Bank Secrecy Act (BSA)

The Bank Secrecy Act (BSA) — also referred to as the Currency and Foreign Transactions Reporting Act — is a U.S. law that requires financial institutions operating in the United States to assist U.S. government agencies in their efforts to detect and prevent money laundering.

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Under the act, financial institutions must keep records of cash purchases of negotiable instruments such as money orders, file reports for daily aggregate transaction totals of more than $10,000, and report any suspicious activity that could otherwise signal that money laundering, tax evasion, or other criminal activity is occurring.

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The BSA was enacted in 1970 to prevent criminals from exploiting financial institutions as a means to conceal or launder their illicit proceeds and is the most prominent anti-money laundering (AML) law in the United States.

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What’s the Purpose of the Bank Secrecy Act (BSA)?

Essentially, the BSA forces financial institutions to help the government in its fight against money laundering and other financial crimes.

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It’s meant to ensure the American economy is protected against money laundering and terrorist financing through robust AML/CTF laws that FIs are required to follow. Ultimately, the BSA contributes to ensuring financial transparency and helps identify those who misuse the system.

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The BSA sets basic requirements for what has to be reported by financial institutions. But it also requires FIs to report any suspicious activity it identifies — even if that activity doesn’t fall within the defined standard. So while all daily transactions above $10,000 need to be reported, other behaviors — such as consistent daily transactions that fall just below that threshold — may also need to be filed under the BSA guidelines.

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Simply put, the BSA draws on the FIS conducting business to help fight money laundering, terrorism financing, and other financial crimes.

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Which Agency Enforces the Bank Secrecy Act (BSA)?

The Bank Secrecy Act (BSA) is enforced by the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN establishes responsibilities for financial institutions to follow that are aimed at combating money laundering and terrorist funding, as well as analyzes and investigates suspicious activity that’s been escalated to them.

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While it’s not the main regulatory authority, the Office of The Comptroller of the Currency (OCC), in its capacity as a regulator and supervisory agency of national banks, sometimes monitors and evaluates FIs' compliance with the BSA.

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To help financial organizations adhere to AML compliance regulations, the BSA has identified five pillars that all FIs should employ. These help organizations develop an adequate AML compliance program and adhere to all relevant regulations.

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The following are the five pillars of the Bank Secrecy Act:

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1. Designate a compliance officer
2. Develop internal controls
3. Establish an AML compliance training program
4. Have independent audits of the program done
5. Perform customer due diligence

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These pillars help establish clear guidelines for financial organizations to follow, and are designed to keep organizations compliant with AML regulations. We cover the five pillars in more detail in our Ultimate Guide to Anti-Money Laundering (AML) Compliance and our in-depth eBook (click below to download!).

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There are six main reports that the BSA requires to be submitted. We cover each in detail below:

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Suspicious Activity Report (SAR)

Filed to: FinCEN

Form: FinCEN Form 111

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Financial institutions are required to file a Suspicious Activity Report (SAR) if they believe suspicious activity may amount to money laundering, fraud, or other violations of the BSA. This could include failure to file a CTR or MIL, violation of federal crime laws, or a variety of different types of fraud.

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Organizations have between 30 to 60 days to file a SAR, depending on if the suspect can be identified or not. The reporting FI is also forbidden from informing a business or consumer that they are filing a SAR against them.

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Currency Transaction Report (CTR)

Filed to: FinCEN

Form: FinCEN Form 112

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Financial institutions are required to file a Currency Transaction Report (CTR) when total daily cash transactions exceed $10,000 for a customer — whether it’s a single transaction or multiple transactions.

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Currency Transaction Reports are fairly straightforward, requiring an individual’s name, address, bank account number, and social security number.

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CTRs are also far less serious than other types of reports. For example, if a customer has a single CTR filed against their account, this is likely of little concern to the authorities — until it becomes a pattern. If there are multiple CTRs (potentially filed from multiple financial institutions), this would likely raise suspicion from authorities, and lead to further investigation. Conversely, a single SAR would be investigated by authorities, as would behavior that attempts to elude CTRs.

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That being said, CTRs are a core component of anti-money laundering efforts, making it much harder for money laundering to go undetected.

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Foreign Bank Account Report (FBAR)

Filed to: FinCEN

Form: FinCEN Form 114

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U.S. citizens and residents are required to file a Foreign Bank Account Report (FBAR) if they have a financial interest in or authority over a foreign bank account with a total value of $10,000 or more. These forms need to be filed with FinCEN each year by October 15th.

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This form is designed to deter and prevent financial crimes through the United States financial system.

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This information also needs to be reported on their tax form — under Schedule B of Form 1040.

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Money Instrument Log

Filed to: Regulatory body

Form: FinCEN Form 105

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Financial institutions are required to file a Money Instrument Log (MIL) for any cash purchase of monetary instruments between $3,000 and $10,000, such as money orders, cashier’s checks, or traveler’s checks.

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The FI is required to keep a record on file for a minimum of five years and will need to be able to present the request if audited.

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Currency and Monetary Instrument Report (CMIR)

Filed to: FinCEN

Form: FinCEN Form 105

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An individual or financial institution is required to file a Currency and Monetary Instrument Report (CMIR) — also referred to as the “Report of International Transportation of Currency or Monetary Instruments” — when transporting currency or monetary instruments with a total value of $10,000 or more into or out of the United States.

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This is true whether they are physically transporting it themselves, or having it mailed, shipped, or otherwise transported.

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Designation of Exempt Person

Filed to: FinCEN

Form: FinCEN Form 110

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Financial institutions are required to file a Designation of Exempt Person to declare when a customer is exempt from the CTR reporting requirements under the BSA. This form is collected every two years to renew exemptions.

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In conjunction with the DOEP, businesses that receive one or more cash payments totaling over $10,000 are also required to file FinCEN Form 8300.

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Ultimately, the BSA makes financial markets safer for everyone operating in them, including individuals, businesses, and the financial institutions themselves. It also empowers the U.S. government to catch and prosecute criminals responsible for money laundering, terrorism financing, and other financial crimes — while helping FIs detect and prevent these crimes from occurring in their organization.

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