BSA/AML: The Basics

Question 1

What is BSA?

Answer 1

Bank Secrecy Act; the primary US anti-money laundering law (AML) that attempts to detect, deter, and disrupt money laundering

Question 2

What is AML

Answer 2

Anti-Money Laundering

Question 3

What is a CIP?

Answer 3

Customer Identification Program

Question 4

Which act requires a CIP be implemented?

Answer 4

USA PATRIOT Act

Question 5

What are the major requirements of the BSA?

Answer 5

1. Customer Identification Program (CIP)
2. Currency Transaction Reports (CTRs)
3. Recordkeeping requirements for negotiable instruments and wire transfers
4. Suspicious Activity Reporting (SAR)

Question 6

What is the alternate name of the BSA and when was it originally passed?

Answer 6

The Currency and Foreign Transactions Reporting Act of 1970

Question 7

What is Money Laundering?

Answer 7

the process whereby criminals engage in a series of transactions to exchange their “dirty” funds for “clean” money.

Question 8

What are some reasons for money laundering?

Answer 8

• drug trafficking
• financial fraud
• tax evasion
• illegal arms sales
• foreign official corruption
• terrorist financing
• computer crimes
• smuggling

Question 9

What are some properties of Terrorist Funds?

Answer 9

• must be relatively mobile
• are generally from both legitimate and unlawful sources
• are not always large sums of money
• may involve transactions that are not complex

Question 10

What are the three planned stages of money laundering?

Answer 10

1. Placement
2. Layering
3. Integration

Question 11

What are examples of the Placement of laundered funds?

Answer 11

• depositing structured amounts of cash

- smuggling currency across international borders for future deposits

Question 12

What are examples of the Layering of laundered funds?

Answer 12

• purchasing monetary instruments
• transfer funds through various accounts
• wire transfers

Question 13

What are examples of the Integration of laundered funds?

Answer 13

• often completed by applying for unnecessary loans to disguise illicit funds

Question 14

T/F: all financial institution employees must be trained on the Bank Secrecy Act (BSA)

Answer 14

True

Question 15

What is required after the institutions CIP is passed?

Answer 15

The new customer must pass an OFAC check

Question 16

What are the criteria used to detect high-risk customers?

Answer 16

• transaction account history with the institution
• geographic location of transactions
• attributes of the business
• expected and actual cash and fund transfer activity levels
• Suspicious Activity Report (SAR) history
• Law enforcement agency inquiries
• other factors determined by the BSA Officer to indicate a high-risk customer

Question 17

What is the process of identifying high-risk customers called?

Answer 17

Enhanced Due Diligence (EDD)

Question 18

What does EDD focus on?

Answer 18

• high-risk areas
• high-risk entities/businesses
• new account relationships in the first 90 days
• high-risk transactions or functions

Question 19

Must every institution check the OFAC list when opening a new account for an individual or business?

Answer 19

Yes

Question 20

T/F: Enhanced Due Diligence (EDD) must be applied to all customers.

Answer 20

False: only high risk customers

Question 21

What types of reports are required by the BSA

Answer 21

• Currency Transaction Report (CTR)
• The $3,000 Rule
• Suspicious Activity Report (SAR)

Question 22

What is a Currency Transaction Report?

Answer 22

a report that is created when a customer conducts a transaction exceeding $10,000 in cash

Question 23

How does the CTR apply?

Answer 23

whenever there is a cash transaction or a number of cash transactions totaling more than $10,000 conducted by or on behalf of an individual entity in one business day whether at one office or multiple locations, the financial institution must complete and file a CTR