The Bank Secrecy Act1 (BSA), enacted in 1970, was originally a reporting and record-keeping statute designed to create a paper trail for law enforcement to identify, and potentially investigate, individuals moving large amounts of cash through the financial system. Congress believed that requiring financial institutions to report certain types of transactions, such as deposits or withdrawals in cash in excess of $10,000, and to institute certain record-keeping functions, would be a minimal imposition on the financial institutions with considerable law enforcement value.2 Aside from reporting and recordkeeping, however, the original BSA also contained the seed of a potential programmatic compliance requirement. This seed has grown over the past 30 years into what has recently become a major focus of criminal enforcement: a financial institution’s obligation to implement and operate an effective anti-money laundering (AML) program, with serious criminal consequences for willful non-compliance. Recent enforcement efforts, coupled with the BSA’s expansive definition of what constitutes a “financial institution,” have resulted in a landscape in which the full potential for criminal enforcement is quite broad—encompassing many non-bank financial institutions that have otherwise operated without scrutiny.

Evolution of Programmatic Requirements

The BSA began predominantly as a reporting and record-keeping statute, establishing a series of reporting requirements for a broad range of financial institutions, primarily concerning cash transactions that met certain monetary thresholds, such as Currency Transaction Reports (CTRs).3 Because the BSA focused on tracing a cash flow, the definition of “financial institution” was intentionally broad and included numerous cash-intensive businesses that may not have ordinarily been considered a financial institution, such as dealers in precious metals, telegraph companies, and travel agencies.4 The BSA also required that a narrower category of financial institutions maintain critical records designed to assist law enforcement in tracking the proceeds of criminal conduct.5