The Bank Secrecy Act (BSA) of 1970 is a money-laundering regulatory law. In this act, banks must report transactions that involve foreign currency. The act has been changed several times, especially with the Patriot Act that is designed to monitor terrorist activities. The goal of the act is prevented banks from playing a role in illegal money transactions.
There are several key takeaways to the Bank Secrecy Act of 1970, including the FATF travel rule and AML compliance.
- Who administers the BSA?
The Financial Crimes Enforcement Network (FINCEN) is responsible for watching financial institutions. FINCEN sets compliance obligations for financial institutions, and management at the institutions must follow the regulations.
- What is an AML program?
An Anti Money Laundering program needs to be designed for each financial institution. They all have varying needs, called risk profiles. So the AML program needs to be designed for the policies and procedures at each financial institution. Employees need to be trained on how to recognize money laundering traits, so they can let their compliance officers know if something is wrong.
- What is a compliance officer?
A compliance officer is the employee who is in charge of developing and implementing the AML program. The compliance officer should understand how to conduct audits while fulfilling the rules of the AML. They often are involved in developing training programs for employees, although they usually do not conduct the training themselves.
- Who audits banks?
Banks should only be audited by third-party, unrelated companies. This means the audits will be honest and follow the rules set forth in the AML.
- When does currency need to be reported?
Currency needs to be reported when the transactions are over $10,000 in cash. Banks must send the documentation to regulators. Businesses need to do the same thing, especially if they receive $10,000 in cash or more from one buyer. The reports need to be sent when the transactions seem especially suspicious.
- What makes a transaction suspicious?
Suspicious activity is tough to identify, and the rules surrounding it are not very clear. This makes the BSA rules difficult to follow. Some of the ways that employees are told to identify suspicious activity is through screening, asking questions, finding records, and evaluating the information. The “SAFE” acronym helps, but it is less than perfect.
Some of the suspicious activity includes frequently depositing or withdrawing large sums of money, especially if the account used has sporadic activity. When the account is filled and emptied regularly, the account might be suspicious. The account holder might have some unexpected small transaction to serve as distractions. You might also see large transactions after major sporting events, as people try to move money after big wins.
- What behaviors are suspicious?
Along with the unusual banking, suspicious activity includes strange behaviors. People who could be suspicious often refuse to talk about where they got the money. Another suspicious behavior is coming up with a strange explanation to how they acquired a lot of money.