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Anti-money laundering (AML) regulations are crucial in combating financial crimes globally. In the United States, AML efforts are governed by the Bank Secrecy Act (BSA) of 1970, a robust regulatory framework to detect and prevent money laundering and terrorism financing activities.
This article provides an overview of AML in the United States, highlighting key regulations, enforcement agencies, and compliance obligations for businesses operating within the country’s financial system.
Money laundering involves concealing the origins of illegally obtained funds to make them appear legitimate. Similarly, terrorism financing involves providing financial support to terrorist organizations or facilitating terrorist activities. AML regulations in the US are designed to identify and deter these illicit activities by establishing stringent compliance requirements for financial institutions and other businesses.
The primary legislation governing AML in the United States is the Bank Secrecy Act (BSA) of 1970. The Bank Secrecy Act (BSA) encompasses a set of laws and regulations implemented in the United States to combat money laundering and terrorism financing. It serves as a cornerstone for fostering financial transparency and deterring individuals and entities attempting to exploit the US financial system for illicit activities such as money laundering, terrorist financing or other unlawful purposes.
The BSA requires financial institutions to maintain records of certain transactions and report suspicious activities to the appropriate authorities. Additionally, the USA PATRIOT Act of 2001 expanded the scope of AML regulations to enhance efforts in combating terrorism financing. It introduced obligations concerning customer due diligence (CDD) for US private banking and correspondent bank accounts involving non-US persons, as well as the requirement for financial institutions to have customer identification programs for new customers, among other measures.
The Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury, is the primary regulatory authority responsible for enforcing AML laws and regulations. FinCEN oversees the collection, analysis and dissemination of financial intelligence to combat money laundering and terrorist financing activities.
Financial institutions and certain businesses, known as “covered entities,” are subject to AML regulations. These entities include banks, credit unions, securities firms, money services businesses (MSBs), foreign exchange dealers, casinos, crypto exchanges and insurance companies, among others.
The key obligations that covered entities must comply with under AML regulations include:
Failure to comply with AML regulations can result in severe penalties for covered entities. Penalties may include civil fines, regulatory sanctions, enforcement actions and reputational damage. Regulatory agencies such as FinCEN and the Office of the Comptroller of the Currency (OCC) enforce AML regulations and may impose sanctions for non-compliance.
AML regulations play a vital role in safeguarding the integrity of the US financial system and protecting it from abuse by criminals and terrorist organizations. Covered entities must remain vigilant and ensure compliance with AML obligations to detect and prevent illicit financial activities effectively. By upholding AML standards, financial institutions and businesses contribute to maintaining a secure and transparent financial environment.
Sources:
Financial Industry Regulatory Authority (FINRA). Anti-Money Laundering (AML).
FinCEN. History of Anti-Money Laundering Laws.
Sanction Scanner. Anti-Money Laundering (AML) in United States of America.
Federal Deposit Insurance Corporation. Bank Secrecy Act / Anti-Money Laundering (BSA/AML).
US Department of the Treasury. Money Laundering.
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