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Banking Interpretations

NYSBL Section 373

To: Deputy Stone

From: Bryan Farrell

Date: May 30, 2006

Subject: Whether the [ ] Check Cashing Corp.'s [ ]voucher cashing is
permissible under Banking Law and/or regulation.
______________________________________________________________________________

Issue

Whether licensee's practice of cashing vouchers on behalf of a customer and
getting payment for the outlay the next day violates Banking Law and/or regulation.

Recommendation

The cashing of vouchers is not an authorized activity of check cashers.

Background

[ ]

BL § 373.1 prohibits a check casher from "engaging in the business of making
loans of money" and, among other things, cashing postdated checks except in the
case of certain government checks and payroll checks, provided that such checks
are payable the following business day.

The cashing of vouchers appears to constitute "lending" and is thus prohibited
under the statute. The dictionary defines "loan" in two ways: 1) something lent for
temporary use; and 2) a sum of money lent at interest. [ ] is not charging interest
on the vouchers, only a volume-based fee. However it is lending on an overnight
basis.

Although the vouchers are treated like checks by the licensee, they are not checks.
Thus, there can be no analogy to the limited circumstances under which postdated
checks may be cashed.

For the foregoing reasons, the voucher cashing practice of [ ] is not permitted
under the statute.

This practice also violates Superintendent's Regulation 400.3 which requires check
cashers to maintain a check log. The log is one of the focal points of a Department
examination, so the absence of one hinders the ability of the Department to
examine.

In addition, this practice may undermine [ ] ability to comply with its anti-
money laundering obligations. In the ordinary course, individuals cashing checks
must present identification to facilitate the recording of the required information in
the check log (name, amount and address, for example) and for purposes of
currency transaction reporting. A check casher is considered a "money services
business" and a "financial institution." As such, it is required to file currency
transaction reports. 31 CRF § § 103.11(uu) (2), 103.11 (n) (3), and 103.22.

In this case, there can be no "check log" since it is not checks that are cashed, and
it is unclear whether customer identification is being required and/or recorded. If
not, it is not clear how [ ] could be complying with its CTR obligations.

The use of vouchers could also mask tax evasion. For example, someone seeking
to avoid tax might exchange a check for services for a voucher from [ ].
Such persons could then simply cash in the voucher with [ ]. The IRS typically
follows a trail to find unreported income. For example, they look first in the bank
accounts of taxpayers who they suspect of underreporting income; that is,
unreported deposits. In this case, income a the s would not be cashed in the
payee's accounts, but in the account of [ ].

[ ]

 

Noted:________

 

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