What is the bank secrecy act?

Examples of required documentation include currency transaction reports, suspicious activity reports, and cash transactions that exceed $10,000. The goal of the Bank Secrecy Act is to give law enforcement agencies enough information to trace funds and suspicious transactions to prevent and detect money laundering activities.

Required Reporting Under the Bank Secrecy Act

The Bank Secrecy Act doesn’t require every transaction to be reported to the Financial Crimes Enforcement Network or IRS. The most common requirement is that cash deposits in excess of $10,000 need to be reported. For one, national banks will report the transaction information to the FinCEN. In addition, businesses must file Form 8300 when $10,000 or more in cash is received from one buyer. The IRS reporting requirements apply to all types of businesses, including Partnerships, Trusts, and Corporations.

Unlike many tax forms, Form 8300 must be filed by the 15^th day after a cash transaction took place. However, this requirement is only applicable if the cash transaction occurred within the United States. If you are a business owner operating overseas and receive a cash payment from a foreign buyer, you will not need to report the transaction.

Moreover, there are situations where national banks will submit a suspicious activity report for review by regulators, even if the transaction is under $10,000. When a bank sees a suspicious transaction, such as regular large cash deposits or frequent overseas transactions, it can file suspicious activity reports for review within 30 days after the initial detection.

Why is the Bank Secrecy Act Important?

The Bank Secrecy Act is a crucial component of reducing money laundering, tax evasion, and other Federal crimes within the United States. For one, it gives regulators concrete information to pursue money laundering charges. For example, a ledger of recent transactions provides insight into who is connected to the crime, what crime has been committed, and potential charges.

In addition, the Bank Secrecy Act has led many other financial institutions and credit unions to implement their own money laundering programs. Noncompliance with the Bank Secrecy Act can come with both civil and criminal penalties, depending on the nature of the violation. This can have serious financial repercussions for financial institutions, which is why many businesses take a proactive approach and implement money laundering programs for employees to follow.

The Drawbacks of the Bank Secrecy Act

Despite the BSA targeting a primary money laundering concern, many reporting agencies and business owners are left with a higher administrative burden. Companies have the burden of collecting, producing, detecting, and maintaining a large volume of data. Sifting through this information isn’t always effective unless law enforcement agencies understand what they are looking for.

For example, an agency might be interested in the transactions of a specific business or Social Security Number. In this case, they are able to pull up data furnished by financial institutions to substantiate their suspicions. However, sifting through large levels of documents without having a target in mind isn’t effective and can lead to numerous instances of money laundering slipping through the cracks.

Although artificial intelligence and machine learning are contributing to the ease of pinpointing suspicious transactions, the process isn’t foolproof. Many individuals, businesses, and organizations have hinted at updating BSA regulations to today’s standards. The law has remained relatively unchanged since 1970.

The Bank Secrecy Act can also adversely impact innocent business owners. For example, a bank might flag a transaction as suspicious when nothing illegal is occurring. This can lead to further investigation by the Financial Crimes Enforcement Network and the IRS.

BSA Business Best Practices

Whether you are looking to cut down your risk of financial crimes or are trying to maintain compliance with FinCEN guidance, here are some best practices to consider implementing in your business:

Train on Compliance

This is one of the most important best practices your business can implement, especially if you are in the financial sector. Your employees need to be aware of what is considered suspicious, including outlier expenses and large unknown transactions. If your business is a financial institution, your employees should understand the chain of command and what to do when suspicious transactions are detected.

Even if you aren’t in the financial sector, your employees still need to be aware of reporting requirements. For one, if a customer pays you in cash, your accounting system needs to contain the proper information to submit Form 8300. Additionally, employee training can help your team detect fraudulent transactions right away to avoid any future losses.

Consistently Review Transactions

The day-to-day operations of your business can get hectic. This means that potentially fraudulent transactions can easily go undetected. On a regular basis, your team needs to review transactions. Part of this best practice can be done with the right payment protection procedures. Eftsure helps thousands of businesses verify transactions and detect potentially incorrect or fraudulent payments before they happen.

Understand BSA Changes

Many lawmakers, financial institutions, and business owners have called for adjustments to the Bank Secrecy Act. This makes it important to stay up to date on any changes that impact your business. This could be reporting deadlines and changes to the reporting threshold. Staying informed is critical to maximize compliance.

Summary

• The Bank Secrecy Act is a law passed in 1970 that requires financial institutions to report certain suspicious transactions.
• The goal of the Bank Secrecy Act is to reduce the risk of tax evasion, money laundering, and fraud.
• Training employees on compliance, consistently reviewing transactions, and understanding BSA changes are three best practices to minimize your risk of fraud and maintain compliance with FinCEN.