Module IVLegislation

The purpose of these laws is to◦ combat money laundering and other financial

crimes such as theft, bribery, embezzlement, tax evasion, etc.

◦ require businesses that deal in large sums of cash help the government track suspicious currency transactions.

◦ Hold the criminal, the financial institution, and the employee responsible for willful violation of the law.

Congress has passed many laws, over time, to combat money laundering including the following:◦ Bank Secrecy Act of 1970 (P.L. 91-508)

Prevent tax evasion and provide tools to fight organized crime.

Verify the identity of customers and keep certain basic records of customer transactions, including cancelled checks and debits, signature cards, and statements of account.

Impose civil and criminal penalties for noncompliance with its reporting requirements.

Improve detection and investigation of criminal, tax, and regulatory violations

The BSA is enforced by the US Treasury Department, FinCEN

Money Laundering Control Act of 1986 (P.L. 99-570)◦ made money laundering a federal crime, creating

three new criminal offenses for money laundering activities by, through, or to a financial institution. This includes: Knowingly helping launder money derived from

criminal activity. Knowingly (including being willfully blind) engaging

in a transaction of more than $10,000 that involves property or funds derived from criminal activity.

Structuring transactions to evade BSA reporting requirements.

Anti-Drug Abuse Act of 1988 (P.L. 100- 690)-reinforced anti-money laundering efforts in several ways◦ Significantly increases in civil and criminal penalties for

money laundering and other BSA violations◦ Requires strict identification and recording of cash

purchases of certain monetary instruments◦ Permits the Department of the Treasury to require certain

financial institutions in specific geographic or "target" areas to file additional BSA reports of currency transactions in amounts less than $10,000 by use of "Geographic Targeting Orders.”

◦ Directs the Department of the Treasury to negotiate bilateral international agreements covering the recording of large U.S. currency transactions and the sharing of such information.

1988 Money Laundering Prosecution Act◦ Expanded the definition of monetary institution to

include car dealers and others.◦ Required the verification of the identity of

purchasers of monetary instruments over $3,000.

Annunzio-Wylie Anti-Money Laundering Act of 1992 (P.L. 102-550)◦ strengthened penalties for financial institutions

found guilty of money laundering by giving the US Treasury the power to require financial institutions to report suspicious activities

Money Laundering Suppression Act (MLSA) of 1994 (P.L. 103-325)◦ Requires each MSB to be registered by an owner

or controlling person of the MSB.◦ Requires every MSB to maintain a list of

businesses authorized to act as agents in connection with the financial services offered by the MSB.

◦ Makes operating an unregistered MSB a federal crime.

◦ Recommended that states adopt uniform laws applicable to MSBs.

Money Laundering and Financial Crimes Strategy Act of 1998 (P.L. 105-310)◦ Requires the President to develop a national

strategy for combating money laundering and related financial crimes and to submit such strategy each February 1st to Congress.

◦ Requires the Secretary of the Treasury to designate certain areas—by geographical area, industry, sector or institution—as being vulnerable to money laundering and related financial crimes.

USA PATRIOT Act of 2001 (P.L. 107-56)-United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001

This requires◦ Establishment of anti-money laundering compliance

programs by all financial institutions.◦ Establishment of a confidential communication system

between government and the financial services industry.◦ Implementation of customer identification procedures for

new accounts.◦ Enhanced due diligence for correspondent and private

banking accounts maintained for non-U.S. persons◦ Establishment of a highly secure network by FinCEN for

electronic filing of BSA reports.

Civil Penalties◦ Range from the amount of the transaction up to $100,000 or

$25,000 for willful violations by any….. Partner Director Employee

◦ Penalties can be up to $1,000 for each record keeping violation (records must be kept for 5 years).

These are maximum penalties for willful failure to comply.

Criminal Penalties◦ Record keeping violations

Up to $10,000 fine and / or five years imprisonment.◦ Willful violation of the BSA

Up to $500,000 and / or up to ten years imprisonment.

OFAC is the law enforcement agency that administers economic and trade sanctions against targeted countries, terrorists, international drug traffickers, and those engaged in the proliferation of weapons of mass destruction.

OFAC publishes:◦ A list of countries that American firms are prohibited from

conducting business with.◦ A list of persons and entities whom are prohibited from

transacting any business in America through American firms, or with American citizens.

Penalties for non-compliance have ranged from $11,000 all the way up to $1 million per transaction, and include possible criminal prosecution.

The US Treasury imposed sanctions against England in 1812 for the harassment of American sailors.

During the Civil War, sanctions were imposed on the Confederate states.

Nazi Germany’s assets were frozen during WWII as well as the countries they invaded.

Chinese and North Korean assets were blocked in 1950.

Cuba in 1962. Drug Cartels in the 1970’s to the present. Terrorists in 1990’s and post 9/11/2001. Violators of human rights.

If the system your firm uses to check the OFAC list alerts you to a potential OFAC “hit”,STOP THE TRANSACTION IMMEDIATELY!!And advise the customer that the transaction

cannot be completed.◦ Alert your supervisor and compliance officer.◦ The compliance officer will further qualify the

alert, check the FAQs on FinCEN’s website and if necessary, call the OFAC Hotline (800-540-6322).