Opinion ID: 3058598
Heading Depth: 2
Heading Rank: 1

Heading: Bank Secrecy Act

Text: The Currency and Foreign Transactions Reporting Act (“Bank Secrecy Act”) enacted in 1970, Pub.L. 91–508, Tit. II, 84 Stat. 1118, delegates to the Secretary of the Treasury the authority to establish regulations for financial institutions. One of those regulations directs that financial institutions must complete and file with the IRS a CTR for currency transactions involving more than $10,000. 31 U.S.C. § 5313; old 31 C.F.R. 103.22 (75 FR 65806-01). All financial institutions, including check-cashing stores, are subject to Bank Secrecy Act (“BSA”) regulations and reporting requirements. The BSA imposes duties upon financial institutions to keep certain records, obtain particular information, file reports, and establish an effective anti-money laundering compliance program. A financial institution is required to have a compliance officer, who is responsible for the institution’s following all BSA requirements. Although the compliance officer is not required to personally 11 prepare every CTR, that officer is required to sign the CTR and oversee the process. A financial institution’s officers and directors must ensure that the BSA’s requirements are fulfilled. Although BSA duties may be delegated, financial institutions retain ultimate responsibility for compliance and no agency relationship may cancel that responsibility. Financial institutions must generate a “paper trail” to identify potential taxable income and to prevent financial crimes. The Code of Federal Regulations sets forth the instructions for completing and filing CTRs and directions are attached to the form. Within the IRS, the Detroit Computer Center maintains a major database of all CTR information called the Currency Bank Retrieval System (“CBRS”), which is available to law enforcement agencies with jurisdiction to investigate financial crimes. Peter D. Djinis, a government expert, explained to the jury that the BSA required financial institutions to report currency transactions over $10,000 to the government.8 He explained that a CTR must identify the date, transaction amount, the person or entity on whose behalf the transaction took place, and the individual who was physically present at the institution to conduct the transaction.9 8 It was stipulated that La Bamba was a “domestic financial institution” under the Bank Secrecy Act and subject to its CTR-reporting requirements. 9 IRS agent William Rondon explained that a CTR may properly be filed within fifteen days of the date of a transaction. 12 Each CTR consists of three parts. Part 1 is concerned with identities of parties to a transaction; section A requires the financial institution to identify and report the beneficiary of the transaction, meaning the party on whose behalf the transaction is conducted, while section B requires the financial institution to identify and report the actual conductor of the transaction, that is, the party who is either depositing and/or receiving more than $10,000 in currency. Part 2 requires the date, the amount of the transaction, and the form of the transaction. If the aggregate amount of different transactions by the same entity during the same day exceeds $10,000 in currency, then a CTR must be filed. This prohibits the structuring of transactions of less than $10,000 to avoid reporting what in actuality is a series of daily transactions that amount to $10,000 or more. Part 3 requires the names of the financial institution where the transaction occurred, the person completing the form, and the person approving the completion and filing of the form. The form provides extra pages to list multiple names if more than one entity is involved in the transaction or if multiple financial institutions are involved. Djinis, further, explained that a financial services institution is required to know its customers. An institution must not simply identify its customers, but it has an obligation to understand who the customers actually are and identify the nature of their business and activity. Customers who engage in repeated 13 transactions involving large amounts of cash generate greater risk and exposure for the financial institution and it is these customers who the institution must place under greater scrutiny. Key indicators of risky transactions are amounts, frequency, and volume of a customer’s transactions. Thus, for money services businesses, like check-cashing stores, they must be cautious that they are doing business with the persons who are complying with the CTR requirements rather than trying to avoid them. Finally, Djinis hypothesized that if La Bamba handled more than $600 million in transactions, as the government suggested, that volume was “exceptionally high” for the services La Bamba offered to the public. That volume of the checks should have prompted La Bamba to investigate the underlying facts of the transactions and the parties involved.