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Updating the Bank Secrecy Act: Is now the time?

By: Naomi Glass, BSA/AML/OFAC Compliance Manager

The year was 1970. Richard Nixon was president, the Vietnam War was in full force, and the Beatles broke up. While these were all big moments in our nation’s history, little did we know there was a bill being passed by Congress that same year that would have major implications for the financial services sector for decades to come. This bill was the Currency and Foreign Transactions Reporting Act of 1970, better known as the Bank Secrecy Act (BSA).

Fulfill your yearly, regulatory training requirement with our BSA/AML and OFAC webinar

If you couldn’t attend the live version of our annual BSA/AML and OFAC compliance webinar series, you can still register for the on-demand version now through September 7. This webinar is:

  • Tailored to credit unions
  • For personnel with branch/management level BSA/OFAC compliance responsibilities and boards of directors
  • Presented by Mark Dever, CAMS, AAP, Senior Consultant at Professional Bank Services

Registration deadline is September 7. You may view the webinar through December 31, 2018.

Financial institutions have spent millions of dollars over the years on resources to ensure compliance with the BSA, a law passed 48 years ago that has remained largely the same since its inception even though much has changed in the financial industry since then. However, some members of Congress would like to update the BSA to better reflect the current state of our industry.

Reviewing the BSA

As a brief reminder, the BSA is legislation that requires financial institutions, such as credit unions, to assist U.S. government agencies to detect and prevent money laundering. Specifically, the BSA requires financial institutions to provide information to law enforcement agencies by filing currency transaction reports (CTRs) for every cash transaction over $10,000 (daily aggregate amount) and suspicious activity reports (SARs) for suspected incidents of money laundering, tax evasion, or other criminal activities.

Updating the BSA

On June 14, 2018, the House Financial Services Committee was scheduled to consider CUNA-backed legislation that would make several updates to BSA/AML requirements. The new bill, titled the Counter Terrorism and Illicit Finance Act (H.R. 6068, 115th Cong), would do the following:

  • Update filing thresholds for CTRs from $10,000 to $30,000 and for SARs from $5,000 to $10,000;
  • Require a formal interagency review of the BSA reporting requirements and propose changes to further reduce regulatory burdens, and ensure that the information provided is of a "high degree of usefulness" to law enforcement;
  • Permit financial institutions to share SARs with its foreign branches, subsidiaries, and affiliates for the purposes of combating illicit finance risks;
  • Establish a no-action letter process at FinCEN
  • Require the Treasury Department take a more prominent role in coordinating AML policy and examinations across the government; and
  • Encourage the use of technological innovations that improve AML Programs

Supporting the BSA

Similar to other advocacy groups, CUNA supports efforts to track money laundering and terrorist financing but has also pushed for a balance of safety and costs. CUNA Chief Advocacy Officer Ryan Donovan has stated “We believe it is essential for regulators and law enforcement to strike the balance between benefits to the federal government and costs to credit unions and other financial institutions. We support this bill’s efforts to streamline reporting, modernize reporting thresholds that haven’t changed in decades and allow for greater transparency and consistency.”

Consideration of the bill was postponed by the Financial Services Committee over concern for lack of support from committee members and law enforcement because the proposed legislation had been stripped of provisions that would require collection of beneficial ownership information at the time of company formation. (A November 2017 version of the bill had included this provision.)

General M. Kendall Day of the Department of Justice, Criminal Division, recently testified that “the pervasive use of front companies, shell companies, nominees, or other means to conceal the true beneficial owners of assets is one of the greatest loopholes in this country’s AML regime.” In fact, the Financial Action Task Force (FATF) recently scored the U.S. as non-compliant – the lowest possible score – in connection with its ability to determine beneficial owners.

Awaiting updates to the BSA

Whether the final version of the bill includes updates to beneficial ownership rules remains to be seen. In the meantime, there is no question that modernization of the BSA is long overdue and there seems to be widespread support in Congress to get this initiative passed. It has been 48 years since the BSA was passed. Now is the time, as the Beatles would sing, to “take a sad song and make it better.”

To view the draft legislation for H.R. 6068, click here.