Financial Crime World

Complying with BSA Requirements: A Must for Financial Institutions and Businesses

Recent studies have highlighted the importance of compliance with Bank Secrecy Act (BSA) requirements for financial institutions and businesses subject to the regulation. According to experts, maintaining accurate records is crucial, as failure to do so can result in severe penalties.

Recordkeeping Requirements

Financial institutions must maintain records for at least five years, or longer if required by other regulations. These records include:

  • Customer information
  • Transactions
  • Suspicious activity reports (SARs)

The Federal Financial Institutions Examination Council (FFIEC) has published a manual outlining the examination procedures for BSA/anti-money laundering (AML) compliance.

Federal Regulators

The federal functional regulators responsible for examining financial institutions for BSA compliance include:

  • Office of the Comptroller of the Currency
  • Federal Reserve
  • Federal Deposit Insurance Corporation
  • National Credit Union Administration
  • Securities and Exchange Commission (broker-dealers and mutual funds)
  • Commodity Futures Trading Commission (FCMs and IB–Cs)

The Internal Revenue Service is responsible for examining non-bank financial institutions, including:

  • Money services businesses (MSBs)
  • Insurance companies
  • Dealers in precious metals, precious stones, and jewels
  • Non-bank residential mortgage originators and lenders

State Regulators

State regulators also play a crucial role in ensuring BSA compliance. For example, the New York Department of Financial Services has implemented unique requirements for licensed financial institutions in the state, including:

  • Annual compliance statements
  • Immediate reporting of potential money laundering activity

Examination Criteria

While examination criteria may vary depending on the regulator, the FFIEC manual provides a comprehensive guide to BSA/AML examination procedures. The IRS has also published an MSB examination manual, although it has not been updated since 2008. The SEC and CFTC do not publish examination criteria comparable to the FFIEC manual.

Conclusion

In conclusion, financial institutions and businesses subject to BSA requirements must ensure they are compliant with relevant regulations. Maintaining accurate records, cooperating with examinations, and reporting suspicious activity are essential to avoiding penalties and maintaining a good reputation. By staying informed about regulatory expectations and examination procedures, financial institutions can minimize their risk of non-compliance.

Key Takeaways

  • Maintain accurate records for at least five years
  • Cooperate with examinations
  • Report suspicious activity promptly
  • Stay informed about regulatory expectations and examination procedures