Page 4 - White-Collar Crime

S4 | MONDAY, SEPTEMBER 29, 2014 | White-Collar Crime
| NYLJ.COM

Increased Criminal Enforcement
compliance with the provisions of this title.”6

The intent of this provision, at the time, was
to provide a mechanism for ensuring that
Of the Bank Secrecy Act
inancial institutions had a system in place
to perform the required record-keeping or
reporting functions. It was not originally
aimed at combating criminal activity gener-
ally.
Sixteen years later, in 1986, that began to
change. In the Money Laundering Control Statute goes beyond a reporting requirement.

Act of 1986 (MLCA), where Congress irst
criminalized the act of money laundering,
Congress mandated that certain bank regu-
latory agencies issue regulations requiring
the inancial institutions they covered to
“establish and maintain procedures reason-
ably designed to assure and monitor the
compliance of such [institution] with the

requirements of the BSA.”7 This provision
applied to only a subset of the BSA’s deini-
tion of a inancial institution, speciically,
all insured depository institutions and
credit unions. In response, the relevant
banking regulators issued regulations that
introduced the four essential components
of an AML program, known today as the
“Four Pillars”:

• Development of written internal poli-
cies, procedures, and controls;
• Designation of a compliance oficer;

• Ongoing employee training program;
and
• An independent audit function to test
programs.8

The BSA further shifted towards program-
matic compliance in 1992 when Congress
passed the Wylie-Annunzio Act.9 While this act
included many changes, two are worth not-
ing. First, inancial institutions were required
to ile Suspicious Activity Reports (SARs) if
the inancial institution detected suspicious

activity.10 This put inancial institutions on the
front lines of detecting criminal activity in a
way they had never been before. Second, a
provision was added (codiied at 31 U.S.C. CK
§5318(h)), authorizing the Secretary of the STO
Treasury to require inancial institutions to BIG
carry out AML programs, listing the Four Pil-
lars as minimum requirements.11 While this tions, would be a minimal imposition on the ing a series of reporting requirements for
provision remained discretionary, it covered BY JONATHAN E. LOPEZ, inancial institutions with considerable law a broad range of inancial institutions, pri-

the full range of inancial institutions, which JOSHUA C. FOSTER
enforcement value.2 Aside from reporting marily concerning cash transactions that
at this point included 24 different bank and AND GUY D. SINGER
and recordkeeping, however, the original met certain monetary thresholds, such
non-bank entities.12
TBSA also contained the seed of a potential as Currency Transaction Reports (CTRs).3
Finally, the PATRIOT Act, enacted shortly he Bank Secrecy Act1 (BSA), enacted programmatic compliance requirement. This Because the BSA focused on tracing a cash
after the events of Sept. 11, 2001, completed in 1970, was originally a reporting and seed has grown over the past 30 years into flow, the definition of “financial institu-
the BSA’s evolution into a full programmatic record-keeping statute designed to what has recently become a major focus of tion” was intentionally broad and included
statute and set the stage for the BSA’s AML create a paper trail for law enforcement to criminal enforcement: a inancial institution’s numerous cash-intensive businesses that
program requirements to become a main identify, and potentially investigate, individu- obligation to implement and operate an effec- may not have ordinarily been considered
focus of criminal prosecution. Among the als moving large amounts of cash through tive anti-money laundering (AML) program, a inancial institution, such as dealers in

PATRIOT Act’s many other provisions, it the inancial system. Congress believed that with serious criminal consequences for willful precious metals, telegraph companies, and
changed the “may” in §5318(h) to “shall.”13 requiring inancial institutions to report cer- non-compliance. Recent enforcement efforts, travel agencies.4 The BSA also required that
In a one-word change, numerous entities tain types of transactions, such as deposits coupled with the BSA’s expansive deinition a narrower category of inancial institutions
such as money service businesses, cur- or withdrawals in cash in excess of $10,000, of what constitutes a “inancial institution,” maintain critical records designed to assist
rency exchanges, credit card operators, and to institute certain record-keeping func-
have resulted in a landscape in which the full law enforcement in tracking the proceeds of
and insurance companies—designated as potential for criminal enforcement is quite criminal conduct.5
inancial institutions since the original 1970 broad—encompassing many non-bank inan- Less of a focus at the time, Congress also
statute—were now required to implement cial institutions that have otherwise operated laid the groundwork for a compliance and
JONATHAN E. LOPEZ and GUY D. SINGER are partners
comprehensive AML programs, complete in Orrick, Herrington & Sutclife’s white-collar group, without scrutiny.
programmatic obligation on these inancial
with potential civil and criminal penalties resident in Washington, D.C. and New York, respec- institutions by including within the BSA a
for failure to do so.14 What started as a discre- tively. JOSHUA C. FOSTER is an associate in the New Evolution of Programmatic Requirements
provision that stated that the “Secretary [of
tionary authority for Treasury to impose pro- York oice. Mr. Lopez served as an inaugural Deputy the Treasury] may by regulation require [a
cedures to ensure compliance with record Chief of the Money Laundering and Bank Integrity The BSA began predominantly as a report- inancial institution] to maintain such proce-
keeping and reporting now became manda-
Unit at the DOJ.
ing and record-keeping statute, establish-
dures as he may deem appropriate to assure