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Bank Secrecy Act of 1970

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Citation Edit

Bank Secrecy Act of 1970 (BSA) (also called the Currency and Foreign Transactions Reporting Act), Pub. L. No. 91-5081 (1970), codified at 12 U.S.C. §§1829b and 1951-59, and 31 U.S.C. §§ 5311-5330; see also 31 C.F.R. §103.

Overview Edit

Enacted by Congress in 1970, the Act authorizes the Secretary of the Treasury to issue regulations requiring financial institutions to retain records and file reports that the Secretary determines have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in intelligence or counterintelligence matters to protect against international terrorism. The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN.

Amendments to the BSA Edit

Annunzio-Wylie Anti-Money Laundering Act of 1992 Edit

The BSA was amended by the Annunzio-Wylie Anti-Money Laundering Act of 1992[1] Annunzio-Wylie authorizes the Secretary of the Treasury and the Board of Governors of the Federal Reserve System (the Board) to jointly issue regulations requiring insured banks to maintain records of domestic funds transfers.[2]

In addition, Annunzio-Wylie authorizes the Secretary and the Board to jointly issue regulations requiring insured banks and certain non-bank financial institutions to maintain records of international funds transfers and transmittals of funds.[3] Annunzio-Wylie requires the Secretary and the Board, in issuing regulations for international funds transfers and transmittals of funds, to consider the usefulness of the records in criminal, tax, or regulatory investigations or proceedings, and the effect of the regulations on the cost and efficiency of the payments system.[4]

USA PATRIOT Act of 2001 Edit

Following the September 11, 2001, terrorist attacks, Congress passed the USA PATRIOT Act, which, among other things, amended the BSA to expand the number of industries subject to BSA regulation and required financial institutions to establish proactive anti-money laundering programs to combat terrorist financing.[5] In addition, the USA PATRIOT Act expanded reporting requirements and allowed the records and reports collected under the BSA to be used in the conduct of intelligence or counterintelligence activities to protect against international terrorism.

Intelligence Reform and Terrorism Prevention Act of 2004 Edit

The Intelligence Reform and Terrorism Prevention Act of 2004[6] amended the BSA to require the Secretary to prescribe regulations

requiring such financial institutions as the Secretary determines to be appropriate to report to the Financial Crimes Enforcement Network certain cross-border electronic transmittals of funds, if the Secretary determines that reporting of such transmittals is reasonably necessary to conduct the efforts of the Secretary against money laundering and terrorist financing.

Types of reports Edit

The BSA regulations require all financial institutions to submit five types of reports to the government.

  1. FinCEN Form 104 Currency Transaction Report (CTR): A CTR must be filed for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through or to a financial institution, which involves a transaction in currency of more than $10,000. Multiple currency transactions must be treated as a single transaction if the financial institution has knowledge that: (a) they are conducted by or on behalf of the same person; and (b) they result in cash received or disbursed by the financial institution of more than $10,000. (31 C.F.R. 103.22)
  1. FinCEN Form 105 Report of International Transportation of Currency or Monetary Instruments (CMIR): Each person (including a bank) who physically transports, mails or ships, or causes to be physically transported, mailed, shipped or received, currency, traveler’s checks, and certain other monetary instruments in an aggregate amount exceeding $10,000 into or out of the United States must file a CMIR.
  1. Department of the Treasury Form 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR): Each person (including a bank) subject to the jurisdiction of the United States having an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $5,000. (31 C.F.R. 103.24).
  1. Treasury Department Form 90-22.47 and OCC Form 8010-9, 8010-1 Suspicious Activity Report (SAR): Banks must file a SAR for any suspicious transaction relevant to a possible violation of law or regulation. (31 C.F.R. 103.18 − formerly 31 C.F.R. 103.21) (12 C.F.R. 12.11).
  1. "Designation of Exempt Person" FinCEN Form 110: Banks must file this form to designate an exempt customer for the purpose of CTR reporting under the BSA (31 C.F.R. 103.22(d)(3)(i)). In addition, banks use this form biennially (every two years) to renew exemptions for eligible non-listed business and payroll customers. (31 C.F.R. 103.22(d)(5)(i))

It also requires any business receiving one or more related cash payments totalling $5,000 or more to file form 8300.[7]

Affected transactions Edit

Currency Transaction Report (CTR) Edit

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.

Monetary Instrument Log (MIL) Edit

Cash purchases of monetary instruments, such as money orders, cashier's checks and travelers checks, totaling from $3,000 to $10,000, inclusive. This form is required to be kept on record at the financial institution, and produced at the request of examiners or audit to verify compliance. A financial institution must maintain a Monetary Instrument Log for five years.

Suspicious Activity Report (SAR) Edit

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).

Sanctions Edit

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.

References Edit

  1. Pub. L. 102-550.
  2. 12 U.S.C. §1829b(b)(2) (2006). Treasury has independent authority to issue regulations requiring non-bank financial institutions to maintain records of domestic transmittals of funds.
  3. Id. §1829b(b)(3).
  4. Id.
  5. USA PATRIOT Act, Pub. L. No. 107-56, 115 Stat. 272 (Oct. 26, 2001).
  6. Pub. L. No. 108-458.
  7. IRS article.

See also Edit


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