Bank Secrecy Act
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The Bank Secrecy Act (or BSA) requires financial institutions to assist government agencies to detect and prevent 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 of the USA PATRIOT Act, have been enacted up to the present to amend the BSA. (See 31 USC 5311-5330 and 31 CFR 103.) The BSA
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Affected Transactions
Currency Transaction Report (CTR)
Template:Main 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.
Negotiable Instrument Log (NIL)
Template:Main Cash purchases of negotiable instruments (e.g., money orders, cashiers checks, travelers cheques) totaling from $3,000 to $10,000, inclusive. Filed with the Internal Revenue Service.
Suspicious Activity Report (SAR)
Template:Main Any cash transaction where the customer seems to be trying to avoid BSA reporting requirements (e.g., CTR, NIL). 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, NILs, 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.
How it Affects You
Many regular people will have a CTR filed under the BSA on a financial transaction at some point. For example, if you withdraw cash to purchase a car that exceed $10,000 or purchase many traveler's checks with cash for a long European vacation. CTRs include your bank account number, name, address, and SSN. SAR reports, required when transactions indicate behaviour designed to elude CTRs (as noted above), include somewhat more detailed information and usually include investigation efforts on the part of the financial institution to assess the validity of transactions, or explaining why they believe you might possibly be structuring the transaction. A single CTR filed for your account is usually of no concern to the authorities, while multiple CTRs from varying institutions or a SAR indicates that activity may be suspicious (as a bank customer though they are meaningless unless you are actually doing something illegal). A financial institution is not allowed to inform a business or consumer that a SAR is being filed. Bob Dole was famous for doing many large cash withdrawals (though this would normally be completely secret even with a CTR except for the fact that the bank in question failed to file CTR's and was closed down because of it).
Businesses that primarily deal in cash, such as bars and restaurants can be exempted from having their deposits and withdrawals reported as CTRs, although this exemption is rarely granted. Instead, most banks have computer systems which retains the CTR information and allows duplicate CTR's to be created seamlessly.
Additional Information
An entire industry has grown up around software to analyze transactions in an attempt to identify transactions or patterns of transactions (called structuring, which requires an SAR report) that qualify for reporting. Financial institutions face heavy penalties for failing to properly file CTR and SAR reports, including heavy fines and regulatory restrictions (even to the point of losing their charter).