In money laundering, criminals make illegally obtained funds legally present the black money as white money. It has three steps: placement, layering, and integration. First, they incorporate the illegal funds into the legitimate financial system. The crooks then aim to create confusion by transferring funds through many accounts.
The dirt or black money is then absorbed into the financial system until it looks like clean or white money. Money laundering has several negative consequences. Money laundering facilitates crimes like drug trafficking and terrorism.
AML compliance or Anti Money Laundering laws were made to prevent money laundering. Its goal is to “protect the financial system from criminal financial abuses such as terrorism financing, money laundering, and other illegal behaviour.”
The BSA, or Bank Secrecy Act, was established in 1970 and is one of the most effective instruments against money laundering. Many more Acts came up as a result of this. The following are a few of them:
The Bank Secrecy Act (BSA) (1970)
1.Individuals, banks, and other financial institutions were required to comply with prescribed record keeping and reporting requirements.
2.Designed to aid in identifying the source, volume, and movement of currency and other monetary instruments moved into or out of the United States, as well as deposited in financial institutions.
3.Banks must: (1) disclose cash transactions over $10,000 using the Currency Transaction Report; (2) accurately identify persons executing transactions; and (3) keep appropriate records of financial transactions to establish a paper trail.
Money Laundering Control Act (1986)
1.Money laundering is now considered a federal crime.
2.Transactions that were structured to evade CTR filings were prohibited.
3.Infractions of the BSA are now subject to civil and criminal penalties.
4.Banks were said to create and maintain systems to ensure that they complied with the BSA’s reporting and record-keeping obligations.
Anti-Drug Abuse Act of 1988
- Firms like auto dealers and real estate closing agents got included in the definition of a financial institution, and they were required to file reports on large cash transactions.
- Those buying monetary instruments valued at more than $3,000 had to show evidence of identity.
Annunzio-Wylie Anti-Money Laundering Act (1992)
- Infractions of the BSA now carry higher sanctions.
- Suspicious Activity Reports are now required, and Criminal Referral Forms, previously used, have been phased away.
- Verification and documentation needs for wire transfers.
- The Bank Secrecy Act Advisory Group was formed (BSAAG)
Money Laundering Suppression Act (1994)
- Banking institutions were required to assess and improve their training and have AML compliance legislations and examination procedures.
- Banking institutions have to assess and enhance their mechanisms for referring cases to the correct law enforcement agency.
- The procedure for obtaining a CTR exemption has been simplified.
- A Money Services Business (MSB) owner or controlling person was required to register the MSB.
- Every MSB was required to maintain a list of businesses allowed to act as agents for the MSB’s financial services.
- Operating an unlicensed MSB is now a federal crime.
- According to the research, states should enact MSB-specific legislation.
Intelligence Reform & Terrorism Prevention Act of 2004
- The Bank Secrecy Act was amended to require the Secretary of the Treasury to issue regulations necessitating certain financial institutions to report cross-border electronic fund transfers if the Secretary determines that such reporting is “reasonably necessary” to combat money laundering and terrorist financing.
- Other government officials have attempted to restrict money laundering, but these are the most common regulations you’ll hear about when it comes to money laundering.
In addition to FinCEN, other government officials have attempted to restrict money laundering offences, yet these are the most common regulations mentioned in money laundering cases.