Bank Secrecy Act

What is the Bank Secrecy Act?

Passed in 1970, the Bank Secrecy Act (BSA) requires U.S. financial institutions to work cooperatively with the government to prevent money laundering. Also known as the Currency and Foreign Transactions Act, the BSA was designed to keep banking institutions from acting as unknown intermediaries in illegal financial transactions.

Deeper definition

The BSA requires financial institutions to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Suspicious financial transactions that prompt BSA reporting include customers wiring funds into accounts and immediately asking to redirect the money to another institution, or customers selecting investment products that offer high fees and low returns.

In addition, transactions completed by customers with known criminal background or customers providing erroneous or suspicious information trigger BSA audits. The act also requires banks to keep records on transfers or cash purchases valued at more than $10,000 (daily aggregate amount) of letters of credit, promissory notes, or foreign currency transfers.

The BSA requires financial institutions to formulate compliance programs, practice internal and external audits, train money-tracking personnel, and ensure senior management receives regular updates on audit reports.

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Bank Secrecy Act example

The BSA is enforced by the Financial Crimes Enforcement Network (FinCEN). In January 2017, FinCEN reported that they assessed $184 million in penalties to Western Union Financial Services for past violations of anti-money laundering rules, in a coordinated effort with the Department of Justice and the Federal Trade Commission.

In 2012, HSBC Bank paid $1.9 billion for violations in its failure to prevent money laundering by drug traffickers, and in 2014 JP Morgan paid $2.6 billion in fines for failing to notify authorities about suspicions of fraud at Bernie Madoff’s fund.

 

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