Under the Bank Secrecy Act (BSA) and related anti-money laundering (AML) requirements, financial institutions have a responsibility to monitor, identify, and report on suspicious activities that may indicate financial fraud, money laundering, or the financing of terrorism.
According to the Federal Deposit Insurance Corporation (FDIC), BSA/AML encompasses "a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism. The BSA provides a foundation to promote financial transparency and deter and detect those who seek to misuse the U.S. financial system to launder criminal proceeds, finance terrorist acts, or move funds for other illicit purposes. The BSA requires each bank to establish a BSA/AML compliance program. By statute, individuals, banks, and other financial institutions are subject to the BSA recordkeeping requirements." 1
BSA/AML regulations require institutions to combat financial crime through:
Complying with anti-money laundering requirements under the Bank Secrecy Act requires effective governance, risk, and compliance processes. Federal banking regulators require U.S. financial institutions to have a risk-based BSA/AML compliance program, and examiners "evaluate the adequacy of a bank’s BSA/AML compliance program relative to its risk profile" and "review risk management practices to evaluate and assess whether a bank has developed and implemented effective processes to identify, measure, monitor, and control risks." 1
Banks and credit unions can strengthen their compliance posture by taking steps to build on the five core elements of an effective program: 2
Maintaining BSA/AML compliance — including suspicious activity reporting (SAR), currency transaction reporting (CTR), and customer identification program (CIP) processes — requires careful management and monitoring to meet regulatory obligations and avoid enforcement actions.
In its supervisory insight on the Bank Secrecy Act, 1 the FDIC identifies common deficiencies in financial institutions’ BSA compliance programs. Violations cited by the agency in examinations fall into four primary categories:
The National Credit Union Association (NCUA) cites the most frequently seen compliance violations at credit unions 2 as:
The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act of 1970, and its implementing regulations establish anti-money laundering obligations for financial institutions.
According to the American Bankers Association, "the law has been amended a number of times, adding requirements to report suspicious activities and track possible terrorist activities. The goal is to detect and deter instances of possible illicit finance, to track criminal activity, and to secure the safety of the financial system."
Multiple regulatory agencies have issued rules and regulations that implement the Bank Secrecy Act, including:
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