not really a bright line that will identify what 
will cause a bank or enable a bank to service our industry 
versus those that do not.
    I think what we have seen, however, is a problem of 
perception. For banks that may otherwise be willing to service 
our industry, I think there is a concern or there has been a 
perception that check cashers and other forms of MSBs are high-
risk accounts. I think if you look to the record of the 
industry, you will find that perception is not borne out.
    The banks that do service our industry successfully, and I 
will add there really are some very fine banks, very fine 
financial institutions that service our industry, what they 
have been able to do is balance the costs and the risk 
associated--the regulatory risk, I should say--associated with 
banking MSBs with a profit structure.
    They have been able to develop a specialty in this area, 
man appropriate compliance departments, and do so in a 
profitable manner.
    The problem, I think, that we are faced with is that due to 
the regulatory structure, the burdens that banks that service 
this industry are faced with, it becomes unprofitable for them 
to service our industry.
    Again, one solution that was being considered in connection 
with the MSB bill, H.R. 2893, was to alleviate banks of this 
role as being a de facto regulator for the customer, thereby 
making it more profitable for them to service our industry.
    Mr. Marchant. In all instances now, the MSBs are regulated 
by the laws of the State in which they operate; is that 
correct?
    Mr. McClain. Not all States, certainly the vast majority 
and certainly any States with any sizable check casher or MSB 
industry generally have very rigorous regulatory structures for 
our industry.
    Mr. Marchant. Does the casa de cambio business fall into 
this?
    Mr. McClain. No, that is generally south of the border, 
Mexican casa de cambios, that is not something we see here in 
the United States, or that is my understanding.
    Mr. Marchant. There are quite a few in Houston. If that 
industry is located in a State, it has nothing to do with this 
money service business?
    Mr. McClain. To the extent they are offering any product or 
service that falls within the definition of a ``money service 
business,'' i.e., check cashing, money order sales, remittance 
activity as agents or principals, they would fall under the 
Bank Secrecy Act and they should be subject to regulation; 
absolutely.
    Mr. Marchant. Ms. Thoren-Peden?
    Ms. Thoren-Peden. Yes. The casa de cambios, basically 
currency exchange entities in essence, are subject to the Bank 
Secrecy Act. They are deemed to be money services businesses 
and are therefore covered by the Bank Secrecy Act and anti-
money laundering requirements.
    Certainly, some States do license them and they are subject 
to licensure. In addition to that licensure, the moment they do 
anything else that triggers licensure in a State, they are also 
required to be licensed. I thought this information might be 
helpful.
    Mr. Marchant. The proposal would create a national optional 
Federal charter for MSBs. Is that the essence of the bill? Mr. 
Cachey?
    Mr. Cachey. The essence of the bill, and I will paraphrase, 
but my understanding is to create an office in the Department 
of the Treasury to regulate money service businesses which will 
then have oversight over an SRO, which would be an industry 
organization that would self-regulate itself under the Federal 
laws, but would also leave in place the 48 State law schemes 
that also regulate the money services businesses.
    Mr. Marchant. Would not an MSB have the ability or the 
right under this bill to not be regulated by this Federal 
entity?
    Mr. Cachey. I think right now that is unclear. Typically, 
the SROs that I am familiar with, and there are a number I am 
familiar with, even offshore for the industry, there are 
internal standards that are set for an entity to be able to 
join that SRO, and those types of details would need to be 
worked out.
    With the tens of thousands of small money service 
businesses out there, it seems to me it would be difficult to 
make sure that many organizations can meet the type of 
standards that maybe some of the larger players in the industry 
would want to have to be comfortable and affiliated with those 
other organizations.
    Mr. Miller of North Carolina. The gentleman's time has 
expired. For the witnesses, you see the lights in front of you, 
if you see the time has expired during your answer, I am 
reluctant to cut you off or interrupt you, but if you would 
keep your answer succinct, and you may elaborate upon it later 
in writing.
    Mr. Lynch has joined us. Like Mr. Bachus before him, he is 
not actually a member of this committee, but I ask unanimous 
consent that the gentleman from Massachusetts be allowed to sit 
with the subcommittee, and that he be allowed to ask questions 
in turn. Hearing no objection, it is so ordered.
    Mr. Sherman is recognized for 5 minutes.
    Mr. Sherman. Thank you. I will be brief.
    People who purchase remittance services are often folks 
getting by on a very small amount of education and yet they are 
dealing with an international financial transaction, and they 
face three different charges. They face whatever charge is 
imposed upon the sender. There are sometimes charges imposed on 
the recipient, and then you have whatever currency conversion 
spread is being used.
    What do we do or what do you suggest we do so that people 
will have simple and clear information and can pick the best 
service at the best price?
    Mr. Cachey. I guess I will address that, since we engage 
directly in remittances. We find our customers to be very 
financially savvy. Typically, if you interview a typical 
remittance customer, they can tell you what the price is and 
what exchange rate they are going to get with a number of 
services.
    Additionally, anybody can walk up to a location for our 
service and many others, quite frankly, and just ask, what are 
you charging today, and what is the FX rate I am going to get 
if I send money overseas? That is freely shared with the 
customer because we think the customer should know that.
    Western Union does not charge people to pick up money, so 
there is not a receiver fee, if you will.
    Mr. Sherman. Do you have a consistent spread? I will define 
the spread as let's say one customer is sending dollars for 
pesos and the other customer is sending pesos for dollars. The 
difference that those two customers face as the spread, do you 
have a consistent spread day after day or are there sometimes 
when you walk in and the fee for service part is probably 
consistent but the amount you are losing on the currency 
transaction is different?
    Mr. Cachey. Depending on the currency, because some 
currencies are more volatile than others--
    Mr. Sherman. What I am saying is day by day. You are 
sending money to Zimbabwe. You are going to face some 
additional charges.
    Mr. Cachey. Yes. Day by day. The spread stays consistent 
but it can change day by day.
    Mr. Sherman. Is the difference between the number of 
dollars you will give for a peso and the number of pesos you 
will give for a dollar--you may have somebody in Mexico sending 
money north, is that difference the same every day?
    Mr. Cachey. I cannot answer that. I do not know.
    Mr. Sherman. I will ask you to answer for the record and I 
yield back. Thank you.
    Mr. Miller of North Carolina. Thank you. The Chair now 
recognizes Mr. Royce of California for 5 minutes.
    Mr. Royce. Ms. Thoren-Peden, if I could ask you a question, 
because in your testimony, you describe MSBs as being among the 
most heavily regulated businesses in the United States, and our 
other two witnesses in their testimony had commentary to that 
effect.
    I am going to ask you based on a line of argument here that 
while this may be true, that in terms of effectiveness, the 
current regulatory structure overseeing MSBs could probably be 
improved.
    Let me just see if you would concur with this. We have a 
number of recent studies, including some by the Treasury 
Inspector General, that found that the IRS could not be doing a 
complete job of ensuring Bank Secrecy Act compliance, and there 
are a couple of examples here.
    One, if they tally the number of MSBs operating in the 
United States, they get an estimate--a lot of these are small 
and local outfits--they are somewhere between 40,000 and 
160,000, and they say something less than 20,000 are actually 
registered at FinCEN.
    Then they say due to the limited resources at the IRS, the 
enforcement of anti-money laundering and anti-terrorist 
financing oversight is largely left up to State regulators.
    One of the arguments they cite is the IRS entering into 
memoranda of understanding with 40 States to facilitate the 
sharing of information that would come from examinations, and 
the fact that the IRS actually examines 3 percent of MBFIs.
    When we look at the collection of various State regulators, 
there are 37 States that have some form of registration or 
regulation apparatus, and then as you look further into the 
level of sophistication and aptitude within those States, you 
see a very wide range, it is a very dramatic range in terms of 
the ability or expertise that is applied here.
    Is there a segment of the MSB industry that is outside of 
the purview of strong anti-money laundering and anti-terrorist 
financed compliance, and in your view, how could we bring 
increased registration and increased compliance of these 
smaller MSBs?
    Ms. Thoren-Peden. In terms of the MSB registration, there 
certainly are more sites in the United States that offer money 
services businesses, but I think the higher numbers refer to 
authorized delegates, also known as ``agents.''
    If they are only acting as a money services business on 
behalf of someone else who is licensed and registered, there is 
no requirement for them to register at the Federal level, 
although there are separate recordkeeping requirements. I just 
wanted to mention that.
    One thing that happens at the State regulatory level, and I 
believe 48 States as well as D.C. and other jurisdictions, 
actually have licensure for money transmittal purposes. There 
are very few States that do not have something in place.
    Part of their examinations go into not only what is the 
licensee doing, how are they financially, how are they 
compliant with the anti-money laundering, how are they 
compliant with OFAC regulations, but they also as part of their 
examinations go out and look at the agent locations as well.
    They do not look at every agent location. The same is true 
functionally for banks as well. If you have 10,000 branches in 
the United States, if there is an examination, quite logically 
the examination is of the entity itself and some of the 
branches. It is the same structure here.
    In answer to your question, do I think that everything is 
examined to the nth degree, no, but I also think if you impose 
that sort of a structure where every authorized agent location, 
every delegate has to have an examination, you will find many 
people will no longer offer those services.
    Mr. Royce. Let me explain the dilemma. We have come some 
way in terms of combatting terrorist financing, but the level 
of resilience and innovation among those who would contemplate 
terrorism is out there, and they are desperate to find funding 
mechanisms that operate under the radar and out of the 
mainstream financial system.
    They understand their ability to carry out operations is 
directly tied to their fund raising. You saw recently in the 
paper here, we have an al-Qaeda leader, Shireen Mazari, who 
called funding, ``the mainstay of Jihad.''
    As we look at reforming this portion of the non-traditional 
banking sector, I think transparency is the key to closing 
vulnerabilities. We need competent and consistent oversight 
that can address these apparent gaps and ensure anti-terrorist 
financing laws are properly enforced.
    I thank you, Mr. Chairman.
    Mr. Miller of North Carolina. If you want to respond to 
that, you may do so in writing.
    Ms. Thoren-Peden. Can I respond to that?
    Mr. Miller of North Carolina. In a sentence, but you may 
respond as fully as you like in writing for the record. You may 
respond in a sentence.
    Mr. Royce. Mr. Chairman, on H.R. 4049, whether she thinks 
that would be helpful or not.
    Mr. Miller of North Carolina. When I said ``a sentence,'' I 
meant in the Ernest Hemingway sense.
    Ms. Thoren-Peden. I think the State banking regulators 
actually are very capable and they actually do an excellent job 
in terms of overseeing their licensees.
    Mr. Miller of North Carolina. Thank you. Mr. Frank would be 
a great deal less polite in his wielding of the gavel.
    The gentlelady from California, Ms. Waters, is recognized 
for 5 minutes.
    Ms. Waters. Thank you very much. I would like to ask 
Western Union first, and maybe the other MSBs can answer.
    When you have disasters in places like Haiti and Chile, and 
these tsunamis that have taken place in the last decade or so, 
you have a lot of transmitting of money. The relatives here in 
the United States are trying to give support to their relatives 
in those countries.
    Do you have any policy that would reduce the amount that 
you charge to transmit when these disasters take place?
    Mr. Cachey. The simple answer is yes, both for the tsunami 
2 years ago, I think, and most recently for Haiti. Western 
Union for a number of months after the disaster was sending 
money transfers for free for customers from the United States, 
France, and Canada into Haiti.
    As well, the Western Union Foundation, which is the 
charitable arm of Western Union, I believe made $2.5 plus 
million available to other charitable activities and disaster 
recovery activities to Haiti.
    Yes, these are our customers as well, because they are 
receiving funds through our dedicated service, so the people in 
Haiti are our customers as well as the people in the United 
States sending the money, and we understand they are in dire 
straits, so we do have programs to reduce or charge no fee at 
all, depending on the extent of the disaster.
    Ms. Waters. Is that true of Chile also?
    Mr. Cachey. Chili is less dependent on remittances than 
Haiti might be. I know we have made charitable contributions in 
one form or another. I am not personally familiar with what our 
reduction in fee structure was for that event though.
    Ms. Waters. Thank you. Mr. McClain?
    Mr. McClain. Thank you. Our membership primarily provides 
retail financial services in the United States. We act as 
agents for Western Union. We did work with Western Union and 
our State associations and actually assisted to promote Western 
Union's activities in terms of discounted remittance fees for 
serving Haiti and we also did some of our own internal fund 
raising, but again, we do not directly provide financial 
services in Haiti or other external jurisdictions.
    Ms. Waters. I have another question that I would like to 
ask, and that has to do with how you calculate the value of 
U.S. dollars, for example, if in fact one is transmitting $100 
to Haiti and the exchange rate is $37.50, how do you do that? 
How do they get the full value of the $100 that is transmitted?
    In the calculation, do you round up? Do you round down? How 
do you do that?
    Mr. Cachey. First, in Haiti, I believe it is a U.S. dollar 
payout because they want dollars in Haiti. There is no 
conversion for that particular portal of transactions. People 
sending a dollar from the United States, a dollar would be paid 
out in Haiti.
    From a currency exchange standpoint, in jurisdictions where 
we do pay out in the local currency, Western Union states what 
the exchange rate is that we are offering and then explicitly 
tells the customer this is the amount of pesos, pounds, euro's, 
whatever the currency may be, that is going to be put into the 
hands of the customer receiving the money, so that the sender 
knows exactly how much money the receiver is going to have 
placed in their hands when they show up at our correspondent 
location in that jurisdiction.
    Ms. Waters. It may be a problem in that the currency of the 
receiving country may not have the kind of denominations, I 
guess, to be able to capture the partial percentage point or 
what have you.
    It seems to me that could add up to a lot of money. Do you 
calculate how much that is and is that captured in your 
earnings report separately from the way you capture the other 
straight amounts that are transmitted?
    Mr. Miller of North Carolina. The witness may answer in a 
sentence with a maximum of two commas and no semicolons, and 
you may answer as fully as you like in writing for the record.
    Mr. Cachey. I will answer in writing with a period.
    Mr. Miller of North Carolina. All right. Mr. Hinojosa of 
Texas is recognized for 5 minutes.
    Mr. Hinojosa. Thank you, Mr. Chairman. I thank the 
panelists for coming to visit today and get us better informed.
    I represent the 15th Congressional District in deep South 
Texas, along the Texas/Mexico Border. Hidalgo County is the 
largest county that I represent, and it is approximately 90 
percent Hispanic.
    It is also one of the poorest counties in the whole Nation 
and home to the poorest of the poor because we have so many 
colonias in that county. It contains the largest number of 
colonias, like I said, and they number something like 800.
    I am concerned about the charges that are being charged by 
the check cashers and payday lenders, and many of my comments 
and questions will be directed towards that group.
    This cash society makes it very difficult for the majority 
of my constituents to obtain non-predatory loans and forces 
them to rely on these check cashers and payday lenders for 
their financial transactions, and such transactions make it 
very difficult for them to obtain non-predatory loans and 
thereby prevents them from establishing credit, possibly 
purchasing a car or appliances. It is just very difficult for 
them to be able to get into the mainstream of financial 
institutions.
    In fact, payday loans over a period of time can result in 
my constituents paying up to 400 percent in interest if they do 
not pay the loans by the end of each month.
    Over the years, I have worked with Chairman Frank, 
Subcommittee Chairman Gutierrez, and Subcommittee Chairwoman 
Maxine Waters to find ways to move our unbanked constituents 
and all the unbanked in the United States into the mainstream 
financial services.
    Unfortunately, many of them remain unbanked, distrust banks 
and other mainstream financial services and entities, and 
continue to suffer at the hands of those folks I mentioned and 
predatory lenders.
    The first question would be to Joe Cachey with Western 
Union. What can you do to help us get many of these unbanked 
into the financial services and the system that we have here in 
the United States so they can have more disposable income to be 
able to enjoy a better quality of life?
    Mr. Cachey. As I stated in my oral testimony, more than 
half of Western Union's customers in the United States are 
banked and really use Western Union as an asset, a cash 
management vehicle for services that banks may provide but 
which Western Union provides at a more convenient and speedier 
manner than a bank might.
    Many people use our systems to make bill payments, for 
example, where they do not want to run the risk of bouncing a 
check and having to pay a $35 bounced check fee. Let's remember 
that last year, the U.S. banking industry made approximately 
$40 billion just on returned check fees.
    A lot of people are banked and use our services to manage 
their cash flow to avoid the types of fees that banks charge 
people.
    Mr. Hinojosa. Joe, let me interrupt you because time will 
get away from us. You said half of them are banked. You had 
about $71 billion last year. That leaves another $35 billion of 
transactions that are by people who are unbanked. I did not 
hear you say what you could do, your company, to educate and to 
encourage people that I represent to use the financial 
services, and if you cannot answer the question, I would like 
to ask the lady if you have some services that would help us in 
my district.
    Mr. Miller of North Carolina. Time has gotten away from us. 
One sentence orally, and as full an explanation as you would 
like in writing for the record.
    Ms. Thoren-Peden. Yes, sir. I think there are a number of 
prepaid products that have become available over the last 
couple of years that are offering many financial services to 
the unbanked and underbanked that hitherto were not readily 
available to them.
    Many of them are priced at a level that is reasonable, and 
it can be very helpful. Some customers are able to establish 
long-term relationships with the underlying banks. That is 
usually at the option of the customer, but there are a number 
of prepaid products that have arrived in the marketplace over 
the last couple of years that I believe and have seen really do 
facilitate getting the unbanked and underbanked financial 
services.
    Mr. Hinojosa. Thank you.
    Mr. Miller of North Carolina. Thank you. That was a very 
long sentence. If any of you testify before the full committee, 
you will think I am a real sweetheart.
    The Chair now recognizes for 5 minutes a leader on this 
issue who has introduced relevant legislation, the gentlelady 
from New York, Ms. Maloney.
    Mrs. Maloney. Thank you very much. As the chairman 
mentioned in his opening remarks, I have re-introduced my bill, 
the Money Services Business Act, which is identical to the 
legislation that unanimously passed the House of 
Representatives last year.
    I am proud to sponsor this legislation and to have it co-
sponsored by the ranking member of the Financial Services 
Committee as well as the chairman and ranking member of the 
Financial Institutions and Consumer Credit Subcommittee, 
Congressman Luis Gutierrez and Jeb Hensarling, and 
Representative Judy Biggert.
    The Money Services Business Act addresses the critical 
problem of MSBs, money service businesses, being denied access 
to the banking system, and without a relationship, MSBs are 
unable to provide financial services to communities, making it 
difficult for millions of Americans to pay their bills, send 
money or cash checks.
    Federal regulatory agencies recognizing the problem facing 
MSBs have sought to address this issue through agency guidance 
and regulatory changes with very little effect.
    This bill establishes a mechanism that would allow MSBs to 
self-certify their compliance with the Bank Secrecy Act and 
anti-money laundering requirements, while allowing banks to 
make risk-based decisions about banking, particularly with 
MSBs.
    My concern has been that if this issue is left unaddressed, 
the viability of MSBs will be compromised, potentially pushing 
many of these transactions underground and potentially 
untraceable to law enforcement.
    This is something we all agree is not the result we are 
looking for, and I hope to have a discussion that can lead to 
the best possible conclusions.
    I would like to ask Mr. McClain, as you know, my colleague, 
Mr. Gutierrez, has a bill that would recognize a self-
regulatory organization that would be delegated rulemaking 
authority as well as enforcement.
    Are there regulatory organizations that have been 
identified as capable of performing the self-regulatory 
function and how were they identified?
    Mr. McClain. Thank you, Congresswoman Maloney. With respect 
to this industry, I am not aware of any self-regulatory 
organizations that would be able to have oversight over the 
very large and very diverse money service businesses industry.
    We have, as you know, what I will term as ``wholesalers'' 
of financial services and products, such as Western Union and 
MoneyGram and others, and then we have at the level of our 
members, retailers of very basic financial services, check 
cashers, etc., that act as agents.
    I cannot as we sit here today perceive what type of self-
regulatory organization could have oversight over this whole 
universe of MSBs, but it is certainly an innovative and 
creative bill, and it is something that I think deserves some 
serious consideration and we will continue to look at it and 
work with the committee.
    Mrs. Maloney. Do you believe this is a better approach to a 
self-certification process?
    Mr. McClain. I think it is certainly a different approach. 
With respect to the self-certification process, the real focus 
and appeal of that proposed legislation is the fact that it 
would relieve banks of being in the role as de facto regulators 
of their MSB customers, so it is a very different bill. It is 
not contrary to the self-regulatory organization proposal. 
Again, I think it attacks the issue or the problem from a 
different perspective.
    Mrs. Maloney. I would like to ask Mr. Cachey and Ms. 
Thoren-Peden, I know you both testified you do not believe that 
additional regulatory oversight is appropriate, and I am 
curious whether you view a self-certification process as 
additional regulatory oversight.
    I do agree that MSBs are already regulated at the State 
level, but would a self-certification process pose an 
additional burden on MSBs that might dissuade them from 
continuing to serve customers?
    Ms. Thoren-Peden. I think if the self-certification process 
allows a bank to rely upon the MSB's certification and 
basically gives the bank a safe harbor for allowing them to be 
a banking customer, that would be very helpful.
    As you indicated, that is one of the core issues that has 
come up over the past couple of years.
    Mrs. Maloney. Mr. Cachey, your response?
    Mr. Cachey. I think self-certification is probably the 
easiest way for smaller MSBs to address the banking issue that 
everybody has expressed concern over.
    Mrs. Maloney. I would like to ask anybody on the panel to 
discuss the current banking situation for MSBs, how is it 
affecting businesses and their ability to deliver financial 
services?
    Mr. McClain. I think at least with respect to the retail 
MSB industry, I can address that. What we are seeing is, again, 
a very small pool of banks willing or able to service the 
industry. We are seeing some bright spots in some smaller 
community banks that are willing to step in. I think they see 
some opportunity here.
    Generally, the problem is certainly not on a large scale 
improving. We have some regional areas, particularly Florida, 
Ohio, the Northeast, where there are really just very few banks 
that can service our industry. It continues to be a problem.
    Mr. Miller of North Carolina. The gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the witnesses 
for appearing. To make sure I direct my questions to the 
appropriate persons, if you believe that there is no need for 
additional regulation, will you kindly extend a hand into the 
air? Witnesses, if you think there is no need for additional 
regulation.
    [show of hands]
    Mr. Green. Two. Thank you. Given my source of information, 
and I will share with you what I have, the indication is that 
we have approximately 40,000 to 160,000 MSBs with only 15,000 
to 20,000 actually registered.
    Is this a fair statement? If you differ with the statement, 
kindly extend a hand into the air. Does anyone differ?
    [show of hands]
    Mr. Green. Yes, sir. What would your number be in terms of 
the actual number of MSBs, please?
    Mr. Cachey. I think something between 30,000 and 40,000 
MSBs. I think the 160,000 number is probably agent locations or 
locations that do not need to be registered.
    Mr. Green. Do you agree that we have more that are not 
registered than are registered?
    Mr. Cachey. I do not know, but I think you are right in 
that there are a number out there that are not.
    Mr. Green. The indication was that we have about 40,000 
that are MSBs; correct? My indication is we have 15,000 to 
20,000 that are actually registered. If it is 40,000, we have 
at least as many that are not registered as are registered. 
Fair statement?
    Mr. Cachey. Fair.
    Mr. Green. Ma'am, do you concur?
    Ms. Thoren-Peden. I do not have the estimates in front of 
me.
    Mr. Green. Without the estimates in front of you, do you 
agree we have more that are not registered than are registered?
    Ms. Thoren-Peden. I--
    Mr. Green. Do you agree that we have a good number that are 
not registered?
    Ms. Thoren-Peden. That, I agree with.
    Mr. Green. Given that we have a good number that are not 
registered and given that we have found that some banks are 
having great difficulty with the current circumstance and they 
are discontinuing the service, do you both agree the banks are 
discontinuing this service and working with these MSBs?
    Do you agree? If you do, raise your hand.
    [show of hands]
    Mr. Green. This is the only way I can do it. I am sorry to 
be so elementary.
    Ms. Thoren-Peden. I believe there are certainly a number of 
banks that have chosen to not bank MSBs.
    Mr. Green. Do you agree that banks are in a tough position?
    Ms. Thoren-Peden. Yes.
    Mr. Green. They are trying to engage in a legitimate 
business practice and they find themselves having to not only 
vet the MSBs but even after vetting, they may find that they 
have done something that is inappropriate, but they have not 
done it with malice or forethought.
    Do you agree, ma'am?
    Ms. Thoren-Peden. I agree, sir.
    Mr. Green. Do you agree, sir?
    Mr. Cachey. Yes.
    Mr. Green. The banks are really the entities that are of 
concern, there are others as well, but it is hard to get around 
the fact that you have banks that are engaged in legitimate 
business practices that have this concern.
    Given that we have the banks with the concern and we have 
those that are not registered, my question to you is, how will 
you stand on the premise that we do not need additional 
regulation, given this circumstance that exists with our 
banking institutions?
    How do you stand on this premise that we need no additional 
regulation? My guess is you may not like the regulation that is 
being proposed. You may think this is not a panacea, but 
surely, given the circumstance, something has to be done 
because we have legitimate business enterprises, known as 
banks, who are not engaging in the process and others that are 
considering discontinuance as it relates to this.
    How can you stand on this, and so as not to give you a 
moment to just talk about it endlessly, and I am sorry to do 
this to you, would you agree rather than answer the question, 
which was rhetorical, would you agree that some regulation is 
necessary?
    I will start with you, sir, Mr. Cachey. Would you agree 
that some regulation is necessary?
    Mr. Cachey. No, I think we just need to apply the 
regulations that we have to the entire industry.
    Mr. Green. How would you apply the regulations that you 
have to the entire industry when the IRS only has 500 people 
and they are already overworked? How would you do that?
    Mr. Cachey. Give them more people.
    Mr. Green. You would hire more people at IRS and let the 
more people at IRS, the 500-plus additional people, service 
this industry?
    I take it, ma'am, that would be your position as well?
    Ms. Thoren-Peden. Yes. The regulations and licensure 
structure are already in effect. They are on the books.
    Mr. Green. You would just enforce the regulations that are 
on the books?
    Ms.  Thoren-Peden. Yes, sir.
    Mr. Green. If the regulations that are on the books have 
not picked up as many persons as are registered, how can you 
contend that is an efficacious regulation? You have more 
people--this is my statement and at least one person agrees 
with me--unregistered than registered.
    How do you contend that is effective regulation when they 
are going under the radar to the extent they are?
    I thank you for the time, Mr. Chairman, and I thank 
Representative Maloney for her legislation as well as the other 
members.
    The members are trying to do something about the problem 
and I think while you may not concur with what is being 
proposed, you have to admit it is time to act.
    Thank you.
    Mr. Miller of North Carolina. If any witness wishes to 
respond in one sentence with ordinary punctuation, or you may 
respond for the record, if you would like.
    [No response.]
    Mr. Miller of North Carolina. The Chair now recognizes the 
gentleman from Georgia, Mr. Scott, for 5 minutes.
    Mr. Scott. Thank you. Let me ask Western Union, Mr. Cachey, 
what mechanisms do you use to ensure that the services that are 
provided by Western Union do not support terrorist activities 
or money laundering?
    Mr. Cachey. That is actually the function that I am 
personally in charge of at Western Union. We spend over $35 
million a year and I have over 325 employees located in 40 
offices around the world who work on anti-money laundering and 
the counter financing of terrorism.
    This includes not only monitoring transactions, looking for 
suspicious activity that can be reported to the government 
under the Bank Secrecy Act, but also doing things like 
government-sanctioned programs in conjunction with OFAC and the 
Department of Treasury, but also gathering and building 
relationships with law enforcement and regulators around the 
world, since we do business in 200 countries, and bringing that 
intelligence back in and trying to determine where in our 
system there might be abuses, and then either eradicating those 
abuses or if there is potential abuse, reporting those to the 
government so they can be acted upon.
    Mr. Scott. Can you share with us some examples perhaps of 
where you have found out that terrorists, organizations or 
sympathy organizations for terrorists have been able to use 
Western Union's services, and if you could tell us, does most 
of your business now--Western Union is international--how much 
of it is national and how much of it is international?
    Mr. Cachey. Approximately 60 percent of Western Union's 
transactions do not touch the United States. Therefore, the 
money goes from France to Algeria, let's say, or some other 
corridor.
    Frankly, when we report to the government what we suspect 
may be some type of illicit activity, we do not get a lot of 
feedback from the government as to hey, good job, that was 
something connected to money laundering or terrorist financing 
and we stopped it.
    We do not get that feedback with all the reporting that we 
do. I cannot cite examples of that, although anecdotally, you 
see things that might get reported in the paper or you hear 
something, oh, yes, an investigation occurred and yes, we know 
we were part of what people are reporting.
    There is not a good mechanism to get information back from 
the government on how much we are helping with the government's 
efforts.
    Mr. Scott. You would say in conclusion that there have been 
several suspicious examples, but nothing concrete. For 9/11, if 
my memory serves me correctly, there were about 28 individuals 
who were intimately involved. They were over here. They 
received money.
    Was any of that suspicious activity through Western Union?
    Mr. Cachey. Actually, there was about $5,000 that was 
returned the day before 9/11 back to the Middle East. Again, it 
was not suspicious because these individuals had the 
appropriate government-issued i.d.'s on the State level. They 
had bank accounts. They had credit cards.
    In looking at our system, the transaction looked like a 
normal day-to-day transaction to us because there was nothing 
irregular about the identification or about the mode in which 
the people sent the funds.
    The only way the funds were identified as being part of 
that was after the names were released by the government and 
then we ran the names through the system and found that $5,000 
transaction.
    Mr. Scott. There have been reports of MSBs that falsely 
certify they are compliant with the requirements of the Bank 
Secrecy Act. How prevalent is this problem?
    Mr. Miller of North Carolina. Again, one sentence orally, 
and as long as you would like in writing for the record.
    Mr. McClain. Thank you, Congressman. I will field that 
question. I am not aware of any particular circumstances 
involving those types of violations.
    I am aware that the IRS has conducted thousands upon 
thousands of examinations of MSBs and there have only been a 
handful of cases that have been referred to FinCEN for 
enforcement action.
    Again, I am not aware of any of those circumstances to 
which you referred.
    Mr. Scott. All right. Thank you, Mr. Chairman.
    Mr. Miller of North Carolina. Thank you. The Chair now 
recognizes the gentleman from Illinois, Mr. Foster, for 5 
minutes.
    Mr. Foster. Thank you. My questions have to do with the 
technological future of this industry. I think you all must be 
thinking about whether even 2 to 5 years from now, everyone is 
just going to have their smart phone and that is how they will 
do everything from check cashing, money transfers, prepaid 
cards, all this sort of thing. We are going to just be 
transferred to electronic platforms.
    I think just the existence of storefront operations is in 
question within a few years.
    The two questions I have, first, if you could just comment 
on what you think the industry will look like 5 years from now, 
from a technological point of view, and what regulation, if 
any, we should be thinking about to get ahead of the curve on 
the changes here, and finally, any comments you have on the 
proposals that I guess are coming through the Senate for 
effectively a biometric worker i.d. card, which could be an 
important part of authentication, which is a huge issue in all 
these things, and what are the main reasons why you would have 
a remaining need for a store front operation.
    A wide range of issues. Let's start with Mr. Cachey.
    Mr. Cachey. We agree with you, things like mobile money 
transfer, mobile banking, that we think are the wave of the 
future, although we do not think the storefront is going to 
become obsolete because eventually people want to figure out 
how to get cash in or cash out of their cell phone.
    Mr. Foster. Is that not why God invented the ATM?
    Mr. Cachey. In a lot of places around the world, they do 
not have ATMs, but there is a Western Union location there that 
can help people with their financial needs.
    That is why we still think the brick-and-mortar locations 
will be viable.
    From a transfer standpoint, we agree and we are already 
offering services between the United States and the Philippines 
and the United States and Kenya based on mobile money transfers 
as pilots to determine what is the best way to offer those 
services and also be compliant with things like the Bank 
Secrecy Act and foreign jurisdiction bank secrecy acts.
    Mr. Foster. Mr. McClain?
    Mr. McClain. It is difficult to foresee the future, but as 
Mr. Cachey has pointed out, I think there will always be a need 
for brick-and-mortar retail financial services.
    Cash will always be with us, I think. I think we are seeing 
in our industry a decline in the number of check transactions, 
as some payments move toward electronic payment systems. I do 
not think we will ever get to a point or certainly not in the 
foreseeable future, where all of a sudden checks will just be 
obsolete. There is certainly a need for them and they serve a 
very convenient need.
    With respect to regulation, it always takes some period of 
time before the law catches up with the technology. I think it 
is just a question of identifying how new technologies create 
these risks and acting aggressively to enact appropriate 
legislation to address that.
    Mr. Foster. Thank you. Ms. Thoren-Peden?
    Ms. Thoren-Peden. I agree. I think a lot of payments and 
payment systems are absolutely growing electronically, whether 
it is going to be through E-Wallet, mobile payments, even the 
clearinghouse in the Federal Reserve is opening up to 37 
countries by the end of the year through the ACH system. It 
tends to be faster, quicker. I believe there will be a shift.
    Like Joe, I still think there is going to be some cash as 
well in the community.
    In terms of the biometric question, it would be a 
convenient identification methodology. I recognize that on a 
privacy front, there are significant privacy issues. Certainly, 
in a voluntary capacity, I think it would be terrific. I think 
it is a good way to do i.d.
    In terms of the current regulations, most of them are 
written with an eye toward electronic payments, so I think 
while the regulations are in pretty good shape, probably there 
needs to be a little more guidance on some of them. I think it 
is going to be more adapting them and helping people understand 
as they offer new services how it applies to them.
    Mr. Foster. Thank you. I yield back.
    Mr. Miller of North Carolina. Thank you, Mr. Foster. The 
Chair recognizes the gentleman from Massachusetts, Mr. Lynch, 
for 5 minutes.
    Mr. Lynch. Thank you very much, Mr. Chairman. Thank you for 
your courtesy in allowing me to sit in. I am not a member of 
this subcommittee, but along with Mr. Royce, the gentleman from 
California, I co-chair the Taskforce on Terrorist Financing. 
This overlaps with that jurisdiction.
    As Mr. Royce has indicated, we have had some success there 
in terms of denying access to the legitimate financial system 
to terrorists. We owe a lot of credit to Treasury, FinCEN, 
OFAC, FATF, the Financial Action Taskforce, which is an inter-
governmental agency, but there has been some success.
    We have been able to drive out a lot of terrorist financing 
from the major banks and major institutions, but what has 
happened is like squeezing a balloon; we have seen that it has 
gone down to less formal institutions.
    Right now, we just concluded a round of discussions with 
the Central Banks in Pakistan. We were very involved in Jordan, 
Tunisia, and Morocco to get them to adopt anti-money laundering 
statutes and to actually stand up financial intelligence units 
in those countries.
    Part of our focus has been on these hawalas that operate, 
and it is an informal value transfer system, you might call it 
the ``Muslim Western Union.'' Because of the connection with 
Muslim culture, it has been a delicate area.
    Here we are requesting these foreign governments to require 
hawalas to register and to adopt anti-money laundering 
measures, to know their customers.
    It seems like what you are suggesting here because of bank 
discontinuance is that we are going to move away from that in 
this country. It is just going to make it very difficult for us 
to require other nations to be more prudent while we, at least 
at your urging, are moving away from this tighter regulation 
and tighter standard, at least with respect to terrorist 
financing.
    I am just wondering how you think this is going to help us 
on the terrorist financing end if banks are required to do less 
and if MSBs are required to do less. How is that going to help?
    Mr. Cachey. I think in the bank certification bill, if I 
can call it that, my understanding is banks still have the 
right to say to a prospective client, you are an MSB, so I need 
to see your FinCEN registration. I do not think it is the guys 
who already play by the rules who are the challenge here.
    The typical challenge that we are all having with hawalas 
is that they do not register with whatever entity they are 
supposed to register with, they do not get the licenses they 
are supposed to get at the State level, and therefore, they are 
outside the scope of examination.
    A self-certification process as contemplated in the bill 
would not preclude a bank from doing its normal due diligence 
which we recommend to banks, let me see your FinCEN 
registration, let me see your State license, to make sure you 
are being regulated appropriately, let me see your compliance 
program, and let me see your certification that you are doing 
everything that you say you are doing.
    I do not think it diminishes or sort of opens the banking 
system up, if you will, to hawalas to infiltrate it.
    Mr. Lynch. No, but I am using our example here in this 
country with MSBs. The fact that we have half the folks maybe 
registered. I am not sure what the exact number is. Half the 
people are not.
    We seem to have a very loose and informal system here. You 
are arguing, at least from the testimony here, because of bank 
discontinuation, we are going to lower the responsibilities 
they have and also with no further regulation on MSBs, we are 
going to reduce the requirement to you as well.
    It seems to be sort of an open system or a less secure 
system. I just see problems in that. I just was wondering how 
you anticipate addressing that.
    Ms. Thoren-Peden?
    Ms. Thoren-Peden. Yes, sir. I do not think the banks are 
going to go away at all. I just think transactions are going to 
become more electronic. That is what I was saying.
    Even under the current regulations, the bank's obligations 
to file suspicious activity reports will continue under the 
Bank Secrecy Act, as is the case with the money services 
businesses as well, which today are also subject to the 
filings.
    The monitoring systems and the filings, I do not see as 
changing with any of the proposals for self-certification.
    Mr. Lynch. As long as there is a connection between the 
bank and the MSB; right?
    Ms. Thoren-Peden. Yes.
    Mr. Lynch. Are we talking about the possibility that is no 
longer the requirement here?
    Mr. Miller of North Carolina. A one sentence answer, 
orally.
    Ms. Thoren-Peden. I think financial services would continue 
to be provided either through the bank or the money service 
businesses, both of which are subject to the Bank Secrecy Act 
and will continue to be.
    Mr. Lynch. Thank you, Mr. Chairman.
    Mr. Miller of North Carolina. Thank you, Mr. Lynch.
    The Chair recognizes the gentleman from Minnesota, Mr. 
Ellison, for 5 minutes.
    Mr. Ellison. Mr. Chairman, thank you for your work here, 
and thank you for this hearing.
    In my district in Minneapolis, we have a number of hawalas. 
These folks are small business people. I think they are trying 
to do the right thing. A number of them have had their 
relationships with their financial institutions cut off.
    I guess my question to the panelists is, for hawalas doing 
business, trying to get money to remote parts of the world, who 
are working to try to comply but for whom there is no specific 
reason to believe they are not in compliance, how will this 
affect their business? How will the bill, H.R. 4331, affect 
their business?
    Mr. McClain. I will take that, Congressman. I do not think 
it was really designed to affect their businesses at all. I 
think this proposed--first of all, if they are conducting 
business and acting as a money transmitter, they have to be 
registered as a money transmitter, and at the State level, they 
have to be licensed in most jurisdictions. That is an absolute 
threshold they do have to meet.
    With respect to the proposed legislation, I do not think it 
would impact at all their ability to do business. One of the 
proposals is the creation of a self-regulatory organization.
    I think that again bears some further examination by the 
industry and some additional work with the subcommittee. I 
think again it is something that would not necessarily directly 
impact a money transmitter's ability to conduct business.
    Mr. Ellison. I am also curious to get your views on this 
topic. Post-9/11, our country very correctly took measures to 
try to stop terrorist financing.
    Given the 9 years or 8\1/2\ years hence, in your view, are 
there things we should do to allow for more enterprise and more 
money transmitting that will not sacrifice our ability to stop 
terrorist financing?
    Mr. McClain. I think I will direct that to Mr. Cachey, who 
represents Western Union.
    Mr. Cachey. Our point of view is that the laws are there. 
The Patriot Act has been very effective if you look at the 
reports coming out of the Department of the Treasury year after 
year. Therefore, the need here is not a different regulatory 
scheme or a regulatory scheme that has more laws, but how do we 
push the effectiveness of the regulations through the entire 
industry?
    When you have a Western Union or a MoneyGram, which is a 
Minnesota company, and you are doing the right thing, that is 
one thing, but when you have 5,000 or 10,000 other companies 
out there that according to the statistics are not even 
registered with FinCEN, it seems to me that is where the risk 
is, and that is where the effort should be put, as opposed to 
passing more laws and trying to just create more regulations 
for the industry.
    Mr. Ellison. Why do you think this large number of 
companies are not registered with FinCEN? Is it because they 
are just small mom and pop operations? Based on your 
institutional knowledge, is there any general reason why not?
    Mr. Cachey. I think it is typical of regulation of any 
industry. The small guys are the start up's, they are 
entrepreneurial, they are willing to take the risk. Compliance 
costs money. If you are only making $50,000 a year on this 
service, are you going to go out and spend $20,000 on a 
compliance system and a person to take a look at it and lawyers 
to advise you on it and all that type of stuff. That is their 
decision to make.
    I could see how a small business person starting something 
up could say maybe I am just going to take the risk for the 
first couple of years to see if this works before I am going to 
build a process to comply with these laws.
    Mr. Ellison. What about a more streamlined way to build 
compliance that ensures safety of the system but reduces some 
of the barriers to entry? As much as it is great to have a big 
company like Western Union and MoneyGram, this is still 
America. We still believe in enterpreneurism.
    Any reflections on that?
    Mr. Cachey. I think there has been a lot of talk recently 
about the risk-based approach to compliance, meaning build a 
system that is commensurate with the risk that your institution 
offers. I think that sheds some light on the subject and gives 
us sort of a light at the end of the tunnel for the smaller 
remitters.
    Mr. Ellison. Thank you.
    Mr. Miller of North Carolina. Thank you, Mr. Ellison.
    The gentlelady from New York has a great interest in this 
topic and has further questions, so we will have a second round 
of questions out of the Chair's great affection and respect for 
the gentlelady and because she is from Greensboro, originally.
    The Chair waives his round. I understand Mr. Marchant 
waives a second round of questioning. The Chair now recognizes 
the gentlelady from New York.
    Mrs. Maloney. I would just like to ask Mr. Cachey, and I 
know you testified earlier, I have been in and out with 
meetings with constituents in the other room, but I do know you 
testified you had concerns about H.R. 4331.
    I am wondering whether you can provide your views on the 
bill I have introduced that would allow for a self-
certification process for MSBs while maintaining the State 
regulatory structure.
    Do you believe that this approach is more in line with your 
proposal to create a licensing system? Do you see the licensing 
system better than these two bills? Do you see it working in 
conjunction with these bills? How do you see us moving forward 
with some type of legislative framework that could help the 
commerce, help the people, and solve this problem?
    Mr. Cachey. Congresswoman, I see two separate problems. One 
is that the smaller remitters, smaller MSBs, are having 
problems maintaining or obtaining bank accounts which they need 
to do their business. I see the self-certification bill that 
you mentioned as an appropriate way to address that.
    On the issue of licensing, as a nationwide business, if you 
will, right now, I have 48 licenses. I get examined between 15 
and 20 times a year from various State banking departments. I 
would rather have one Federal regulator license me and come in 
and examine me every year. To me, that is a more efficient way 
to operate our business.
    I really see them as two separate issues. I think the 
certification process is appropriate. I do not think there is 
any hidden bogeyman in there. I think it is a way for smaller 
businesses to get the services they need from their local 
banks.
    For a company like Western Union, MoneyGram, which we 
mentioned before you came in, and the other larger MSBs, the 
bifurcation of licensing among 48 States just is burdensome, 
contradictory in some circumstances, and just is not an 
efficient way to operate a business.
    Mrs. Maloney. Thank you. Mr. Chairman, that was my focus, 
to try to figure out what would be a way to move forward. Thank 
you.
    Mr. Miller of North Carolina. The Chair thanks the 
gentlelady, and the gentlelady from the upper east side of 
Manhattan is proof that if you can make it in Greensboro, you 
can make it anywhere.
    Mr. Ellison does not have a second round.
    I would now like to thank all the witnesses and the members 
for their participation in the hearing. As I have said 
repeatedly to the witnesses and to the members, the record will 
remain open.
    Without objection, the hearing record will remain open for 
30 days for members to submit written questions to the 
witnesses, and to place the witnesses' responses in the record, 
as well as any written responses to oral questions asked today.
    The subcommittee hearing is now adjourned.
    [Whereupon, at 11:40 a.m., the hearing was adjourned.]


                            A P P E N D I X



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