Business, Legal & Accounting Glossary
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, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. It 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.)
The BSA regulations require all financial institutions to submit five types of reports to the government. (not an exhaustive list of reports)
It also requires any business receiving one or more related cash payments totalling $10,000 or more to file form 8300.
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.
Cash purchases of monetary instruments, such as money orders, cashier’s checks and traveller’s checks, totalling from $3,000 to $10,000, inclusive. Filed with the Internal Revenue Service.
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”).
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.
CTRs include the individual’s bank account number, name, address, and Social Security Number. SAR reports, required when transactions indicate behaviour 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, as a bank customer though they are meaningless unless you are actually doing something illegal. 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 CTR’s to be created seamlessly.
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”.
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This glossary post was last updated: 18th April, 2020 | 4 Views.