Bank Secrecy Act for Operations Staff Presented by Jan Vogel, Center for Professional Development WilliamsTown Communications, Contributing Writer #TR1118 l Introduction Welcome to CUNA’s Bank Secrecy Act for Operations Staff Training on Demand course! Compliance with the Bank Secrecy Act, otherwise known as the BSA, is a critical task for each and every credit union in the United States, so all credit union employees must be familiar with BSA requirements. To that end, this course provides an overview of the Bank Secrecy Act, including specific actions that you, as a member of your credit union’s operations staff, must take to be BSA compliant. Of course, you also need to be sure that you know What Is the the BSA policy and procedures at your credit union. Bank Secrecy Act? This is key to being in compliance with the require- Not surprisingly, the first step to BSA compliance ments of the Bank Secrecy Act. is understanding just what the Bank Secrecy Act in- Let’s get started! volves and why it was enacted in the first place. In its current form, the BSA is more than just a single act of Objectives Congress; rather, it is a combination of multiple laws The Bank Secrecy Act applies to all credit unions, that have been passed during the last four decades. and it requires that employees in these institutions These laws were enacted to assist law enforcement carry out certain tasks. But what exactly does the officials in the investigation of activities and crimes BSA entail, and how does it affect operations staff such as money laundering, tax evasion, and financing in particular? By the end of this Training on Demand of terrorist groups. Collectively, these acts and their course, you’ll know the answers to these questions. related regulations require that financial institutions In fact, upon completing the course, you will be able obtain specific information, maintain certain records, to: and report certain financial transactions to the federal government. • Explain the Bank Secrecy Act (BSA); Today, BSA enforcement is the responsibility of • Know when to file Currency Transaction Reports an agency called the Financial Crimes Enforcement (CTRs) and Suspicious Activity Reports (SARs); Network, or FinCEN. FinCEN is a bureau of the United • Explain the requirements for wire transfer pay- States Department of the Treasury. ment orders and monetary instrument purchases; • Understand how to apply Customer/Member Identification Programs; and • Explain the purpose of 314(a) and 314(b) infor- mation sharing. 2 Laws That Comprise Bank Secrecy Act of 1970 the Bank Secrecy Act The Bank Secrecy Act of 1970 is the foundation upon which the current version of the BSA was built. As described earlier, the Bank Secrecy Act is not a So, what did this act entail? In short, the primary single law, but rather a combination of multiple laws purpose of this law was to prevent financial institu- that have been enacted at the federal level. Some of tions — including credit unions — from being used as the most important of these laws include the following: intermediaries in currency transactions that might be • The Bank Secrecy Act of 1970; linked to money laundering, tax evasion, and other • The Anti-Drug Abuse Act of 1986; criminal activities. To accomplish this goal, the Bank • The Money Laundering Control Act of 1986; and Secrecy Act of 1970 standardized recordkeeping and reporting requirements for all financial institutions • The USA PATRIOT Act of 2001. in the United States. Many of these requirements will Although each of these laws deals with a different be discussed in greater detail later in this book. topic, each also has the same basic purpose: to create a paper trail for currency transactions. Let’s take a look Anti-Drug Abuse Act of 1986 at each of these laws in greater detail. A second major law that helped shape today’s BSA was the Anti-Drug Abuse Act of 1986. This law was passed during a period of rising concern about the many negative effects of illicit drugs on American society. Therefore, the act sought to strengthen the U.S. government’s “War on Drugs” efforts by: • Helping law enforcement thwart illicit drug crops; • Stopping international drug trafficking; • Improving the enforcement of existing anti-drug laws; and • Establishing more effective drug abuse and pre- vention programs. Most notably for the purposes of this course, the Anti-Drug Abuse Act of 1986 also set the stage for the first piece of legislation to outlaw money laun- dering: the Money Laundering Control Act of 1986. 3 l ent areas in its efforts to root out and prevent terror- ism, one particular area of concern relates to the fi- nancing of terrorist activities. Accordingly, the PATRIOT Act authorized the U.S. Department of the Treasury to issue regulations requiring all financial institutions in the United States to: • Have minimum standards to verify the identity of new members when opening accounts; • Have anti-money laundering programs in place; • Search their records for information if requested by Money Laundering FinCEN; and Control Act of 1986 • Compare the names of new members with a govern- As previously described, the Money Laundering ment list of known or suspected terrorists. Control Act of 1986 strengthened the BSA by making Currently, this particular list has not yet been re- money laundering a federal crime. In particular, the leased. For the time being, all credit unions should Money Laundering Control Act resulted in regula- screen their new members against the list of Specially tions that: Designated Nationals and Blocked Persons (SDN list) • Criminalized the act of money laundering; released by the U.S. Office of Foreign Assets Control, or OFAC. • Prohibited the act of structuring transactions to evade currency transaction report (CTR) filings; and How the BSA Affects Credit Unions The National Credit Union Administration (NCUA) is • Introduced both civil and criminal penalties for responsible for ensuring that all credit unions comply violations of the BSA. with the provisions of the Bank Secrecy Act. In particu- More information about CTR filings is provided later lar, during their periodic review of a credit union’s op- in this book. erations, NCUA examiners ensure that the credit union has all five elements of an effective BSA program in USA PATRIOT Act of 2001 place. These elements are as follows: Finally, yet another piece of legislation that played 1. A system of internal controls —including a significant role in shaping the BSA was the USA policies and proce-dures —to ensure ongoing PATRIOT Act of 2001. This law’s full name is the BSA compliance; “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct 2. A BSA officer — in other words, a staff member Terrorism Act,” and it was passed in the wake of the with appropriate resources and authority who terrorist attacks of September 11, 2001. is responsible for coordinating and monitoring Although the PATRIOT Act focuses on many differ- BSA compliance; 4 3. A program that trains employees with regard to of $10,000.01 or more. This amount includes multiple BSA compliance; and same-day cash transactions completed at any credit 4. An independent testing program to monitor union branch by, or on behalf of, the same individual internal compliance. or entity. For the purposes of a CTR, deposits made at night, over a weekend, or on a holiday are treated as if 5. Risk-based procedures for ongoing they are received on the next business day. member/customer due dilligence. The following transactions are similar to those you During an NCUA examination, all employees can be are likely to encounter at your credit union. These asked to prove that they know and understand BSA re- should help you determine when to file a CTR. quirements. In other words, compliance with the Bank Secrecy Act isn’t just the duty of the BSA officer — it’s Scenario 1: Betty comes into your credit union’s Main everyone’s responsibility. Street branch with $12,000 in currency and wants to deposit that money into her savings account. Do you need to file a CTR? Currency Transaction This is an easy one! Because the transaction involves Reports more than $10,000 in currency, you must file a CTR for this transaction. What must you and your credit union do to comply with the BSA? You must always follow the BSA regula- Scenario 2: John withdraws $11,500 in currency in tions related to Currency Transaction Reports, or CTRs. the morning. Later that day, he deposits $6,000 in cur- Under current federal regulations, all financial institu- rency back into his account, saying he didn’t need all of tions — including credit unions — are required to file the money. Should you file a CTR? a CTR any time they process a deposit, withdrawal, or Yes, you should. Even though the total dollar amount exchange of cash in excess of $10,000. In other words, going out of John’s account is only $5,500, you still a CTR is required for each and every cash transaction need to file a CTR for the original $11,500 cash with- drawal. Scenario 3: Fred deposits $6,000 in cash into his share draft account in the morning. Later that day, his broth- er wants to deposit $5,000 cash into Fred’s share draft account. Do you file a CTR? Yes, a CTR must be filed, because all cash transactions made in the same day to the same account either by the account holder or for the account holder must be ag- gregated. One easy way to remember when to file a CTR is by re- calling the following phrase: “More than $10,000 today, a CTR is on the way.” http://www.fincen.gov/forms/bsa_forms/ 5 Filing CTRs • The credit union has been the victim of insider Completed CTRs must be filed no later than the fif- abuse involving funds in any amount.