AML/CFT regulations in the United States
The Anti-Money Laundering and Counter Financing of Terrorism Act of 2009 established three regulators tasked with ensuring that businesses comply with the requirements designed to assist prevent and trace money laundering and terrorist financing.
Financial Crime Enforcement Network (FinCEN)
Located in Washington, DC, the Financial Crimes Enforcement Network (FinCEN) is the primary anti-money laundering and counter-terrorist funding authority in the United States. In its mission to protect the financial system from illicit use, combat money laundering, and advance national security, FinCEN is a Treasury Department bureau whose primary tools are the acquisition, study, and dissemination of financial data and financial authorities, as well as the strategic use of financial authorities. This is accomplished via the collection and storage of financial activity data, the interpretation and dissemination of the data for law enforcement purposes, and the promotion of worldwide cooperation with counterpart agencies in other nations and international organisations.
The Office of Foreign Assets Control (OFAC)
Foreign governments and regimes, terrorists, international drug traffickers, others involved in actions relating to the proliferation of weapons of mass destruction, and those who pose a threat to the United States' national security, foreign policy, or economy are targeted by the Office of Foreign Assets Control (OFAC), which imposes economic and trade sanctions in accordance with the goals of the United States' foreign policy and national security objectives.
AML/CFT reporting obligations in the United States
The Bank Secrecy Act and the USA Patriot Act are the two main AML Regulations.
Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA) of the United States is the earliest and most severe anti-money laundering and counter-terrorist financing (AML/CFT) legislation in the country's history. Bank Secrecy Act (BSA): The BSA gives the Secretary of the Treasury the authority to issue regulations requiring banks and other financial institutions to take precautions against financial fraud, such as the implementation of anti-money laundering (AML) schemes that provide adequate consumer due diligence (CDD), monitoring, reporting, and record-keeping.
USA Patriot Act
The USA Patriot Act (Uniting and Strengthening America through the Provision of Appropriate Tools Required to Intercept and Obstruct Terrorism) was passed in 2001 in response to the terrorist attacks on September 11, 2001 in the United States. The goal of the USA PATRIOT Act is to prevent and punish terrorist acts conducted in the United States and throughout the globe, as well as to improve law enforcement investigative capabilities and achieve other goals. It was signed into law in 2001. The scope of the BSA is expanded, and law enforcement agencies are given more monitoring power as a result of this legislation.
How to comply with the BSA and USA Patriot Acts?
Banks and other financial institutions are required to comply with the Bank Secrecy Act and associated anti-money laundering legislation, which includes the following requirements:
- Internal controls should be in place to ensure continuous compliance; independent testing should be performed; a designated individual should be in charge of organising and monitoring day-to-day compliance; and adequate training should be provided to the relevant people
- Customer due diligence procedures and monitoring programmes that are successful should be put in place
- Verify against the Office of Foreign Assets Control (OFAC) and other government lists before proceeding
- Establish a procedure for monitoring and reporting suspicious behaviour that is effective
- Develop anti-money laundering procedures that are based on risk
- Records should be kept of all cash acquisitions of negotiable instruments
- Inform the authorities of any unusual behaviour that may indicate criminal activity (e.g., money laundering, tax evasion)
Reporting Obligations under the AML/CTF Act in the United States
Financial institutions are required to produce a variety of reports in accordance with BSA requirements. The following are examples of important reporting responsibilities:
Currency Transaction Reports (CTR)
Money transactions in excess of $10,000 in a single business day are reported using Currency Transaction Reports (CTR), which may be one transaction or a series of cash transactions in one business day. Financial Crimes Enforcement Network (FinCEN) Form 112 reports are submitted electronically with FinCEN and are referred to as FinCEN Form 112 reports (formerly Form 104).
Suspicious Activity Reports (SAR)
Unless the client seems to be attempting to circumvent BSA reporting requirements by not submitting a CTR or monetary instrument log (MIL), every cash transaction must be reported to the appropriate BSA agency. Additionally, if the customer's activities indicate that they are laundering money or otherwise breaking federal criminal laws, such as committing wire transfer fraud, cheque fraud, or disappearing without a trace, a SAR must be submitted. These reports are submitted with FinCEN and are referred to as Treasury Department Form 90-22.47 and OCC Forms 8010-9 and 8010-1. They are also available on the OCC website.
Cash Purchases of $3,000-$10,000, inclusive
Cash transactions totalling $3,000-$10,000, inclusive, are needed to be recorded by Money Services Businesses (MSB) that offer money orders or traveler's cheques. The MSB must regard several cash purchases of monetary instruments totalling $3,000 or more as a single purchase, and this purchase must be documented if they are made at the same time or if the MSB has information that such purchases happened within a single working day.
Money Transfers of $3,000 or more
MSBs that offer money transfer services are required to collect and record certain information for any money transfer of $3,000 or more, regardless of the mode of payment used to make the transfer. They must retain the record for a period of five years after the date of the transaction.
Currency Exchanges of more than $1,000
Foreign currency exchangers are required to maintain a record of any transaction involving more than $1,000 in either domestic or foreign currency, and they must keep the record for a period of five years from the date of the transaction.
Foreign Bank Account Reports (FBAR)
FBARs are needed to be filed with the United States Treasury by October 15 of each year if a citizen or resident has a financial interest in, foreign bank accounts or foreign financial accounts with an aggregate worth of $10,000, or if they have control over such accounts. FinCEN Form 114 is the document (formerly Treasury Department Form 90-22.1)needs to be submitted. Aside from that, they must include the accounts on Schedule B of the Form 1040 tax form.