R8.5 – Money Laundering Flashcards
Bank Secrecy Act
Money laundering is prohibited under the Bank Secrecy Act (BSA).
– BSA = primary tools to fight money laundering
Government agencies involved
– Financial Crimes Enforcement Network (FinCEN)
– Federal Banking Agencies
Money Laundering
Money-laundering = processing of illegally obtained money through a series of transactions so that the money appears to be proceeds of the collectivities.
3 steps:
- Placement = put money into financial system
- Layering = hide the source through complex transactions
- Integration = more transactions to create a cover story for funds
Financial Crimes Enforcement Network (FinCEN)
FinCEN is a bureau of US Treasury
Administers BSA
- Issues regulations & interpretive guidance
- Provide outreach to regulated industries
- Support examination functions of federal banking agencies
- CIVIL enforcement actions
Federal Banking Agencies
Responsible for oversight of the various banking entities operating in US
e.g. National Credit Union Administration, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation
Reports Required by BSA
5 Required Reports
- Currency transactions reports
- Suspicious activity reports
- Reports of international transportation of currency or monetary instruments
- Reports of foreign nan and financial accounts
- Designation of exempt person forms
Currency Transaction Report (CTR)
File CTR for each deposit, withdrawal, exchange of currency, or other payment or transfer by, through, or to a financial institution, which involves a transaction in currency of $10,000+
File CRT within 15 days of transaction (25 days if filed electronically)
Financial institutions that must file Currency Transaction Reports
– Banks – Credit Unions – Savings and loans – Pawn brokers – Casinos – Automobile, plane and boat sales business – Travel agencies – Stock and commodities brokerages – Issuers and redeemers of travel cheques – Credit card companies – Insurance companies – Dealers in precious metal, stones, and jewels
Suspicious Activity Report (SAR)
Banks must file an SAR for any suspicious transaction relevant to a possible violation or law or regulation
Banks must adopt Know Your Customer policies
SAR filing within 30 days of detection
– if no suspect identified up to 60 days
Banks must notify its board or appropriate board committee that SAR filed
Bank should not notify suspect
When to file SAR
Insider abuse in any amount
Involve $5,000+ when a suspect can be identified
Involve $25,000+ even if can’t identify suspect
Involve $5,000+ if the bank knows or suspects that the transaction may involve money laundering, is designed to evade BSA regulations, has no apparent lawful or business purpose, or is not the type that the customer normally would be expected to engage in.
International Transportation of Currency of Monetary Instruments (CMIR)
Anyone (including a bank) who transports $10,000+ currency, traveler’s checks and certain other monetary interments into or out of US must file CMIR at time of entry or departure
Foreign Bank and Financial Accounts Report (FBAR)
Each person (including bank) subject to US jurisdiction must file FBAR if has interest in, signature or authority over in securities or other financial account in a foreign account if aggregate value is $10,000+ at any point in a calendar year
Designation of exempt person forms – Phase I Exemptions
Banks not required to file CRT on large currency transactions conducted by
– domestic depository institutions
– federal, state, local government agency or department
– any entity exercising governmental authority within the US
– any entity other than a bank with common stock or analogous security interest listed on national stock exchange or NASDAQ (does not include NASDAQ small-cap)
File Designation of Exempt form within 30 days after 1st transactions to be exempt
Filing covers initial transaction and all subsequent transactions in currency with the exempted entity
Designation of exempt person forms – Phase II Exemptions
Exempt if qualify as non-listed business or payroll customer
Non-listed business
– Maintained transaction account at the bank for at least 2 months
– Frequently engages in transaction in currency with bank in excess of $10,000
– Incorporated under laws of US or a state
or is registered as or/and is eligible to do business within US or a state
Payroll customer
– Maintain transaction account at bank for at least 2 months
– Operates firm that regularly withdraws $10,000+ to pay its US employees in currency
and is incorporated or organized under laws of US or a state
or is registered as or/and is eligible to do business within the US or a state
Must file 30 days after first customer transaction the bank wishes to exempt.
Disqualifications from Non-Listed Business
Not eligible to be non-listed business if get majority revenue stream from:
– Serving as financial institution or as agent for a financial institution of any type
– Purchasing or selling motor vehicles, vessels, aircraft, farm equipment or mobile homes
– Practicing law, accounting, or medicine
– Auctioning of goods
– Chartering or operating ships, buses, or aircraft
– Pawn brokerage
– Engaging in gaming other than licensed pari-mutual betting at race tracks
– Investment advisory services
– Investment banking services
– Real estate brokerage
– Title insurance activities and real estate closeting
– Trade union activities
BSA Recordkeeping Requirements
BSA requires bank to maintain the following records for 5 years:
– Customer Identification Program (CIP) information
– Money Instrument Sales Records
– Verify identity of persons purchasing $3,000 – $10,000 of money instruments for currency
– Funds transfer recordkeeping and travel rule requirements
– Each fund transfer of $3,000+ which bank originates, as an intermediary for, or receives
