If you are a financial institution in the United States, you need to be familiar with the Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act. This is a federal law that requires you to cooperate with the government in detecting and preventing money laundering and other financial crimes. In this blog post, we will explain what the BSA is, what it requires you to do, and what are the consequences of non-compliance.
What is the BSA?
The BSA was enacted in 1970 to prevent criminals from using financial institutions to hide or launder their illegal funds. The law gives the Department of the Treasury the authority to impose reporting and recordkeeping requirements on banks and other financial institutions, such as money transmitters, casinos, broker-dealers, and insurance companies. The law also establishes the Financial Crimes Enforcement Network (FinCEN) as the agency responsible for administering and enforcing the BSA.
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The main purpose of the BSA is to help law enforcement agencies track the movement of large amounts of cash and other monetary instruments that may be related to criminal activities, such as tax evasion, drug trafficking, terrorism, or fraud. The BSA also aims to deter criminals from using financial institutions as a cover for their illicit actions.
What does the BSA require you to do?
As a financial institution subject to the BSA, you have to comply with several obligations, such as:
Filing currency transaction reports (CTRs) for cash transactions over $10,000 in a single day by or on behalf of one person. You have to file CTRs electronically within 15 days of the transaction using FinCEN’s BSA E-Filing System.
Filing suspicious activity reports (SARs) for transactions that you know or suspect are related to money laundering or other illegal activities. You have to file SARs electronically within 30 days of detecting the suspicious activity using FinCEN’s BSA E-Filing System.
Keeping records of certain transactions, such as cash purchases of negotiable instruments over $3,000, wire transfers over $3,000, and foreign bank account reports (FBARs) for accounts over $10,000 held by U.S. persons in foreign countries.
Verifying the identity of your customers and maintaining customer due diligence (CDD) records. You have to collect basic information about your customers, such as their name, address, date of birth, and social security number or tax identification number. You also have to conduct enhanced due diligence (EDD) for high-risk customers, such as politically exposed persons (PEPs), non-resident aliens (NRAs), or customers from jurisdictions of primary money laundering concern.
Implementing an anti-money laundering (AML) program that includes policies, procedures, internal controls, training, and independent testing to ensure compliance with the BSA and other AML regulations. You have to designate a compliance officer who is responsible for overseeing your AML program and reporting any violations or deficiencies.
What are the consequences of non-compliance?
If you fail to comply with the BSA or any other AML regulations, you may face civil or criminal penalties from FinCEN or other regulators, such as the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), or the Securities and Exchange Commission (SEC). The penalties may include fines, cease-and-desist orders, injunctions, suspension or revocation of licenses, or imprisonment.
The amount and severity of the penalties depend on several factors, such as the nature and extent of the violation, the harm caused by the violation, the history of previous violations, and the level of cooperation with the authorities. Some examples of recent BSA enforcement actions are:
In 2020, Capital One agreed to pay $390 million for failing to file thousands of SARs for suspicious transactions by its check cashing customers.
In 2019, UBS Financial Services agreed to pay $14.5 million for failing to implement an adequate AML program for its foreign correspondent accounts.
In 2018, Wells Fargo agreed to pay $185 million for opening millions of unauthorized accounts for its customers without their consent or knowledge.
How can you ensure compliance with the BSA?
Complying with the BSA and other AML regulations can be challenging and costly for financial institutions. You have to keep up with the changing rules and regulations, monitor your transactions and customers for suspicious activity, file timely and accurate reports, maintain adequate records, and implement an effective AML program.
To help you with these tasks, you can use various tools and resources available online or from third-party providers. For example:
You can use FinCEN’s website to access guidance documents, advisories, FAQs, forms, and other information related to the BSA and AML compliance.
You can use the BSA E-Filing System to submit your CTRs and SARs electronically and securely to FinCEN.
You can use online databases or software to verify the identity of your customers, screen them against sanctions lists or watchlists, and conduct due diligence checks.
You can use AML compliance software or services to automate your transaction monitoring, risk assessment, reporting, recordkeeping, and auditing functions.
The BSA is a vital law that protects the integrity of the U.S. financial system and helps combat money laundering and other financial crimes. As a financial institution, you have a responsibility to comply with the BSA and other AML regulations. By doing so, you can avoid penalties, reputational damage, and legal risks, and contribute to the safety and security of your customers and society.