BSA (Bank Secrecy Act)
U.S. primary anti-money laundering law requiring financial institutions to assist in detecting and preventing financial crimes.
The Bank Secrecy Act (BSA, 1970), also known as the Currency and Financial Transactions Reporting Act, is the cornerstone of the U.S. anti-money laundering regulatory framework. It requires financial institutions to maintain records and file reports that are useful in detecting, identifying, and preventing money laundering and tax evasion. FinCEN (Financial Crimes Enforcement Network) administers the BSA; the OCC, Federal Reserve, FDIC, NCUA, and state regulators examine banks for BSA compliance.
Core BSA requirements: Currency Transaction Reports (CTRs) filed for cash transactions exceeding $10,000; Suspicious Activity Reports (SARs) filed for potentially illegal transactions; record-keeping for wire transfers and certain instruments; Customer Identification Program (CIP) requirements; AML program maintenance (written policies, internal controls, independent testing, designated compliance officer, employee training); and Customer Due Diligence (CDD) for beneficial ownership identification.
The BSA has been significantly expanded through subsequent legislation: the USA PATRIOT Act (2001) added enhanced due diligence for correspondent and private banking, prohibited shell bank accounts, and required information sharing between institutions (Section 314(b)). The Anti-Money Laundering Act of 2020 made the most sweeping BSA reforms in decades, including the Corporate Transparency Act, enhanced whistleblower protections for BSA reporters, FinCEN innovation office establishment, and stricter penalties for BSA violations.
BSA enforcement has been robust: banks and MSBs have paid billions in BSA/AML penalties including HSBC ($1.9B, 2012), BNP Paribas ($8.9B for sanctions violations, 2014), and Capital One ($390M, 2021). Egregious violations result in Deferred Prosecution Agreements, consent orders, and Federal Reserve enforcement actions imposing enhanced compliance obligations.
FAQs
What is a Currency Transaction Report (CTR) and how does it differ from a SAR?
A Currency Transaction Report (CTR) is a mandatory report filed for every cash transaction (or series of related transactions) involving more than $10,000 in a single business day—it is an objective, threshold-based reporting requirement with no discretion required. A SAR is filed based on the institution's judgment that activity appears suspicious, regardless of amount (above $5,000). CTRs report lawful but large cash transactions; SARs report suspected illegal activity. Every large cash transaction must be CTR-reported; not every large cash transaction is SAR-worthy. Importantly, 'structuring'—deliberately keeping transactions below $10,000 to avoid CTR filing—is itself a federal crime requiring a SAR filing.
What is Section 314(b) information sharing under the PATRIOT Act?
Section 314(b) of the USA PATRIOT Act establishes a voluntary information-sharing program allowing participating financial institutions to share information with each other about individuals, entities, and organizations reasonably suspected of involvement in terrorism or money laundering. Institutions must register with FinCEN to participate. When one institution suspects suspicious activity involving a customer, they can query other registered institutions to see if the customer appears in their SAR filings or monitoring systems, helping build a fuller picture of potential illicit financial activity. 314(b) sharing is protected by safe harbor from civil liability and is widely used in correspondent banking due diligence and complex multi-bank money laundering investigations.
What are the elements of an adequate BSA/AML compliance program?
FinCEN's five pillars of an adequate BSA/AML compliance program are: (1) written policies, procedures, and controls implementing BSA requirements; (2) a designated compliance officer responsible for day-to-day BSA program management; (3) ongoing employee training covering BSA requirements and the institution's specific procedures; (4) independent testing (internal audit) of the BSA program's effectiveness at least annually; and (5) Customer Due Diligence procedures including beneficial ownership identification for legal entity customers. Regulators examine each pillar during BSA examinations, and deficiencies in any pillar—particularly the independence and scope of testing or the adequacy of CDD—frequently trigger enforcement actions.
Related Terms
SAR (Suspicious Activity Report)
Confidential report filed by financial institutions with FinCEN when they detect potentially illegal activity.
CDD (Customer Due Diligence)
Process of verifying customer identity and assessing risk before and during a financial relationship.
FATF Guidelines
International standards from the Financial Action Task Force setting AML and counter-terrorism financing requirements.
Beneficial Ownership
Identification of natural persons who ultimately own or control a legal entity above a defined ownership threshold.
