The Bank Secrecy Act (BSA) and Anti-Money Laundering (AML): A Comprehensive Guide to Its Pillars and Applicability Across Industries
AML-A001 BSA AML Pillars Compliance Applicability
Introduction
The Bank Secrecy Act (BSA), enacted in 1970, and its companion framework of Anti-Money Laundering (AML) regulations, form the backbone of the United States’ financial crime prevention system. Together, they establish a legal and regulatory foundation designed to combat money laundering, terrorist financing, and other illicit financial activities.
Over the decades, the BSA has evolved through amendments such as the USA PATRIOT Act (2001) and the AML Act of 2020, expanding obligations to cover new risks like terrorist financing and virtual assets. Today, BSA/AML compliance is not limited to banks — it applies to broker-dealers, insurance companies, fintech firms, casinos, money services businesses, and even individuals in certain circumstances.
This guide explores:
The history and purpose of the BSA/AML Act
The five pillars of compliance
Its applicability across industries and individuals
Practical case scenarios and compliance checklists
The Five Pillars of BSA/AML Compliance
The five pillars form the foundation of every compliance program:
Designation of a Compliance Officer
A qualified individual responsible for oversight.
Example: A mid-sized bank appoints a VP of Compliance with direct reporting to the board.
Internal Policies, Procedures, and Controls
Written frameworks tailored to risk.
Example: A fintech firm documents procedures for monitoring peer-to-peer transfers.
Ongoing Employee Training
Regular, documented training for staff.
Example: A casino trains floor staff to recognize suspicious betting patterns.
Independent Testing and Review
External or internal audits to validate effectiveness.
Example: A broker-dealer hires a third-party consultant to test its AML program.
Customer Due Diligence (CDD)
Identification and verification of customers and beneficial owners.
Example: An insurance company verifies the beneficial owner of a life policy.
Applicability Across Industries
1. Banking and Credit Unions
Obligations: SARs, CTRs, CDD, CIP.
Case Scenario: A bank detects structured deposits just under $10,000 — files a SAR.
Checklist:
SAR/CTR filing procedures
Risk-based monitoring software
Board-approved AML policy
2. Broker-Dealers and Securities Firms
Obligations: AML programs under SEC/FINRA rules.
Case Scenario: Suspicious trading linked to shell companies triggers a SAR.
Checklist:
Trade surveillance systems
Beneficial ownership checks
Independent AML audits
3. Insurance Companies
Obligations: AML programs for life insurance and annuities.
Case Scenario: Policyholder attempts early cash surrender with unexplained funds.
Checklist:
Risk-based AML program
Beneficial owner verification
SAR filing procedures
4. Money Services Businesses (MSBs)
Obligations: Registration with FinCEN, AML programs.
Case Scenario: A money transmitter detects repeated transfers to high-risk jurisdictions.
Checklist:
FinCEN registration
Transaction monitoring
KYC/KYB procedures
5. Fintech and Virtual Assets
Obligations: AML programs, KYC, transaction monitoring.
Case Scenario: A crypto exchange detects layering through multiple wallets.
Checklist:
Blockchain analytics tools
Enhanced due diligence for high-risk customers
SAR filing procedures
6. Casinos and Gaming
Obligations: AML programs for casinos with >$1M in annual revenue.
Case Scenario: A player buys chips with large cash deposits, cashes out quickly.
Checklist:
CTR filing for cash transactions
Suspicious betting monitoring
Staff training
7. Individuals
Obligations:
FBAR (FinCEN Form 114) for foreign accounts >$10,000.
Form 8300 for cash payments >$10,000 in trade/business.
Case Scenario: A U.S. resident with multiple foreign accounts files FBAR via BSA E-Filing.
Checklist:
Track aggregate balances
File FBAR annually
File Form 8300 for qualifying transactions
Why BSA/AML Compliance Matters
Legal Risk: Non-compliance can result in fines exceeding $600M.
Reputational Risk: Institutions face loss of trust if linked to financial crime.
Operational Risk: Weak compliance exposes firms to fraud and regulatory scrutiny.
Strategic Advantage: Strong compliance builds credibility and client confidence.
Conclusion
The BSA/AML Act is more than a regulatory requirement — it is a cornerstone of financial integrity. By understanding its five pillars and recognizing its applicability across industries and individuals, organizations can remain compliant while strengthening their trustworthiness and resilience.
For advisory, compliance program design, or training tailored to your industry, FMQ Consulting provides expertise in audit, and regulatory frameworks — ensuring your business stays ahead of both risks and opportunities.
