Bank Secrecy Act

The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of $3,000 or more (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Many banks will no longer sell negotiable instruments when purchased with cash, requiring the purchase to be withdrawn from an account at that institution. BSA was passed by the Congress of the United States in 1970. The BSA is sometimes referred to as an "anti-money laundering" law ("AML") or jointly as “BSA/AML”. Several anti-money laundering acts, including provisions in title III of the USA PATRIOT Act, have been enacted up to the present to amend the BSA. (See 31 USC 5311-5330 and 31 CFR 103.)

Contents

Types of Reports

The BSA regulations require all financial institutions to submit five types of reports to the government. (not an exhaustive list of reports)

  1. FinCEN Form 104 Currency Transaction Report (CTR): A CTR must be filed for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through or to a financial institution, which involves a transaction in currency of more than $10,000. Multiple currency transactions must be treated as a single transaction if the financial institution has knowledge that: (a) they are conducted by or on behalf of the same person; and, (b) they result in cash received or disbursed by the financial institution of more than $10,000. (31 CFR 103.22)
  2. FinCEN Form 105 Report of International Transportation of Currency or Monetary Instruments (CMIR): Each person (including a bank) who physically transports, mails or ships, or causes to be physically transported, mailed, shipped or received, currency, traveler’s checks, and certain other monetary instruments in an aggregate amount exceeding $10,000 into or out of the United States must file a CMIR
  3. Department of the Treasury Form 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR): Each person (including a bank) subject to the jurisdiction of the United States having an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $5,000. (31 CFR 103.24)
  4. Treasury Department Form 90-22.47 and OCC Form 8010-9, 8010-1 Suspicious Activity Report (SAR): Banks must file a SAR for any suspicious transaction relevant to a possible violation of law or regulation. (31 CFR 103.18 − formerly 31 CFR 103.21) (12 CFR 12.11)
  5. "Designation of Exempt Person" FinCEN Form 110: Banks must file this form to designate an exempt customer for the purpose of CTR reporting under the BSA (31 CFR 103.22(d)(3)(i)). In addition, banks use this form biennially (every two years) to renew exemptions for eligible non-listed business and payroll customers. (31 CFR 103.22(d)(5)(i))

It also requires any business receiving one or more related cash payments totalling $5,000 or more to file form 8300.[1]

Affected transactions

Currency Transaction Report (CTR)

Cash transactions in excess of $10,000 during the same business day. The amount over $10,000 can be either from one transaction or a combination of cash transactions. Filed with the Internal Revenue Service.

Monetary Instrument Log (MIL)

Cash purchases of monetary instruments, such as money orders, cashier's checks and travelers checks, totaling from $3,000 to $10,000, inclusive. This form is required to be kept on record at the financial institution, and produced at the request of examiners or audit to verify compliance. A financial institution must maintain a Monetary Instrument Log for 5 years.

Suspicious Activity Report (SAR)

Any cash transaction where the customer seems to be trying to avoid BSA reporting requirements (e.g., CTR, MIL). A SAR must also be filed if the customer's actions indicate that s/he is laundering money or otherwise violating federal criminal law. The customer must not know that a SAR is being filed. These reports are filed with the Financial Crimes Enforcement Network ("FinCEN").

Sanctions

There are stiff penalties for individuals and institutions that fail to file CTRs, MILs, or SARs. There are also penalties for those that disclose to its clients that it has filed a SAR about a client. Penalties include extremely high fines and long prison sentences if found guilty.

How it affects American citizens

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CTRs include the individual's bank account number, name, address, and Social Security Number. SAR reports, required when transactions indicate behavior designed to elude CTRs (or many other types of suspicious activities), include somewhat more detailed information and usually include investigation efforts on the part of the financial institution to assess the validity or nature of the transactions. A single CTR filed for your account is usually of no concern to the authorities, while multiple CTRs from varying institutions or a SAR indicates that activity may be suspicious. A financial institution is not allowed to inform a business or consumer that a SAR is being filed, and all the reports mandated by the BSA are exempt from disclosure under the Freedom of Information Act.

Businesses that primarily deal in cash, such as bars and restaurants can be exempted from having their deposits and withdrawals reported as CTRs, although this exemption is rarely granted. Instead, most banks have computer systems which retains the CTR information and allows duplicate CTRs to be created seamlessly.

Additional information

An entire industry has developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions, called structuring, which requires a SAR filing, that qualify for reporting. Financial institutions face penalties for failing to properly file CTR and SAR reports, including heavy fines and regulatory restrictions, even to the point of charter revocation. These software applications effectively monitor bank customer transactions on a daily basis and, using customer historical information and account profile, provide a "whole picture" to the bank management. Transaction monitoring can include cash deposits and withdrawals, wire transfers and ACH activity. In the bank circles, these applications are known as "BSA software" or "Anti-money laundering software".

References

  1. ^ IRS article.

See also

External links

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