Bank Secrecy Act (BSA) Regulations - What MSBs Should Look For

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

Money laundering schemes can vary widely. Federal action to curtail money laundering activities once focused heavily on identification and documentation of large currency transactions. More recently, anti-money laundering efforts have focused on the use of money transfers, both through bank and non-bank money transfer systems, and other means of moving funds. Today, as money launderers become more sophisticated, all types of financial transactions are facing greater scrutiny.

The following situations may indicate money laundering or other illegal activity. These lists are not comprehensive, but they may help MSBs recognize ways launderers and other criminals may try to use them to launder money.

Attempts to Evade BSA Reporting or Recordkeeping Requirements

Customers may try to keep their transactions just below the reporting or recordkeeping thresholds, such as:

*A customer or group of customers who attempt to hide the size of a large cash transaction by breaking it into multiple, smaller transactions by, for example, conducting the smaller transactions-
-At different times of the day.
-With different MSB cashiers on the same day or different days.
-At different branches of the same MSB on the same or different days.

*A customer or group of customers who conduct several similar transactions over several days, staying just under reporting or recordkeeping limits each time. For example, the customer may:
-Purchase money orders with cash just under $3,000 over several days.
-Purchase traveler’s checks with cash just under $3,000 over several days.
-Initiate multiple money transfers to the same receiver, each transfer in an amount under $3,000, over several days.

*A customer who is reluctant to provide information needed for a reporting or recordkeeping requirement, whether required by law or by company policy.
*A customer who is reluctant to proceed with a transaction after being informed that a report must be filed or a record made.

*A customer who breaks down a single large transaction into smaller transactions after being informed that a report must be filed or a record made.

*A customer who presents different identification each time a transaction is conducted.

*A customer who spells his/her name differently or uses a different name each time he/she initiates or receives a money transfer or purchases traveler’s checks.

*Any individual or group that bribes or attempts to bribe an MSB employee not to file any required reporting forms or not to create a record entry required by law or company policy.

*Any individual or group that forces or attempts to force an MSB employee not to file any required reporting forms or create a record required by law or company policy.

*A customer who receives payment of multiple money transfers that appear to have been purchased in a “structured” manner – organized in a way to evade reporting and recordkeeping requirements.
-By the same send customer, each transfer in an amount just under $3,000 (or other relevant threshold).
-By multiple send customers initiated at one MSB location within minutes of each other, each transfer in an amount just under $3,000 (or other relevant threshold).

*A customer cashing multiple instruments (money orders, traveler’s checks, cashiers’ checks, foreign drafts) that appear to have been purchased in a structured manner (e.g. each in an amount below $3,000).


Customers Who Provide Insufficient and/or Suspicious Information

Individual and business customers may try to evade providing required identification, such as:

*An individual customer who is unwilling or unable to provide identification or information.

*An individual customer who provides different identification or information each time he or she conducts a transaction.
-Different name or different spelling of name.
-Different address or different spelling or numeration in address.
-Different identification types.

*An individual customer without a local-address, who appears to reside locally because he or she is a repeat customer.

*A legitimate ID that appears to have been altered.

*An identification document in which the description of the individual does not match the customer’s appearance (e.g. different age, height, eye color, sex).

*An expired identification document.

*An individual customer who presents any unusual or suspicious identification document or information.

*A business customer that is reluctant to provide complete information regarding: the type of business, the purpose of the transaction, or any other information requested by the MSB.

*A prospective business customer that refuses to provide information to qualify for a business discount (or other preferred customer program offered by the MSB).


Activity Not Consistent With the Customer’s Business or Occupation

Look for examples of inconsistent customer activity, such as:

*An individual customer conducts MSB transactions in large amounts inconsistent with the income generated by the individual’s stated occupation.

*A business customer engages in transactions that frequently use large bills when the nature of the customer’s business activity does not justify such use.

*An individual or business customer cashes large numbers of third party checks.

*A customer makes cash purchases of money orders, traveler’s checks, or other instruments inconsistent with the customer’s business or occupation.

*A business customer uses a means of payment inconsistent with general business practices (e.g., pays for MSB services with traveler’s checks, money orders, or third party checks).

*A business customer sends or receives money transfers to/from persons in other countries without an apparent business reason or gives a reason inconsistent with the customer’s business.

*A business customer sends or receives money transfers to or from persons in other countries when the nature of the business would not normally involve international transfers.