Bank Secrecy Act (BSA) Regulations - Compliance Programs

Gregory J. Cook, EA, CPA+ Accredited Tax Advisor Past President Alabama Society of Enrolled Agents Past President Alabama Association of Accountants

Each MSB is required by law to have an effective anti-money laundering (AML) compliance program. The regulation requiring MSBs to develop and maintain an AML compliance program is contained in 31 CFR 103.125.


Each program must be commensurate with the risks posed by the location, size, nature and volume of the financial services provided by the MSB. For example, a large money transmitter with a high volume of business located in the Los Angeles area is at higher risk than a small check casher with a low volume of business located in Boise. Therefore, the large California money transmitter would be expected to have a more complex AML compliance program, commensurate with its higher risk, than the smaller Idaho check casher, who is at lower risk of being used to facilitate money laundering. An effective program is one designed to prevent the MSB from being used to facilitate money laundering.

Each AML compliance program must be in writing and must:

Incorporate policies, procedures and internal controls reasonably designed to assure compliance with the BSA;

Designate a compliance officer responsible for day-to-day compliance with the BSA and the compliance program;

Provide education and/or training of appropriate personnel; and

Provide for independent review to monitor and maintain an adequate program.

Strong management commitment to the AML compliance program promotes ongoing compliance and helps prevent the MSB from being used by money launderers.


FinCEN further encourages MSBs to adopt policies and procedures that incorporate the Basel Committee Statement of Principles on Money Laundering, which urges:

Proper identification of all persons conducting financial transactions with the financial institution;

High ethical standards in financial transactions and compliance with laws and regulations governing financial transactions;

Cooperation with law enforcement;

Information and training for staff to ensure that they can and do carry out these principles.

Establish Customer Relationships

Strict customer identification and verification policies and procedures can be a financial institution’s most effective weapon against money laundering. Requiring appropriate identification and verifying information in certain cases, and being alert to unusual or suspicious transactions can help an MSB deter and detect money laundering schemes.

A customer identification and verification policy tailored to the operations of a particular business:

Helps detect suspicious activity in a timely manner:

Promotes compliance with all state and federal laws applicable to MSBs;

Promotes safe and sound business practices;

Mimimizes the risk that the MSB will be used for illegal activities;

Reduces the risk of government seizure and forfeiture of funds associated with customer transactions (such as out-standing money orders/traveler’s checks and outstanding money transfers) when the customer is involved in criminal activity; and protects the reputation of the MSB.