The United States has taken advanced steps to overcome money laundering and terrorism funding in the shadow of the September 11, 2001, terrorist attacks. The USA Patriot Act of 2001 adjusts the Bank Secrecy Act (BSA) by authorizing all financial institutions to implement Anti-Money Laundering (AML) systems. The Act aims to improve the United States' strategies to avoid, identify, and punish money laundering and terrorist funding.
Suspicious Activity Reports (SARs) must be filed in the United States if a significant or suspicious transaction occurs, based on the requirements established by AML regulators. In addition, financial companies in the United States are also expected to follow comprehensive customer recognition systems to check each customer's true identity and prevent money laundering.
Being the world's largest economy and most influential national force, The United States plays a critical role in the international fight for money laundering and terrorist funding. The US is a member of the Financial Action Task Force (FATF) and has established a substantial AML/CFT policy that reflects international regulatory principles and implements severe sanctions for non-compliance. As a result, financial companies must be familiar with the applicable laws and learn how to comply to prevent these fines.
AML Regulators in the USA
FinCEN: One of the most important regulators of the US Treasury Department's principal AML/CFT, The Financial Crimes Enforcement Network (FinCEN), is the Financial Intelligence Unit of the United States (FIU). FinCEN is in charge of tracking banks, financial institutions, and entities and analyzing irregular transactions and transfers to tackle money laundering, terrorist financing, and other financial crimes. In addition, FinCEN collaborates with state and federal law enforcement authorities to exchange information to prevent financial crime.
OFAC: Responsible for monitoring and implementing the United States' economic and trade sanctions, in a similar AML/CFT capability to FinCEN, The Office of Foreign Assets Control (OFAC) is under the jurisdiction of the US Treasury Department. OFAC aims to prohibit banned nations, organizations, and people from committing financial and peripheral crimes such as money laundering and insurgency, drug trafficking, and arms proliferation.
AML/CFT Regulations in the States
The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act, was established in 1970 to stop terrorists from using financial services to conceal or launder their ill-gotten profits. If their customers cope with unusual cash trades of more than $10,000, the regulation forces financial firms to provide documentation to regulators. Although the legislation does not demand paperwork on transactions above $10,000, companies that accept more than $10,000 in cash from a single consumer must file IRS Form 8300 to comply with suspicious transactions and clients.
The USA Patriot Act is legislation that gives law enforcement authorities broad powers to investigate, indict, and prosecute terrorists immediately after September 11, 2001, terrorist attacks in the United States. It has resulted in stricter punishments for those who conduct and help violent acts. Through increased law enforcement and improved money laundering control, the USA Patriot Act deters and punishes terrorist acts in the United States and overseas. It also encourages terrorist investigations to use research methods for organized crime and drug trafficking control. As a result, officers, FBI investigators, federal judges, and intelligence agencies became better able to exchange facts and details about individuals and plots, improving community safety.
Other necessary AML/CFT regulations in the USA:
Money Laundering Control Act (1986)
Money Laundering Suppression Act (1994)
Money Laundering and Financial Crimes Strategy Act (1998)
Suppression of the Financing of Terrorism Convention Implementation Act (2002)
Intelligence Reform and Terrorism Prevention Act (2004)
Implications of Failure to Comply with AML Regulations
Non-compliance with AML laws and regulations in the United States can have consequences. Still, violations can result in criminal and civil charges, fines, and jail sentences in more difficult situations. Penalties may be levied under the BSA on each division or location found to comply with AML regulations, and for each day the violation happens. Fines imposed by the BSA will vary from $10,000 to $100,000 a day (for failure to register international financial agency transactions) (for failures in customer due diligence). Violation of AML legislation is also expected to result in the loss of assets and funds associated with the illegal operation.
Financial fines and jail sentences are not the only repercussions of non-compliance with AML regulations. Firms that are found to have violated AML/CFT laws also suffer reputational harm and may be subject to US Treasury Department restrictions.
Compliance with the US AML/CFT Regulations
Under the light of the Bank Secrecy Act and the USA Patriot Act regulations, banks and financial institutions are required to take a risk-based approach to AML/CFT and implement measures.
AML program: Firms must establish and execute an internal AML/CFT policy that is personalized to the risk profile of their clients and market sectors. Written rules and practices should be included in the curriculum, outlining the firm's approach to:
- Due diligence from the customer
- Transaction detection and screening
- Scanning for negative media and PEPs
- Screening for sanctions
Currency Transaction Reporting: the financial companies determined under the BSA regulations are required to fill in the Currency Transaction Reports.
BSA Training: Firms should ensure that their employees undergo the necessary training to meet their enforcement obligations. In addition, firms must ensure that a plan is in action to provide continuing instruction to staff following the developments in AML rules.
Reporting and Record-Keeping: Firms must accurately track reports on their clients and submit information to the BSA when their customers participate in suspicious purchases or financial practices to comply with the BSA. Assent of irregular action reports (SARs) for transactions above $5,000 or transactions accused of violating the BSA is one of these obligations.
Compliance Officer: A special enforcement officer should oversee their company's AML policy and coordinate audits. The appointed AML officer must have appropriate authority (ideally management level) and professional expertise to carry out their duties efficiently.
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