What is the Banking Secrecy Act?
The Bank Secrecy Act (BSA) of 1970, also known as the Currency and Foreign Transactions Reporting Act, is a law requiring financial institutions (FIs) in the United States to assist government agencies detect and prevent money laundering and fraud. Specifically, the act requires financial institutions to keep records of cash purchases of ‘negotiable instruments’, file reports if the daily aggregate exceeds $10,000, and report suspicious activity that may signify money laundering, tax evasion, or other criminal activities.
Under the amendments proposed this November, further modifications to the BSA include the requirements of FIs to assemble and retain information on certain funds transfers and transmittals of funds.
The proposed modification would reduce this threshold from $3,000 to $250 for funds transfers and transmittals of funds that begin or end outside the United States. FinCEN is likewise proposing to reduce from $3,000 to $250 the threshold requiring FIs to transmit to other institutions in the payment chain information on funds transfers and transmittals of funds that begin or end outside the United States.
Further to the amendments currently proposed, the aim is to clarify the meaning of ‘money’ to ensure that the rules apply to both domestic and cross-border transactions. Such transactions will involve convertible virtual currency (‘CVC’), which is a type of exchange (such as cryptocurrency) that either has an equivalent value as fiat currency, or acts as a substitute for fiat currency, but lacks legal tender status. Moreover, the latter will also be extended to include that the rules apply to domestic and cross-border transactions involving digital assets that do in fact, have legal tender status.
Likewise, under the new regulations, firms that do not have a federal functional regulator (e.g. Federal Deposit Insurance Corporation (FDIC) or Securities & Exchange Commission (SEC)), will now be subject to comparable rules that apply to any FDIC regulated firm. This will include, but is not exhaustive to:
Non-federally insured credit unions; and
Please note: the latter comes into effect as of 16 November 2020; however, firms have a period of 180 days in which they will need to comply. Meaning, all firms need to be ready by 15 May 2021.
How Can Lysis Help?
Half a year is not enough time for firms to adequately prepare themselves. Compliance teams will need to ensure that the effect on existing customer identification programmes is known, and realise the resulting impact on beneficial ownership structures with respect to the corresponding requirements. Lysis has a wide range of experts that can ensure:
Correct procedures are in place to determine customers on known or suspect terrorist organisation lists (as issued by the US Federal Government);
Effective record keeping processes are in place;
Practical client communication strategies are in place. Lysis can help reassess current procedures and provide clear guidance on how best to communicate with your clients when requesting verification of identity; and
Amendments are implemented to existing internal anti-money laundering (AML) programmes.
For further information, please visit: https://www.lysisgroup.com/consulting-and-advisory
By Lauren Parmenter, Consultant at Lysis Group