If you are a member of a fraud or compliance team at a bank, credit union, fintech, or other type of organization involved in moving money, chances are you have had to file a report with the government due to suspected fraud, money laundering, or other similar activity. This is nothing new; the US government established rules in 1970 via the Bank Secrecy Act (BSA) requiring certain financial institutions and businesses to assist U.S. government agencies in detecting and preventing money laundering.
Specifically, the BSA requires these entities to:
- Keep records of cash purchases of negotiable instruments,
- File reports of cash transactions exceeding $10,000 (a daily aggregate amount), and
- Report suspicious activity that might indicate possible criminal activity (e.g., money laundering, tax evasion).
It’s also important to note that the Financial Crimes Enforcement Network (FinCEN), a U.S. Department of the Treasury Bureau, administers the BSA. The law has been enhanced by various pieces of legislation, including the USA PATRIOT Act, which further strengthened the requirements to prevent, detect, and prosecute money laundering and the financing of terrorism.
What sort of institutions are required to comply with BSA reporting? Likely more than you think.
Entities that need to report under the BSA include:
- Banks and Credit Unions
- Money Service Businesses (MSBs), including check cashing, money orders, currency dealing/exchange, and money transmitting
- Casinos and Card Clubs
- Brokers or Dealers in Securities
- Mutual Funds
- Insurance Companies that issue or underwrite certain products
- Futures Commission Merchants and Introducing Brokers in Commodities
- Dealers in Precious Metals, Precious Stones, or Jewels
- Operators of Credit Card Systems
- Loan or Finance Companies
Additionally, any individual or organization engaged in a trade or business and receiving more than $10,000 in cash in a single transaction or related transactions must file Form 8300 with the IRS.
One of the most common reports that banks deal with are SARs (Suspicious Activity Reports). These reports are filed for various reasons, including activities that suggest a customer might be laundering money, committing wire or check fraud, attempting to subvert reporting requirements for cash transactions, cyber crimes, and other illicit activities.
SARs are comprised of multiple sections. Not only must the information about the reporting organization be included, but also details about where the activity occurred (which may or may not be the same as the filing organization), the people or businesses involved (which may be more than one), and the type of activity that occurred which was found to be suspicious.
The process of building a SAR might include gathering information from multiple events (transactions, onboarding events, account opening, etc), numerous people or businesses, other financial organizations, and more. The more information that is required, the lengthier a SAR can be.
On top of all of that, SARs include a free-form narrative section, where the filer is expected to provide more details about the observed activity and subjects. Altogether, SARs can be a very lengthy form to fill out, and we’ve been told that the narrative alone can take anywhere between 30 minutes and 3 hours, depending on the situation.
How do these types of institutions report?
The most basic way to file a report is by utilizing PDF files that are provided by FinCEN (a page of which can be seen above) and uploading them onto the BSA E-File website. This approach might feel simple, and it can be if you only occasionally file a report.
For those organizations that regularly file, it can become a cumbersome process. The lack of ability to pre-fill organizational info or data from case management systems, the unstructured open-endedness of trying to build a narrative, ensuring team members have the right credentials, and keeping track of filings all can make for a complicated and inefficient process.
At Effectiv, we recently released our own in-house BSA filing solution aimed at helping teams to create reports more efficiently. Starting with SARs, we have crafted a modern, more friendly experience than what most reporters are used to.
We have painstakingly recreated the well-known SAR report into a sleek, modern UI and added time-saving features such as the ability to standardize and pre-fill institutional information across all reports, import data from our case management system, and validate information on the fly to ensure that reports contain the proper information. We package these reports up into XML files that can be easily uploaded into the BSA E-File system, saving teams time and effort.
But this is just the first step in a wider range of powerful BSA compliance tools that we are creating. Our roadmap includes CTR (Currency Transaction Report) filing solutions, one-click direct filing with FinCEN, templates to assist with the cumbersome narrative creation process, status tracking, and much more!
Keep on the lookout for more compliance tools coming soon, and reach out to one of our team members if you are interested in taking advantage of our modern, efficient solutions.