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BSA/AML/OFAC Compliance in the United States


Money laundering and terrorism financing laws in the United States?

In the United States money laundering and terrorism financing are serious offences and is governed by several key statutes and regulations including the Bank Secrecy Act, the USA PATRIOT ACT and the Money Laundering Control Act (MCLA).

  • Bank Secrecy Act (BSA/AML Act) - the BSA is the cornerstone of AML/CFT legislation in the United States and requires financial institutions to establish and maintain robust AML programs including customer identification and due diligence procedures, record-keeping and reporting of certain transactions to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
  • USA Patriot Act - the USA Patriot Act was enacted in response to the 9/11 terrorist attacks and expanded the AML/CTF obligations and provided law enforcement with additional tools to combat money laundering and terrorism financing. It introduced provisions such as Section 326, which mandates customer identification and verification requirements for financial institutions, and Section 311, which allows the Treasury Department to designate foreign jurisdictions, financial institutions, or transactions as primary money laundering concerns and impose special measures.
  • Money Laundering Control Act (MLCA) - the MLCA is a federal law that criminalises money laundering activities. It defines money laundering as engaging in financial transactions involving proceeds of specified unlawful activities with the intent to conceal or disguise the nature, source, ownership, or control of those proceeds.


Key obligations that reporting entities have under American laws?

The key obligations under the various AML/CFT laws include:

  • Customer Due Diligence (CDD) - financial institutions, including banks, credit unions, money services businesses, securities brokers and dealers, and casinos, are required to establish and implement risk-based CDD measures. This includes verifying the identity of customers, obtaining beneficial ownership information, and assessing the risk associated with each customer.
  • Suspicious Activity Reporting (SARs) - financial institutions must file suspicious activity reports (SARs) with the Financial Crimes Enforcement Network (FinCEN) when they detect or suspect transactions involving money laundering, terrorism financing, or other illegal activities. SARs should be filed promptly after the detection of suspicious activity.
  • Currency Transaction Reporting - financial institutions must file currency transaction reports (CTRs) with FinCEN for cash transactions exceeding a certain threshold (currently set at USD$10,000) in a single business day. This requirement helps track large cash transactions and potential money laundering activities.
  • Record-Keeping - financial institutions must maintain records of transactions, customer identification information, and supporting documentation for a designated period, typically five years. These records should be readily available for examination by regulatory authorities.
  • Compliance Programs - financial institutions are expected to establish and maintain effective anti-money laundering (AML) compliance programs. This includes implementing internal policies, procedures, and controls to detect, prevent, and report money laundering and terrorism financing activities. Staff training and independent audits are important components of these programs


ML/TF regulators in United States and what functions do they perform?

In the United States, the regulators responsible for combating money laundering and terrorism financing include:

  • Financial Crimes Enforcement Network (FinCEN) - FinCEN is a bureau of the U.S. Department of the Treasury. The Director of FinCEN is appointed by the Secretary of the Treasury and reports to the Treasury Under Secretary for Terrorism and Financial Intelligence. FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.  FinCEN carries out its mission by receiving and maintaining financial transactions data; analysing and disseminating that data for law enforcement purposes; and building global cooperation with counterpart organisations in other countries and with international bodies.  FinCEN exercises regulatory functions primarily under the Currency and Financial Transactions Reporting Act of 1970, amended by the USA PATRIOT Act of 2001 and other legislation, which is commonly referred to as the "Bank Secrecy Act" (BSA).
  • Office of Foreign Assets Control (OFAC) - The OFAC administers and enforces economic and trade sanctions against targeted foreign countries, entities, and individuals, as well as counter-terrorism-related sanctions. Financial institutions are required to screen their customers against OFAC's list of sanctioned individuals and entities and freeze any assets or transactions related to them.
  • Foreign Account Tax Compliance Act (FATCA) - FATCA was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets to the Internal Revenue Service (IRS).
  • Securities and Exchange Commission (SEC) - The mission of the SEC is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation.  The SEC has imposed AML requirements in broker-dealers and registered investment advisers to prevent money laundering through the securities markets. The United States actively cooperates with international counterparts in combating money laundering and terrorism financing. This involves exchanging information, cooperating on investigations, and providing assistance to other jurisdictions when requested.


Industry sectors subject to ML/TF regulations?

In the United States the main industries that are regulated under AML/CFT laws include:

Banks and Financial Institutions

Includes federally insured banks, credit unions, savings associations, trust companies, broker-dealers, mutual funds, insurance companies, and other financial institutions operating within the United States.

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Money Services Businesses (MSBs)

MSBs are non-bank financial institutions engaged in activities such as money transmission, currency exchange, check cashing, prepaid access, and money order sales. Examples include money transmitters, currency exchangers, check cashers, and issuers of prepaid access products.

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Casinos and Card Clubs

Includes both brick-and-mortar establishments and online gambling platforms including casinos on tribal lands.

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Securities and Futures Industries

Includes Securities brokers, dealers, investment advisers, and other entities regulated by the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC)

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Insurance Companies

Including life insurance, property and casualty insurance, and reinsurance companies.

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Precious Metals and Stones Dealers

Includes businesses involved in the buying, selling, and trading of precious metals, gems, and stones.

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Real Estate

Certain real estate professionals, such as real estate brokers, agents, and developers that facilitate transactions involving high-value residential and commercial properties.

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Dealers in Firearms, Firearms Parts, and Ammunition

Includes businesses engaged in the sale of firearms, ammunition, and parts.

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Non-Profit Organisations

Certain non-profit organisations, particularly those involved in international activities, are subject to AML regulations to prevent abuse for money laundering or terrorist financing purposes.

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Penalties for non-compliance with AML/CTF laws?

The penalties for non-compliance with money laundering and terrorism financing laws in the United States can vary depending on the specific offence committed and the provisions violated. The types of penalties that may apply include:

  • Civil Penalties - regulatory authorities, such as FinCEN and the Office of the Comptroller of the Currency (OCC), have the authority to impose civil penalties for violations of anti-money laundering (AML) and counter-terrorism financing (CTF) requirements. These penalties can be substantial and are typically in the form of monetary fines. The specific penalties can vary based on the severity and frequency of the violation.
  • Criminal offences - serious breaches of money laundering and terrorism financing laws can result in criminal charges. Criminal penalties can include fines and imprisonment, depending on the nature and severity of the offence. Convictions under the BSA and related laws can lead to significant fines and imprisonment for individuals involved in money laundering or terrorism financing activities.
  • Forfeiture of Funds and Assets - authorities have the power to seize and forfeit funds and assets that are determined to be involved in or derived from money laundering or terrorism financing activities. This can include freezing bank accounts, confiscating properties, or seizing other assets.


Largest fines for non-compliance with AML/CTF laws?

The regulatory authorities in the United States have shown they  willing to take action for non-compliance with AML/CFT laws and has used their enforcement powers including:

  • BNP Paribas - a French bank was fined USD$8.9 billion by various U.S. authorities for violating U.S. sanctions laws and facilitating transactions for entities in countries subject to U.S. sanctions, including Sudan, Iran, and Cuba (2014)
  • Wells Fargo - one of the largest banks in the U.S., was fined USD$1 billion by the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) for deficiencies in its anti-money laundering controls (2018)
  • Wells Fargo - agreed to pay USD$3 billion in criminal and civil penalties for fraudulently opening millions of customer accounts in a scandal that federal authorities reflected a “complete failure of leadership” at the US Bank (2020)
  • HSBC - a British multinational bank, agreed to pay USD$1.9 billion to various U.S. authorities for AML and sanctions violations. The fine was imposed for facilitating money laundering by Mexican drug cartels and violating U.S. sanctions against countries such as Iran and Sudan (2012)
  • Standard Chartered -  British bank, was fined USD$667 million by multiple U.S. agencies, including the New York Department of Financial Services (DFS), for violating U.S. sanctions against Iran and other countries. The fine was related to the bank's failure to implement adequate anti-money laundering controls and detect suspicious transactions (2012).
  • Goldman Sachs - a US investment bank was fined a record USD$2.9 billion to resolve the 1MDB bribery scheme (2020).