Academic journal article ABA Banking Journal

BSA: What You Think You Know Could Hurt You

Academic journal article ABA Banking Journal

BSA: What You Think You Know Could Hurt You

Article excerpt

Banks and other organizations file, on average, 27,000 suspicious activity reports monthly. That average continues to rise, especially as companies "defensively file" SARs to avoid regulatory criticism, and also because causes for filing continue to grow. In 2003, for instance, identity theft, or the suspicion of it, was added to the stated reasons for filing SARs. Previously it had been a "fill-in" reason for filing.

Last fall ABA, in conjunction with the American Bar Association, presented the latest edition of the groups' Money Laundering Enforcement Seminar. Several of the sessions dealt with the many common myths that are associated with U.S. anti-money-laundering laws, and spe- cifically regarding the filing of SARs. Here are major points confirmed or debunked at that seminar, and, in one case, revised by a later regulatory decision.

1 The BSA requires me to implement systems to both track and aggregate all currency transactions.

This is one of those letter of the law versus spirit of compliance issues. "There is no obligation to aggregate multiple transactions," said Ian M. Comisky, partner, Blank Rome LLP, Philadelphia, Pa.

However, Comisky continued, banks do have the obligation to file suspicious activity reports and the latest enforcement orders from the regulatory agencies say that institutions must have systems in place to detect suspicious activities and that it is therefore likely that the bank in fact needs a system to aggregate transactions.

2 Currency that goes directly into my bank's cash vault does not have to be reported on a currency transaction report (CTR).

Comisky said that pickups and deliveries by armored car service must have a CTR filed. (Don't expect the armored service to file such reports, he advised. What they'll generally provide is a daily report of picked-up and dropped-off currency.)

The lesson here is that you "don't begin and end your CTR program at the teller's window'," said Peter G. Djinis, partner, Law Offices of Peter Djinis, and session moderator.

3 If we receive a grand jury subpoena, we must file a SAR on that customer.

The bank must examine the activity in the customer's account carefully before taking such action, said Comisky. Theoretically, he said, the bank can ask the summoning authority what the subpoena is about, but it's highly unlikely the bank will receive an answer. FinCEN's William Langford, associate director for regulatory policy, programs, and enforcement, added that this is an area where FinCEN (Treasury's Financial Crimes Enforcement Network) needs to issue more guidance.

[During another session at the conference dealing with subpoenas and similar legal demands for information, a federal prosecutor explained that he and his fellows are often bound by grand jury secrecy requirements and unable to reveal why they want the information they have requested. In that session, Gordon Greenberg, partner, McDermott, Will and Emery, Los Angeles, said there ought to be a reasonable need to file implied, whereas subpoenas may be issued very generally.]

4 I don't have to file a SAR because I already filed a currency transaction report.

Bruce Bettigole, partner, Crowell & Moring, said this is wrong. Bettigole says a SAR permits more detail than a CTR, and may be warranted by the circumstances noticed by the bank's staff.

5 MY customer structured a transaction and I filed a SAR. Even though the structuring is continuing, I don't have to file another SAR. This is because he's not doing anything else illegal.

"Each incident represents a potential criminal offense," said Djinis, a former federal anti-money-laundering official, "so a SAR must be filed as each occurs." However, Djinis noted that the government does permit special filing arrangements on some ongoing violations.

6 There is no need to file a SAR on an honest customer who structures to avoid the delay in preparing a CTR. …

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