Homeland Security & Patriot Act

BANKING & SECURITIES

It is clear — especially in the aftermath of September 11th — that no bank or financial institution wants to see its name in the headlines as the source of funds that facilitated an act of terrorism. Effective screening of Specially Designated Nationals (SDN) and other government terrorist and law enforcement lists is one method by which the financial services industry and the government can work together to ensure that terrorists don't use our own banks against us. Doing so is now the law. About OFAC

The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces a series of new laws that impose economic and trade sanctions against targeted foreign countries and their agents, terrorism sponsoring organizations and agencies, and international narcotics traffickers based on U.S. foreign policy and national security goals.

Under these laws, financial institutes, securities firms, and insurance companies are obligated to block or "freeze" property and payment of any funds transfers or transactions, and to report all blockings to OFAC within 10 days of occurrence. Any institution in non-compliance is open to adverse publicity, fines, and even criminal penalties.

Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close co-operation with allied governments.

OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under U.S. jurisdiction.

New Treasury Rules

Recently, as an extension of the U.S.A. Patriot Act, OFAC created new Rules impacting on financial institutions. The objective of these Rules is to eliminate the flow of funds in any form to terrorists (broadly referred to as "money laundering").

These Rules require all U.S. financial institutions (banks, insurance companies, credit unions, etc.) to screen new customers against federal lists of known and suspected terrorists, with an emphasis on Specially Designated Nationals (SDN).

Executive Responsibility

Responsibility for this process will be held at the executive level, and must be a component of an executive involved and approved plan.

U.S.A. Patriot Act, Section 326

Specifically, Section 326 of the U.S.A. Patriot Act calls for the following:

1. Verifying the identity of any person seeking to open an account, to the extent reasonable and practicable, and;
2. Maintaining records of the information used to verify the person's identity, including name, address, and other identifying information, and;
3. Determining whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency.

This means --

• Financial institutions must have a customer identification and verification program.
• All new accounts need to be screened against OFAC Specially Designated Nationals and other published lists of blocked persons, criminal suspects, known and suspected terrorists, and designated terrorist organizations.
• Documents used to identify the new account holder (such as driver's license, passport, social security card, or credit cards) need to be verified to a reasonable and practical extent to determine that the identity is valid.
• A certified database of all accounts needs to be maintained containing the name, date of opening, identification presented, and the identity verifications, with records retained for 5 years after the account is closed.

Additional related rules are also coming into effect for other large money-handling interests, such as lottery corporations and casinos.

Be prepared for mandatory screening

Screening for Blocked Persons is mandatory under OFAC regulations. Homeland Security meets your screening needs by providing all the tools and content you need to make sure you and your company stay on the right side of the law, and contribute to U.S. national security.

Homeland Security

• Has a screening process with a proven track record.
• Is professionally designed to be accurate, fast, economical, and efficient.
• Is sophisticated yet easy to learn and use.
• Is Web-based to provide accessibility and the most current data available (you don't have to purchase and load any software, maintain the database, or download lists yourself).
• We update the lists daily and notify you by email that changes have been made.
• You have access to an extensive list of applicable federal regulations, rules, and notices in an easy searchable format.
• Has fuzzy logic to handle all types of spelling problems in order to lessen false-positive flags: for example, missing or extra letters, incorrect letters, transposed letters, names run together, and varying name order, initials, abbreviations, and alternate foreign transliterations.
• Can batch process large CIF customer databases and provide detailed reports.
• Provides the option of automatically emailing the search results to yourself to provide an audit trail of all your searches. If a search produces no positive hits, a complete report of all the lists searched is provided for your records.

The MSR E-Mail Escalation System

These features are supported by a real-time notification system. The Homeland Security E-Mail Alert System is configured to suit your needs. You don't need to rely on screening data-entry personnel to ensure senior management is fully informed. Reports are automatically dispatched by email to everyone on your institution's notification list — whether at your local, regional, or national offices — when a possible security breach is detected.



Using Government Lists Can Be Time Consuming

Homeland Security screens all your new accounts against Denied lists from several federal departments, commissions, and agencies, some available over the internet. Some of this information is not published by the government agencies, but appears only in the daily Federal Registry. Using these lists, one by one, is time consuming, cumbersome, inefficient, and extremely prone to errors.

Comprehensive Screening

Homeland Security provides the most comprehensive available service for Blocked Persons screening, including the following lists of particular pertinence to the new banking rules.

Banking and Securities Blocked Party and Law-Enforcement Screening (Domestic)

• Specially Designated Nationals and Blocked Persons (OFAC)
• FBI Wanted Fugitives
• FBI Ten Most Wanted Fugitives
• FBI Most Wanted Terrorists
• U.S. Marshals Service - Top 15 Most Wanted
• U.S. Marshals Service - Major Fugitive Cases
• U.S. Drug Enforcement Administration - Major International Fugitives
• U.S. Customs Most Wanted
• U.S. Postal Inspection Service - Most Wanted
• U.S. Secrect Service - Most Wanted
• Bureau of Alcohol, Tobacco and Firearms Most Wanted
• Air Force Office of Special Investigations - Top Ten Fugitives
• Naval Criminal Investigative Service - Wanted Fugitives

Banking and Securities Blocked Party and Law-Enforcement Screening (International)

• European Union Council Regulation on Restrictive Measures to Combat Terrorism [Designated Persons, Groups, and Entities]
• Interpol Recently Wanted
• United Nations Consolidated List
• World Bank Listing of Ineligible Firms
• OSFI Consolidated List - Individuals
• OSFI Consolidated List - Entities
• OSFI Warning List
• Royal Canadian Mounted Police - Wanted

Alerts are provided for Financial Action Task Force on Money Laundering (FATF) Non-Cooperative Countries and Territories.

Restricted Party Screening

Homeland Security also covers all lists published by other government departments. Principally the Bureau of Industry and Security [BIS] of the Department of Commerce, and the Office of Defense Trade Controls [ODTC] of the Department of State (for exports and munitions orders) as well as the U.S. General Services Administration, and the Office of Inspector General.

• Arms Export Control Act Debarred Parties (ITAR)
• Denied Persons List (BIS)
• Entity List and "Unverified" List (BIS)
• Specially Designated Nationals and Blocked Persons (OFAC)
• Foreign Persons Designated Under the Weapons of Mass Destruction Trade Control Regulations (OFAC)
• Department of State Nonproliferation Orders: Missile Sanctions, Lethal Military Equipment Sanctions, Chemical and Biological Weapons Sanctions, Nuclear Sanctions
• Department of State ITAR Munitions Export Orders (ODTC)
• Japan Foreign End Users of Concern

• GSA List of Parties Excluded from Federal Procurement, Non-procurement, and Reciprocal Programs
• OIG List of Individuals/Entities Excluded from Federal Health and Medicare Programs

Affected Financial Institutions

The new OFAC regulations are not limited to banks. Insurance companies, securities and investment firms, and import/export trading companies are also subject to OFAC Rules.

More specifically, Section 352 amends the definition of a financial institute to now include:

• An insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act)
• A commercial bank or trust company
• An agency or branch of a foreign bank in the United States
• A private banker
• A broker or dealer in securities or commodities
• A thrift institution
• A broker or dealer registered with the Securities and Exchange Commission under the Securities and Exchange Act of 1934
• An uninsured institution (as defined in section 401(a) of the National Housing Act)
• An investment banker or investment company
• A currency exchange
• An issuer, redeemer, or cashier of travelers' cheques, money orders, or similar instruments
• A dealer in precious metals, stones, or jewels
• A loan or finance company
• A pawnbroker
• A travel agency
• An operator of a credit card system
• A licensed sender of money
• A telegraph company
• A business engaged in vehicle sales, including automobile, airplane, and boat sales
• Persons involved in real estate closings and settlements
• The United States Postal Service
• An agency of the United States Government.

OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under U.S. jurisdiction.

http://www.homelandsecurity-us.com/banking.html

Thanks to "deanr" PTR Post

How Safe Is Your Cash?

Written by Robert Brokamp

Published February 24, 2012

    Cash in a Chest

One of oldest adages in investing is “no risk, no return.” These days, that old saying seems literally true, since cash is considered the safest asset, yet it earns virtually no interest. However, in this article we'll examine whether cash is as safe as is sounds. Then, we'll look for where to get the most bang for your bucks.

The not-quite-so-new FDIC limits

The first place, and perhaps the safest place, people turn to keep their cash is a bank to take advantage of FDIC insurance. The insured limit was raised from $100,000 to $250,000 during the financial crisis of 2008, and the increase was made permanent in 2010 by the Dodd-Frank bill. Additionally, through 2012, all non-interest-bearing accounts have unlimited coverage.

The limits apply to each “ownership category,” which includes single accounts, joint accounts, certain retirement accounts, and trusts, among others. So, you could have a single account in your name that is insured up to $250,000, your spouse could have a separate single account insured up to $250,000, and you both could have a joint account that has an additional $250,000 of coverage, for a total of $750,000 insured deposits (just in case you find a LOT of change in your sofa). Also, you get a whole new set of limits if you go to another bank - but it has to be a completely different bank, not just a different branch of the same bank. Use the Electronic Deposit Insurance Estimator (EDIE) at FDIC.gov to determine how much of your cash is covered.

Deposits at credit unions have nearly identical coverage through the National Credit Union Association. You can use the e-calculator at NCUA.gov to determine how much of your deposits are insured. Both FDIC and NCUA insurance are backed by the full faith and credit of Uncle Sam. That doesn't feel as safe as it used to, but the reality is that it's about as safe as you'll find in this world. Just make sure that your bank or credit union really is insured, which you can confirm at FDIC.gov and NCUA.gov.

The insurance extends to what are generally considered cash equivalents, such as checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. The insurance does not cover investments such as stocks or bonds, nor does it cover money market funds, which are very different from money market accounts. What's the difference? We're glad you asked.

What's in a money market fund?

A money market deposit account is essentially a savings account at a bank or credit union that allows for a limited number of checks to be written to third parties. A money market fund is a mutual fund run by a financial services firm, and it invests in short-term debt (with maturities of a year or less) from governments and corporations. Like every other mutual fund, there is no government guarantee behind a money market fund. However, every fund strives keep its net asset value at $1. There have been only two instances of funds “breaking the buck”: one in 1994 and one in 2008. Investors in these funds lost 2% to 8% of their principal.

Chances are, the cash in your brokerage account or IRA is in a money market fund. To see what's actually in the fund, you'll need to visit the website of the company that sponsors the fund. (Fund information providers such as Morningstar typically don't provide analysis of money market funds.) As an example, let's peer inside a fund from Fidelity, the largest provider of money market funds for retail investors. Almost half of the Fidelity Cash Reserves Fund (FDRXX) is in certificates of deposit, almost 12% in Treasuries or government agency debt, and more than 17% is in short-term debt (known as “commercial paper”) from financial companies. On average, the debt in the fund matures in 56 days.

What many investors might find surprising is that most money market funds have exposure to European debt, though funds have reduced their exposure from 30% at the end of May to 10% by the end of December, according to the Fitch rating service. Meanwhile, they've been increasing their holdings of U.S. government debt and repurchase agreements (a.k.a., “repos”), which are a form of secured lending and, thus, theoretically safer bets.

But as the name implies, repos include an agreement by which the seller agrees to buy back the security at a later date, at a certain price. If the seller can't honor the agreement, the buyer - in this case, the money market fund - is stuck with the debt instrument at whatever the price the market is willing to pay for it. The Fidelity Cash Reserves Fund has almost 20% of its assets in repos. The T. Rowe Price U.S. Treasury Money Fund (PRTXX), which you'd think - given the name - is invested just in U.S. Treasuries, actually has more than a third of its assets in repos. The fund's fifth-biggest holding is debt from General Electric.

As long as the global economy functions in a somewhat normal (albeit slow) manner, money market funds are very safe. However, if there was another “black swan” event such as we experienced in 2008, it would not be a surprise if a few more money market funds “break the buck.”

Where to turn

We don't want to overstate the risks of money market funds; the vast majority will maintain a $1 NAV. However, given their low yields - the Fidelity Cash Reserves Fund yields a whopping 0.02% - there are few compelling reasons to say with a money market fund, especially if you don't need the money in the near term. Financial planner and columnist Allan Roth has written about choosing higher-yielding, longer-term CDs. Even if you have to pay a penalty for getting your money back early, it's worth getting the extra yield, as long as you can leave the money alone for approximately two years (depending on the yield and early withdrawal penalty). To find the best rates, check out the GRS CD rate finder, which monitors more than 200 banks and displays the 50 highest rates. There's no reason to get virtually no yield from a money market fund, when you can get 1% to 2% or higher from a CD that enjoys FDIC or NCUA insurance. That's the kind of risk-reward proposition we like most.

Where do you keep your cash? Know of any banks or credit unions offering particularly good rates? Let us know in the comments.

The original article can be found at GetRichSlowly.org:
How Safe Is Your Cash?

This is a post from staff writer Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the adviser for The Motley Fool's Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

Source

_ Currency Reporting For Travelers from TSA - post by AndieZ1 from 3 S's member Meisme


02/01/2012  

http://www.tsa.gov/travelers/airtravel/assistant/editorial_1848.shtm

Currency Reporting For Travelers

It is legal to transport any amount of currency or other monetary instruments into or out of the United States.  However, if you transport, attempt to transport, or cause to be transported (including by mail or other means) currency or other monetary instruments in an aggregate amount exceeding $10,000 (or its foreign equivalent) at one time from the United States to any foreign place, or into the United States from any foreign place, you must file a report with U.S. Customs.  This report is called the Report of International Transportation of Currency or Monetary Instruments, Customs Form 4790.  Furthermore, if you receive in the United States, currency or other monetary instruments in an aggregate amount exceeding $10,000 (or its foreign equivalent) at one time which has been transported, mailed, or shipped to you from any foreign place, you must file a CF-4790.  These forms can be obtained at all U.S. ports of entry and departure.

Monetary instruments include:

U.S. or foreign coins and currency;

Traveler checks in any form;

Negotiable instruments (including checks, promissory notes, and money orders) that are either in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such form that title thereto passes upon delivery;

Incomplete instruments (including checks, promissory notes, and money orders) signed, but with they payee’s name omitted; and


Securities or stock in bearer form or otherwise in such form that title thereto passes upon delivery.  However, the term "monetary instruments" does not include:

Checks or money orders made payable to the order of a named person which have not been endorsed or which bear restrictive endorsements;

Warehouse receipts; or

Bills of lading.

Reporting is required under the Currency and Foreign Transaction Reporting Act (PL 97-258, 31 U.S.C. 5311, et seq.), as amended. Failure to comply can result in civil and criminal penalties and may lead to forfeiture of your monetary instrument(s).

U.S. Customs Service
1300 Pennsylvania Avenue, N.W.
Washington, D.C. 20229

Telephone: (202) 927-1520

_What Happens to a Savings Account if a Bank Collapses?
By Mark Kennan, eHow Contributor

When a bank fails, most of the money in the savings accounts will be recovered by the account holders as long as the bank was covered by Federal Deposit Insurance Corp. (FDIC) insurance.
Related Searches:

    Bank Credit Union
    Bank Money Transfer

    Definition

        FDIC insurance is a government-run program that protects consumers' bank accounts including savings accounts, checking accounts, money market deposit accounts and certificates of deposit in case a bank collapsing.
    Mergers

        In many cases, a failing bank gets bought buy another bank. If this occurs, your account will simply transfer to the acquiring bank.
    Limits

        In the event that a bank fails, the first $250,000 of your savings account will be reimbursed by the FDIC. The limit is set to return to $100,000 at the start of 2014.
    Time Frame

        According to Investopedia.com, you should receive your funds within a few days of the failed bank's closing.
    History

        No account holder has every lost funds insured by the FDIC since the FDIC was started in 1933.

SOURCE

_
Home > Seizures > Bank Account Seizures by ICE and DEA for Money Laundering

Posted on December 30, 2011 by Peter Quinter

Bank Account Seizures by ICE and DEA for Money Laundering   Peter A. Quinter, Florida Customs Lawyer

This past year has seen an explosion of seizures of bank accounts by the Drug Enforcement Administration (DEA) and the U.S. Immigration and Customs Enforcement (ICE) or Homeland Security Investigations (HSI) for alleged trade-based money laundering or "structuring". In 2011, I have handled these cases in Miami, New York, San Diego, Boston, Phoenix, San Juan, and Norfolk.  The funds in the bank accounts are taken when the bank is served with a Seizure Warrant signed by a United States Magistrate Judge, based upon an affidavit prepared by the DEA or ICE Agent.   

Typically, the bank (and its customer) do not get to see the Affidavit because the criminal proceeding is ongoing, and the Affidavit is sealed.  The Seizure Warrant itself typically alleges that the money is subject to seizure because it is the proceeds of drug activity in violation of 21 U.S.C. 881 and 18 U.S.C. 1956.  

A related legal basis for the seizure of bank accounts is 'structuring' - the deposit of $10,000 or less in cash repeatedly in a bank account to avoid the filing by the bank of a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCen), U.S. Department of the Treasury .  See 31 CFR 1010.314.  A CTR is FinCen Form 104.  A CTR is required to be filed by all banks whenever a deposit of cash over $10,000 is made in a single day into a single account or by a customer into different accounts.  Be aware that deposits of cash into multiple branches of a bank or in multiple transactions is still structuring.  See 31 CFR 1010.313.  Whenever a bank suspects that its depositor or customer is depositing $10,000 or less to avoid the bank filing the CTR, the bank often instead files a Suspicious Activity Report (SAR) .  The SAR reports are analyzed by FinCen, and often referred to the DEA or ICE for investigation.  Some of the investigations results in seizures of bank accounts as mentioned above.  

Bank account holders absolutely have the right to challenge the taking of their money by the DEA or ICE.  If your money has been seized, you have a right to know the legal basis for the seizure, and should, through your attorney, contact the DEA or ICE Agent, or the Assistant U.S. Attorney.  In civil forfeiture cases, there is an administrative process to follow once a Notice of Seizure is issued to the bank account holder by the Fines, Penalties, and Forfeitures Office of U.S. Customs and Border Protection (CBP) or a Notice of Seizure by the DEA.  If the Notice of Seizure is from CBP, file a Petition, and if the Notice of Seizure is issued by the DEA, file a Sworn Claim with the Asset Forfeiture Section located in Quantico, Virginia.  The procedures of both agencies are very specific, and must be followed carefully, otherwise, your right to challenge the seizure will be lost forever.  

Comments or questions, click below, or contact me directly.   Peter Quinter, Partner in Charge, Customs and International Trade Law Department   (954) 270-1864 or

SOURCE

Bank Secrecy Act of 1970 and the Patriot Act on money laundering
Dude McCann  Today at 1:18 PM 

This is the link to Wikipedia, there is enough links to other sites to do some good research;

http://en.wikipedia.org/wiki/Bank_Secrecy_Act

Also, a link to the Patriot Act. Title III: Anti-money-laundering to prevent terrorism;
this is the one that would pertain to cash-out;

LINK

Thanks to our friends at My Invested Group (Dude McCann post)
LINK

IRS Focuses on Wealthiest Americans in Foreign Bank Account Reporting Plan

The Internal Revenue Service is focusing on the wealthiest Americans with money overseas as it develops regulations that will require foreign banks to give the government more information about those customers.

In new guidance released today, the IRS said it will direct foreign banks to spend less time identifying and monitoring accounts of people with less than $50,000 and more effort focusing on U.S. account holders with more than $500,000 and with private banking relationships.

The information provided today should help financial institutions figure out the process of identifying U.S.-linked accounts, even though the IRS didn’t answer every question that companies have raised, said Barbara Angus, a partner at Ernst & Young LLP in Washington.

“It has operational impacts on financial institutions, on all aspects of their business, on IT systems, on the account opening process,” she said. “That kind of impact, again, is sort of why information is needed, and needed as soon as possible.”

The requirements, passed by Congress last year, take effect in 2013. They force foreign banks to tell the IRS about U.S. account holders as part of the agency’s effort to combat offshore tax evasion. Banks based outside the U.S. face 30 percent withholding on certain payments from inside the U.S. if they fail to share information with the IRS.

Implementing the Rules

An overall goal of the regulatory process is to get information to stakeholders as quickly as possible, according to a Treasury Department official who spoke on condition of anonymity to describe the agency’s approach. The administration is working on the regulation and knows that financial institutions are anxious to know how to implement the rules by the effective date, the official said.

Financial institutions from around the world, including Allianz SE (ALV), Aegon NV (AGN) andCommonwealth Bank of Australia (CBA), filed comments with the IRS after the agency released its first set of guidance on the law last August.

The rules are part of a broader effort by the U.S. government and the IRS to combat offshore tax evasion. Commissioner Douglas Shulman has made the issue one of his top priorities.

Voluntary Disclosure

Separately, the IRS is operating a voluntary disclosure initiative, which encourages taxpayers with undeclared accounts and income to come forward, pay penalties and likely avoid prosecution. The deadline for entering that program is Aug. 31.

About 15,000 taxpayers came forward during a similar program in 2009, and the IRS has been using the information it gleaned during that process to pursue others, Shulman said April 6. Yesterday, the agency asked a court for a summons that would require HSBC Holdings Plc (HSBA) to disclose information about its U.S. clients with accounts in India.

The information released today deals largely with foreign financial institutions and doesn’t address other questions attorneys have about how the new law will work, said Charles Kolstad, an attorney at Venable LLP in Los Angeles who represents the owners and beneficiaries of trusts.

The law, he said, imposes new reporting requirements on beneficiaries of foreign trusts, even in cases where the beneficiaries may not know trust details. That’s an area where the IRS will need to release future guidance.

“This really doesn’t answer most of the questions that people have,” Kolstad said.

LINK


http://www.bloomberg.com/news/2011-04-08/irs-focuses-on-wealthiest-in-foreign-bank-account-reporting-plan.html

IRS Video Portal: Compliance with Bank Secrecy Act for MSBs

Transcript:

Hello. I’m Kevin McCarthy of the IRS and I would like to discuss with the money services business market segment how an effective anti-money laundering or AML program can assist you in complying with the Bank Secrecy Act, also known as the BSA.

Money services business, or MSB, activities may include:

The issuance and sale of money orders and traveler’s checks;
Money transmission;
Check cashing; and/or
Currency exchange or dealing.
Any of the financial services offered by an MSB carries the risk of being used in money laundering or terrorist activities. This risk is determined by the types of products offered and customers served, high-risk geographic areas, and by the absence of a comprehensive anti-money laundering or AML program.

An AML program is the key component in managing your risk. The program must be sufficient to allow the MSB to identify, monitor, mitigate and, when required, report financial activity. It must also comply with BSA regulatory requirements.

IRS BSA examiners and state regulators conduct examinations to determine compliance with the BSA. Examinations are risk-based and focus on the AML program. The examiner will consider:

The risk assessment of the MSB,
The strength of the MSB’s AML program,
The training provided to personnel,
The quality of independent testing conducted, and
The MSB’s compliance history.
Generally, an examination will include:

An on-site visit and walk-through of the business,
Interviews with key employees such as personnel conducting transactions and the AML compliance officer,
Examination of the AML program to assess its adequacy, and
Examination of the books and records, to include limited transaction testing.
More information is available in the Bank Secrecy Act/Anti-Money Laundering Examination Manual for Money Services Businesses.  This manual can be found at IRS.gov by entering keywords “money services businesses” or at FinCEN.gov. Click on the MSB link. I hope this information is useful and assists you in complying with the Bank Secrecy Act.

LINK

Anti-Money Laundering Laws & Practices for Banks, Individuals & Corporations
 
The author discusses the requirements of the United States’ anti-money laundering laws and the banking industry’s standard practices and procedures for implementing these legal requirements. He also explains some related principles of offshore banking, wire transfers, Know Your Customer, Economic Substance, and other pertinent practices related to anti-money laundering issues and litigation.
 
The United States has passed eight major laws that define how banks and the country as a whole deal with money laundering:
 
1. Bank Secrecy Act of 1970
 
Key Points:
 
● The Grand Daddy of anti-money laundering laws. It established the original requirements for recordkeeping and reporting by banks, individuals, and some other financial institutions.
 
● Required banks to file Currency Transaction Reports (“CTRs”) with the Financial Crimes Enforcement Network (“FinCEN”) at the IRS’s Detroit Computing Center for any cash – read “currency” – transactions over $10,000.
 
 
● Established basic Know Your Customer requirements for banks.
 
2. Money Laundering Control Act of 1986
 
Key Points:
 
● Addressed the prohibition of deposit structuring intended to avoid the $10,000 reporting ceiling. 
 
3. Anti-Drug Abuse Act of 1988
 
Key Points:
 
● Began requiring car dealers and real estate closing personnel to file CTRs for transactions involving more than $10,000.
 
● Required sellers of financial instruments of $3,000 or more to verify the identity of the purchaser.
 
4. Annunzio-Wylie Anti-Money Laundering Act of 1992
 
Key Points:
 
● Instituted the Suspicious Activity Report (“SAR”) form as a replacement for the previously used Form 366 Criminal Referral. SARs are filed with FinCen at the IRS’s Detroit Computing Center.
 
● Began requiring banks to verify and maintain records regarding wire transfers. 
 
5. Money Laundering Suppression Act of 1994
 
Key Points:
 
● Required every Money Services Business to register with FinCEN.
 
● Facilitated the CTR exemption process for legitimate businesses that handle large amounts of cash.
 
● Required banking agencies to review and enhance their anti-money laundering training, and develop anti-money laundering examination procedures.
 
● Required banks to establish improved procedures for referring suspected cases of anti-money laundering to the appropriate law enforcement officials.
 
6. Money Laundering and Financial Crimes Strategy Act of 1998
 
Key Points:
 
● Required banking agencies to include anti-money laundering training in their bank examiner training programs.
 
● Required the formulation of an overall national strategy to deal with money laundering.
 
● Established the ability to target anti-money laundering enforcement activities against specific 
geographical areas, industry sectors, or financial institutions where warranted.
 
7. USA PATRIOT Act a/k/a/ Uniting and Strengthening America by Providing Appropriate Tools to Restrict, Intercept and Obstruct Terrorism Act of 2001. Title III of the USA PATRIOT Act is known as the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001.
 
Key Points:
 
● Strengthened customer identification procedures required of financial institutions.
 
● Required financial institutions to establish adequate due diligence procedures for offshore and foreign bank accounts.
 
● Prohibited United States financial institutions from doing business with foreign shell banks.
 
● Permitted the federal government to seize the assets of a bank that is holding assets of a person or entity that is laundering money.
 
● Improved information sharing between financial institutions and the U.S. government.
 
● Expanded the anti-money laundering program requirements to all financial institutions.
 
● Permitted imposing more strict anti-money laundering measures on jurisdictions, institutions, or transactions that are deemed to be more likely to be engaged in money laundering activities.
 
● Required federal banking agencies to consider a bank’s anti-money laundering practices while considering approval of proposed bank mergers and bank or branch acquisitions.
 
8. Intelligence Reform & Terrorism Prevention Act of 2004
 
Key Points:
 
● Permitted requiring specific financial institutions to report cross-border electronic transmittals of funds.
 
As you can tell from the development of American anti-money laundering laws over the last forty years, the government has gradually increased the intensity of the preventive and detection measures in response to the failure or inadequacy of the previously enacted measures. For example, the introduction of the CTR in 1970 did not foresee the obvious inevitability of structuring transactions; yet structuring was not addressed until sixteen years later in 1986.
 
For another example, focusing law enforcement attention on a specific area, such as Columbia, was not addressed until 1998, some 28 years after the Bank Secrecy Act, even though it was known in 2006 that 70% of the world’s cocaine originated in Columbia. (Source: United States National Drug Intelligence Center.)
 
Clearly, anti-money laundering laws are generally one step behind what needs to be in place in order to be effective.
 
Cash versus Wire Transfers
 
Initial anti-money laundering efforts were primarily aimed at detecting cash deposits by criminals into financial institutions so that they could then move around their funds. As time passed, it became obvious that a great deal of criminally-sourced funds were making their way into the financial system; and money laundering detection efforts expanded their initial concentration on funds entering the system and began to look at funds already in the system and moving around by wire transfer, check and other means.
 
These detection efforts involve enhanced due diligence on the part of financial institutions and their knowledge of their customers’ businesses and at least basically how they operate. This is sometimes referred to as the “Know Your Customer” policy. The goal is for the bank to understand the Economic Substance of their customers’ businesses so that the bank can understand how the funds transfers under consideration fit into their customers’ normal business patterns.
 
Verification of identification for individuals and companies opening new accounts has been a part of effective anti-money laundering procedures for a long time; and this is easier to accomplish than the Know Your Customer aspect. Nevertheless, it is not unreasonable that banks should be required to have a face-to-face meeting with their customers and understand their business model and their standard operating system. 
 
Once a bank has this understanding of who their customer is and how they operate, the bank can be alert as to any out-of-pattern account activity that could indicate money laundering going on in the account.
 
If a bank does detect out-of-pattern activity, the bank should immediately file a Suspicious Activity Report with FinCEN through the IRS’s Detroit Computing Center, as directed on the SAR form.
 
One often overlooked area that may give rise to money laundering is when one company acquires another. The problem that can occur is that a criminal-controlled company can acquire a legitimate company that already is a bank customer. This makes it important that the bank re-investigate its customer anytime that the customer is acquired by another entity.
 
Particular attention should be paid to wire transfers and other transactions to or from so-called offshore banks, offshore bank accounts, or offshore entities that are located in areas known for their lax banking and financial policies.
 
Without blindly accusing any particular jurisdiction, here is a list of countries that are generally considered by the financial community to be suspicious locations for inbound or outbound financial funds transfers, and that warrant close scrutiny:
 
Andorra, Anguilla, Antigua and Barbuda, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Cyprus, Dominica, English Channel Islands of Jersey and Guernsey, Ghana, Gibraltar, Hong Kong, Ireland, Isle of Man, Labuan (in Malaysia), Liechtenstein, Luxembourg, Madeira, Malta, Macau, Mauritius, Monaco, Montserrat, Nauru, Panama, Saint Kitts and Nevis, Seychelles, Singapore, Switzerland, and the Turks and Caicos Islands.
 
This is what banks need to know and do in order to effectively deal with the prevention of money laundering:
 
1. Establish and have in place complete anti-money laundering policies and procedures.
 
2. Document these policies and procedures in either your existing policy and procedure manual(s) or in a separate manual.
 
3. Make sure that all existing and new employees that are in a position to observe money laundering activities are informed regarding money laundering and the bank’s means for preventing it.
 
4. Make sure that the established policies and procedure manuals are available for reference by the staff when operational questions arise.
 
5. Make sure that all employees know to whom they should refer any questions on this subject when they arise.
 
6. Be aware of any unusual or out-of-pattern funds transfer activities, and report them on a Suspicious Activity Report.
 
7. Don’t be afraid to turn down an account that you suspect might be involved in money laundering or any other illegal activity. You will be better off without it, and you may save your bank the kind of front page notoriety that it doesn’t want.
 
ABOUT THE AUTHOR: Don Coker
Expert witness and consulting services. Over 430 cases for plaintiffs & defendants nationwide, 107 testimonies, 12 courthouse settlements, all areas of banking and finance. Listed in the databases of recommended expert witnesses of both DRI and AAJ. Clients have included numerous individuals, 60 banks, and governmental clients such as the IRS, FDIC.
 
Employment experience includes Citicorp, Ford Credit, and entities that are now JPMorgan Chase Bank, BofA, Regions Financial, and a two-year term as a high-level governmental banking regulator. B.A. degree from the University of Alabama. Completed postgraduate and executive education work at Alabama, the University of Houston, SMU, Spring Hill College, and the Harvard Business School.
 
Called on by clients in 27 countries for work involving 57 countries. Widely published, often called on by the media.
 
Copyright Don Coker 
More information about Don Coker
 
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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