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Anti-Money Laundering (AML) Compliance

The Patriot Act, which amends the Bank Secrecy Act (BSA), was adopted in response to the September 11, 2001 terrorist attacks. The Patriot Act is intended to strengthen U.S. measures to prevent, detect, and prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) regulations that impact the banking, financial, and investment communities.

As a result of the Patriot Act, all categories of money services business (MSB) financial institutions are subject to BSA regulation under 31 CFR part 103 and must implement an anti-money laundering compliance program including:

Regulatory Requirements

Anti-money laundering (AML) regulations were put in place to prevent a money services business (MSB) from being used to facilitate money laundering and the financing of terrorism. AML regulations stipulate at an AML compliance program be setup, with the minimum requirements:

Incorporate policies, procedures & internal controls to comply with the Bank Secrecy Act (BSA) including:
Verifying customer identification
Filing reports
Detecting suspicious activity
Creating and retaining records
Responding to law enforcement requests

Designate a compliance officer to assure daily compliance with the program. The responsibilities of such person include assuring that:

The business properly files reports and creates and retains records
The compliance program is updated as necessary to reflect current requirements and related guidance issued by the Department of Treasury
The business provides appropriate training and education

Provide for ongoing training of appropriate personnel concerning their responsibilities under the program, including training in the detection of suspicious transactions.

Provide for an independent review to monitor and maintain an adequate program.
Such review may be conducted by an officer or employee of the MSB so long as the reviewer is not the person designated as the compliance officer.

In addition, 31 CFR 103 provides that compliance programs should be commensurate with the risks posed by the location and size of, and the nature and volume of financial services provided by, the money services business.

Compliance Tasks

General anti-money laundering (AML) compliance activities include the following:

Risk Assessment
Updating of policies and procedures
Gap Analysis
Employee Training
Account Opening Procedures
Client-Vetting Due Diligence
Transaction Monitoring and Review
Record-keeping and Retention
Suspicious Activity Reporting (SAR Drafting)
Look-back Projects
Know Your Customer (KYC) Remediation
System Validation

Recordkeeping Forms

The following is a list of the most important forms that are required to be completed and stored:

Suspicious Activity Report (SAR S-F)
Suspicious Activity Report for Insurance Companies (proposed) (SAR-IC)
Blocked Properties Reporting Form (AML)
Voluntary Form for Reporting Blocked Transactions (AML)
Voluntary Form for Reporting Rejected Transactions (AML)
Report of Foreign Bank and Financial Accounts (FBAR)
Report of International Transportation of Currency or Monetary Instruments (CMIR)
Currency Transaction Report (CTR)