Money Handlers Beware: Feds Go After Bank Secrecy Act Violations

A complex modern economy involves a myriad of complex financial transactions every day. This is only natural. As Adam Smith wrote in The Wealth of Nations two centuries ago, it’s part of human nature to engage in “truck and barter.”

Today, however, the U.S. Justice Department is increasingly concerned about the use of money from sources that may have been illegal. Truck and barter is one thing, money laundering is quite another.

This article will discuss the DOJ’s new initiative aimed at confronting money laundering and other forms of white collar crime. This initiative raises the prospect of stepped-up prosecutions of a wide range of financial institutions and individuals who are subject to the Bank Secrecy Act.

Bank Secrecy Act Compliance

The Bank Secrecy Act is a federal law that requires financial institutions to keep records of certain transactions in order to discourage or detect money laundering. The law dates back to 1970 and is also known as the Currency and Foreign Transactions Reporting Act.

The responsibilities the law imposes include, for example, keeping track of negotiable instruments purchased with $10,000 or more in cash. The BSA also imposes a duty on banks to report suspicious activity or illicit cash flows that might indicate money laundering.

Financial institutions can face significant monetary penalties for failing to comply with the Act. Individuals who are found in violation of the law’s requirements could be subject to stiff criminal penalties. Sentences for individual violations can be up to ten years in length.

DOJ Initiative Against Money Laundering

The U.S. Department of Justice is now ramping up for increased enforcement of the BSA. This affects not only commercial banks, but also a broad range of financial players, including credit unions, insurers and securities broker-dealers. Many other businesses that handle significant amounts of money, such as casinos and pawnbrokers, could also be implicated.

The DOJ’s Asset Forfeiture and Money Laundering Section is making no secret of its intention to go after Bank Secrecy Act violations. “I think you are going to see more complex BSA cases against banks,” said the section’s director, Jennifer Shasky Calvery. “I think you are going to see enforcement across the broader spectrum of financial institutions,” she added.

Indeed, such prosecutions have already begun. In June 2012, DOJ charged two different check-cashing businesses with failing to file required transaction reports. To underscore the national nature of the enforcement initiative, the two businesses were located on either side of the country – in Brooklyn and Los Angeles, respectively.

Protecting Yourself and Your Business

If you are the owner or an employee of a business subject to Bank Secrecy Act reporting requirements, make sure you know the law. With the U.S. government so short of cash itself, the Department of Justice will be looking to prosecute as many people as possible to extract penalties for BSA violations.