Bank Secrecy Act Violations: Penalties and Consequences
The Bank Secrecy Act (BSA) is a crucial federal law that aims to combat money laundering and other financial crimes. Violations of the BSA can result in severe penalties, both criminal and civil.
Criminal Penalties
Individuals, including bank employees, who willfully violate the BSA or its implementing regulations face criminal penalties. These penalties may include:
Key Facts
- Criminal Penalties: A person, including a bank employee, who willfully violates the BSA or its implementing regulations can face criminal penalties. These penalties may include a fine of up to $250,000 or imprisonment for up to five years, or both.
- Civil Penalties: Various civil penalties can be imposed for BSA violations, depending on the specific violation. Some examples include:
a. Failure to Report Transactions with Foreign Financial Agencies: A civil penalty not exceeding the greater of the transaction amount (up to $100,000) or $25,000 may be assessed for willful violations of reporting requirements.
b. Failure to Comply with Geographical Targeting Orders: A civil penalty not exceeding the greater of the transaction amount (up to $100,000) or $25,000 may be assessed for willful violations of recordkeeping and reporting requirements specified in a Geographical Targeting Order.
c. Violations of Due Diligence Requirements: Financial institutions or agencies that violate due diligence requirements for private banking or correspondent accounts involving foreign persons may face a civil penalty not less than two times the transaction amount, but not more than $1,000,000.
d. Prohibition on Correspondent Accounts with Foreign Shell Banks: Financial institutions or agencies that violate the prohibition on correspondent accounts with foreign shell banks may face a civil penalty not less than two times the transaction amount, but not more than $1,000,000.
- Recent Example: In 2024, Shinhan Bank America (SHBA) was assessed a $15 million civil money penalty by the Financial Crimes Enforcement Network (FinCEN) for willful violations of the BSA. SHBA failed to maintain an effective AML program and timely report suspicious transactions, resulting in unreported suspicious financial activity amounting to tens of millions of dollars.
- Fines of up to $250,000
- Imprisonment for up to five years
- Both fines and imprisonment
Civil Penalties
Various civil penalties can be imposed for BSA violations, depending on the specific violation. Some examples include:
- Failure to Report Transactions with Foreign Financial Agencies: A civil penalty not exceeding the greater of the transaction amount (up to $100,000) or $25,000 may be assessed for willful violations of reporting requirements.
- Failure to Comply with Geographical Targeting Orders: A civil penalty not exceeding the greater of the transaction amount (up to $100,000) or $25,000 may be assessed for willful violations of recordkeeping and reporting requirements specified in a Geographical Targeting Order.
- Violations of Due Diligence Requirements: Financial institutions or agencies that violate due diligence requirements for private banking or correspondent accounts involving foreign persons may face a civil penalty not less than two times the transaction amount, but not more than $1,000,000.
- Prohibition on Correspondent Accounts with Foreign Shell Banks: Financial institutions or agencies that violate the prohibition on correspondent accounts with foreign shell banks may face a civil penalty not less than two times the transaction amount, but not more than $1,000,000.
Recent Example
In 2024, Shinhan Bank America (SHBA) was assessed a $15 million civil money penalty by the Financial Crimes Enforcement Network (FinCEN) for willful violations of the BSA. SHBA failed to maintain an effective AML program and timely report suspicious transactions, resulting in unreported suspicious financial activity amounting to tens of millions of dollars.
Sources
- FFIEC BSA/AML Introduction – Introduction
- Bank Secrecy Act Penalties | Internal Revenue Service
- FinCEN Announces $15 Million Civil Money Penalty Against Shinhan Bank America for Violations of the Bank Secrecy Act | FinCEN.gov
FAQs
What is the Bank Secrecy Act (BSA)?
The Bank Secrecy Act is a federal law that aims to combat money laundering and other financial crimes by requiring financial institutions to report suspicious transactions and maintain certain records.
What are the penalties for violating the BSA?
Violations of the BSA can result in both criminal and civil penalties, including fines and imprisonment.
What are some examples of civil penalties for BSA violations?
Examples of civil penalties for BSA violations include:
- Failure to report transactions with foreign financial agencies: Up to $100,000 or $25,000
- Failure to comply with geographical targeting orders: Up to $100,000 or $25,000
- Violations of due diligence requirements: Not less than two times the transaction amount, but not more than $1,000,000
- Prohibition on correspondent accounts with foreign shell banks: Not less than two times the transaction amount, but not more than $1,000,000
What are some examples of criminal penalties for BSA violations?
Examples of criminal penalties for BSA violations include:
- Fines of up to $250,000
- Imprisonment for up to five years
- Both fines and imprisonment
What is a recent example of a BSA violation penalty?
In 2024, Shinhan Bank America (SHBA) was assessed a $15 million civil money penalty by the Financial Crimes Enforcement Network (FinCEN) for willful violations of the BS
Who can be penalized for BSA violations?
Individuals, including bank employees, and financial institutions can be penalized for BSA violations.
How can I avoid BSA violations?
Financial institutions can avoid BSA violations by implementing and maintaining an effective anti-money laundering (AML) program, which includes policies and procedures for identifying and reporting suspicious transactions.