Bank Secrecy Act of 1970 (BSA)
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On October 3, 2007 I attended the
Practitioners Council Liaison Meeting at the Internal Revenue Service's
Birmingham, Alabama office. One of the IRS speakers at this meeting was Susan
Vega, Bank Secrecy Act Expert. I found the information Mrs. Vega presented to be
very interesting and informative and decided to dedicate several pages of our
website to it. |
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Greg Cook, EA, CPA
The Bank Secrecy Act
of 1970 (BSA) also referred to as the Currency and Foreign Transactions
Reporting Act, requires U.S.A. financial institutions to assist U.S. government
agencies in detecting and preventing money laundering. Specifically, the act
requires financial institutions to keep records of cash purchases of negotiable
instruments, file reports of cash transactions exceeding $10,000 (daily
aggregate amount), and to report suspicious activity that might signify money
laundering, tax evasion, or other criminal activities. It was passed by the
Congress of the United States in 1970. The BSA is sometimes referred to as an
"anti-money laundering" law ("AML") or jointly as “BSA/AML”. Several anti-money
laundering acts, including provisions in title III of the USA PATRIOT Act, have
been enacted up to the present to amend the BSA.
Types of Reports
The BSA regulations require all financial institutions to submit five types of
reports to the government.
FinCEN Form 104 Currency Transaction Report (CTR): A CTR must be filed
for each deposit, withdrawal, exchange of currency, or other payment or
transfer, by, through or to a financial institution, which involves a
transaction in currency of more than $10,000. Multiple currency transactions
must be treated as a single transaction if the financial institution has
knowledge that: (a) they are conducted by or on behalf of the same person; and,
(b) they result in cash received or disbursed by the financial institution of
more than $10,000. (31 CFR 103.22)
FinCEN Form 105 Report of International Transportation of Currency or
Monetary Instruments (CMIR): Each person (including a bank) who physically
transports, mails or ships, or causes to be physically transported, mailed,
shipped or received, currency, traveler’s checks, and certain other monetary
instruments in an aggregate amount exceeding $10,000 into or out of the United
States must file a CMIR
Department of the Treasury Form 90-22.1 Report of Foreign Bank and Financial
Accounts (FBAR): Each person (including a bank) subject to the jurisdiction
of the United States having an interest in, signature or other authority over,
one or more bank, securities, or other financial accounts in a foreign country
must file an FBAR if the aggregate value of such accounts at any point in a
calendar year exceeds $10,000. (31 CFR 103.24)
Treasury Department Form 90-22.47 and OCC Form 8010-9, 8010-1 Suspicious
Activity Report (SAR): Banks must file a SAR for any suspicious transaction
relevant to a possible violation of law or regulation. (31 CFR 103.18 − formerly
31 CFR 103.21) (12 CFR 12.11)
"Designation of Exempt Person" FinCEN Form 110: Banks must file this form
to designate an exempt customer for the purpose of CTR reporting under the BSA
(31 CFR 103.22(d)(3)(i)). In addition, banks use this form biennially (every two
years) to renew exemptions for eligible non-listed business and payroll
customers. (31 CFR 103.22(d)(5)(i))
Affected Transactions
Currency Transaction Report (CTR)
Cash transactions in excess of $10,000 during the same business day. The amount
over $10,000 can be either from one transaction or a combination of cash
transactions. Filed with the Internal Revenue Service.
Monetary Instrument Log (MIL)
Cash purchases of monetary instruments, such as money orders, cashier's checks
and travelers checks, totaling from $3,000 to $10,000, inclusive. Filed with the
Internal Revenue Service.
Suspicious Activity Report (SAR)
Any cash transaction where the customer seems to be trying to avoid BSA
reporting requirements (e.g., CTR, MIL). A SAR must also be filed if the
customer's actions indicate that s/he is laundering money or otherwise violating
federal criminal law. The customer must not know that a SAR is being filed.
These reports are filed with the Financial Crimes Enforcement Network ("FinCEN").
Sanctions
There are stiff penalties for individuals and institutions that fail to file
CTRs, MILs, or SARs. There are also penalties for those that disclose to its
clients that it has filed a SAR about a client. Penalties include extremely high
fines and long prison sentences if found guilty.
