Must Know - 8.1 BSA Flashcards
Purpose of the BSA
The purpose of the BSA is to require United States (U.S.) financial institutions to maintain appropriate records and file certain reports involving currency transactions and a financial institution’s customer relationships.
The two primary means by which banks satisfy the requirements of the BSA
The BSA consists of two parts: Title I Financial Recordkeeping and Title II Reports of Currency and Foreign Transactions. Title I authorizes the Secretary of the Department of the Treasury (Treasury) to issue regulations, which require insured financial institutions to maintain certain records. Title II directed the Treasury to prescribe regulations governing the reporting of certain transactions by and through financial institutions in excess of $10,000 into, out of, and within the U.S.
When an institution is required to file a CTR
U.S. financial institutions must file a CTR, Financial Crimes Enforcement Network (FinCEN) Form 104 (formerly known as Internal Revenue Service [IRS] Form 4789), for each currency transaction over $10,000. A currency transaction is any transaction involving the physical transfer of currency from one person to another and covers deposits, withdrawals, exchanges, or transfers of currency or other payments. (Cash transactions only, and aggregate transactions adding up to $10,000 in a single day)
The definition of a currency transaction
Currency is defined as currency and coin of the U.S. or any other country as long as it is customarily accepted as money in the country of issue.
Multiple currency transactions made on the same business day by or on behalf of any person, even if at different branches, shall be treated as a single transaction for CTR purposes
True
Filing requirements for CTRs (who they must be filed with, what they must include, and filing deadlines); note that all filing is now required to be electronic and within 25 days
Transactions regulations must be filed with the IRS. Financial institutions are required to provide all requested information on the CTR, including the following for the person conducting the transaction:
• Name,
• Street address (a post office box number is not acceptable),
• Social security number (SSN) or taxpayer identification number (TIN) (for non-U.S. residents), and
• Date of birth.
- Account number,
- Social security number or taxpayer identification number of the person or entity for whose account the transaction is being conducted (should reflect all account holders for joint accounts), and
- Amount and kind of transaction (transactions involving foreign currency should identify the country of origin and report the U.S. dollar equivalent of
What “persons” are eligibile for exemption from CTR filings under “Phase I” and what the requirements are for documenting/maintaining these exemptions
- A bank, to the extent of its domestic operations;
- A Federal, State, or local government agency or department;
- Any entity exercising governmental authority within the U.S. (U.S. includes District of Columbia, Territories, and Indian tribal lands);
- Any listed entity other than a bank whose common stock or analogous equity interests are listed on the New York, American, or NASDAQ stock exchanges (with some exceptions);
- Any U.S. domestic subsidiary (other than a bank) of any “listed entity” that is organized under U.S. law and at least 51 percent of the subsidiary’s common stock is owned by the listed entity.
What “persons” are eligibile for exemption from CTR filings under “Phase II” and what the requirements are for documenting/maintaining these exemptions
A “non-listed business,” which includes commercial enterprises that do not have more than 50% of the business gross revenues derived from certain ineligible businesses. Gross revenue has been interpreted to reflect what a business actually earns from an activity conducted by the business, rather than the sales volume of such activity. “Non-listed businesses” must also be incorporated or organized under U.S. laws and be eligible to do business in the U.S. and may only be exempted to the extent of its domestic operations.
• A “payroll customer,” which includes any other person not covered under the “exempt person” definition that operates a firm that regularly withdraws more than $10,000 in order to pay its U.S. employees in currency. “Payroll customers” must also be incorporated and eligible to do business in the U.S. “Payroll customers” may only be exempted on their withdrawals for payroll purposes from existing transaction accounts.
Commercial transaction accounts of sole proprietorships can qualify for “non-listed business” or “payroll customer” exemption.
Both “non-listed businesses” and “payroll customers” must meet the following additional criteria to be eligible for “Phase II” exemption:
• The entity has maintained a transaction account with the financial institution for at least twelve consecutive months;
• The entity engages in frequent currency transactions that exceed $10,000 (or in the case of a “payroll customer,” regularly makes withdrawals of over $10,000 to pay U.S. employees in currency); and
• The entity is incorporated or organized under the laws of the U.S. or a state, or registered as, and eligible to do business in the U.S. or state.
Which types of businesses are ineligible for exemption – BEAT IT, PRANO!
- Purchasers or sellers of motor vehicles, vessels, aircraft, farm equipment, or mobile homes;
- Those engaged in the practice of law, medicine, or accountancy;
- Investment advisors or investment bankers;
- Real estate brokerage, closing, or title insurance firms;
- Pawn brokers;
- Businesses that charter ships, aircraft, or buses;
- Auction services;
- Entities involved in gaming of any kind (excluding licensed para mutual betting at race tracks);
- Trade union activities; and
- Any other activities as specified by FinCEN.
Requirements for reporting international transportation of currency or monetary instruments
Treasury regulation 31 CFR 103.23 requires the filing of FinCEN Form 105, formerly Form 4790, to comply with other Treasury regulations and U.S. Customs disclosure requirements involving physical transport, mailing or shipping of currency or monetary instruments greater than $10,000 at one time out of or into the U.S. The report is to be completed by or on behalf of the person requesting the transfer of the funds and filed within 15 days.
Information-gathering requirement for sales of monetary instruments, both for individuals who hold an account at the bank and those who do not
Aggregate $3000 in monetary instruments in 1 day. The following information must be obtained from a purchaser who has a deposit account at the financial institution:
• Purchaser’s name;
• Date of purchase;
• Type(s) of instrument(s) purchased;
• Serial number(s) of each of the instrument(s) purchased; and
• Amounts in dollars of each of the instrument(s) purchased.
If the purchaser does not have a deposit account at the financial institution, the following additional information must be obtained:
• Address of the purchaser (a post office box number is not acceptable);
• Social security number (or alien identification number) of the purchaser;
• Date of birth of the purchaser; and
• Verification of the name and address with an acceptable document (i.e. driver’s license).
CIP requirements
o Information required to be obtained prior to account opening
specify the identifying information obtained from each customer prior to opening the account. The minimum required information includes:
• Name.
• Date of birth, for an individual.
• Physical Address
• Identification number including a SSN, TIN, Individual Tax Identification Number (ITIN), or Employer Identification Number (EIN).
o The different types of CIP verification methods banks can use
For non-U.S. persons, the bank must obtain one or more of the following identification numbers:
• Customer’s TIN,
• Passport number and country of issuance,
• Alien identification card number, and
• Number and country of issuance of any other (foreign) government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.
o Requirements for relying on another institution’s CIP
The reliance can be used with respect to any bank customer that is opening or has opened an account or similar formal relationship with the relied-upon financial institution. Additionally, the following requirements must be met:
• Reliance is reasonable, under the circumstances;
• The relied-upon financial institution (including an affiliate) is subject to the same anti-money laundering program requirements as a bank, and is regulated by a Federal functional regulator (as previously defined); and
• A signed contract exists between the two entities that requires the relied-upon financial institution to certify annually that it has implemented its anti-money laundering program, and that it will perform (or its agent will perform) the specified requirements of the bank’s CIP.
Section 314(a)
o Governs MANDATORY information sharing between government and banks
o What the institution must do upon receiving a 314(a) request, including deadlines, appropriate responses when identifying a match/not identifying a match, and confidentiality requirements
Section 314(b)
o Governs VOLUNATRY information sharing between banks
o What purposes the information sharing is limited to
o Annual certification requirements
o Verifications requirements
The goal of Customer Due Diligence (CDD)
The goal of a CDD program is to develop and maintain an awareness of the unique financial details of the institution’s customers and the ability to relatively predict the type and frequency of transactions in which its customers are likely to engage. In doing so, institutions can better identify, research, and report suspicious activity as required by BSA regulations.
