BANK SECRECY ACT, ANTI-MONEY LAUNDERING, AND OFFICE OF FOREIGN ASSETS CONTROL Section 8.1 INTRODUCTION TO THE BANK respectively, over the past several decades. Several of SECRECY ACT these acts include: The Financial Recordkeeping and Reporting of Currency • Money Laundering Control Act of 1986, and Foreign Transactions Act of 1970 (31 U.S.C. 5311 et • Annuzio-Wylie Anti-Money Laundering Act of 1992, seq.) is referred to as the Bank Secrecy Act (BSA). The • Money Laundering Suppression Act of 1994, and purpose of the BSA is to require United States (U.S.) • Money Laundering and Financial Crimes Strategy Act financial institutions to maintain appropriate records and of 1998. file certain reports involving currency transactions and a financial institution’s customer relationships. Currency Most recently, the Uniting and Strengthening America by Transaction Reports (CTRs) and Suspicious Activity Providing Appropriate Tools Required to Intercept and Reports (SARs) are the primary means used by banks to Obstruct Terrorism Act (more commonly known as the satisfy the requirements of the BSA. The recordkeeping USA PATRIOT Act) was swiftly enacted by Congress in regulations also include the requirement that a financial October 2001, primarily in response to the September 11, institution’s records be sufficient to enable transactions and 2001 terrorist attacks on the U.S. The USA PATRIOT Act activity in customer accounts to be reconstructed if established a host of new measures to prevent, detect, and necessary. In doing so, a paper and audit trail is prosecute those involved in money laundering and terrorist maintained. These records and reports have a high degree financing. of usefulness in criminal, tax, or regulatory investigations or proceedings. FINANCIAL CRIMES ENFORCEMENT The BSA consists of two parts: Title I Financial NETWORK REPORTING AND Recordkeeping and Title II Reports of Currency and RECORDKEEPING REQUIREMENTS Foreign Transactions. Title I authorizes the Secretary of the Department of the Treasury (Treasury) to issue regulations, which require insured financial institutions to Currency Transaction Reports maintain certain records. Title II directed the Treasury to and Exemptions prescribe regulations governing the reporting of certain transactions by and through financial institutions in excess U.S. financial institutions must file a CTR, Financial of $10,000 into, out of, and within the U.S. The Crimes Enforcement Network (FinCEN) Form 104 Treasury’s implementing regulations under the BSA, (formerly known as Internal Revenue Service [IRS] Form issued within the provisions of 31 CFR Part 103, are 4789), for each currency transaction over $10,000. A included in the FDIC’s Rules and Regulations and on the currency transaction is any transaction involving the FDIC website. physical transfer of currency from one person to another and covers deposits, withdrawals, exchanges, or transfers The implementing regulations under the BSA were of currency or other payments. Currency is defined as originally intended to aid investigations into an array of currency and coin of the U.S. or any other country as long criminal activities, from income tax evasion to money as it is customarily accepted as money in the country of laundering. In recent years, the reports and records issue. prescribed by the BSA have also been utilized as tools for investigating individuals suspected of engaging in illegal Multiple currency transactions shall be treated as a single drug and terrorist financing activities. Law enforcement transaction if the financial institution has knowledge that agencies have found CTRs to be extremely valuable in the transactions are by, or on behalf of, any person and tracking the huge amounts of cash generated by individuals result in either cash in or cash out totaling more than and entities for illicit purposes. SARs, used by financial $10,000 during any one business day. Transactions at all institutions to report identified or suspected illicit or branches of a financial institution should be aggregated unusual activities, are likewise extremely valuable to law when determining reportable multiple transactions. enforcement agencies. CTR Filing Requirements Several acts and regulations expanding and strengthening the scope and enforcement of the BSA, anti-money Customer and Transaction Information laundering (AML) measures, and counter-terrorist financing measures have been signed into law and issued, All CTRs required by 31 CFR 103.22 of the Financial Recordkeeping and Reporting of Currency and Foreign DSC Risk Management Manual of Examination Policies 8.1-1 Bank Secrecy Act (12-04) Federal Deposit Insurance Corporation BANK SECRECY ACT, ANTI-MONEY LAUNDERING, AND OFFICE OF FOREIGN ASSETS CONTROL Section 8.1 Transactions regulations must be filed with the IRS. transaction. PACS was launched in October 2002 and Financial institutions are required to provide all requested permits secure filing of CTRs over the Internet using information on the CTR, including the following for the encryption technology. Financial institutions can access person conducting the transaction: PACS after applying for and receiving a digital certificate. • Name, Examiners reviewing filed CTRs should inquire with • Street address (a post office box number is not financial institution management regarding the manner in acceptable), which CTRs are filed before evaluating the timeliness of • Social security number (SSN) or taxpayer such filings. If for any reason a financial institution should identification number (TIN) (for non-U.S. residents), withdraw from the magnetic tape program or the PACS and program, or for any other reason file paper CTRs, those • Date of birth. CTRs must be filed within the standard 15 day period following the reportable transaction. The documentation used to verify the identity of the individual conducting the transaction should be specified. Exemptions from CTR Filing Requirements Signature cards may be relied upon; however, the specific documentation used to establish the person’s identity Certain “persons” who routinely use currency may be should be noted. A mere notation that the customer is eligible for exemption from CTR filings. Exemptions were “known to the financial institution” is insufficient. implemented to reduce the reporting burden and permit Additional requested information includes the following: more efficient use of the filed records. Financial institutions are not required to exempt customers, but are • Account number, encouraged to do so. There are two types of exemptions, • Social security number or taxpayer identification referred to as “Phase I” and “Phase II” exemptions. number of the person or entity for whose account the transaction is being conducted (should reflect all “Phase I” exemptions may be granted for the following account holders for joint accounts), and “exempt persons”: • Amount and kind of transaction (transactions 2 involving foreign currency should identify the country • A bank , to the extent of its domestic operations; of origin and report the U.S. dollar equivalent of the • A Federal, State, or local government agency or foreign currency on the day of the transaction). department; • Any entity exercising governmental authority within The financial institution must provide a contact person, and the U.S. (U.S. includes District of Columbia, the CTR must be signed by the preparer and an approving Territories, and Indian tribal lands); official. Financial institutions can also file amendments on • Any listed entity other than a bank whose common previously filed CTRs by using a new CTR form and stock or analogous equity interests are listed on the checking the box that indicates an amendment. New York, American, or NASDAQ stock exchanges (with some exceptions); CTR Filing Deadlines • Any U.S. domestic subsidiary (other than a bank) of any “listed entity” that is organized under U.S. law and CTRs filed with the IRS are maintained in the FinCEN at least 51 percent of the subsidiary’s common stock is database, which is made available to Federal Banking owned by the listed entity. Agencies1 and law enforcement. Paper forms are to be filed within 15 days following the date of the reportable “Phase II” exemptions may be granted for the following: transaction. If CTRs are filed using magnetic media, pursuant to an agreement between a financial institution • A “non-listed business,” which includes commercial and the IRS, a financial institution must file a CTR within enterprises that do not have more than 50% of the 25 calendar days of the date of the reportable transaction. business gross revenues derived from certain ineligible A third option is to file CTRs using the Patriot Act businesses. Gross revenue has been interpreted to Communication System (PACS), which also allows up to reflect what a business actually earns from an activity 25 calendar days to file the CTR following the reportable conducted by the business, rather than the sales volume of such activity. “Non-listed businesses” must 1 Federal Banking Agencies consist of the Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), National Credit Union Administration (NCUA), and 2 Bank is defined in The U.S. Department of the Treasury (Treasury) the FDIC. Regulation 31 CFR 103.11. Bank Secrecy Act (12-04) 8.1-2 DSC Risk Management Manual of Examination Policies Federal Deposit Insurance Corporation BANK SECRECY ACT, ANTI-MONEY LAUNDERING, AND OFFICE OF FOREIGN ASSETS