| The Bank Secrecy Act (BSA) was the first statute requiring U.S. financial institutions to file certain reports or keep records to assist government agencies in identifying the sources, volumes, and movements of illicit funds and other financial instruments. In the 45 years since its enactment, the financial system in the United States, and the nature of threats to it, has evolved rapidly. The BSA regulations, and compliance with those regulations, have also evolved, but the statutory, regulatory, and supervisory regime has not uniformly kept pace with the transformation, exposing gaps in the system. Increases in the number and dollar amounts of fines associated with regulatory failures for financial institutions is also resulting in banks attempting to simplify their business models and reduce their exposure to money laundering risks and regulatory scrutiny by de-risking certain business sectors or customers (Adisa, 2014). The purpose of this research was to examine statutory, regulatory, and supervisory gaps in the BSA, whether or not those gaps are contributing to de-risking, and whether or not consistent regulation and supervision would alleviate de-risking. The literature studied for this project confirmed there are gaps and that regulatory agency scrutiny combined with the potential for a regulatory enforcement action is a driver to why banks are choosing to de-risk certain business sectors (BBA, 2014). At this time, there is no clear evidence that consistent regulation and supervision of all financial institutions in the United States would increase a bank's ability to manage risk and alleviate de-risking. Lastly, recommendations provide suggestions the U.S. Government, regulators and the private sector might take to further identify, mitigate, or lessen the gaps in the BSA and ease the practice of de-risking. Keywords: Economic Crime Management, Paul Pantani, anti-money laundering (AML), financial institution supervision. |
