How to verify customer identity, maintain organized records, and operate according to applicable requirements
If you operate a remittance store, also known as a money transfer store, an important part of daily operations is ensuring that customer identities are verified and that transaction-related documents and records remain organized.
In the previous article, we explained what KYC (Know Your Customer) is. In this article, the focus is practical: how remittance stores typically handle customer identification and record retention requirements in order to operate in an organized manner and according to applicable rules.
KYC Requirements Are Based on Federal Law
In the United States, customer identification and record retention requirements are part of the Bank Secrecy Act (BSA), which is administered by Financial Crimes Enforcement Network.
In simple terms, these rules establish that certain financial businesses, including many remittance stores, must identify their customers and maintain transaction records for minimum periods defined by law.
Stores Must Follow the Rules of Their Money Transfer Providers
When a store operates as an authorized agent for companies such as Western Union, MoneyGram, RIA, Intermex, or others, it must follow the operational procedures established by each provider.
These procedures are important for maintaining the store’s authorization to represent those brands and preserving its business relationships.
In practice, this means that before completing a transaction, the provider’s system may require specific customer information and documentation.
Each Provider May Have Different Requirements
Not all providers use the same criteria.
One company may require the customer’s identification to be submitted only for transfers above $3,000, while another may require identification starting at $1,000.
Some providers accept foreign passports or consular IDs. Others may accept only specific forms of identification.
For this reason, it is essential to understand how each provider operates and which documents are accepted in each situation.
The Store Also Defines How It Maintains Its Own Records
Although each provider has its own requirements, the store remains responsible for establishing its own internal procedures.
In practice, many stores verify customer identity every time a transaction is processed, even when the provider’s system does not require an ID upload, because this helps confirm that the customer is who they claim to be.
The most important operational decision is often how the store maintains its own records.
For example, the store may decide to keep a copy of the customer’s identification document for every transaction or only in specific situations, according to its internal procedures.
These criteria form part of the store’s own AML program.
If you have not yet documented these procedures, we recommend reading How to Create Your Own AML Program as a Small MSB Agent.
What the Law Requires for Record Retention
Several federal regulations require money services businesses (MSBs), including remittance stores, to retain certain records for at least five years.
31 CFR § 1010.430(d)
This regulation provides that records required under the Bank Secrecy Act must generally be retained for five years.
31 CFR § 1010.410(e)
This regulation requires financial institutions, including money transmitters, to maintain records for funds transfers of $3,000 or more, including information such as:
- Sender’s name
- Address
- Identification number
- Transaction details
In practical terms, these rules help explain why many remittance stores maintain their own customer and transaction records, regardless of what is stored by the money transfer companies.
Why Maintaining Your Own Files Matters
Imagine that your store worked with a particular provider for several years and later decides to terminate that relationship.
If all records were stored only in the provider’s system, the store may have difficulty accessing historical information.
By maintaining its own files, the store preserves access to the documents and data needed for the minimum retention period required by law.
This also makes audits, internal reviews, and requests involving older transactions much easier to handle.
Verifying Customer Identity in Practice
In well-organized remittance stores, verifying a customer’s identity is usually a quick and natural part of the transaction process.
The customer arrives at the counter, presents their identification, and within a few seconds the employee confirms that the person standing in front of them matches the customer profile on file. The employee may then confirm that the customer’s address is still current and determine, based on the store’s own AML program, whether any additional information should be recorded.
For example, the employee may add a note explaining why the customer sent money to many different beneficiaries or why they completed several small transfers within a short period of time. These notes become part of the customer’s record and can be reviewed later if questions arise.
When the store already has the customer’s identification document stored in the customer’s profile, the process becomes even simpler. There is no need to make another copy every time the customer returns. If the customer says they forgot their ID at home, the store can quickly review the document already on file and confirm the information available in its records.
The contrast with a disorganized operation can be significant.
In some stores, employees make a new copy of the customer’s ID every time that person returns, even if they have served the same customer many times before. In other cases, the document was already expired and no one noticed during the transaction, forcing the store to contact the customer after they have already left.
Similarly, when the store does not maintain structured notes and records, important information about customer behavior depends entirely on the employee’s memory.
In practice, an organized process makes transactions faster, reduces rework, and makes it much easier to retrieve information when questions or document requests arise in the future.
How Money Transfer Agents Store Customer Documents
There is no single storage method. Each store chooses the approach that best fits its operation.
Physical Files
Some stores keep printed copies organized by customer name or date.
The main advantage is simplicity.
The disadvantages include paper deterioration, misplaced documents, and difficulty searching through large volumes.
Local Computer Storage
Other stores scan documents and save them in folders on a computer.
This can make searching easier, but creates risks if the computer fails or does not have reliable backups.
Cloud Storage
Online storage services provide remote access and reduce the risk of physical loss.
On the other hand, they may require stronger access controls and do not always make it easy to monitor document expiration dates.
Specialized Systems for Remittance Stores
Some stores use platforms specifically designed for remittance operations, such as MsB Manager.
In this model, documents are stored directly within each customer’s profile along with transaction history, internal notes, and expiration alerts.
This can make it easier to locate documents and track expired IDs.
Practical Example
Imagine that an auditor requests the identification document for a customer who sent $2,800 in July of last year.
A store with organized files can retrieve the document in minutes.
A store without a clear storage system may spend hours searching or discover that it never kept a copy of the document.
Monitoring Expired Documents
Storing documents is only part of the process.
It is also important to monitor expiration dates.
When a document stored in the store’s records reaches its expiration date, the store may need to request an updated ID from the customer before processing additional transactions.
Many stores maintain internal controls to identify documents that are expired or nearing expiration.
Excel Can Work at the Beginning
Some stores use spreadsheets to track where documents are stored and when they expire.
For smaller operations, this can be a practical temporary solution.
As transaction volume grows, manually maintaining this information becomes increasingly difficult.
Final Thought
Meeting KYC requirements in practice involves three main elements: understanding the rules of each money transfer provider, verifying customer identity, and maintaining organized records for the required retention period.
Federal regulations establish minimum record retention requirements, while each store decides how to structure its own document storage and tracking process.
The most important thing is being able to locate the necessary information quickly when it is needed.
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Frequently Asked Questions
How long must records be retained?
Certain records must be maintained for five years under applicable federal regulations.
Do I need to keep copies of customer identification documents?
Many stores choose to maintain copies in their own files to facilitate future access to records.
Can documents be stored in paper or digital form?
Yes. Each store chooses the storage method that best fits its operation.
Why is it important to monitor expired documents?
Because returning customers may present expired IDs that need to be updated before additional transactions are processed.
Continue Reading
Now that you understand how KYC requirements work in practice, the next step is documenting your own internal procedures.
Read next:
- How to Create Your Own AML Program as a Small MSB Agent →
- How Money Transfer Agents Can Monitor Customer Activity Against Their Own AML Thresholds →
- How to See Which Customers Are Approaching Your Store’s AML Thresholds in MsB Manager →