History of United States Anti-Money Laundering Laws

[BCB]

Money laundering is the process of making illegally-gained proceeds (i.e. "dirty money") appear legal (i.e. "clean"). Typically, it involves three steps: placement, layering and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the "dirty money" appears "clean." Money laundering can facilitate crimes such as drug trafficking and terrorism, and can adversely impact the global economy.

In its mission to "safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering and other illicit activity," the Financial Crimes Enforcement Network acts as the designated administrator of the Bank Secrecy Act (BSA). The BSA was established in 1970 and has become one of the most important tools in the fight against money laundering. Since then, numerous other laws have enhanced and amended the BSA to provide law enforcement and regulatory agencies with the most effective tools to combat money laundering. An index of anti-money laundering laws since 1970 with their respective requirements and goals are listed below in chronological order.

Bank Secrecy Act (1970)
Established requirements for record keeping and reporting by private individuals, banks and other financial institutions
Designed to help identify the source, volume, and movement of currency and other monetary instruments transported or transmitted into or out of the United States or deposited in financial institutions

Required banks to
(1) report cash transactions over $10,000 using the Currency Transaction Report;
(2) properly identify persons conducting transactions; and
(3) maintain a paper trail by keeping appropriate records of financial transactions

Money Laundering Control Act (1986)
Established money laundering as a federal crime

Prohibited structuring transactions to evade CTR filings
Introduced civil and criminal forfeiture for BSA violations
Directed banks to establish and maintain procedures to ensure and monitor compliance with the reporting and recordkeeping requirements of the BSA

Anti-Drug Abuse Act of 1988
Expanded the definition of financial institution to include businesses such as car dealers and real estate closing personnel and required them to file reports on large currency transactions
Required the verification of identity of purchasers of monetary instruments over $3,000

Annunzio-Wylie Anti-Money Laundering Act (1992)
Strengthened the sanctions for BSA violations
Required Suspicious Activity Reports and eliminated previously used Criminal Referral Forms
Required verification and recordkeeping for wire transfers
Established the Bank Secrecy Act Advisory Group (BSAAG)

Money Laundering Suppression Act (1994)
Required banking agencies to review and enhance training, and develop anti-money laundering examination procedures
Required banking agencies to review and enhance procedures for referring cases to appropriate law enforcement agencies
Streamlined CTR exemption process
Required each Money Services Business (MSB) to be registered by an owner or controlling person of the MSB
Required every MSB to maintain a list of businesses authorized to act as agents in connection with the financial services offered by the MSB
Made operating an unregistered MSB a federal crime
Recommended that states adopt uniform laws applicable to MSBs

Money Laundering and Financial Crimes Strategy Act (1998)
Required banking agencies to develop anti-money laundering training for examiners
Required the Department of the Treasury and other agencies to develop a National Money Laundering Strategy
Created the High Intensity Money Laundering and Related Financial Crime Area (HIFCA) Task Forces to concentrate law enforcement efforts at the federal, state and local levels in zones where money laundering is prevalent. HIFCAs may be defined geographically or they can also be created to address money laundering in an industry sector, a financial institution, or group of financial institutions.

Uniting and Strengthening America by Providing Appropriate Tools to Restrict, Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act)
[Title III of the USA PATRIOT Act is referred to as the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001]
Criminalized the financing of terrorism and augmented the existing BSA framework by strengthening customer identification procedures
Prohibited financial institutions from engaging in business with foreign shell banks
Required financial institutions to have due diligence procedures (and enhanced due diligence procedures for foreign correspondent and private banking accounts)
Improved information sharing between financial institutions and the U.S. government by requiring government-institution information sharing and voluntary information sharing among financial institutions
Expanded the anti-money laundering program requirements to all financial institutions
Increased civil and criminal penalties for money laundering
Provided the Secretary of the Treasury with the authority to impose "special measures" on jurisdictions, institutions, or transactions that are of "primary money laundering concern"
Facilitated records access and required banks to respond to regulatory requests for information within 120 hours
Required federal banking agencies to consider a bank's AML record when reviewing bank mergers, acquisitions, and other applications for business combinations

Intelligence Reform & Terrorism Prevention Act of 2004
Amended the BSA to require the Secretary of the Treasury to prescribe regulations requiring certain financial institutions to report cross-border electronic transmittals of funds, if the Secretary determines that such reporting is "reasonably necessary" to aid in the fight against money laundering and terrorist financing

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[BCB]

Financial Action Task Force
http://www.fatf-gafi.org/pages/aboutus/

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions.  The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.  The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.


The FATF currently comprises 34 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe.

Argentina

Australia

Austria

Belgium

Brazil

Canada

China

Denmark

European Commission

Finland

France

Germany

Greece

Gulf Co-operation Council

Hong Kong, China

Iceland

India

Ireland   

Italy

Japan

Republic of Korea 

Luxembourg

Mexico

Netherlands, Kingdom of

New Zealand

Norway

Portugal

Russian Federation

Singapore

South Africa

Spain

Sweden

Switzerland

Turkey

United Kingdom

United States

FATF Associate Members

Asia/Pacific Group on Money Laundering (APG) (See also: APG website)
Caribbean Financial Action Task Force (CFATF) (See also: CFATF website)
Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) (See also: Moneyval website)
Eurasian Group (EAG) (See also: EAG website)
Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) (See also: ESAAMLG website)
Financial Action Task Force on Money Laundering in South America (GAFISUD) (See also:   GAFISUD Website)
Inter Governmental Action Group against Money Laundering in West Africa (GIABA) (See also: GIABA website)
Middle East and North Africa Financial Action Task Force (MENAFATF) (See also: MENAFATF website)

[MSantori]

You are doing god's work on this board, BCB.

[smoothie]

Where I am floored is the double standard that the authorities enforce. Allow the rich to do as they want while the rest follows a set of rules.

Power always corrupts if given in more than moderation.

Just my opinion.

[marcus_of_augustus]

Anti-money laundering laws, however well-intentioned, righteous and god-faring they make you feel, inevitably destroy the fungibility of the monetary unit.

When shaping money into a tool of law-enforcement and moral judgement, you lessen, even remove completely, its usefulness as an economic good.

How much are you prepared to penalise the whole of society by removing the enumerable benefits that good fungible money provides, in the mostly vain quest of catching a few bad apples through their money?

Just because it is Law does not make it right.

[TippingPoint]

Thank you for documenting 34 years (1970-2004) of the progressive erosion of liberty and the pursuit of happiness, under the auspices of "fighting terrorists".

[URSAY]

BCB gets a post award for quality.  Thank you sir.   

[marcus_of_augustus]

BCB gets a post award for quality.  Thank you sir.   

Yes, quality fore-lock tugging, bowing, scraping and general sycophancy.

[zoinky]

Very informative post, big thanks.

[BCB]

The point here gentleman is that anti-money laundering has been a significant issue in the United States for over 34 years.  These laws have also been amended every 2-5 years since 1986 so this issue continues to be of great concern.

Since the creation of the FATF in 1989, 36 countries have come out in support of similar legislation and regulation.

When you look at the liberty reserve case you see that 15 countries were involved in that effort.
http://www.justice.gov/usao/nys/pressconference/libertyreserve/visual.pdf

So when individuals rail about the over-reach of the US government or say they are safe or immune from these laws because they are in other countries they are naively mistaken.

I'm not saying I agree with or support these laws and regulations as the pertain to virtual currencies but it is important we identify and understand the risks.

The laws and potential new  regulation and  "guidance" are clearly a threat to the long term viability of virtual currencies and it is important we understand them in any effort to finda way forward.

[BCB]

Thank you for documenting 34 years (1970-2004) of the progressive erosion of liberty and the pursuit of happiness, under the auspices of "fighting terrorists".

Who did you vote for last election?  Did you research the candidates stance on civil liberties?

[Carlton Banks]

Thank you for documenting 34 years (1970-2004) of the progressive erosion of liberty and the pursuit of happiness, under the auspices of "fighting terrorists".

Who did you vote for last election ugly baby contest?  Did you research the candidates stance on civil liberties?

FTFY 

[BCB]

Thank you for documenting 34 years (1970-2004) of the progressive erosion of liberty and the pursuit of happiness, under the auspices of "fighting terrorists".

Who did you vote for last election ugly baby contest?  Did you research the candidates stance on civil liberties?

FTFY 

Carlton

You seen like a smart guy. You can call them ugly babies, and that may be true and other than possibly making you feel better where does that get you?  What action are you taking?  How do you make a difference?

[ProfMac]

BCB gets a post award for quality.  Thank you sir.   

He did omit a tip address.

[ProfMac]

BCB gets a post award for quality.  Thank you sir.   

Yes, quality fore-lock tugging, bowing, scraping and general sycophancy.

I think Lao Tsu would approve of BCB's post.

[countryfree]

Great work! Thanks for the info, and thanks for taking the time to put it here.

But I think you shall consider changing the title. It should be more like: "How the ugly government gained legal right to scrutinize and control all private transactions in the country".

[BCB]

Great work! Thanks for the info, and thanks for taking the time to put it here.

But I think you shall consider changing the title. It should be more like: "How the ugly government gained legal right to scrutinize and control all private transactions in the country".

Or just. "History of Financial Surveillance."

[TippingPoint]

Thank you for documenting 34 years (1970-2004) of the progressive erosion of liberty and the pursuit of happiness, under the auspices of "fighting terrorists".

Who did you vote for last election?  Did you research the candidates stance on civil liberties?

I could answer you, but do we really want to get into politics here?  We can't be sure, but I think I voted for the best option.

[Carlton Banks]

Thank you for documenting 34 years (1970-2004) of the progressive erosion of liberty and the pursuit of happiness, under the auspices of "fighting terrorists".

Who did you vote for last election ugly baby contest?  Did you research the candidates stance on civil liberties?

FTFY  

Carlton

You seen like a smart guy. You can call them ugly babies, and that may be true and other than possibly making you feel better where does that get you?  What action are you taking?  How do you make a difference?

I think you might have misunderstood a little: I'm making the point that it may as well be a competition about who lies the most convincingly, i.e. a race to the bottom instead of a race to the top. When was the last situation where calling grown adults ugly babies was an insult related to their appearance or behaviour? You might need to tune your cognition of interpretation a little there.

[BCB]

Sorry. Just trying to maintain an intelligent conversation.

But my question remains:  how are you making a difference?