Knowledgebase

AML Regulations in the United States: Compliance and Noncompliance with AML

aml regulations in the united states

As the largest economy in the world and an influential political power, the United States plays an important role in the global fight against money laundering and the financing of terrorism. The US is a member of the Financial Action Task Force (FATF) and has developed a robust AML/CFT framework that reflects international regulatory standards and imposes significant penalties for noncompliance. To avoid those penalties, financial institutions must be familiar with the relevant regulations and understand how to achieve compliance.

Financial Authorities

FinCEN: The Financial Crimes Enforcement Network (FinCEN) is the primary AML/CFT regulator in the United States and operates under the authority of the United States Treasury Department. FinCEN is responsible for combating money laundering, the financing of terrorism and other financial crimes by monitoring banks, financial institutions and individuals and analyzing suspicious transactions and payments. FinCEN works with state and federal law enforcement agencies, sharing information to assist in the fight against financial crime. 

OFAC: In a similar AML/CFT capacity to FinCEN, and under the authority of the US Treasury Department, the Office of Foreign Assets Control (OFAC) is responsible for administering and enforcing the United States’ economic and trade sanctions. OFAC works to prevent sanctions-targeted countries, regimes and individuals from perpetrating financial crimes, such as money laundering or terrorism, and peripheral crimes, such as drug trafficking and weapons proliferation.

AML/CFT Regulations

The Bank Secrecy Act: Introduced in 1970, the Bank Secrecy Act (BSA) is the United States’ most important anti-money laundering law. The BSA is intended to combat money laundering and ensure that banks and financial institutions do not facilitate or become complicit in it. The BSA imposes a range of compliance obligations on firms operating within US jurisdiction, including a requirement to implement a risk-based AML program with appropriate customer due diligence (CDD) and screening measures and to perform a range of reporting and record-keeping tasks when dealing with suspicious transactions and customers. 

USA Patriot Act: The USA Patriot Act was passed in 2001 in the wake of the September 11 terror attacks. This legislation targets financial crimes associated with terrorism and expands the scope of the BSA by giving law enforcement agencies additional surveillance and investigatory powers, introducing new screening and customer due diligence measures and imposing increased penalties on firms or individuals found to be involved in terrorism financing. The USA Patriot Act includes specific provisions and controls for cross-border transactions in order to combat international terrorism and financial crime.

In addition to the BSA and the USA Patriot Act, firms should be familiar with other important US AML/CFT regulations. These include:

  • Money Laundering Control Act 1986
  • Money Laundering Suppression Act 1994
  • Money Laundering and Financial Crimes Strategy Act 1998
  • Suppression of the Financing of Terrorism Convention Implementation Act 2002
  • Intelligence Reform and Terrorism Prevention Act 2004

Consequences of Noncompliance With AML Regulations

The potential impact of noncompliance with AML laws and regulations in the US depends on a variety of factors, but in the most serious cases, breaches can result in both criminal and civil penalties, fines and prison terms. Under the BSA, penalties may be imposed on each branch or location found to be violation of AML regulations and for each day that the violation occurs. BSA fines may range from $10,000 per day (for failures to report foreign financial agency transactions) to $100,000 per day (for failures in customer due diligence). Breaches in AML law are also likely to result in the forfeit of assets and funds involved in the criminal activity. 

The consequences of noncompliance with AML regulations are not restricted to financial penalties and prison terms. Firms that are found to have broken AML/CFT laws often suffer reputational damage and may have to operate under restrictions imposed by the US Treasury Department.   

How To Comply With US AML/CFT Regulations

Under the Bank Secrecy Act and the USA Patriot Act, banks and financial institutions must take a risk-based approach to AML/CFT and implement the following compliance measures:

AML program: Firms must develop and implement an internal AML/CFT program designed to match the risk profile of their customers and business sectors. The program should consist of written policies and procedures detailing the firm’s approach to: 

  • Customer due diligence
  • Transaction screening and monitoring
  • Adverse media and PEP screening
  • Sanctions screening

Reporting and Record-Keeping: In compliance with the BSA, firms must maintain detailed records on their customers and submit reports to the BSA when their customers engage in certain transactions or financial activities. Amongst these responsibilities is the submission of suspicious activity reports (SARs) for transactions over $5,000 or for transactions that are suspected to be in violation of the BSA. 

Compliance Officer: An individual employee should be appointed as chief compliance officer to oversee their firm’s AML program and be responsible for arranging audits. The designated AML officer must have sufficient authority (ideally management level) and professional experience to carry out their duties effectively. 

BSA Training: Firms should ensure their employees receive the training they need to fulfill their compliance responsibilities. Firms must also ensure a schedule is in place to deliver ongoing training to employees in line with changes to AML laws. 

Automated Compliance

For firms operating in the US, BSA-AML compliance presents a significant administrative challenge. Performing manual CDD and screening checks requires time and resources and carries the ongoing possibility of costly human error. To overcome that problem, many firms choose to automate their AML program with a range of smart technology tools designed to complement the expertise of their employees. By adding efficiency and accuracy to the process, AML automation not only represents a way to reduce friction for customers but to help US firms continue to deliver the standards of regulatory compliance that FinCEN expects. 

Get Started Now

Learn More About Our Automated AML Compliance Tools.

1+

2 Comments

Share your thoughts and start a conversation.

Leave a Reply

Related articles:

anti money laundering guidance
May 7, 2014

Anti-Money Laundering Guidance

Anti-Money Laundering Guidance Various government agencies and interest groups publish information regarding anti-money laundering. Australia:…
Read More
Dodd-Frank
July 1, 2014

Dodd-Frank

Why is Dodd-Frank important? The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as…
Read More
European Market Infrastructure Regulation
July 1, 2014

European Market Infrastructure Regulation

An Overview of the European Market Infrastructure Regulation (EMIR) The European Market Infrastructure Regulation, otherwise…
Read More
FATCA
July 1, 2014

The Foreign Account Tax Compliance Act (FATCA)

The Effects Of FATCA On Foreign Accounts The Foreign Account Tax Compliance Act, otherwise known…
Read More
EU flag among the grey sky
July 1, 2014

MiFID

Markets in Financial Instruments Directive (MiFID) The Markets in Financial Instruments Directive (MiFID) was created…
Read More
MiFID II
July 2, 2014

MiFID II

How MiFID II has affected the European investment market One of the most influential laws…
Read More
anti money laundering policies
July 4, 2014

Anti-Money Laundering Policies

The importance of anti-money laundering policies With financial crime more prevalent than ever, it is…
Read More
4AMLD
May 25, 2016

The Fourth Anti-Money Laundering Directive (4AMLD)

What is 4AMLD and What Does it Mean for Regulated Industries? The European Union Fourth…
Read More
cryptocurrency regulations around the world
July 4, 2018

Crypto Regulations Around The World

Crypto Regulations Around The World Learn how different nations approach coin and exchange regulation and…
Read More
September 6, 2018

The 5th EU Anti-Money Laundering Directive (5AMLD)

5AMLD - 5th EU Anti-Money Laundering Directive The Fifth Money Laundering Directive (5MLD) will come…
Read More
GDPR AML
November 8, 2018

GDPR and AML

Managing AML Challenges Under GDPR With GDPR in effect, financial institutions in the EU and…
Read More
FATF Recommendations
June 18, 2019

FATF Recommendations

FATF Recommendations: What You Need To Know The Financial Action Task Force (FATF) an international, intergovernmental…
Read More
Share:

To make sure you get a great experience on our website, we use cookies. To confirm you consent to this, please click below. Read more about our Cookie Policy

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close