Jumio is taking a look back at the history of Anti-Money Laundering (AML) legislation in the United States. The company specifically highlights the importance of the Bank Secrecy Act (BSA), which was enacted 50 years ago (on October 26, 1970) and has since become one of the most influential pieces of legislation for financial regulators around the world.
According to Jumio, the BSA was originally passed in an effort to curtail organized crime. The law forced banks to file a Currency Transaction Report (CTR) for any cash transactions greater than $10,000, and also forced banks to create a paper trail, insofar as they were asked to record each transaction and to confirm the identity of the person initiating it. The BSA gave law enforcement more insight into criminal activities, and laid the groundwork for contemporary AML regulations.
The next major laws were the Money Laundering Control Act of 1986 and the Anti-Drug Abuse Act of 1988. The former made money laundering a federal crime, and banned the practice of structuring, which was a technique that criminals used to get around the BSA with deposits that fell below the $10,000 threshold. The latter forced car dealers and real estate agents to file CTRs to prevent the flow of drug money into the country.
However, Jumio noted that AML laws have not always had beneficial effects. The structuring provisions in the Money Laundering Control Act made it easier for law enforcement officers to use civil forfeiture to seize people’s assets without due process, even if they do not charge that person with a crime.
In the ’90s, the government created the Financial Crimes Enforcement Network (FinCEN) to help enforce the BSA and to investigate potential violations. The BSA itself was expanded with three new acts that introduced more stringent identity verification and record keeping requirements. Meanwhile, the 2000s coincided with the War on Terror, bringing about a Patriot Act that asked banks to look at foreign transactions, with an emphasis on watch lists and sanction screening.
Since then, new laws have extended FinCEN and the BSA to increase the fines and to give it more oversight over casinos, insurance companies, and other industries. For its part, Jumio believes that the introduction of digital identity verification technology will be the most significant change moving forward. Digital tech automates the confirmation process, and allows banks to analyze each transaction to watch for suspicious activity in real time.
With that in mind, digital solutions will make it easier to enforce the BSA and other AML regulations on a global stage. Jumio itself has released several new solutions in the past few months, following the September launch of its new KYX platform with the debut of its Video Verification solution in October. Both solutions are designed to help financial institutions keep pace with international Know Your Customer and AML regulations.