Generally a bank or financial institution complies with the BSA through the filing of Currency Transaction Reports, also referred to as CTRs and Suspicious Activity Reports, also referred to as SARs.  In addition to certain record keeping requirements, the Bank Secrecy Act also requires, in general, a financial institutions records be sufficient enough to allow for the reconstruction of a customer’s account if such reconstruction is necessary.  Therefore, an audit trail or paper trail can be constructed if needed, which as reported by certain federal agencies, has been very useful information and vital in criminal investigations as well as other tax and regulatory investigations and cases. 

There are two parts to the BSA those being: 1: Financial Recordkeeping and 2: Reports of currency and Foreign Transactions.  Financial Recordkeeping authorizes the Secretary of The Treasury to issue regulations that will require the maintenance of certain records by insured financial institutions.  Thus, think about the FDIC notices when you walk in your bank.  These types of financial institutions that are insured are required to maintain a certain level of records.  Reports of Currency and Foreign Transactions allows the Department of Treasury to regulate and thus require the reporting of certain transactions.  You may have heard that banks are required to report transactions in excess of $10,000 and in many cases this is correct and what Part 2 of the BSA in terms of currency transaction reporting is associated with. 

The purpose of the BSA is thus to require maintenance of records and reporting of transactions that enable and aid investigations and examinations of a wide variety of criminal activity from tax evasion to money laundering that may associated with illegal drug trafficking and/or terrorism.  The idea is that if certain records are maintained, and certain transactions reported, these records can be used to investigate and examine certain individuals and track certain criminal activity.  This makes a lot of sense.  The paper trail left by money can often lead to the individuals responsible for crime.  The majority of criminal activities can create and lead to large sums of money, and generally require a certain amount of money.  Thus, finding the source of this money can assist law enforcement. 

Other acts and regulations have expanded and thus strengthened the scope of the Bank Secrecy Act.  For example, please see the Money Laundering Control Act of 1986, the Annuzio-Wylie Anti-Money Laundering Act of 1992 or the Money Laundering and Financial Crimes Strategy Act of 1998.

This article has been drafted by John McGuire, a tax attorney in Denver, Colorado at The McGuire Law Firm.  Mr. McGuire’s practice focuses on taxation matters with individuals and businesses, and tax representation before the Internal Revenue Service and other taxing authorities.  Mr. McGuire also works with businesses regarding their transactional matters.