What is Bank Secrecy Act (BSA)?

The BSA (Bank Secrecy Act) is a United States act that helps prevent money laundering by involving financial institutions that keep financial records and file daily reports for suspicious activities.

President Richard Nixon passed this law by the US Congress in 1970. The law provides regulations for the financial institutions that further help the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, to enforce and combat money laundering around the country.

According to the Bank Secrecy Act, specific rules are defined:

Rules for Financial Institutions

• The Financial institutions will form a currency transaction report (CTR) for every transaction exceeding $10000 in a single business day.
• A CTR would include the customer’s name, address, account number, and social security number. The CTR can be filled on paper or online, and financial institutes must record the CTR for 5 Years.
• For every transaction, a suspicious activity report (SAR) must be reported where a customer avoids a CTR report or is found suspicious of money laundering, wire transfer, check fraud, or any other illegal activity. The financial institutions should not inform the customer about the SAR report being filed.
• A US citizen with a foreign bank account valued over 10000$ must file a Foreign Bank Account Report( FBAR) each year before 15 October, with all year’s financial activity and the account details.
• The financial institutions must keep a record of the Monetary Instrument Log (MIL) for 5 years of every customer having money order, Cashier Check, and traveler’s check worth between 3000$ 10000$.
• Every person or institution that physically transports, mails, or ships a certain amount of currency or monetary instruments across US borders worth 10000$ or more must file a Currency and Monetary Instrument Report (CMIR)

Suggested Read: How BSA/AML Help With Fighting Financial Crimes in 2024?

Compliance Guidelines

• All financial institutions must verify the identity of persons opening and conducting transactions using the Know Your Customer (KYC) process.
• All financial institutions should include mandated AML regulations in their BSA AML compliance program.
• A thorough BSA AML risk assessment should also be carried out regularly to ensure that financial organizations detect and mitigate the risks associated with money laundering and terrorist financing.

Suggested Read: AML Compliance Guide 2024

Fines & Penalties

• The Financial Crimes Enforcement Network (FinCEN) will impose heavy fines and prison sentences on persons in financial institutions such as banks and businesses who fail to file CTRs, MILs, or SARs.
• If a person does not file (FBAR) for foreign financial holdings, he will be fined 10000$ each month until filing.
• The institutions that provide prior information about filed SAR will suffer severe consequences for violating the Bank Secrecy Act  (BSA) because of their involvement in Money Laundering.

Suggested Read: TOP AML Fines Penalties You Should Avoid in 2024