Bank Secrecy Act, BSA, and AML Compliance Basics — Flashcards

The Bank Secrecy Act (BSA) is the primary U.S. anti-money laundering (AML) law enacted in 1970 that requires financial institutions to assist government agencies in detecting and preventing money laundering, terrorism financing, and other financial crimes.

Key requirements include filing Currency Transaction Reports (CTRs) for cash transactions over $10,000, filing Suspicious Activity Reports (SARs), implementing risk-based AML programs, and conducting customer due diligence. 

Key Components of BSA/AML Compliance
Internal Controls: Establishing policies, procedures, and systems to manage risks and ensure compliance.
Designated Compliance Officer: A specific individual responsible for coordinating and monitoring day-to-day compliance.
Ongoing Training: Regular training for employees to identify suspicious activities.
Independent Testing: Periodic audits to test the effectiveness of the AML program.
Customer Due Diligence (CDD): Verifying customer identities (Customer Identification Program - CIP), understanding the nature of customer relationships, and identifying beneficial owners (25% or more ownership) of legal entities.
Reporting & Recordkeeping: Filing CTRs for cash transactions > $10,000, SARs for suspicious activities, and keeping records of certain transactions. 

Key Requirements & Penalties
Reporting Thresholds: Cash transactions over $10,000 (single or aggregated within a business day) must be reported via CTR.
Suspicious Activity (SAR): Any suspected illegal activity, regardless of the amount, must be reported using a SAR.
Penalties: Non-compliance can lead to massive fines, reputational damage, and, for individuals, criminal penalties including imprisonment for up to 20 years.
Regulators: The Financial Crimes Enforcement Network (FinCEN) administers the BSA, while other regulators (FDIC, OCC, etc.) examine institutions for compliance.