In simpler times, the Bank Secrecy Act (BSA) regulated the Anti-Money Laundering (AML) activities of banks, as the name implies. In our globalized and networked world, it has expanded to cover financial institutions ranging from the biggest banks to mom and pop check cashing, or money transfer operations running out of storefronts in a mall. The Financial Crimes Enforcement Network (FinCEN) has launched actions against businesses across this spectrum for violations of BSA/AML requirements.
One thing all these businesses have in common is a culture of compliance with BSA/AML regulations—or not. Enforcement actions have identified a weak culture of compliance as one of the causes of violations, which can result from the actions of employees at virtually any level of an organization.
You are most likely familiar with the Financial Crimes Enforcement Network (FinCEN) which is a bureau of the Treasury Department. FinCEN’s mission is “to safeguard the financial system from illicit use and combat money laundering and promote national security” through the use of financial services information.
The Financial Crimes Enforcement Network (FinCEN) works to ensure that the Bank Secrecy Act (BSA) / Anti Money Laundering (AML) program of your financial institution is in compliance.
In order to get to the role of FinCEN, you need to understand the legal and operational context of which it is part. For convenience, we refer to the entire system as BSA or BSA/AML requirements, but in fact there are a number of moving parts that are interlocked.
Laws authorizing programs to combat the use of financial institutions to commit or enable crimes or terrorist activity go back to at least 1970. In that year, Congress passed the Currency and Foreign Transactions Reporting Act, a.k.a. the Bank Secrecy Act (BSA), which required financial institutions to record and report currency and other transactions, identify the parties involved, and maintain a paper trail. The aim was to help Federal agencies investigate and prosecute uses of the financial system to finance or cover up illegal activities, including criminal, tax and regulatory violations, and money laundering.
Over time this same basic approach has been strengthened in response to weaknesses in the system and to events in the environment, e.g., terrorism. Of special note is the Money Laundering Control Act of 1986 which made it illegal to use the financial system in ways designed to avoid the BSA (e.g., via 3rd parties) and for the first time made financial institutions responsible for documenting compliance with BSA/AML regulations. This latter point is important because much of the more recent enforcement activity has been directed toward evaluating institutions’ compliance programs to determine if they are capable of timely and accurate reporting on a risk-adjusted basis.
After 9/11, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act). Though this law tortured the English language to get the right acronym, it has a very important point: BSA/AML enforcement has become firmly embedded in our national security effort, with all of the heightened surveillance that brings. The PATRIOT Act extended BSA/AML requirements to cover virtually all financial institutions, including banks, credit unions, and non-bank financial services such as cash-in-transit providers, with stronger penalties for non-compliance.
Enforcement of BSA/AML Requirements: FinCEN
Numerous Federal government agencies play a role in implementing BSA regulations. The Treasury, Federal banking agencies such as the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, and the Office of the Comptroller of the Currency, as well as international agencies are involved in the enforcement of BSA/AML requirements.
The U.S. Department of the Treasury is at the heart of the U.S. effort. And within it, FinCEN is the bureau charged with the administration of BSA activities. The agency’s role is summarized in this statement:
FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.
The word “network” in FinCEN’s name is a clue to its role at the center of BSA/AML enforcement because it is the location where regulations and enforcement guidelines emerge, coordination with banking agencies that initiate enforcement actions occurs, and civil legal actions are initiated if needed. In this capacity, the agency monitors and records financial transactions, supplies information to law enforcement agencies, and coordinates with similar agencies in other countries. Throughout, FinCEN descriptions emphasize its role in national security.
When necessary, FinCEN will initiate legal actions, usually in coordination with or support of other agencies, to enforce BSA requirements. A long list of enforcement actions can be found on its website, including actions against “depository institutions,” “securities and futures,” “money services businesses,” and “casinos.”
Financial services businesses may never directly encounter FinCEN, at least if they remain in compliance. Yet the risk-based compliance approach recommended by banking agencies and the Office of Foreign Assets Control (OFAC — also a Treasury bureau) is rooted in a common approach stemming from FinCen efforts. With its emphasis on anti-terrorist efforts, FinCEN is a potent financial regulator of which all participants in the financial services circle need to be aware.
In March 2014, Thomas J. Curry, Comptroller of the Currency, spoke before the Association of Certified Anti-Money Laundering Specialists about the Bank Secrecy Act (BSA) and Anti-Money Laundering law (AML) compliance. While he generally spoke positively about the efforts of banking institutions to meet the requirements of the BSA, he was also quick to point out that most of the headlines surrounding banks and the BSA are negative.
In other words, the media will seek out banks that are not in compliance. As a result, the industry as a whole must do more.
Curry noted that BSA infractions can, “almost always be traced back to decisions and actions of the institution’s board and senior management.” The underlying deficiencies that lead to these poor decisions fall into four areas: