What is the Bank Secrecy Act? Policies, Changes & Business Impact Explained (2024)

Imagine someone walks into your office with a suitcase. They’re dressed well, they smile, but something about them feels…off. 

They insist on paying for your services in cash—a lot of cash—and avoid giving too many details about their business. You could take the money, no questions asked. But what if it’s dirty money? What if, by taking it, you’re helping to hide something illegal?

The Bank Secrecy Act (BSA) – America’s first and most comprehensive anti-money laundering law – was designed to address exactly this.

It’s a framework that guides financial institutions to ask questions, track large transactions, and report unusual patterns. Initially met with resistance, these policies have since expanded, forcing businesses to understand their clients in ways that protect everyone.

We’re breaking it all down — the Bank Secrecy Act, what it really means, how it’s changed, what it means for your business, and how to stay compliant. 

Take your cuppa coffee and let’s make sense of it all, step by step.

What is BSA?

Think of the Bank Secrecy Act as America’s financial watchdog, but one that works in partnership with businesses. Originally titled the Currency and Foreign Transactions Reporting Act, BSA creates a standardized framework requiring financial institutions to assist U.S. government agencies in detecting and preventing financial crimes.

At its core, BSA mandates specific documentation and reporting requirements for financial transactions. Financial institutions must report cash transactions exceeding $10,000, maintain records for five years, and establish internal programs to monitor and report suspicious activities that might indicate money laundering, tax evasion, or terrorist financing.

But don’t let the term “financial institutions” mislead you – the scope extends far beyond traditional banks. Today’s BSA compliance requirements touch everyone from cryptocurrency exchanges to payment processors, and as of February 2024, FinCEN has proposed including investment advisers under its umbrella.

Policies and Changes in BSA

The Bank Secrecy Act’s framework has undergone significant changes since its 1970 introduction. Here are the critical policies and recent changes that business leaders need to understand:

Key Policy Requirements 

Banks and financial institutions must file: 

• Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000 within 15 days. 
• Suspicious Activity Reports (SARs) within 30 days of detecting potential financial crimes. 

Customer Due Diligence rules mandate verifying beneficial ownership for business accounts and maintaining comprehensive customer identification programs.

Recent Regulatory Changes 

FinCEN included investment advisers under BSA regulations, expanding oversight to a new sector of financial services. The 2021 Anti-Money Laundering Act introduced stricter beneficial ownership reporting requirements, creating a centralized database at FinCEN. 

Digital asset regulations now require cryptocurrency exchanges to maintain the same BSA compliance standards as traditional financial institutions.

Enforcement Focus 

FinCEN has increased scrutiny of transaction monitoring systems and customer due diligence programs. The focus has shifted toward testing the effectiveness of automated monitoring systems and ensuring proper documentation of suspicious activity investigations.

Implications for Different Types of Businesses 

Let’s explore what this means for different organizations, and most importantly – how you can prepare effectively.

Traditional Financial Institutions 

Banks and credit unions, you’re the veterans here. 

Your BSA KYC programs are mature, but that doesn’t mean they’re challenge-free. In 2023, even a major bank like Wells Fargo was penalized $97.8 million for breaching BSA/AML laws. 

To stay away from fines while in financial services industry, you need to focus on two main aspects:

1. Risk Assessment and Monitoring: Regular system audits, transaction screening, and customer due diligence
2. Documentation and Reporting: Systematic SAR filing processes, audit trails, and up-to-date record keeping

Modern Financial Services 

Here’s the interesting part – if you’re running a fintech company or digital payment platform, you actually have an advantage. Instead of trying to modernize legacy systems, you’re building your BSA AML compliance from the ground up. Think of it as designing a modern home rather than renovating an old one.

You can build automated monitoring systems that grow with your business, and design processes that scale without breaking. The real power lies in your technical infrastructure – API-driven verification systems, real-time transaction monitoring, and automated reporting that works quietly in the background while you focus on growing your business.

Non-Traditional Financial Businesses 

Money service providers (MSBs) and recently regulated investment advisers (2024 update), your path to compliance might look different, but it’s equally important. 

MSBs must register with FinCEN within 180 days of starting operations. Their program requires government-issued photo ID verification for transactions over $3,000, with enhanced due diligence above $10,000. All customer and transaction records must be maintained for 5 years, with daily screening against compliance thresholds.

Investment advisers, under the new 2024 rules, must establish risk-based customer due diligence, verify client identity and source of funds, and maintain comprehensive reporting systems. Digital payment providers need specialized measures including real-time screening capabilities and pattern recognition for unusual activity.

All non-traditional financial businesses must tailor their BSA compliance to their specific models while meeting core regulatory requirements.

Practical Compliance Framework

While the regulations might seem complex, breaking them down into manageable components helps create a robust compliance program. 

Below is a detailed breakdown of essential components that ensure ongoing compliance.

Compliance Leadership and Structure 

A qualified BSA officer needs proven expertise in regulatory requirements and full authority to enforce compliance policies. Organizations handling over $1 billion in assets require dedicated compliance teams, while smaller institutions can operate with dual-role assignments. 

Key BSA Officer responsibilities include:

• Developing and enforcing compliance policies
• Overseeing training programs and documentation
• Managing regulatory relationships and examinations
• Ensuring timely reporting and record retention

Moreover, the BSA officer must maintain direct reporting lines to senior management and document all significant decisions and policy changes. 

Documentation and Reporting Standards 

Maintaining proper documentation serves as critical evidence of compliance efforts. All customer files must be retained for 5 years after account closure, including verification documents, risk assessments, and account activity records. 

Transaction records require 5-year retention from the date of transaction, with clear audit trails of monitoring and decisioning.

SARs must be filed within 30 days of detecting suspicious activity, with a possible 15-day extension if additional investigation is required. CTRs require submission within 15 days for cash transactions exceeding $10,000. Form 8300 follows the same 15-day timeline for reportable cash received in trade or business.

Monitoring Framework and Requirements 

Transaction monitoring requires systematic oversight and clear protocols. Every transaction above $3,000 needs review for potential structuring patterns. 

New customer relationships demand immediate screening against OFAC sanctions lists, with periodic rescreening of existing customers.

High-risk customers require enhanced monitoring, with monthly activity reviews and risk profile updates. This includes examining transaction patterns, assessing changes in behavior, and documenting all findings. 

Automated monitoring systems should generate monthly reports tracking key metrics like alert volumes, investigation outcomes, and filing statistics.

Conclusion

BSA compliance forms the bedrock of operating in the U.S. financial sector. While regulations evolve and requirements grow, success lies in building robust yet practical compliance programs. The cost of proper BSA infrastructure is always lower than the price of violations – in dollars, reputation, and business opportunities.

Signzy offers comprehensive identity verification and compliance solutions to help businesses meet BSA requirements effectively. Our suite of APIs includes essential tools for KYC/AML compliance, including UBO checks, business verification, and real-time fraud screening. 

Ready to streamline your BSA compliance? Schedule a no-obligation demo to see how Signzy’s solutions can automate your verification processes while ensuring regulatory compliance. Our experts will walk you through customized solutions that fit your specific business needs.