There are few things that cause more anxiety for bankers than an email from the Bank Secrecy Act/Anti Money Laundering investigation team inquiring about transactional activity for one of their clients as it relates to the Bank Secrecy Act and reporting requirements. Passed in 1970, the Bank Secrecy Act works to ensure U.S. Financial Institutions assist U.S. Government Agencies in detecting and preventing money laundering activity. With the passing of the U.S. Patriot Act in October of 2001 we saw amendments to the Bank Secrecy Act that put more onus on financial institutions to identify their clients -you’ll hear this referred to as ‘Know Your Client’ through the customer identification program that banks are required to have in place. In that process they’re looking for a clear picture of your business structure, operations, and intentions. The information you provide to your financial institution at the time of account opening sets the stage for how the transactional activity is monitored throughout the life of your relationship with that bank.
When the BSA / AML Officer engages with your banker they are doing so as a requirement of federal regulation to ensure the transaction, or as I often found in the cannabis space, multiple transactions, were compliant with bank policies and federal regulations. Banks are required to monitor and report suspicious activity to the Financial Crimes Enforcement Network (FinCEN) for further review and investigation and they take that responsibility seriously. However, they will do their internal due diligence on the activity in question to determine if it is within compliance of transactional requirements before filing an official report.
Having spent 15 years working directly with midsize to large corporate clients I was well aware of the requirements around transactional monitoring, after all continued compliance training is one of the five pillars of BSA/AML Compliance requirements for financial institutions meaning all employees of financial institutions are required to take and pass annual BSA/AML training, with