Passed in 1970, the Bank Secrecy Act (BSA) was the first set of laws specifically designed to combat money laundering. In fact, it is sometimes referred to as the “Anti-Money Laundering Law (AML)” or “BSA/AML.” The BSA has been amended over the years by the addition of other anti-money laundering laws, including the Patriot Act. The BSA requires business and financial institutions to keep records and/or file reports of certain transactions and activity. The records and reports are especially useful to government and law enforcement activities in detecting money laundering, tax evasion, terrorism and other criminal activities.
As a practical matter, the government knows everything that you do with a bank. The government requires banks to have sophisticated computer programs in place that are monitored by experienced knowledgeable people that look for every kind of possible wrongdoing; whether the possible wrongdoing is done with one branch of one bank, or different branches of the same bank, or done on different days or done with multiple banks. The bottom line is that whatever scheme you can think up has already been thought up and guarded against and trying any of them will only result in the bank reporting you and your transactions to a variety of government agencies who can prosecute you on very serious felony charges which can result in many long years of imprisonment and extremely large monetary penalties.
Bank Reporting Requirements
While the BSA mandates reports or records from certain individuals and businesses, much of the law institutes reporting and recording requirements for banks and other financial institutions. Every currency deposit, withdrawal, exchange of currency or other payment or transfer involving more than $10,000 must be reported on a Currency Transaction Report (CTR). While there are certain exemptions, such as transactions between a bank and other banks, governmental agencies or entities on the NYSE, etc., the financial institution is required to file a designation of exemption.
Banks also must report any suspicious transactions or attempted transactions. A Suspicious Activity Report (SAR), found here, must be filed if one or several related transactions involves $5,000 in non-fact to face transactions and $2,000 in face to face transactions and the bank knows or believes that the transaction:
- Involves funds from illegal activities, or
- Is intended to hide or disguise funds or assets from illegal activities in order to violate or evade any federal law or regulation or to avoid a transaction reporting requirement, or
- Is designed to evade the regulations created under the BSA, or
- Has no business or lawful purpose or is not the kind of transaction a particular customer normally engages in and, after looking at the background, facts, and possible purpose of the transaction, the bank cannot reasonably explain it.
Penalties for failing to Report Suspicious Acts
Financial Institutions are required to file these reports. A fine of the greater of $25,000 or the amount of the transaction (not to exceed $100,000) will be imposed upon a bank that fails to file a CTR or SAR. Even negligence on the part of a bank may cause it to be fined $500 for one violation or $50,000 for a pattern of negligence. Conversely, there is no penalty for reports that are not necessary.
In 1986, as part of the Money Laundering Control Act, Congress stated that a financial institution would not be held liable for the sharing of information relating to suspicious activity. As concerns grow regarding money laundering and terrorism, privacy rights become diminished. Financial institutions report a client’s name, address, social security number, driver’s license number and more. Any transaction of $10,000 or more will require that a customer’s information be shared. Also, the language of the regulation may make it necessary to report totally legal transactions of $5,000 or more because the transaction is not the kind the customer normally engages in. The reports are filed with the Treasury Department’s Financial Crimes Enforcement Network and thereafter they are available to the FBI, Secret Service, Customs Service, every U.S. Attorney’s Office and several other law enforcement agencies. Agencies can access the reports without the normal evidentiary requirements that would normally need to be shown before gaining access to the information.
For more information, contact Moskowitz, LLP.