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Bank Secrecy Act (BSA)

03 December, 2023

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The Bank Secrecy Act of 1970, also known as the Currency and Foreign Transactions Reporting Act, is a US law that was passed to regulate financial institutions. This act is now administered by the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). It is also known as the AML Bank Secretary Act.

What is the Bank Secretary Act (BSA)?

The BSA requires financial institutions to help aid regulatory bodies by streamlining their own processes to catch illegal financial activities. This act is mainly based on the reporting process; organizations are obliged to present necessary reports to regulatory bodies so that their legitimacy can be verified. This act also gave other regulatory authorities, such as the Department of the Treasury, the power to impose strict reporting regulations on organizations. 

The main concern that led to the development of this act was money laundering. Money launderers use extraordinary means to launder money. The only way to catch these criminals was by finding loopholes in paperwork. This act was developed so that regulatory authorities could effectively go through detailed paperwork and catch any illegal activities. It proved effective, but manual processes can only go so far. Ever since the digitization of processes, the reporting process has become relatively easier, and it has allowed regulatory bodies to conduct these verification checks on a larger scale, allowing them to scale up their processes. 


The Purpose of BSA and How its Shaping Our Financial Sector 

The BSA mainly focuses on aiding the regulatory bodies in identifying suspicious financial activities, trailing them, and then putting an end to them. This is done in close collaboration with financial institutions and organizations, which help these regulatory bodies track criminals. Digitization must be taken into account, as it has played a crucial role in both facilitating regulatory bodies and criminals. Using modern technologies, criminals such as money launderers have become more sophisticated. They have developed mechanisms such as deepfakes and document forgery to dodge security checks and commit crimes. Keeping up with these ever-evolving mechanisms is important. 

Regulatory bodies worldwide have been introducing new and sound policies to battle the modern mechanisms used by criminal offenders. The Bank Secretary Act (BSA) has also introduced new policies that businesses are obliged to obey. To be specific, BSA compliance requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions that exceed $10,000, and report suspicious activities that may signify potential money laundering, tax evasion, or other criminal activities. 

The BSA Reporting Process 

The Bank Secretary Act (BSA) involves a reporting process. The main purpose of the BSA bank secretary act was to urge financial institutions to keep proper records, which are used in the reporting process. Regulatory bodies also hold the power to conduct audits without informing any institution. This is a challenge because if an organization fails to present the necessary documents to the authorities, then it is subjected to legal action. This can result in fines and lawsuits because making up for missing records is something that cannot be done on the spot. 

Anyone can file a report under the BSA, Bank Secretary Act regulations, as it allows individuals and businesses to file reports. A user can fill out a form online and attach the needed documents with it, and the authorities will take a look into it. This reporting process is known as Suspicious Activity Reporting (SAR). Suspicious activities, such as altered transactions and missing records, can be reported using this process. Businesses dealing with an illegal entity, an employee suspected of being involved in illegal activity, or a business suspecting any of its employees can file a SAR report.

BSA Violations: Penalties and Legal Prosecutions 

It is absolutely crucial for businesses to comply with the rules and regulations of the regulatory authority they are functioning under. These regulatory bodies can charge fines and penalties simply for non-compliance. If a business fails to comply with a specific set of policies, legal action is taken against it. This makes compliance necessary. 

Nonetheless, if an organization violates BSA, it is subjected to hefty fines and penalties. While these charges vary depending on the condition of the organization and the extent of the crime, no entity is set free without fines. Standard civil and federal fines under the BSA range from $5,000 per violation to $1,000,000, or 1% of the assets of a financial institution for every day that the violation occurs, if it is greater than the initial fine. Apart from that, considering individual penalties, an individual from the banking sector who violates the BSA can be fined up to $250,000 and spend five years in prison. If the violation involves a sum of $100,000 or more and follows a pattern or series of offenses, the perpetrator can be fined up to $500,000 and spend 10 years in prison. A person convicted of money laundering can be fined up to $500,000 and sentenced to up to 20 years in prison. If a bank or a financial organization is found guilty, it can be fined up to $1 million, or twice the amount of money involved. 

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