BSA/AML: The Basics Flashcards
What is BSA?
Bank Secrecy Act; the primary US anti-money laundering law (AML) that attempts to detect, deter, and disrupt money laundering
What is AML
Anti-Money Laundering
What is a CIP?
Customer Identification Program
Which act requires a CIP be implemented?
USA PATRIOT Act
What are the major requirements of the BSA?
- Customer Identification Program (CIP)
- Currency Transaction Reports (CTRs)
- Recordkeeping requirements for negotiable instruments and wire transfers
- Suspicious Activity Reporting (SAR)
What is the alternate name of the BSA and when was it originally passed?
The Currency and Foreign Transactions Reporting Act of 1970
What is Money Laundering?
the process whereby criminals engage in a series of transactions to exchange their “dirty” funds for “clean” money.
What are some reasons for money laundering?
- drug trafficking
- financial fraud
- tax evasion
- illegal arms sales
- foreign official corruption
- terrorist financing
- computer crimes
- smuggling
What are some properties of Terrorist Funds?
- 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
What are the three planned stages of money laundering?
- Placement
- Layering
- Integration
What are examples of the Placement of laundered funds?
- depositing structured amounts of cash
- smuggling currency across international borders for future deposits
What are examples of the Layering of laundered funds?
- purchasing monetary instruments
- transfer funds through various accounts
- wire transfers
What are examples of the Integration of laundered funds?
- often completed by applying for unnecessary loans to disguise illicit funds
T/F: all financial institution employees must be trained on the Bank Secrecy Act (BSA)
True
What is required after the institutions CIP is passed?
The new customer must pass an OFAC check
What are the criteria used to detect high-risk customers?
- 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
What is the process of identifying high-risk customers called?
Enhanced Due Diligence (EDD)
What does EDD focus on?
- high-risk areas
- high-risk entities/businesses
- new account relationships in the first 90 days
- high-risk transactions or functions
Must every institution check the OFAC list when opening a new account for an individual or business?
Yes
T/F: Enhanced Due Diligence (EDD) must be applied to all customers.
False: only high risk customers
What types of reports are required by the BSA
- Currency Transaction Report (CTR)
- The $3,000 Rule
- Suspicious Activity Report (SAR)
What is a Currency Transaction Report?
a report that is created when a customer conducts a transaction exceeding $10,000 in cash
How does the CTR apply?
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
