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2 January 2024 / Matthew D. Urban

The Top 5 BSA Takeaways From Our Recent Weltman Webinar


 
If you work for a credit union or financial institution, then you are no stranger to the Bank Secrecy Act (BSA). Passed by Congress in 1970, the BSA aims to detect and fight against people who may be laundering money or committing fraudulent financial activity. While you may not face laundering activity every day, it’s not as uncommon as you’d hope. The United Nations estimates that a whopping $2 trillion in current U.S. dollars is laundered around the globe every year. 
 
Given the importance of the BSA, it’s essential to understand the ins and outs of the act so your organization remains compliant. Shareholder Matt Urban recently offered a complimentary webinar that covered all of the key information your team needs to know: requirements for the financial services industry, how to recognize and report fraud, customer identification program, recordkeeping, and more.  
 
We’ve summarized a few of his top takeaways below and highly recommend you watch the webinar for a full overview on the BSA. 
 

Top 5 takeaways about the BSA

 

1. Vigilance mitigates fraud 

How can you prevent fraudulent activity? As with any serious matter, a proactive approach is best to deter threats within your organization. The BSA puts systems, procedures, and programs in place to help you protect against illegal acts. 
 
One of the most important measures is to designate an employee (or team depending on the institution’s size) who is responsible for ensuring compliance with BSA tasks and procedures, maintaining up-to-date records and regularly communicating with the financial industry’s governing body. 
 

2. Complying with the minimum requirements 

If you have an employee who is dedicated to ongoing BSA compliance, they must conduct independent BSA compliance tests. These tests are designed to review monitoring systems for suspicious activity reports (SARs), currency transaction reports, and other reporting tools. The complexity of the testing is dependent on your products, services, size, and location. 
 
Ultimately, there are three steps to stay in compliance. These include:
  • Capture data
  • Communicate it to the compliance officer
  • Ensure SARs get filed when necessary
 
If you miss one of these steps, your institution may face hefty fines and penalties.
 

3. The red flags of money laundering 

Money laundering typically involves three stages: placement, layering, and integration. The most vulnerable stage is placement, when the thief attempts to introduce unlawful or ill-gotten money into the financial system without drawing your attention. Some common placement warning signs to watch for include: 
  • Refund check deposits from canceled vacation or insurance policy
  • Large deposits made in smaller, less conspicuous amounts 
  • Purchasing a series of monetary instruments (cashier’s checks/money orders) that are collected and deposited to another branch or financial institution 
  • Structuring deposits
 
The second stage, layering, involves the thief/criminal attempting to move funds around the financial system, often in a series of transactions, to create confusion and complicate the paper money trail. Common layering schemes include:
  • Exchanging monetary instruments for smaller or larger amounts
  • Wiring or transferring funds through numerous accounts in one or more financial institutions 
 
The third stage, referred to as integration, is the ultimate goal of money laundering. It creates the appearance of legality and further protects the criminal from a recorded connection to the funds by providing a plausible excuse for the money, such as the purchase and reselling of real estate, foreign trusts, etc. 
 

4. Recordkeeping supports compliance

Everyone loves to keep records, right? Although it’s not always the most exciting duty, it’s important to have procedures in place for making and maintaining records of all accounts with your credit union or financial institution. They are extremely helpful, especially if you need to open an investigation. 
 
At a minimum, each record must include:
  • All identifying information obtained about a member
  • Description of any document relied upon, noting: the type of document, any identification number contained in the document, place of issuance and date of issuance, and expiration date
  • Description of the verification method and the results
  • Resolution of any substantive discrepancy discovered 
 
Additionally, the documents you keep need to be available for any federal, state, or local law enforcement agency. The records also need to be maintained for five years from the date the account was closed. 
 

5. Take action right away  

If you know, suspect, or have a reason to suspect that any crime or suspicious transaction related to money laundering activity is occurring, you must promptly file a suspicious activity report (SAR) and notify your board of directors (or a designated committee). Common types of SARs include money laundering, check fraud, mortgage loan fraud, credit card fraud, consumer loan fraud, check kiting, identity theft, and false statements. 
 
As a reminder, a SAR (and any information that would reveal the existence of a SAR) is confidential and should never be disclosed. If you receive a request to disclose a SAR, you should decline the request and notify FinCEN and NCUA

Watch the full webinar 

For more information about the BSA and compliance, you can watch the full webinar today. 
 
If you have any questions about the BSA or need further clarification about the content discussed in this webinar, connect with Matt at any time. 
 
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

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