Bank Secrecy Act (BSA)

The Bank Secrecy Act (BSA) is legislation created in 1970 to prevent financial institutions from being used as tools by criminals to hide or launder their ill-gotten gains. The law requires banks and other financial institution to provide documentation such as currency transaction reports to regulators. Such documentation can be required from banks whenever their clients deal with suspicious cash transactions that involve sums of money in excess of $10,000. This grants authorities the ability to more easily reconstruct the nature of the transactions.

This legislation is also known as the "Currency and Foreign Transactions Reporting Act."

The BSA was put into action to better identify when money laundering is used to further a criminal enterprise, support terrorism, cover up tax evasion or disguise other unlawful activities. The legislation saw early use to counteract the funding of criminal organizations but soon came into use to also address the funding of terrorist groups.

Criminals and fraudsters use money laundering as a means to hide their illicit actions under the color of legitimacy. Cash, rather than traceable electronic transactions, tends to be the preferred means of buying illicit goods and services. Money laundering tactics are employed to disguise those cash sources of revenue as legitimate transactions.

The law does not require every transaction exceeding $10,000 to be documented. According to the Internal Revenue Service, there is a general rule that any person in a trade or business must file Form 8300 if their business receives more than $10,000 in cash from one buyer. This can be the result of a single transaction or of two or more related transactions. The rule can apply to an individual, a company, corporation, partnership, association, trust, or an estate. Form 8300 must be filed by the 15th day after the cash transaction took place. This requirement is applicable if any part of the cash transactions occurs within the United States, its possessions, or territories.

The legislation maintains a list of exceptions that do not call for such scrutiny. Government departments/agencies and companies listed on the major North American exchanges are examples of exempt parties.

While this act can be useful in fighting criminal activity, the BSA has drawn criticism because there are very few guidelines defining what is considered suspicious. Law enforcement agencies also do not need to obtain a court order to gain access to the information.

The Office of the Comptroller of the Currency regularly examines banks, federal savings associations, and other institutions for compliance with the BSA.