What is the Bank Secrecy Act?

The Bank Secrecy Act (BSA), which was passed in 1970, and is sometimes referred to as the Currency and Foreign Transactions Reporting Act or the Anti-Money Laundering Act (AML), is a statute designed to curb money laundering events. In particular, the BSA requires banks and financial institutions to help state agencies identify and stop activities that might denote money laundering in their organizations. Such reports refer to the types of transactions most likely to show money laundering activities. It was created to help ensure that financial institutions have the control measures necessary to prohibit and pinpoint financial fraud, economic espionage, terrorist funding criminal acts and the mishandling of national financial institutions.

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How Does the Bank Secrecy Act Work?

The BSA had been designed to prevent banks from serving as secret intermediaries of illicit financial transactions. Questionable financial transactions that trigger BSA to investigate involve customers who cable funds into accounts and then request that the money be transferred to another entity or customers who choose investment products that offer high fees and poor returns. Money transfers performed by customers with suspected criminal background or customers supplying erroneous or suspicious information triggers BSA audits. Individuals and financial firms who fail to meet BSA standards can face severe fines of up to tens of thousands of dollars to hundreds of millions or billions of dollars, and prison sentences of up to five years to twenty years for more serious offenses.

Ways the Bank Secrecy Act Is Applied

The BSA also requires banks to keep records of credit letters, promissory notes, or foreign currency transfers, cash purchases priced at more than $10,000 (daily overall amount). This demand involves only the exchange of physical money (cash and paper) between the parties. The BSA requires financial institutions to formulate compliance programs, conduct internal and external audits, train money tracking staff and ensure that senior management receives regular updates on audit reports. Institutions must maintain a record of money instruments transactions (such as a bank, travel and cashier checks) ranging from $3,000 $10,000. In these instances, the log must document and validate buyers ' identities, and calculate their transaction value.