The world of regulations can sometimes seem like a bowl of alphabet soup. US money laundering regulations are no exception. We have compiled a list of the top ten money laundering acronyms and their definitions.
AML – anti money laundering is the term for activities aimed at curbing the practice of money laundering. Money laundering is a focus area for regulators and an important tool in the fight against drug trafficking and the financing of terrorism.
BSA – Tea bank secrecy law was the original US anti-money laundering regulation. At first, the regulation focused mainly on tax evasion and organized crime. The BSA focused on establishing a paper record for cash transactions over $10,000. Many people refer to the entire collection of anti-money laundering regulations as the BSA.
KYC – know your customer it is the concept of understanding who your customer is. Various aspects of the law require financial institutions to verify the identity of customers. Banks must also understand what is normal business for certain customers. Without knowing what behavior to expect, it is difficult to identify what activity is suspicious.
IPC – Part of KYC, the Customer Identification Program was introduced in the USA PATRIOT Act CIP requires financial institutions to collect five pieces of information about new customers. They must collect name, date of birth, physical address, social security number (or tax identification number), and proof of identity. CIP programs make it difficult for criminals to open accounts inconspicuously.
CTR – HAS Currency transaction report is presented for any cash transaction over $10,000. CTRs will also be reported for multiple transactions by the same person totaling $10,000 in a given period. People who split transactions to avoid the reporting threshold are suspicious. As long as the source of funds is legitimate, there are no negative consequences for submitting a CTR. For example, a cash-intensive business, such as a bar that deposits business receipts, will not be suspicious.
RAE – When a financial institution (very broadly defined) suspects that a transaction may be the product of illegal activity, it must file a Suspicious Activity Report. An individual will not be notified if a SAR is filed against them, to avoid alerting potential criminals. SAR filings are forwarded to the Financial Crimes Enforcement Network, which determines if further investigation is warranted.
FinCEN – Tea Financial Crimes Enforcement Network is the US government entity charged with combating financial crime, including money laundering. SAR reports are filed with FinCEN. From time to time, FinCEN provides analysis based on the information provided in SAR reports.
USA PATRIOT Act – The Uniting and Strengthening America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism Act was enacted shortly after 09/11/2001. As its name implies, the law provided extensive tools for law enforcement in the fight against terrorism. The law also made significant improvements to money laundering laws. In particular, it required the creation of CIP programs.
ENERGY – Politically Exposed Persons they are very high-ranking foreign government officials and their associates. Due to their high rank, the logic follows that they are a higher risk of corruption. There is no standard list of PEPs like there is for OFAC-specific Designated Nationals. Financial institutions must take a risk-based approach to dealing with PEPs and are not expressly prohibited from having them as customers. At a minimum, financial institutions must conduct enhanced due diligence on PEPs.
OFAC – Tea Office of Foreign Assets Control it is not directly related to money laundering. OFAC imposes economic sanctions against foreign countries. Under OFAC rules, banks are prohibited from conducting monetary transactions with certain foreign countries. The assets of specific individuals and organizations can also be frozen. Since OFAC rules deal with money transmission in connection with terrorist financing, many institutions combine these functional departments. OFAC also maintains a list of specific designated nationals with whom financial institutions are prohibited from doing business.