Measures Taken by Depository Institutions and Money Transmitters

The term "money laundering" refers to converting Money earned through illegal means into legitimate Money. These activities include drug trafficking or terrorist funding, and the law considers it a severe financial crime adopted by criminals.

The United States has taken steps to safeguard and regulate remittance providers to prevent money laundering. The Bank Secrecy Act (BSA) is an essential tool in federal law enforcement to identify and protect financial institutions from exploitation by criminal activities. Moreover, the Financial Crimes Enforcement Network (FinCEN), a bureau within the Department of the Treasury, monitors the BSA.

BSA Requirements and Compliance Related

A study conducted by a U.S agency reported that money transmitters and depository institutions are vulnerable to money laundering and illicit activities. These activities give birth to terror financing, drug smuggling and human trafficking.

Consequently, BSA came up with rules for money transmitters and depository institutions. Any organisation that is in this business must address these requirements listed hereunder.

  • Design and implement a written AML (Anti-money laundering) program

  • Report any suspicious transactions to Treasury

  • Maintain recordkeeping and proper documentation for funds transfers of $3,000 or more.

Hereunder we will discuss these requirements in details.

Money Transmitters and Depository Institutions BSA Requirements

AML Program:All financial institutions are subjected to BSA requirements to establish an AML program. At a minimum, each AML program must

  • Create written AML compliance policies, procedures and internal controls

  • Hire an individual to monitor daily compliance

  • Implement training for appropriate personnel

  • Provide for an audit function to test for compliance

FinCEN reported that they had developed complex AML programs to meet its obligations. They use a software system that aided to achieve AML requirements for robust monitoring of high-risk customers.

The results were assertive as the money transmitters emphasised the AML program with agent oversight. Furthermore, they also included BSA regulation as a part of their business models, which amplified the positive impact.

According to FinCEN, money transmitters try to mitigate agent risk by

  • Conducting due diligence on potential agents

  • On-site visits to existing agents

  • Reviewing and monitoring transactions

  • Engaging in mystery shopping

Report Requirements:It is essential to draft a report regarding any suspicious activity related to large transactions. Money transmitters must file a suspicious activity report for any transaction worth $2000 and depository institutions at least $5000.

It plays an integral role in law enforcement investigations and finances regulatory compliance at both federal and state levels. However, the institution did not file a report for suspicious activity because of the valid explanation of the transaction. According to FinCEN, money transmitters have used social media

  • to verify any suspicious activity

  • developed proprietary systems to identify suspicious activity,

  • keep accounts on hold after filing a suspicious activity report

Recordkeeping and Identity Verification:BSA has specific instructions for transfers amounting to $3000 or more. The depository institutions and money transmitters must obtain complete information of senders transferring such amounts. The requirements include:

Verify customer ID when the transaction involves in person, and the sender is not an established customer

  • Record specific customer and transaction information

  • Providing particular information to the receiving money transmitter

  • Maintaining the record for five years from the date of transaction


Money transmitters presented a mixed response to the above requirement. The more prominent players had no problems adhering to the suggestions as they kept such records as per their internal policies and procedures.

However, as far as the smaller money service businesses were concerned, they were concerns about the cost implication of such compliances. The customer will bear these in the form of enhanced charges, and the overall cost of remittance will go up significantly.

However, each coin has two sides, and simultaneously remittances have two opposite consequences. With the help of new acts, the government is now expecting to enhance anti-money laundering surveillance. The officials conduct a thorough process to deter any suspicious activity. Not to forget the latest advancement of technology which makes the process of monitoring more simpler.

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Irene Asha Tirkey

Irene has completed her post-graduation in Integrated Marketing Communication from Calcutta Media Institute, Kolkata, India. Her key areas are blogging and content writing. She is in this industry for three years. Her interest areas include travelling listening to music, and painting.