Bank Secrecy Act:

What is Money Laundering?

Money Laundering involves transactions intended to disguise the true source of funds; disguise the ultimate disposition of the funds; eliminate any audit trail and make it appear as though the funds came through legitimate sources; and evade income taxes.

Money laundering erodes the integrity of a nation’s financial system by reducing tax revenues through underground economies, restricting fair competition with legitimate businesses, and disrupting economic development. Ultimately, laundered money flows into global financial systems where it could undermine national economies and currencies. Thus, money laundering is not only a law enforcement problem, but poses a serious national and international security threat as well.

Combating Money Laundering

The Bank Secrecy Act (BSA) was enacted by Congress in 1970 to require insured depository institutions to maintain certain records and to report certain currency transactions, in an effort to prevent banks from being used to hide money derived from criminal activity and tax evasion. These records and reports have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings. Since 1970, there have been many legislative and regulatory standards imposed to help prevent money laundering and to strengthen the government’s ability to combat money laundering and more recently, terrorist activity financing.

History of Anti-Money Laundering Legislation

1970 Bank Secrecy Act

• Required banks to report cash transactions over $10,000 via the Currency Transaction Report (CTR).
  

1986 Money Laundering Control Act

• Criminalized the act of money laundering;
• Prohibited structuring transactions to evade CTR filings; and
• Introduced civil and criminal forfeiture for BSA violations.
  

1988 Money Laundering Prosecution Improvement Act

• Expanded the definition of financial institution to include businesses such as car dealers and real estate closing personnel and required them to file reports on large currency transactions; and
• Required the verification of identity of purchasers of monetary instruments over $3,000.
  

1990 Bank Fraud Prosecution and Taxpayer Recovery Act of 1990 (Crime Control Act)

• Updated the FDIC Statement of Policy issued pursuant to Section 19 of the Federal Deposit Insurance Act that prohibits, without the prior written consent of the FDIC, any person from participating in banking who has been convicted of a crime of dishonesty or breach of trust or money laundering, or who has entered a pretrial diversion in connection with such an offense.
  

1992 Annunzio-Wylie Money Laundering Suppression Act

• Added Sections 18(w) to FDI Act which provides for the revocation of federal deposit insurance of institutions convicted of certain money laundering crimes;
• Required Suspicious Activity Reports and eliminated criminal referrals; and
• Required Verification and recordkeeping for wire transfers.
  

1994 Money Laundering Suppression Act

• Required banking agencies to develop anti-money laundering examination procedures; and
• Streamlined CTR exemption process.
  

1998 Money Laundering and Financial Crimes Strategy Act

• Required banking agencies to develop anti-money laundering training for examiners;
• Required Treasury and other agencies to develop a National Money Laundering Strategy; and
• Created the High Intensity Money Laundering and Related Financial Crime Area (HIFCA) Task Forces.
  

2001 Uniting and Strengthening America by Providing Appropriate Tools to Restrict, Intercept and Obstruct Terrorism Act (USA PATRIOT Act)

• Required government-institution information sharing and voluntary information among financial institutions;
• Required verification of customer identity program;
• Required enhanced due diligence programs, and
• Required anti-money laundering programs across the financial services industry.
  

Bank Secrecy Act Examination Program Overview

The FDIC has prescribed in its regulations, Section 326, Subpart B- Procedures for Monitoring Bank Secrecy Act Compliance (12 CFR Part 326.8) a requirement that depository institutions establish and maintain procedures reasonably designed to assure and monitor the compliance with the BSA and the implementing regulations 31 CFR 103. The FDIC monitors compliance with the BSA-related regulations by conducting on-site examinations of every FDIC-supervised depository institutions. BSA compliance is a safety and soundness issue due to the reputational, regulatory, legal, and financial risk exposure to the bank for being involved in money laundering schemes or willfully violating the BSA statute. Civil money penalties and regulatory enforcement actions may be imposed for noncompliance with money laundering regulations which can endanger capital and earnings. Furthermore, banks may be criminally prosecuted for willful violations of money laundering statutes, which could ultimately lead to termination of FDIC insurance.

Examination Resources

• Revised Bank Secrecy Act/Anti-Money Laundering Examination Manual and Infobase
  
• Amended Statement of Policy on Bank Merger Act Transactions - "Anti-Money Laundering Record"
  
• Guidance on Accepting Accounts From Foreign Governments, Foreign Embassies & Foreign Political Figures
  
• Bank Secrecy Act Statute and Regulations
  
• USA Patriot Act of 2001 Title III
  
• FDIC Rules and Regulations on Bank Secrecy Act Compliance Program

Currency Transaction Reports and Exemptions

• Rules For Currency Transaction Reporting Exemptions
  
• Currency Transaction Reporting Exemption Rule
  
• Form for Designation of Exempt Person (Form TD F 90-22.53)
  
• Rules For Currency Transaction Reporting Exemptions
  
• Frequently Asked Bank Secrecy Act Questions
  
• Currency Transaction Report

Suspicious Activity Reports

• Sharing Suspicious Activity Reports With Controlling Companies
  
• "Safe Harbor" and Filing of Suspicious Activity Reports
  
• Suspicious Activity Report Changes
  
• Suspicious Activity Report
  

Rules Under the USA PATRIOT Act

Customer Identification Program Rule

Final Rule on Customer Identification Programs

Guidance on Customer Identification Programs

FDIC: FIL-34-2005: Guidance on Customer Identification Programs
Consumer Information on the USA Patriot Act

Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activity

Final Rule Implementing Information-Sharing Section of USA PATRIOT ACT

Special Due Diligence for Correspondent Accounts and Private Banking Accounts

Final Regulation Implementing Section 312 of USA PATRIOT Act
Final Rule Implementing Sections of the USA PATRIOT Act that Address Correspondent Accounts for Foreign Shell Banks
Special Due Diligence Programs for Banks, Savings Associations, and Credit Unions
Minimum Due Diligence Requirements
Guidance on Enhanced Scrutiny for Transactions That May Involve the Proceeds of Foreign Official Corruption
Federal Reserve Board’s Supervision and Regulation Letter 97-19 on Private Banking Activities (June 30, 1997)

Primary Money Laundering Concerns/Special Measures

Special Measures for "Primary Money Laundering Concerns"

Anti-Terrorist Measures

Reporting Terrorist Activity

FDIC encourages financial institutions to cooperate with law enforcement in the investigation of terrorist activity in the United States. In Financial Institution Letter 87-2001, dated September 28, 2001, banking organizations were asked to voluntarily report suspicious transactions related to terrorist activity to law enforcement using the Financial Crimes Enforcement Network's ("FinCEN") Financial Institutions Hotline at 1-866-556-3974. The hotline operates seven days a week, 24 hours a day. The hotline's purpose is to provide to law enforcement the nature of the suspicious activity expeditiously.

International Anti-Money Laundering and Anti-Terrorist Financing Initiatives:

• Financial Action Task Force ("FATF") on Money Laundering
  
• Asia/Pacific Group on Money Laundering
  
• Guidance for Financial Institutions in Detecting Terrorist Financing
  
• United Nations Money Laundering Home Page
  

Office of Foreign Assets Control (OFAC)

OFAC administers laws that impose economic sanctions against hostile foreign countries to further U.S. foreign policy and national security objectives. OFAC is also responsible for issuing regulations that restrict transactions by U.S. persons or entities (including banks) with certain foreign countries, their nationals, or "specially designated nationals." Violations of these laws can expose financial institutions to substantial penalties.

FDIC encourages banks to implement a compliance program that includes: a designation of a compliance officer responsible for monitoring compliance with the program; a system of internal controls and procedures for regular screening of bank transactions and accounts against the OFAC SDN list; training of employees; and independent test of compliance with the program.

Screening of transactions and accounts may be done by computer software or manually. If computerized, OFAC offers the SDN list in a delimited format file that can be imported into some software programs. There are also several record search software packages available commercially. OFAC maintains current information and FAQs on its website.

For any questions, OFAC encourages banks to contact its Compliance Hotline phone: 800-540-6322 (7:30am to 6pm weekdays Eastern Time).

Please reference these sites for more information:

• OFAC Regulations by Industry
  
• List of Specially Designated Nationals and Blocked Persons
  

Money Services Businesses

Registration and De-registration of Money Services Businesses

• Interprative Guidance on Providing Banking Services to Money Services Business Operating in the United States
  
• Joint Statement on Providing Banking Services to Money Services Business
  
• Bank Secrecy Act Statement on Money Services Business
  
• Money Service Business Registration List
  

Bank Secrecy Act and Anti-Money Laundering Examination Manual

The most up to date information available concerning Bank Secrecy Act is the FFIEC InfoBase. Developed by the FFIEC’s Task Force on Examiner Education to provide field examiners at the financial institution regulatory agencies with an electronic source for training and distributing needed examination information.

The site link is located here: Bank Secrecy Act and Anti-Money Laundering Examination Manual

Other Resources

Financial Crimes Enforcement Network (FINCEN) Publications
The Federal Reserve Board
Internal Revenue Service-Criminal Investigation