AML Compliance – Strategies and Obligations by the Bank Secrecy Act (BSA)

The Bank Secrecy Act (BSA) of 1970 completed its 50 years in the fight against financial crimes. Since its creation, this regulation has been reigning as one of the most important Anti Money Laundering (AML) tools. While fraudsters deploy advanced techniques to conceal their funds, this act has undergone various amendments to come up with countermeasures. 

BSA has set the pace to increase global efforts in combating money laundering. It is also undergoing changes to keep up with the evolving face of crimes. This regulation assists law enforcement agencies, businesses, and financial firms in ensuring AML compliance. Furthermore, guidelines within the BSA help institutions detect and prevent money laundering. This blog entails how this AML verification act has evolved over the years. 

Overview of the Bank Secrecy Act (BSA) – Decades of Fighting Financial Crimes 

This anti-money laundering regulation has been a vital component of regulatory landscape with its application to both individuals and businesses. Tracing back its origin to 1970, BSA became the foremost requirement for every financial institution in 1986, right after the Money Laundering Control Act (MLCA) made flow of illicit funds illegal. 

The establishment of the Financial Crimes Enforcement Network (FinCEN) further brought several amendments. Customer Due Diligence (CDD) and Suspicious Activity Report (SAR) counts as the major changes in BSA. The next section outlines five decades of evolutions within this anti-money laundering regulation. 

Organized Crimes of the ‘70s

The ‘70s decade is the period that experiences a massive hit of crimes involving flow of illicit funds in large amounts. AML compliance efforts were put into practice to counter these fund transfers without them being reported to the government.

To address the skyrocketing increase in BSA required respective financial institutions such as banks to carry out AML monitoring. Furthermore, they should report fund transfers exceeding $10,000 by creating and submitting a Currency Transaction Report (CTR). 

The guidelines within BSA include efficient screening of customers in order to identify individuals opting to make a payment. This also involves maintaining a paper trail by recording transactions and keeping their databases updated. Despite facing challenges, legal proceedings, and controversies, this anti-money laundering law was upheld. 

The ‘80s War on Drugs

It was the last ‘80s when criminals found ways to exploit CTRs. For this, they were using structuring – the process where large transactions are broken down into small amounts. This helps fraudsters escape anti-money laundering checks and flow their illicit money through financial systems.

While making efforts to combat drug trafficking, law enforcement agencies made BSA’s implementation mandatory to restrict the movement of illicit money. For this, the Money Laundering Control Act of 1986 was put into force to ensure AML screening compliance.

The Birth of FinCEN in the ‘90s

Criminals are coming up with more sophisticated techniques to exploit AML compliance programs and launder money with every passing year. In 1994, the Financial Crimes Enforcement Network (FinCEN) came up with multi-source intelligence and analytical network to counter monetary crimes. 

This decade of the ‘90s further brought major expansions within the BSA with the passing of three new anti-money laundering laws. These legal obligations involve Suspicious Activity Report (SAR), AML verification with customer identification, and record-keeping requirements. 

Terrorism Taking Center Stage in the 2000s

In the new millennium, the world came under a series of first-hand terrorist attacks. Starting from 9/11, the criminals were using earnings through drug trafficking as the source of funds for their organized illicit activities. Fraudsters were making their way to banks and while using synthetic identities created fake accounts.

To further escape anti-money laundering regulatory scrutiny, terrorists used document forgeries to make their identities look legitimate. 

In 2001, the USA PATRIOT Act came into force while strengthening AML compliance for businesses involved in dealing with international customers or firms. It further expands the scope of BSA by making Customer Due Diligence (CDD) a strict legal obligation.

Integrating efficient AML systems to screen along with cross-verifying customers against sanctions, watchlist, and PEPs records are other anti-money laundering liabilities.

The Future of AML and BSA

Since 9/11, FinCEN is responsible to monitor financial institutions and mandate them to ensure AML compliance. In order to combat money laundering without compromising the operations of businesses, the BSA has undergone several shifts and changes.

Institutions can now integrate AML solutions to verify customers, validate their sources of funds, and ensure presence while performing a transaction. 

Criminals are making efforts to conceal their identities during digital onboarding, selfie-based verification counters their attempts more efficiently. Hence, financial institutions can stay put with BSA AML compliance and play their part in the fight against money laundering.