June 22, 2005
Dear [ ]:
I am writing in response to your letter of April 1, 2005 regarding the [ ] Proposal to offer certain services to customers with places of business located outside of New York State using an unaffiliated armored car service located outside of New York State.
Cash and Check Pick-Up Activities
As you explain, [ ] intends to provide certain existing customers that maintain deposit accounts in New York with services for picking up cash and checks at the customer's place of business located outside of New York State. The customers to be serviced typically have significant cash needs, as in the case of large retail businesses. The courier service" will contract directly with the customers to pick up cash and checks and transport them to the courier's service facility. The courier service acts as agent for the customer in transporting the cash and checks, with the customer bearing the entire risk of loss while the cash and checks are in transit from the
- The courier service has no affiliation with [ ] does not provide services exclusively to [ ] and does not advertise using the name of [ ]
customer's place of business to the service facility. The courier delivers the cash and checks to the service facility and informs [ ] of the amount of cash and check that the customer indicates is contained in the shipment ("Gross Count"). The deposit of cash is considered received by [ ] when it is received at the service facility and the courier service informs [ ] of the Gross Count of the cash items. It is at that point that the risk of loss passes to [ ].
In general, the cash received at the service facility is further counted and packaged ("processing") by the courier when it reaches the service facility. After processing the cash, the courier service delivers the cash to the local Federal Reserve Bank for deposit to [ ] account2. Upon receipt of the cash, the local Federal Reserve Bank credits [ ] account for the amount of cash received. The courier service indemnifies [ ] for any loss of the cash while it is in transit from the service facility to the local Federal Reserve Bank. With respect to the checks picked up by the courier service, the courier service scans the checks into electronic format at the service facility and delivers the check information to [ ] electronically. When the image file is received electronically by [ ] [ ] processes the checks and the funds are made available to the customer in accordance with applicable funds availability schedules.
For customers with places of businesses in certain states, the courier service will deliver the customer's cash and/or checks to the courier's service facility. In these states, [ ] considers the deposit of the cash and/or checks to be received by [ ] only when it is received at the courier's service facility. The courier then notifies [ ] of the amount of the cash and/or checks received (Gross Count). In these circumstances, the courier does not perform any further processing. Instead, the cash and/or checks are transported by the courier to a license [ ] facility.
In any case, for all customers, the deposit of customer cash and/or checks is considered received by [ ] when it is received at the courier's service facility.
It is your position that [ ] proposed cash and check pick-up activities described above do not require the establishment of a [ ] branch at the place of the courier service facility. You reason that a branch is not required based on the Banking Department's ("NYBD") interpretations of Section 105(1)(a) of New York's Banking Law ("NYBL"). Specifically, as you have noted, the NYBD has interpreted Section 105(1)(a) to allow a New York
- At times, cash to be transferred in this way is held temporarily at the service facility until it can be processed in the manner required by the local Federal Reserve Bank (e.g. "strapped" in sufficiently large quantities).
State-chartered bank to use an unaffiliated armored courier service to pick up its customer's deposits without establishing a branch, provided that the following conditions are met: (1) the bank's customer and the courier enter into a written agreement under which the courier acts as the customer's agent in picking up the deposit 3; (2) the courier or the customer, but not the bank, is responsible at all times for the funds while the funds are in transit; (3) the deposits collected are not considered to have been received by the bank until delivered by an independent courier service to an independent service bureau, correspondent bank, or other permissible facility such as a back office facility.
You have concluded that the proposed cash and check pick-up services that you have described conform to these conditions. The NYBD is in agreement with you in that regard. Consequently, the establishment of a branch or limited branch under Section 105 of the NYBL is not required under the circumstances that you have described regarding the cash and check pick-up services.
Courier Cash Delivery Services
In your letter of April 1, 2005, you also explain that [ ] plans to facilitate the purchase of cash by [ ] customers outside New York State from the same courier service referred to above through an arrangement with the courier service. In particular, customers that want to purchase cash will place orders with the courier service. The courier service will notify [ ] of the cash order. In order for the courier service to be paid for the cash order, [ ] will debit the customer account for the dollar amount of the cash purchase and either credit an account of the courier service held at [ ] or initiate a wire transfer to an account of the courier service held at another financial institution. The courier service will then deliver the cash obtained from a source other than [ ](e.g., a local correspondent bank) to the customer's place of business. The purchase and transportation of cash is done solely between the customer and the courier service. The risk of loss of the cash is on the courier service or the customer during transit. [ ] role is limited to facilitating communication between the customer and the courier service and making payment on behalf of the customer to the courier service.
It is your position that the delivery of cash by the courier service to [ ] customers does not constitute branch banking on [ ] part because
- The NYBD has permitted a modification of this condition to allow the bank to arrange such a contract directly with the courier service. In such a case, the courier still must be agent for the customer.
[ ] involvement extends only to making payment on behalf of its customers to the courier service for the purchases of cash, while the purchase and transportation of the cash is solely between the customer and the courier service. In addition, you point out that the delivery of cash by the courier service is activity that is distinguishable from activities discussed in existing Department opinions in which the Department opined that maintenance of a cash vault inventory at a service facility for the purpose of fulfilling customer orders required that a branch be established by the bank for this purpose. For the reasons that you have concluded that a branch is not required for the delivery of cash by the courier service to [ ] customers, the NYBD is in agreement with you.
I trust that this is responsive to the inquiries noted above. With respect to you inquiry of April 1, 2005 regarding proposed cash vault inventory activities at a courier service facility located outside of New York State, a response to that inquiry will be provided under separate cover. If you have any questions I can be reached at (212) 709-1650.
Christine R. Cardi