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Sep29 - 23

Understanding the 5 Pillars of BSA/AML/OFAC Compliance

The Bank Secrecy Act (BSA), or the Currency and Foreign Transactions Reporting Act, is a landmark piece of legislation requiring financial institutions to assist U.S. government agencies in detecting and preventing money laundering. All financial institutions, including banks, broker-dealers, virtual currency businesses, and money services businesses, are subject to BSA regulations

To ensure compliance with these regulations, there are five key pillars that each institution must address. Understanding these requirements and how they contribute to preventing and detecting money laundering is critical to the success of financial services institutions.

Policy and Procedure Development

The foundation of any BSA/AML compliance program will be its internal policies. Institutions must establish clear controls, policies, and procedures tailored to their specific operations and risk profiles. These policies should cover all types of transactions and roles within the organization, ensuring that every activity complies with BSA/AML requirements.

Designation of a Compliance Officer

Every money services business (MSB) must designate a compliance officer responsible for overseeing the implementation and management of the BSA/AML compliance program. This officer should be well-versed in BSA/AML regulations and capable of identifying and managing the risks associated with the institution’s operations. The compliance officer must also be an expert on the institution’s compliance program and policies.

Ongoing Employee Training

Regular training is essential to ensure that all employees understand and can effectively implement compliance policies and procedures. Training should be comprehensive, addressing both the theoretical aspects of BSA/AML regulations and their practical application within the institution. It’s also important to keep accurate records of employee training activities.

Independent Testing and Review

To verify the effectiveness of the BSA/AML compliance program, independent reviews should be conducted regularly. These reviews test the program for risk or compliance issues, providing valuable insights into areas that may need improvement. The review should also provide a risk assessment of the institution.

The review cannot be conducted by the Compliance Officer, as this is not independent. Working with a third-party compliance consultant is recommended, especially for businesses that may be in the medium or high-risk categories.

Customer Due Diligence

Finally, institutions must perform due diligence regarding their customers. The Customer Due Diligence rule was added to the BSA to help improve transparency and prevent criminal activity. It involves four requirements:

  • Verifying the identity of customers
  • Verifying the identity of beneficial owners of companies with accounts, including anyone with at least 25% ownership or control of the business
  • Understanding the nature of customers’ business
  • Monitoring transactions for suspicious activity

Expert Guidance for BSA Compliance Programs

Complying with BSA/AML regulations can be complex, but with the right guidance, it is entirely manageable. Here at Bates Group LLC, we specialize in helping banks, money-transmitters, and other financial institutions navigate this complicated landscape. Our team of experts can assist you in developing a tailored BSA/AML compliance program, providing training for your employees, conducting independent reviews, and implementing customer due diligence procedures.

With our help, you can ensure that your institution remains compliant with BSA/AML regulations, protecting both your business and the integrity of the U.S. financial system. Contact us today to learn more about how Bates Group LLC can assist you in meeting these critical regulatory requirements.




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