By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
FOREIGN TRANSMITTAL
AGENCY LICENSING
No. 2010-326

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST

In the Matter of
ALPHA MONEY TRANSFER, INC.
Nashua, New Hampshire

Foreign Transmittal Agency License No(s): FT5529 et al.


The Commissioner of Banks ("Commissioner") having determined that ALPHA MONEY TRANSFER, INC., located at 402 Amherst Street, Suite 204, Nashua, New Hampshire ("Alpha Money" or the "Corporation") has engaged, or is engaged in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 169, and applicable regulations found at 209 CMR 44.00 et seq., hereby issues the following ORDER TO CEASE AND DESIST pursuant to General Laws chapter 169, section 13(b).

FINDINGS OF FACT

  1. The Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of persons engaged in the business of a foreign transmittal agency pursuant to Massachusetts General Laws chapter 169.
  2. Alpha Money is, and at all relevant times has been, a foreign corporation conducting business in the Commonwealth of Massachusetts. Alpha Money's main office is located at 402 Amherst Street, Suite 204, Nashua, New Hampshire.
  3. Alpha Money is licensed by the Commissioner as a foreign transmittal agency under Massachusetts General Laws chapter 169. According to records maintained on file with the Division, the Commissioner initially issued a foreign transmittal license to Alpha Money on or about June 15, 2007, with license number FT5529. License number FT5529 authorized Alpha Money to operate as a foreign transmittal agency at 19 Mill Street, Lowell, Massachusetts.
  4. Alpha Money maintains thirty one (31) additional foreign transmittal licenses for thirty-one authorized agents, for locations operated in the Commonwealth from which the Corporation conducts its foreign transmittal business.
  5. Alpha Money transmits money received from Massachusetts consumers primarily to Brazil. According to information reflected on the Corporation's 2009 annual report filed with the Division, Alpha Money transmitted $24,710, 536.15 for calendar year 2009.
  6. Alpha Money is a money service business as defined by The Bank Secrecy Act ("BSA") and its implementing regulation at 31 C.F.R. Part 103.
  7. Pursuant to Massachusetts General Laws chapter 169, section 10, the Division conducted an inspection of the books, accounts, papers, records, and files of Alpha Money on June 29, 2010 (the "2010 examination/inspection").
  8. The Division's Report of Examination/Inspection on Consumer Compliance (the "Report"), which was issued to Alpha Money on the effective date of this Temporary Order, presented the findings of the 2010 examination/inspection and alleged significant failures to comply with applicable state and federal laws, rules, regulations, and regulatory guidelines governing the conduct of those engaged in the business of a foreign transmittal agency in Massachusetts as more specifically enumerated in this Temporary Order.

    A. Failure To Demonstrate the Financial Responsibility, Character, Reputation, Integrity, and General Fitness to Maintain a Foreign Transmittal Agency License

  9. Massachusetts General Laws chapter 169, section 12 relevant to the licensing of foreign transmittal agencies states:

    The commissioner may suspend or revoke any license issued pursuant to this chapter if he finds that: (a) the licensee has violated any provision of this chapter or any rule or regulation adopted hereunder or any other law applicable to the conduct of such business; or (b) any fact or condition exists which, if it had existed at the time of the original application for such license, would have warranted the commissioner to refuse to issue such license.

  10. The Division's regulation at 209 CMR 44.04(2) states in part:

    (a) The Commissioner may deny an application to engage in the business of foreign transmittal agency, if the Commissioner upon review of the application and other relevant information, determines that the Applicant has not satisfied the requirements of M.G.L. c. 169 or 209 CMR 44.03.

    (b) The Commissioner may also deny such an application if the Applicant has:

    1. violated any provision of M.G.L. c. 169 or 209 CMR 44.00;
    2. violated or engaged in a pattern of violations of any state or federal law applicable to the conduct of the business of a foreign transmittal agency and any rule, regulation or administrative order or directive promulgated thereunder;
    3. conducted, or will conduct, its business in an unsafe and unsound manner...

  11. Books and records reviewed by the Division's examiners during the 2010 examination/inspection revealed that Alpha Money failed to maintain the financial responsibility character, reputation and integrity to conduct the foreign transmittal business in the Commonwealth as the Corporation conducted the foreign transmittal business in an unsafe and unsound manner by conducting business with unauthorized foreign agents and co-mingling the Corporation's escrow and business accounts by utilizing Massachusetts consumer funds to conduct the Corporation's business as specifically enumerated in this Temporary Order.

    B. Failure to Establish Adequate and Appropriate Polices, Procedures and Controls with Foreign Correspondents

  12. The BSA's implementing regulation at 31 C.F.R. § 103.125 states, in part:

    (a) Each money services business ... shall develop, implement and maintain an effective anti-money laundering program .... that is reasonably designed to prevent the money services business from being used to facilitate money laundering and the financing of terrorist activities.

    (b) The program shall be commensurate with the risks posed by the location and size of, and the nature and volume of the financial services provided by, the money services business.

  13. Massachusetts General Laws chapter 169, section 8 states, in part:

    All money received for transmission to a foreign country by any licensee shall be forwarded to the person to whom the same is directed within seven days following receipt thereof...

  14. The Division's regulation 209 CMR 44.10(5) states:

    Grounds for license revocation under M.G.L. c. 169, § 12 and the issuance of cease and desist orders under M.G.L. c. 169, § 13 shall include, but are not limited to, the following prohibited acts and practices by Licensees:

    (5) failing to forward all money received for transmission to a foreign country to the person to whom the same is directed within seven days following receipt thereof.

  15. The BSA's implementing regulation at 31 C.F.R. § 103.125(d) requires all money services businesses including but not limited to a foreign transmittal agency such as Alpha Money to implement written anti-money laundering policies and procedures that, at a minimum: (1) incorporate policies and procedures and internal controls reasonably designed to assure compliance with this part, including requirements verifying customer identification, filing reports, creating and retaining records, and responding to law enforcement requests; (2) designate a person to assure day to day compliance with the program; (3) provide for education and/or training of appropriate personnel, including training in the detection of suspicious transactions; and (4) provide for independent review to monitor and maintain an adequate program.
  16. The Financial Crimes Enforcement Network Interpretative Release, 2004-1 ("2004-1 Interpretative Release"), which Alpha Money is subject to, requires money service business agents utilizing foreign agents to incorporate "certain risk-based policies, procedures and controls designed to identify and minimize money laundering and terrorist financing risks associated with foreign agents and counterparties that facilitate the flow of funding into and out of the United States."
  17. The 2004-1 Interpretative Release states in part:

    A Money [s]ervices [b]usiness' anti-money program should include procedures for the following...(1) Conduct of Due Diligence on Foreign Agents and Counterparties...(2) Risk-based monitoring for Foreign Agents or Counterparties...(3) Corrective Action and Termination.

  18. The Central Bank of Brazil authorizes and supervises the operations of foreign agents conducting business in Brazil. The Division's review of the directory of agents authorized to engage in foreign exchange transactions in Brazil available from the Central Bank of Brazil, indicates that Alpha Money currently maintains an agent relationship with an unauthorized foreign agent in Brazil.
  19. Books and records reviewed by the Division's examiners during the 2010 examination/inspection revealed that Alpha Money's failure to establish an effective anti-money laundering program resulted in the Corporation's failure to investigate and verify the license status of Alpha Money's unauthorized foreign agent and establish adequate and appropriate policies procedures and controls commensurate with the risk of money laundering and the financing of terrorism posed by the Corporation's relationship with the unauthorized foreign agent.
  20. Books and records reviewed by the Division's examiners during the 2010 examination/inspection further revealed that Alpha Money failed to incorporate any risk based policies, procedures or controls identified in the 2004-1 Interpretive Release and frequently received payment instructions from the unauthorized foreign agent to reconcile funds paid to beneficiaries in Brazil. Instead of remitting the funds to the intended recipient, payment instructions from agents often required Alpha Money to transfer funds to third parties in the United States that had no connection to the customer initiating the transmittal.
  21. Books and records reviewed by the Division's examiner during the 2010 examination/inspection revealed that Alpha Money failed to retain records evidencing the receipt of funds by consumers in Brazil within seven days.

    C. Prohibited Use of Consumer Funds/Commingling

  22. The Division's regulation 209 CMR 44.07(4) states:

    No person licensed as a foreign transmittal agency shall commingle money collected for transmission abroad from clients with its own funds or use any part of a client's money in the conduct of the Licensee's business.

  23. Books and records reviewed by the Division's examiners during the 2010 examination/inspection found that Alpha Money maintained at least four accounts at two banking institutions. Three of the four accounts were designated as escrow accounts which contained consumer funds. A review of the transactions and account records for the three escrow accounts revealed that Alpha Money consistently utilized funds deposited in the escrow accounts for various business purposes. The account records reviewed indicated that at least one escrow account was linked to a corporate debit card and the same account was used for various purposes including but not limited to agent deposits, correspondent payments and miscellaneous business expenses, including gas and food purchases.

    D. Designated Compliance Officer

  24. The BSA's implementing regulation at 31 C.F.R. § 103.125(d)(2) states, in part:

    [The money services business' anti-money laundering program shall] [d]esignate a person to assure day to day compliance with the program and this part. The responsibilities of such person shall include assuring that: (i) The money services business properly files reports, and creates and retains records, in accordance with applicable requirements of this part; (ii) The compliance program is updated as necessary to reflect current requirements of this part, and related guidance issued by the Department of the Treasury; and (iii) The money services business provides appropriate training and education in accordance with paragraph (d)(3) of this section.

  25. Alpha Money has designated a compliance officer however, the examination/inspection revealed that the compliance officer failed to effectively perform the required duties necessary for that position. Alpha Money's designated compliance officer failed to ensure that the Corporation was in compliance with the Division's regulations and BSA requirements by: failing to ensure that the Corporation maintained records demonstrating that consumer funds transmitted to Brazil were received within seven days; failing to ensure that the Corporation had implemented risk-based policies, procedures and controls with foreign agents by maintaining a business relationship with an unauthorized foreign agent; and failing to ensure that staff were appropriately educated and trained to ensure that escrow funds were properly utilized.

    E. Failure to Comply with Written Policies and Procedures

  26. The BSA's implementing regulation at 31 C.F.R. § 103.125(d)(4) states:

    [The money services business' anti-money laundering program shall] [p]rovide for independent review to monitor and maintain an adequate program. The scope and frequency of the review shall be commensurate with the risk of the financial services provided by the money services business. Such review may be conducted by an officer or employee of the money services business so long as the reviewer is not the person designated in paragraph (d)(2) of this section.

  27. Books and records reviewed by the Division's examiners during the 2010 examination/inspection indicate that Alpha Money's anti-money laundering program manual requires the Corporation to ensure that an independent review is conducted at least annually. Records reviewed by the Division's examiners revealed that Alpha Money failed to ensure that an independent review had been conducted for the calender year 2009.

    F. Engaging in Prohibited Advertising Practices

  28. The Division's regulation 209 CMR 44.10(3) states, in part:

    Grounds for license revocation under M.G.L. c. 169, § 12 and the issuance of cease and desist orders under M.G.L. c. 169, § 13 shall include, but are not limited to, the following prohibited acts and practices by Licensees:

    (3) failing to disclose the type and number of its license(s) to all clients in writing at the time deposits for transmittal abroad are accepted or to fail to disclose the type and number of its license(s) in all advertisements.

  29. Alpha Money failed to disclose the Corporation's license type and number on the Corporation's advertisements.

    G. Other Violations

  30. In addition to the violations specifically set forth in this Temporary Order, a Report of Examination/Inspection on Consumer Compliance prepared as of June 29, 2010 and to be provided to Alpha Money in conjunction with the issuance of this Temporary Order, describes other violations observed during the 2010 examination/inspection.

    CONCLUSIONS OF LAW

  31. Based on the information contained in Paragraphs 1 through 30, Alpha Money has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the business will operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 169, section 6 the Division's regulation 209 CMR 44.03, and the Division's regulation 209 CMR 44.04.
  32. Based upon the information contained in Paragraphs 1 though 30, Alpha Money failed to implement an effective anti-money laundering program commensurate with the risks posed by the location and size of, and nature and volume of the financial services provided by the Corporation, in violation of 31 C.F.R. § 103.125.
  33. Based upon the information contained in Paragraphs 1 through 30, Alpha Money failed to establish risk-based policies, procedures and controls designed to identify and minimize money laundering and terrorist financing risks associated with conducting business with a foreign entity in violation of 31 C.F.R. § 103.125 and the Financial Crimes Enforcement Network Interpretative Release, 2004-1.
  34. Based on the information contained in Paragraphs 1 through 30, Alpha Money, failed to retain any records to ensure that funds received for transmissions to Brazil were remitted within seven days of receipt thereof in violation of M.G.L. chapter 169 section 8 and the Division's regulation 209 CMR 44.10(5).
  35. Based upon the information contained in Paragraphs 1 though 30, by utilizing consumer funds in the conduct of the Corporation's business Alpha Money is in violation of the Division's regulation 209 CMR 44.07(4).
  36. Based upon the information contained in Paragraphs 1 though 30, Alpha Money's designated compliance officer failed to effectively perform the duties required to ensure compliance with The Bank Secrecy Act's requirements, in violation of 31 C.F.R. § 103.125(d)(2).
  37. Based upon the information contained in Paragraphs 1 through 30, by failing to conduct an independent review that was commensurate with the risk of the services provided by the Corporation, and failing to comply with the Corporation's own written policies and procedures, Alpha Money is in violation of The Bank Secrecy Act's requirements, in violation of 31 C.F.R. § 103.125(d)(4).
  38. Based upon the information contained in Paragraphs 1 through 30, by failing to disclose the Corporation's license type and number on the Corporation's advertisements, Alpha Money is in violation of the Division's regulation 209 CMR 44.10(3).
  39. Based upon the information contained in Paragraphs 1 through 30, the public interest will be harmed by delay in issuing an Order to Cease and Desist under General Laws chapter 169, section 13(b) because, upon information and belief, Alpha Money has collected funds from Massachusetts consumers that it is utilizing for both business expenses and for transmittal to an unauthorized foreign agent in Brazil. As of the date of this Temporary Order, Alpha Money has failed to demonstrate that those funds received for transmissions from Massachusetts consumers were remitted within seven days of receipt.
  40. Based upon the information contained in Paragraphs 1 through 30, the Commissioner has determined that:
    1. Alpha Money has engaged, or is about to engage in, acts or practices which warrant the belief that the Corporation is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a foreign transmittal agency including, but not limited to, the provisions under General Laws chapter 169 and the Division's regulations at 209 CMR 44.00 et seq.
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Alpha Money.
  41. Based upon the information contained in Paragraphs 1 through 30, had the facts and conditions found therein existed at the time of Alpha Money's original foreign transmittal agency license application, the Commissioner would have been warranted in refusing to issue such license.

    ORDER TO CEASE AND DESIST

    After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

  42. ORDERED that Alpha Money, any and all officers, directors, employees, independent contractors, or agents operating on behalf of Alpha Money, and their successors or assigns, shall immediately cease engaging directly or indirectly in the business of a foreign transmittal agency in Massachusetts, as defined in M.G.L. chapter 169, section 1, except as otherwise expressly permitted by the terms of this Temporary Order or by the Commissioner.
  43. IT IS FURTHER ORDERED that within (1) day of the effective date of this Temporary Order, Alpha Money shall submit to the Commissioner: a detailed record of the Corporation's pending transmittal orders for funds received from Massachusetts consumers. The records to be provided shall be as of the effective date of this Temporary Order.
  44. IT IS FURTHER ORDERED that Alpha Money, shall ensure that all consumer funds previously collected from Massachusetts consumers relative to any transactions are placed in a separate escrow account and shall not be utilized for business purposes.
  45. IT IS FURTHER ORDERED that this Temporary Order shall become effective immediately and shall remain in effect unless set aside, limited or suspended by the Commissioner or upon court order after review pursuant to General Laws chapter 30A.
  46. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such Temporary Order shall become permanent and final only upon receipt of a written request for such a hearing from the Licensee within twenty (20) days of the effective date of this Temporary Order. If no hearing is requested within this twenty (20) day period, this Temporary Order shall become permanent and final until it is modified or vacated by the Commissioner.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 14th day of September, 2010

By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts