Bank Secrecy Act

THE BANK SECRECY ACT (BSA, Public Law 91–508), signed by President Richard Nixon in 1970, was formulated in order to detect illegal activities by tracking suspicious financial transactions. Also known as the Currency and Foreign Transactions Reporting Act, the BSA is a major crime-fighting tool used by different U.S. government agencies, including the Internal Revenue Service (IRS) and the Federal Bureau of Investigation (FBI).

Since the enactment of the BSA, it has been amended multiple times. These substantial modifications to the BSA include the Anti-Drug Abuse Act of 1986, which contained the Money Laundering Control Act of 1986, and the Money Laundering Suppression Act of 1994. These acts enhanced the enforcement effectiveness of the law by making money-laundering a criminal activity, requiring researchers to develop more successful examination methods, and calling for more examiner training in order to better identify suspicious schemes at financial institutions.

In its current form, the BSA requires that all financial institutions comply with certain provisions and that banking officials formulate internal compliance programs in order to do so. In its simplest form, an internal compliance program must be written, approved by the directors, and include a structure of internal controls to guarantee compliance with the BSA, external or internal auditing of the institution's compliance, daily supervision by a specified person, and training for the money-tracking personnel. The internal controls are required by the BSA to be comprehensive and effective. They must detail the monitoring of opening and closing accounts and transactions-reporting procedures. Senior management at a financial institution must be updated regularly with compliance and audit reports in order to ensure their knowledge of compliance. Also, the BSA must be an integral factor of a job offer's description and it has to be one of the conditions of employment.

Testing by external or internal auditors is an essential check to ensure that there are no lapses in compliance. Auditors are required by the BSA to monitor a financial institution's internal compliance program and evaluate the employee's knowledge concerning BSA requirements, the quality of the BSA training program, and observe the bank's ability to identify suspicious activity.

The designation of a compliance officer and the establishment and maintenance of a BSA training program are two other components of an internal compliance program. A qualified employee directly employed by the financial institution is required to oversee all the components of the BSA internal compliance program, including the training program. Training must involve all relevant banking personnel, whether an employee is a bank teller or a bank president. It is essential that the training program be updated often to address new bank-crime schemes and new regulations.

According to the BSA, there are five reporting requirements with which banks must comply. These reports include an IRS form detailing any transaction amounting to over $10,000, a U.S. Customs form for anyone who transports, mails, or receives foreign currency over $10,000, and a Department of Treasury form with a list of a customer's foreign accounts that exceed $10,000. The Suspicious Activity Report (SAR) is another form, which must be submitted to the Department of Treasury that details any transaction, which is deemed to be suspicious. Also, an exemption report must be filed every other year in order to gain authorization for an exempt customer.

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