See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/316526702

Anti-Money Laundering: History and Current Developments

Article · January 2015

CITATIONS READS

3 13,007

1 author:

Tracey Anderson
Indiana University South Bend
27 PUBLICATIONS   20 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Money Laundering View project

Taxation of Life Insurance Proceeds View project

All content following this page was uploaded by Tracey Anderson on 27 April 2017.

The user has requested enhancement of the downloaded file.

 Anti-Money Laundering: History and Current Developments 521

them seem legitimate.8 The first step in this process, often

Anti-Money
Laundering: History
and Current
Developments
*
Michael J. Anderson, MBA
Tracey A. Anderson, JD, **
LLM, CPA
keywords to be inserted by the indexer
Introduction to money laundering
Hollywood movies and network and cable television have
glorified illegal activities for decades. Movies like Bonnie
and Clyde (1967),1 the Outlaw Josey Wells (1976),2Lord
of Wars (2005),3 the FX television series Sons of Anarchy
(2008–2014)4 and the AMC television series Breaking
Bad (2008–2013)5 are all prime examples of this
glorification. Society, on the other hand, views these
activities as morally, ethically, and legally reprehensible.
This article focuses on the rationale behind anti-money
laundering statues, the history of such statues, the success
and failures of these statutes as well as current
developments in the world of money laundering.
What is money laundering?
Black’s Law Dictionary Free Online Legal Dictionary6
defines money laundering as “taking money gotten
illegally and washing or laundering it so it appears to
have been gotten legally”.7 Money laundering is typically
described as a three-step process in which an individual
disguises the original nature of funds in order to make
called “Placing” or “Placement” involves getting illegal
funds into the financial system. This can be done in many
ways including purchasing gambling chips from casinos,
repaying loans with the illegal funds, or using currency
exchanges. The second step in the process is called
“Layering”. In this step, the laundered funds will be
filtered through several different banking institutions in
an attempt to make them as hard to trace as possible. This
process often is helped by moving funds across borders
into foreign jurisdictions in order to block one government
from having full access to the trail. Finally, in a step called
“Integration” the money is filtered back to the original
owner and is able to be used for any purpose, now
seeming to be fully legal tender.9
Some of the most common illegal activities where
money laundering is prevalent are:
• illegal drug sales;10
• illegal firearms sales;11
• illegal gambling activities;12
• smuggling human subjects across borders;13
• smuggling human subjects for sale as work
slaves;14
• smuggling human subjects for sale as sex
slaves;15 and
• financing terrorist activities.16
Why should society care about money
laundering?
Lost tax revenue
One of the major concerns of society regarding the
underground economy is the significant loss of tax dollars.
It is estimated that the worldwide underground economy
is approximately $2 trillion and that the US alone loses
approximately $500 billion each year in taxes due to this
underground economy.17 This loss in tax revenue is
significant especially in a time when tax dollars have been
reduced due to economies around the world just starting

*
Michael J. Anderson is a graduate of the Indiana University Kelley School of Business 3/2 program and earned his MBA in 2014. He is currently a Staff Accountant with
the “Big 4” accounting firm Ernst & Young LLP in its Chicago Office. His area of expertise is fraud investigation and dispute services.
**
Tracey A. Anderson has “Big 8” accounting experience having worked with Deloitte Haskins & Sells from 1983–1986. Professor Anderson earned his BS in Business
from the Eller School of Business at the University of Arizona in 1979 and his JD from the James E. Rodgers College of Law at the University of Arizona in 1984. Dr
Anderson went on to receive his LLM in Taxation from the University of Florida Levin School Of Law in 1985. Dr Anderson is currently employed at the Leighton School
of Business at Indiana University South Bend as a Full Professor of Accounting.
1
See http://www.imdb.com/title/tt0061418/ [Accessed July 13, 2015].
2
See http://www.imdb.com/title/tt0075029/ [Accessed July 13, 2015].
3
See http://www.imdb.com/title/tt0399295/ [Accessed July 13, 2015].
4
See http://www.inquisitr.com/2222706/sons-of-anarchy-kurt-sutter-the-man-behind-the-most-watched-show-in-fx-history/ [Accessed July 13, 2015].
5
See http://www.imdb.com/title/tt0903747/ [Accessed July 13, 2015].
6
Black’s Law Dictionary Free Online Legal Dictionary, 2nd edn.
7
See http://thelawdictionary.org/money-laundering/ [Accessed July 13, 2015].
8
See http://www.protiviti.com/en-US/Documents/Resource-Guides/Guide-to-US-AML-Requirements-5thEdition-Protiviti.pdf [Accessed July 13, 2015].
9
See https://www.moneylaundering.ca/public/law/3_stages_ML.php [Accessed July 13, 2015].
10
See http://fpif.org/drug_trafficking_and_money_laundering/ [Accessed July 13, 2015].
11
See http://www.icaew.com/en/technical/legal-and-regulatory/business-crime-and-misconduct/illegal-arms-dealing/illegal-arms-dealing-and-money-laundering [Accessed
July 13, 2015].
12
See http://www.casinoscamreport.com/2015/04/13/money-laundering-illegal-gambling-conspiracy/ [Accessed July 13, 2015].
13
See http://banderasnews.com/0509/eded-coyote.htm [Accessed July 13, 2015].
14
See http://haltht.spcollege.edu/assets/Herrera-MoneyLaunderingHumanTraffick.pdf [Accessed July 13, 2015].
15
See http://www.riskmonitor.bg/js/tiny_mce/plugins/ajaxfilemanager/upload/Reports/RM-02-SexTrafficking_EN.pdf [Accessed July 13, 2015].
16
See http://www.state.gov/j/inl/rls/nrcrpt/2003/vol2/html/29843.htm [Accessed July 13, 2015].
17
See http://www.nolo.com/legal-encyclopedia/the-underground-economy-unreported-income.html [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
522 Journal of International Banking Law and Regulation

to emerge from the 2009 recession.18 These lost tax dollars
would go a long way in helping reduce government debt,
paying for entitlement programs, as well as paying for
normal governmental operating expenses. These lost
dollars are so significant it cannot be ignored.19
Heinous reprehensible nature of activities
Society also is concerned about the underground economy
because of the heinous reprehensible nature of the illegal
activities involved. The illegal drug trade is an extremely
violent activity perpetuating the following:
• murder of rival distributors;
• drug addiction;
• death due to drug overdose;
• domestic violence; and
• theft.20
Illegal gambling is no better, leading to the following:
• addiction;
• murder;
• domestic violence;
• theft; and
• other criminal activities such as drugs and
prostitution.21
Illegal firearm sales by its very nature leads to violent
activity including the extermination of entire tribes in
Africa.22 In regard to smuggling illegal aliens into the US,
they often face death defying conditions. The following
are a few of the dangers they face:
• often shaken down and family members
threatened with death to secure additional
fees;
• hazardous conditions such as extreme heat
or cold crossing the desert depending on
the time of year;
• absence of water and food during transport;
and
• hazardous travel conditions including riding
in non-ventilated vehicles (i.e. trunks of
vehicles, trucks, semitrailers, and train
cars).23
The last two categories of illegal underground
activities, smuggling human subjects as work or sex
slaves, have many of the same violent outcomes as the
other illegal underground activities including murder.
However, these illegal activities include additional horrific
consequences almost unimaginable to the common man
including kidnapping and incarceration of human
subjects.24 Terrorist activities such as 911 speak for
themselves: “2996 dead.”25
Difficulty in catching top level members of
organised crime
One of the problems with catching the top level players
in criminal organisations is the fact that they usually direct
others to do the illegal activity. Since they themselves
rarely carry out the illegal activity their chances of being
caught and prosecuted are extremely small. During the
Prohibition Era in the US the authorities could never seem
to catch Alphonse Gabriel “Al” Capone engaging in
illegal activity even though the authorities were well
aware he was the boss of the Chicago Outfit.26 His known
illegal activities included bootlegging alcohol and murder.
However, the Federal Government could never acquire
sufficient evidence to prove this. The Federal Government
decided if it could not attack Capone’s illegal activity
directly it would attempt to attack it indirectly. On May
16, 1927, the United States Supreme Court decided the
case United States v Sullivan. The United States Supreme
court held in this case that illegal income must be reported
or the failure to do so was tax evasion.27 Subsequently in
1931 the Government was able to prosecute and convict
Capone on tax evasion charges for failure to file tax
returns for years 1928 and 1929 instead of charges relating
to his other illegal activities.28
History of anti-money laundering
statutes
29
Bank Secrecy Act (“BSA”)
In 1970, the United States Congress passed the Currency
and Foreign Transaction Reporting Act more commonly
known as the Bank Secrecy Act (“BSA”).30 The purpose
of the Act is to make money laundering more difficult
and help prevent US banks from becoming unknowing
immediacies in this illegal activity.31 This Act created the
Financial Crime Enforcement Network (“FinCEN”) as a
bureau under the United States Department of the
Treasury.32

18
See http://useconomy.about.com/od/grossdomesticproduct/a/recession_histo.htm [Accessed July 13, 2015].
19
See http://www.businessweek.com/debateroom/archives/2009/07/under-the-table_pay_is_unacceptable.html [Accessed July 13, 2015].
20
See http://www.bjs.gov/index.cfm?ty=tp&tid=35 [Accessed July 13, 2015].
21
See http://triblive.com/x/pittsburghtrib/news/s_742867.html#axzz3ao0zdv7a [Accessed July 13, 2015].
22
See http://usatoday30.usatoday.com/news/world/2006-09-27-darfur-cover_x.htm [Accessed July 13, 2015].
23
See http://banderasnews.com/0509/eded-coyote.htm [Accessed July 13, 2015].
24
See http://www.unodc.org/unodc/en/human-trafficking/what-is-human-trafficking.html [Accessed July 13, 2015].
25
See http://www.statisticbrain.com/911-death-statistics/ [Accessed July 13, 2015].
26
See http://www.alcaponebio.com/ [Accessed July 13, 2015].
27
See http://www.politico.com/story/2013/05/this-day-in-politics-91424.html [Accessed July 13, 2015].
28
See http://chicagohs.org/history/capone/cpn3a.html [Accessed July 13, 2015].
29
Bank Secrecy Act Pub. L. 91-508, title II, October 26, 1970, 84 Stat. 1118; 31 U.S.C. § 321 at
http://www.aba.com/Compliance/Documents/07cbe87f05f94aa8b84faa573c790ba5AppendixC.pdf [Accessed July 13, 2015].
30
See http://lawi.us/currency-and-foreign-transactions-reporting-act/ [Accessed July 13, 2015].
31
See http://searchfinancialsecurity.techtarget.com/definition/Bank-Secrecy-Act-BSA [Accessed July 13, 2015].
32
See http://www.fincen.gov/statutes_regs/bsa/ [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
 Anti-Money Laundering: History and Current Developments 523

The Treasury by specific grant of authority under The Comprehensive Crime Control Act of
Treasury Order 180-01 assigned the following specific 1984
37

duties to FinCEN:
“1. take all necessary and appropriate actions
to implement and administer the provisions
of the Bank Secrecy Act, including
provisions which are codified at 12 USC
1829b, 12 USC 1951-59, 31 USC 5311 et
seq., and section 314 of P.L. 107-56,
including, but not limited to, the
promulgation and amendment of
regulations and the assessment of penalties;
2. exercise authority for enforcement of and
compliance with regulations at Title 31,
Chapter X - Financial Crimes Enforcement
Network with respect to the activities of
agencies exercising authority thereunder
that has been re-delegated to such agencies
by FinCEN under paragraph 4 infra; and 3.
design and implement programs of public
outreach and communication to the
financial community and the general public
relating to the functions of the Bureau and
the Department’s efforts to prevent and
detect money laundering and other financial
crime.”33
Domestic banks (i.e. those located in the US) are
subject to the provisions of the Bank Secrecy Act.
However, it is actually much broader than that. In addition
to retail banks, investment banks, broker-dealers,
commodities brokers, casinos, money transmitters,
payment processors and mutual funds are all subject to
the Bank Security Act.34 These financial institutions aid
the US Government in the detection and prevention of
money laundering activities in two major ways:
• reporting of daily aggregate cash
transactions greater than $10,000 from one
customer; and
• reporting any suspicious activity that might
The purpose of the Comprehensive Crime Control Act
of 1984 was to enhance the Government’s arsenal in
fighting drug trafficking. By including money laundering
under the umbrella of the Racketeer Influenced and
Corrupt Organisations (“RICO”) Statutes the Government
could now seize the proceeds of illegal activity38 as well
at impose significant civil and criminal penalties for each
violation.39 Felonies greater than $1,000 can result in fines
of up to $15,000 and/or imprisonment for up to five
years.40 Two provisions of the Act drastically increased
the government’s chances of catching money laundering
activity:
• allowing border agents to conduct searches
based on carrying too much undisclosed
currency; and
• authorising the federal agents to pay
rewards to informants for providing
information.41
42
The Money Laundering Control Act of 1986
The Money Laundering Control Act of 1986 put a lot of
power behind the enforcement of the anti-money
laundering statutes.43 Money laundering became a Federal
crime under the 1986 Act.44 Thus, Federal prosecutors
could now pursue money laundering activities in Federal
court. The Act also made it illegal to try to structure
transactions so that they did not technically come under
the parameters of the Act.45 The power behind the Act
included criminal and civil penalties for failure to detect
and prevent money laundering activities. This includes
fines of the greater of $500,000 or twice the value of the
property involved in the transaction and imprisonment
for up to 20 years or both.46 Financial institutions were
now required to implement and maintain procedures to
ensure compliance with the provisions of the Act.47
48

signify money laundering.35 The Anti-Drug Abuse Act of 1988

Thus, financial institutions have to be able to properly The Anti-Drug Abuse Act of 1988 further expanded the
identify their customers as well as provide a clear paper definition of financial institutions as well as reduced the
trail of their customers’ financial transactions.36 size of transactions subject to reporting. Under this Act,

33
See http://www.treasury.gov/about/role-of-treasury/orders-directives/Pages/to180-01.aspx [Accessed July 13, 2015].
34
See http://www.insidecounsel.com/2015/04/08/criminal-prosecutions-under-the-bank-secrecy-act-i [Accessed July 13, 2015].
35
See http://www.fincen.gov/statutes_regs/bsa/ [Accessed July 13, 2015].
36
See http://files.acams.org/pdfs/AdvancedCertPapers/Informal%20Value%20Transfer%20Systems%20-%20A%20FI%27s%20Perspective%20%28Ryan%20Hodge%29
.pdf [Accessed July 13, 2015].
37
Comprehensive Crime Control Act 1984 Pub. L. 98-473, title II, October 12, 1984, 98 Stat. 1976; 18 U.S.C. 1.
38
Comprehensive Forfeiture Act of 1984.
39
Sentencing Reform Act of 1984.
40
Amends the Labor Management Relations Act 1947 (“Taft-Hartley Act”).
41
Title IX: Currency and Foreign Transactions Reporting Act Amendments.
42
Money Laundering Control Act 1986 Pub. L. 99-570—OCT. 27, 1986; 18 U.S.C. ss.1956 and 1957.
43
See http://www.ffiec.gov/bsa_aml_infobase/documents/regulations/ML_Control_1986.pdf [Accessed July 13, 2015].
44
See http://www.fincen.gov/statutes_regs/bsa/title18a.html [Accessed July 13, 2015].
45
See https://www.law.cornell.edu/uscode/text/31/5324 [Accessed July 13, 2015].
46
See http://www.ffiec.gov/bsa_aml_infobase/documents/regulations/ML_Control_1986.pdf [Accessed July 13, 2015].
47
See http://www.fincen.gov/news_room/aml_history.html [Accessed July 13, 2015].
48
Anti-Drug Abuse Act 1988 Pub. L. 100-690, November 18, 1988, 102 Stat. 4181; 21 U.S.C. 1501.

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
524 Journal of International Banking Law and Regulation

car dealers and real estate closing agents were now
considered to be financial institutions subject to its
provisions.49 In addition, the size of transaction requiring
reporting was reduced to $3,000.50 Also under this statute,
offenders are subject to minimum penalties for drug
offenses as well as to the death penalty if someone is
killed while violating the Act.51
Annunzio-Wylie Anti-Money Laundering Act
of 1992
52
The Annunzio-Wylie Anti-Money Laundering Act of
1992 continued to strengthen the Government’s power
to take action against money laundering activities. This
Act established the Bank Secrecy Act Advisory Group
(“BSAAG”). The BSAAG is a 30-member special panel
organised to provide the Department of Treasury with
advice on strengthening anti-money laundering programs
and simplifying currency reporting forms.53 Conspiracy
to commit a money laundering offense now has the same
penalty as the offense itself.54 This Act requires that
verification and recordkeeping now be maintained for
wire transfers.55 More extensive penalties for BSA
violations were imposed under this Act.56 The law was
expanded to preclude certain defenses in civil cases in
regard to the forfeiture of cash and monetary
instruments.57 Financial institutions are now required to
prepare and file Suspicious Activity Reports which
replaces the requirement to prepare and file Criminal
Referral Forms.58 The Act also provided whistleblower
immunity for financial institutions filing the SARs.59
Money Laundering Suppression Act of
60
1994
registered.62 It is a federal crime for the MSB to operate
if it is not registered. MSAs are required to keep a list of
all of its agents.63MSBs are organised under state law.
For that reason, the Act recommends that states adopt
uniform laws. In regard to expanding the definition of
financial institutions subject to the BSA this Act added
tribal casinos to the list.64 The Act expanded the
responsibilities of banking institutions by requiring them
to provide improved internal training and compliance
programs.65 On the other hand, the Act did streamline
some of the CTR reporting requirements.66
Money Laundering And Financial Strategy
67
Act of 1998
The Money Laundering and Financial Strategy Act of
1998 identified non focused efforts at the federal, state
and local levels as a major problem in the fight against
money laundering activities. The Act therefore required
that the Department of the Treasury and other agencies
develop a national money laundering strategy.68 It also
created the High Intensity Money Laundering and Related
Financial Crime Area (“HIFCA”) Task Force to
concentrate the efforts of federal, state, and local agencies
in money laundering hot zones.69 The focus of these zones
could be either by geographic region or by specific
industry. The Act also required banking institutions to
train bank examiners in how to spot money laundering
activities.70
Uniting and Strengthening America by
Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of
2001 (“USA Patriot Act”)
71

The Money Laundering Suppression Act of 1994 targeted “On September 11, 2001, 19 militants associated
Money Service Businesses (“MSB”), expanded the with the Islamic extremist group al-Qaeda hijacked
definition of financial institutions, and placed additional four airliners and carried out suicide attacks against
responsibilities on banking institutions. The Act requires targets in the United States. Two of the planes were
each MSB to register a controlling person.61 If the MSB flown into the towers of the World Trade Center in
has multiple branches all branches must also be

49
See https://www.govtrack.us/congress/bills/100/hr5210/text [Accessed July 13, 2015].
50
Treasury Regulation 31 CFR 103.29; See http://www.ffiec.gov/bsa_aml_infobase/documents/FDIC_DOCs/BSA_Manual.pdf [Accessed July 13, 2015].
51
21 U.S.C. 848(e)(1)(A)–(B) .
52
Annunzio-Wylie Anti-Money Laundering Act 1992 Pub. L. 102–550, title XV, §1500, October 28, 1992, 106 Stat. 4044; 12 USC 1811.
53
See http://www.fincen.gov/news_room/nr/html/19940310.html [Accessed July 13, 2015].
54
See https://www.law.cornell.edu/uscode/text/18/371 [Accessed July 13, 2015].; 18 U.S.C. 271.
55
See http://www.instantbenefits.com/projects/redassociates/guidelines/Federal_Record_Retention_Guidelines.pdf [Accessed July 13, 2015].
56
See http://www.ffiec.gov/bsa_aml_infobase/documents/regulations/annunzio_wylie.pdf [Accessed July 13, 2015].
57
See http://www.ffiec.gov/bsa_aml_infobase/documents/regulations/annunzio_wylie.pdf [Accessed July 13, 2015].
58
See http://www.bankersonline.com/articles/bhv05n10/bhv05n10a5.html [Accessed July 13, 2015] and http://www.fincen.gov/statutes_regs/frn/pdf/brokerdealersar.pdf
[Accessed July 13, 2015].
59
See http://tmprisk.com/anti-money-laundering-laws-101/ [Accessed July 13, 2015].
60
Money Laundering Suppression Act 1994 Pub. L. 103-325, title IV, September 23, 1994, 108 Stat. 2243; 31 USC § 5324.
61
U.S.C 5330(a).
62
U.S.C 5330(b).
63
U.S.C 5330(c).
64
See http://www.hklaw.com/files/Publication/2f2d4c42-bdc2-461f-972f-c0b7f9f6da94/Presentation/PublicationAttachment/67a8f2d7-239b-45ad-8afb-687462447f96/54597
.PDF [Accessed July 13, 2015].
65
Money Laundering Suppression Act 1994 s.404.
66
Money Laundering Suppression Act 1994 s.401.
67
Money Laundering and Financial Strategy Act 1998 Pub. L. 105–310, October 30, 1998, 112 Stat.2941; 31 U.S.C. 5340 onwards.
68
See http://kycmap.com/usa-history-of-anti-money-laundering-laws/ [Accessed July 13, 2015].
69
See http://www.fincen.gov/law_enforcement/hifca/index.html [Accessed July 13, 2015] and http://www.irs.gov/uac/Narcotics-Related-Financial-Investigations-Criminal
-Investigation-%28CI%29 [Accessed July 13, 2015].
70
See https://fdic.gov/regulations/examinations/bsa/basics2.html [Accessed July 13, 2015].
71
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 Pub. L. 107-56, October 26, 2001, 115 Stat.272; 18 U.S.C. 1.

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
 Anti-Money Laundering: History and Current Developments 525

New York City, a third plane hit the Pentagon just
outside Washington DC, and the fourth plane
crashed in a field in Pennsylvania. Often referred to
as 9/11, the attacks resulted in extensive death and
destruction, triggering major US initiatives to combat
terrorism and defining the presidency of George W.
that a SAR has been filed.84 The Government wanted to
prevent banks from tipping off their customer before it
could take action against the identified customer.85
Intelligence Reform and Terrorism
Prevention Act of 2004
86

Bush. Over 3,000 people were killed during the

attacks in New York City and Washington DC,
including more than 400 police officers and
firefighters.”72
The Patriot Act was one of these initiatives thereafter
put into place to combat terrorism. The Government
believed that if it cannot directly stop the illegal activity
(terrorism), it could track and seize the money used to
fund the activity.73 Without the money to finance terrorist
activities these activities should cease.
So what exactly did the Patriot Act do in regard to
money laundering activities? The current law already
required information to be gathered on new domestic
customers known as the customer identification program
(“CIP”).74 Basic information such as name, address, tax
identification number, as well as proof of identity is
required for all new customers.75CIP and the enhanced
due diligence is known as “know your customer”
(“KYC”).76 Many domestic banks have correspondent
banks in foreign countries. These for all practical purposes
are foreign branches of the domestic banks. Under the
Act it was now necessary to gather the same information
on foreign customers as was already gathered on domestic
customers. This also included extra due diligence in
regard to private bank accounts (i.e. Wealth Management)
for non-US customers.77 Domestic banks also are
prohibited from having correspondent accounts with
foreign shell banks.78 Financing of terrorist activity was
criminalised under the Act.79 The Act also enabled the
Government to issue subpoenas and seize foreign bank
accounts.80 The definition of financial institution was
broadened to include security brokers and underground
banks.81SARs also were required for these newly added
financial institutions.82 The Act amended the SAR
provisions by giving extra protection to the reporting
institution.83 The changes also placed some extra burdens
on banks by not allowing them to inform their customers
The only real addition to AML statutes by this Act was
the amendment of the BAS to require the Secretary of
the Treasury to prescribe regulations that would require
financial institutions to report cross-border electronic
transmittals of funds if determined to be “reasonably
necessary” to aid in the fight against money laundering
and terrorist financing.
Global efforts in anti-money laundering
The Bank Security Act was definitely a necessary first
step in the fight against money laundering activities. Other
countries like the UK and Switzerland also implemented
their own anti-money laundering legislation.87 However,
the Bank Secrecy Act in and of itself was not the final
solution and cure all for the eradication of money
laundering activities. To enhance its anti-money
laundering agenda the US Government created the Bureau
of International Narcotics and Law Enforcement Affairs
(“INL”). The INL has the following two major
responsibilities:
• to reduce the entry of illegal drugs into the
US; and
• to minimise the impact of international
crime on the US and its citizens.88
To help the INL accomplish these goals it annually
prepares an International Narcotics Control Strategy
Report (“INCSR”).89 This report assesses the anti-money
laundering efforts in more than 200 countries. The report
organises these jurisdictions into one of three categories:
• jurisdictions of Primary Concern;
• jurisdictions of Concern; and
• other Jurisdictions Monitored.

72
See http://www.history.com/topics/9-11-attacks [Accessed July 13, 2015].
73
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 s.302.
74
See https://www.fdic.gov/consumers/community/AEI/regional/boston/BAEI-Fact-Sheet_CIP.pdf [Accessed July 13, 2015] and http://www.bankersonline.com/aml
/326whitepaper.pdf [Accessed July 13, 2015].
75
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 Title III s.311.
76
See http://globalimebank.com/downloads/21AML_KYC_Policy_of_GIBL_2011.pdf [Accessed July 13, 2015].
77
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 Title III s.312.
78
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 Title III s.313.
79
See https://www.fbi.gov/news/testimony/usa-patriot-act-terrorism-financing-operations-section [Accessed July 13, 2015].
80
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 Title III ss.316 and 319.
81
See http://www.ratical.org/ratville/CAH/Section351.html [Accessed July 13, 2015].
82
See http://fas.org/irp/crs/RS21203.pdf [Accessed July 13, 2015].
83
See http://www.fincen.gov/statutes_regs/guidance/html/advis35.html [Accessed July 13, 2015].
84
See http://www.bankrate.com/brm/news/bank/20060628b1.asp [Accessed July 13, 2015].
85
See http://www.fincen.gov/news_room/aml_history.html [Accessed July 13, 2015].
86
Intelligence Reform & Terrorism Prevention Act 2004 Pub. L. 108-458 of December 17, 2004; 118 Stat.3638
87
See http://www.imf.org/external/pubs/ft/scr/2011/cr11231.pdf [Accessed July 13, 2015] and https://www.academia.edu/4550825/The_Swiss_Anti-Money_Laundering
_Regime [Accessed July 13, 2015].
88
See http://www.state.gov/j/inl/ [Accessed July 13, 2015].
89
See http://www.state.gov/j/inl/rls/nrcrpt/2013/vol2/204062.htm [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
526 Journal of International Banking Law and Regulation

The INL looks at several factors in categorising these
countries but the primary factor is the estimated size of
illegal transactions occurring in these countries. The US
Government has determined the best course of action is
to pursue the big money illegal activities.
The war against money laundering cannot be fought
in isolation. No one country can fight this battle alone
with any hope of winning. For this reason, a global
organisation known as the Financial Action Task Force
(“FATF”) was established at the G-7 Summit in Paris in
1989.90 This international organisation addresses the fight
against money laundering activities with an entirely
different approach from that of the INL. Its main focus
is member country adoption of its anti-money laundering
recommendations and monitoring country compliance
with money laundering laws. FATF has issued Forty
Recommendations on Money Laundering (“The Forty
Recommendations”)91 and nine Special Recommendations
on Terrorist Financing (“Special Recommendations”)92
as the global standards for AML/CFT. The FATF Forty
Recommendations draws heavily on the United Nations
Conventions held in Vienna in 1988 and Palermo in
2001.93 Other significant conventions aimed at fighting
money laundering, corruption, and other illegal activities
include the European Union Conventions in Strasbourg
in 1990 and Warsaw in 2015.94 At last count, 38 countries
have become members of FATF. Because of this group’s
efforts more and more countries are adopting anti-money
laundering legislation.95
AML activities of the World Bank (“WB”)
and the International Monetary Fund
(“IMF”)
What role do the WB and IMF play in the money
laundering fight? Both of these organisations are major
players on the international financial stage. However,
they both have very different purposes. The WB focuses
on fighting poverty around the world (i.e. local economic
focus).96 The focus of the IMF is promoting worldwide
economic stability (i.e. international economic focus).97
After the events of September 11, 2001 the Executive
Boards of both organisations joined the money laundering
fight. These organisations grasped the destructive impact
these activities have on the economic, political, and social
fabric of the countries they touch:
“Furthermore, the Boards recognized, in July and
August 2002, The Forty Recommendations on
Money Laundering (The Forty Recommendations)
and the eight (now nine) Special Recommendations
on Terrorist Financing (Special Recommendations),
issued by the Financial Action Task Force on Money
Laundering (FATF), as the relevant international
standards for AML/CFT.”98
The support of these influential international
organisations is a tremendous boost in the fight against
money laundering.
Weaknesses in the law
Keeping ahead of the criminals
Unfortunately the battle in the money laundering arena
is not static. It is constantly changing. Once laws are
implemented the criminals try to figure out how to get
around the law. Criminals initially tried to get around the
reporting thresholds by making sure their transactions
did not exceed the filing thresholds. However, the
Government made it clear that the reporting applied not
to just one single transaction but to a series of related
transactions. Also the mere structuring of a transaction
to avoid the law is a crime. The next sections of this
article will address several ways criminals have attempted
to circumvent the AML laws.
99
New advancements in technology
Criminals quickly found out that there were several ways
to circumvent the AML laws. One way was to not
technically come within the definition of currency
transaction defined in the law. Another way was to be so
secretive in these transaction that no one could ever
discover the transaction. The next sections will discuss
these modes of circumvention.
Cyber-currencies
When the first cyber-currency came on the scene many
questions had to be addressed. First of course is what a
cyber-currency is? A cyber-currency is a fully electronic
store of value accepted as a medium of exchange.100 Prior
to 2009 cyber-currencies did not exist. The first
cyber-currency, Bitcoin, was first released in 2009.
Bitcoin was the brainchild of Satoshi Nakamoto.101 Since
2009 over 100 cyber-currencies have been developed.102

90
See http://www.fatf-gafi.org/pages/aboutus/historyofthefatf/ [Accessed July 13, 2015].
91
See http://www.fatf-gafi.org/media/fatf/documents/FATF%20Standards%20-%2040%20Recommendations%20rc.pdf [Accessed July 13, 2015].
92
See http://www.fatf-gafi.org/topics/fatfrecommendations/documents/ixspecialrecommendations.html [Accessed July 13, 2015].
93
See http://www.imf.org/external/np/leg/amlcft/eng/aml4.htm [Accessed July 13, 2015].
94
See https://treaties.un.org/Pages/DB.aspx?path=DB/studies/page2_en.xml&menu=MTDSG [Accessed July 13, 2015].
95
See http://www.fatf-gafi.org/countries/ [Accessed July 13, 2015].
96
See http://www.worldbank.org [Accessed July 13, 2015].
97
See http://www.imf.org/external/index.htm [Accessed July 13, 2015].
98
See http://siteresources.worldbank.org/INTAML/1983064-1133906114980/20934730/RG_AML_en_Ch10.pdf [Accessed July 13, 2015].
99
See http://www.unafei.or.jp/english/pdf/RS_No83/No83_08VE_Weld3.pdf [Accessed July 13, 2015].
100
T. A. Anderson, “Bitcoin-Is it Just a Fad? History, Current Status and Future of the Cyber-Currency Revolution”[2014] Journal of International Banking Law and
Regulation 29(7): 428–435.
101
Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System” November 1, 2008.
102
See https://coinmarketcap.com/ [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
 Anti-Money Laundering: History and Current Developments 527

Cyber-currencies have their own exchanges similar to
banks. The primary questions that had to be addressed
were:
• whether a cyber-currency is a real currency
subject to the AML laws; and
• whether a cyber-currency exchange is a
MSB that requires registration under the
AML laws?
For several years it was debated whether
cyber-currencies were actual currencies subject to the
AML laws. They were not like usual currencies that are
backed by the full faith and credit of the issuing countries.
Financial Icon Warren Buffet concluded that Bitcoin was
not a currency.103 However, an East Texas Federal court
disagreed with Buffet finding that Bitcoin was indeed a
currency.104 If cyber-currencies were held not to be real
currencies then they would have been beyond the reach
of the AML laws. However, the statutes, regulations, and
cases make it very clear that cyber-currencies are real
currencies subject to the AML laws and that Bitcoin
exchanges also are subject to the MSB registration
requirements.105
Dark web and Silk Road
Another significant problem in the fight against money
laundering activity is illegal activity conducted on the
“dark web.” The dark web is an underground system that
intentionally promotes the transmission of highly
encrypted information between anonymous users.106 The
encryption software used by these sites is called Tor and
was developed by the US Naval Research Laboratory.107
This software was initially used by journalists and free
speech advocates to protect their anonymity.108 However,
Tor is now used by criminals to conduct their anonymous
illegal activities on the dark web.109 For example, Silk
Road, one such underground dark web site was utilised
to sell weapons, drugs, and assassins for hire.110 This site
was initially launched in February of 2011 and was
originally closed down by an FBI sting operation in
2013.111 However, the site reopened as Silk Road 2.0 in
November the same year producing an estimated $8
million in monthly sales. 112 It is interesting to note that
Bitcoin was readily accepted in payment for these goods
or services.113 As part of an international drug bust in
2014, almost a year to the date after the original Silk Road
was closed, Silk Road 2.0 and 17 other dark web sites
were closed by a team of international law enforcement
agencies.114 Unfortunately, this is just a small portion of
the illegal activity conducted on the dark web.
Illegal activity conducted by governments
It is very interesting to note that some glaring problems
exist in regard to the Bank Secrecy Act’s reporting
exemption requirements.115 The following entities are
specifically exempt from the reporting requirements of
the BSA according to the statutes and regulations:
• a department or agency of the US, any state,
or any political subdivision of any state;
and
• certain other entities exercising
governmental authority on behalf of the
US, any state or political subdivision of any
state.116
It seems abundantly clear that this reporting carve out
is a clear violation of the underlying intent of the BSA.
The intent of the BSA was to go after the money of illegal
drug and terrorist organisations. We live in a world
steeped in corruption and crime that has pervaded all
levels of organisations including religious, political, and
governmental. A few examples of such alleged illegal
activity in these organisations include:
• Fast and Furious, the Bureau of Alcohol,
Tobacco, and Firearms gun running
activity;117
• CIA drug running activity to fund black
operations;118
• Vatican Banking Scandal;119
• Hamas sponsored terrorist
activities;120ISIS/ISIL sponsored terrorist
activities;121 and Iran sponsored terrorist
activities.122

103
See http://www.marketwatch.com/story/warren-buffett-bitcoin-is-not-a-currency-2014-03-03 [Accessed July 13, 2015].
104
See http://www.jdsupra.com/legalnews/federal-district-court-holds-bitcoin-is-56136/ [Accessed July 13, 2015].
105
See http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ [Accessed July 13, 2015].
106
See http://blog.dictionary.com/dark-web/ [Accessed July 13, 2015].
107
See http://www.bbc.com/news/technology-24443216 [Accessed July 13, 2015].
108
See https://www.torproject.org/about/torusers.html.en [Accessed July 13, 2015].
109
See http://thenextweb.com/insider/2014/11/06/silk-road-2-0-closed-fbi-one-year-original-site-seized/ [Accessed July 13, 2015].
110
See http://abcnews.go.com/US/silk-road-website-dealt-drugs-guns-assassins-bitcoins/story?id=20446005 [Accessed July 13, 2015].
111
See https://www.cs.columbia.edu/~smb/UlbrichtCriminalComplaint.pdf [Accessed July 13, 2015].
112
See http://www.alan.com/2013/11/08/update-black-market-website-silk-road-reopens-new-arrests-follow/# [Accessed July 13, 2015].
113
See http://www.reuters.com/article/2013/10/08/net-us-crime-silkroad-bitcoin-idUSBRE99113A20131008 [Accessed July 13, 2015].
114
See http://wn.com/operation_onymous_%27dark_web%27_drug_bust_closes_silk_road_2.0 [Accessed July 13, 2015].
115
See http://www.gao.gov/new.items/d08355.pdf [Accessed July 13, 2015].
116
See https://www.fdic.gov/regulations/laws/rules/8000-1600.html [Accessed July 13, 2015].
117
See http://www.latimes.com/nation/atf-fast-furious-sg-storygallery.html [Accessed July 13, 2015].
118
See http://www.panacea-bocaf.org/ciarunningdrugs.htm; http://www.huffingtonpost.com/2011/12/30/ron-paul-conspiracy-theory-cia-drug-traffickers_n_1176103.html
[Accessed July 13, 2015].
119
See http://www.bbc.com/news/world-europe-25831234 [Accessed July 13, 2015].
120
See http://www.nctc.gov/site/groups/hamas.html [Accessed July 13, 2015].
121
See http://www.cnn.com/2014/08/14/world/isis-terror-threat-al-qaeda/index.html [Accessed July 13, 2015].
122
See http://terrorism.about.com/od/iran/p/Iran2.htm [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
528 Journal of International Banking Law and Regulation

It would appear that crime endorsed, supported, or
conducted by governments, government agencies, their
agents, or political parties also should be covered by the
BSA if there is to be any hope of eradicating these illegal
activities.
Strong versus weak jurisdictions
Another significant obstacle in the fight against money
laundering is the level of importance placed on preventing
these activities by the various jurisdictions. As mentioned
earlier in this article the US, Switzerland, and the UK
were the earliest adopters of anti-money laundering
legislation. Israel,123 Iran,124 Russia,125 China,126 and Japan127
have more recently joined the fight to crack down on
money laundering activities. These countries likely joined
the battle in order to maintain credibility in the eyes of
the world as well as wanting to prevent a significant loss
in tax revenue related to these money laundering
activities. On the other spectrum are countries like Sri
Lanka which permits paramilitary groups to run
kidnapping, extortion, and prostitution rackets.128
Afghanistan, Iran, Iraq, Pakistan, Syria, and Sudan allow
significant numbers of terrorist to reside within their
borders.129 In these countries, Islamic Banks seem to be
the primary financial institutions. One might question
whether these banks in countries with high levels of
terrorist may somehow be involved in money laundering
activities. However, at least one authority argues just the
opposite is true. Mahmood Mohamed Sanusi, Ahmad
Ibrahim Kulliyah of Laws, International Islamic
University Malaysia, Kuala Lumpur, Malaysia, identifies
the attitude of the Islamic law in monitoring and
preventing the concept of money laundering, further
distinguishing between illicit gains (al-Kasb al Haram)
and lawful gains.130 The Jordan Islamic Bank’s Summary
of Anti-Money Laundering and Combating Terrorist
Financing (“AML/CTF”) Policy Manual also stresses that
Islamic Sharia’, forbids illegitimate gains regardless of
their origin and also forbids all forms of dealing with
them.131 Continuing to move these weak jurisdictions in
the direction of broader adoption of the AML seems to
be a positive step in the money laundering fight.
Corporate inefficiencies in the form of
compliance costs
Another weakness in the AML laws is the significant cost
of corporate compliance. While the effectiveness of
certain AML laws is no doubt helpful to the overall
economy and is helping to curb the various illegal acts
that are funded by these laundered funds, businesses are
finding it increasingly difficult to keep up with certain
aspects of these AML laws, including KYC disclosures
and other various due diligence procedures which add
expenses and are often time consuming for each
individual client.132 The threat of incurring sanctions from
regulatory bodies by not capturing money laundering
transactions also has led to an increase in corporate
spending on transactions monitoring software for
organisations.133 These costs could potentially force certain
smaller firms out of the marketplace when partnered with
the multitude of other due diligence checks like terrorist
financing checks and tax evasion due diligence.134
Recent cases involving anti-money
laundering statutes
This section of the article reviews a few recent cases in
the money laundering arena. Former US Speaker of the
House, Dennis Hastert, was recently indicted for violation
of the AML laws.135 Representative Hastert made 15
$50,000 withdrawals from his bank. These withdrawals
subjected him to the reporting requirements of the BSA
since the amounts were over $10,000. Once
Representative Hastert found out about the reporting
requirement he structured his future withdrawals in an
attempt to circumvent the law. When asked by the FBI
why he was withdrawing the money he lied and said he
was keeping the money for himself. In reality, he was
paying someone to be quiet about a past indiscretion. The
complaint alleges two counts; one for violation of the
BSA and another for lying to the FBI. These two counts
are each punishable by a fine of $200,000 and a five-year
prison term.
Another intriguing case is pending in the Italian court
system. That case deals with Vatican Monsignor Nunzio
Scarano.136 Scarano was a senior accountant in the Vatican
department of Administration of the Patrimony of the
Apostolic See. As a senior accountant in this department
he had access to the accounts dealing with the Vatican
real estate holdings and stock portfolios. Monsignor
Scarano devised a donation scam whereby parishioners

123
See http://www.anti-moneylaundering.org/middleeast/Israel.aspx [Accessed July 13, 2015].
124
See http://www.anti-moneylaundering.org/middleeast/iran.aspx [Accessed July 13, 2015].
125
See https://www.opendemocracy.net/od-russia/pavel-usanov/russian-money-laundering-how-does-it-work [Accessed July 13, 2015].
126
See http://www.breitbart.com/california/2014/07/18/china-cracking-down-on-money-laundering-to-buy-real-estate/ [Accessed July 13, 2015].
127
See http://www.reuters.com/article/2014/10/10/us-japan-economy-moneylaundering-idUSKCN0HZ01V20141010 [Accessed July 13, 2015].
128
See http://www.hindustantimes.com/world-news/govt-allowed-ltte-to-run-prostitution-racket-in-lanka/article1-639794.aspx [Accessed July 13, 2015].
129
See http://www.terrorism-research.com/state/countries.php [Accessed July 13, 2015].
130
See http://www.emeraldinsight.com/doi/abs/10.1108/13685200810889399?journalCode=jmlc [Accessed July 13, 2015].
131
See http://www.jordanislamicbank.com/userfiles/file/Anti%20Money%20Laundering/AML%20Policy%20Summary1.pdf [Accessed July 13, 2015].
132
See http://onlinelibrary.wiley.com/doi/10.1111/ecpo.12051/full#ecpo12051-bib-0044 [Accessed July 13, 2015].
133
See https://www.kpmg.com/KY/en/IssuesAndInsights/ArticlesPublications/PublishingImages/global-anti-money-laundering-survey-v3.pdf [Accessed July 13, 2015].
134
See http://www.valuewalk.com/2015/07/jp-morgan-private-banker-we-cant-make-money-anymore/ [Accessed July 13, 2015].
135
See http://www.washingtonpost.com/news/post-nation/wp/2015/05/28/former-house-speaker-dennis-hastert-indicted/ [Accessed July 13, 2015].
136
See http://www.bbc.com/news/world-europe-25831234 [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
 Anti-Money Laundering: History and Current Developments 529

thought they were donating to the Vatican real estate
development account but were actually contributing to
the payment of his personal mortgage. An Italian judge
calculated Monsignor Scarano’s wealth to be in excess
of $8 million that he somehow accumulated on an annual
income of $41,000.137 He also is accused of trying to
smuggle approximately €26,000,000 from Switzerland
into Italy. The President of the Vatican Bank was
dismissed for dereliction of duty in regard to this matter.138
The Vatican Bank has subsequently enhanced its own
AML practices.139
Another interesting case is that of US Ocean Bank.140
US Ocean Bank based in Miami Florida intentionally
failed to set up systems to prevent, monitor, and report
money laundering activity. As a result of this failure the
Mexican drug cartels were able to launder millions of
dollars from their illegal narcotics sales. The government
chose not to pursue criminal penalties but imposed a
whopping $10.9 million fine against the bank for violation
of the BSA.
The Standard Bank of South Africa case is one of the
most interesting.141 This particular case was filed against
the UK arm of the South African Standard Bank by the
Financial Conduct Authority. The matter resulted in a
fine of £7,600,000. What is so interesting about this case
is that the bank was fined for having lax AML controls
in place even though no actual money laundering activity
was ever proved. The Financial Conduct Authority
investigated 48 of the bank’s customer files and found
the each one had one or more “politically exposed
persons” and the review highlighted “serious weaknesses”
in the bank’s procedures.
Finally, Federation Internationale de Football
Association (“FIFA”), the organisation responsible for
securing venues for the world cup has a pending case as
of July 2015 that alleges as many as 53 separate counts
of money laundering in connection to bribes.142 The 53
counts of money laundering were brought to light by
“suspicious bank relations” forms filed in Switzerland,
which is a due diligence step required under Swiss
regulations for financial institutions. These allegations
are tied to FIFA’s handling of bids from the 2018 and
garnered a lot of negative media attention for the
organisation, including the arrest of many of its leaders
and challenges to the future locations already selected for
the World Cup.143
Anti-money laundering reporting
requirements
A substantial level of reporting is required under the Bank
Secrecy Act. The focus in this article will be exclusively
US required forms. Other jurisdictions that have adopted
AML laws require the filing of similar forms. This section
briefly describes the requirement for filing the following
forms: FinCEN Forms 114, 112, 111, 110, 107, 105, 104,
103 and IRS Forms 8300 and 3520.144 After April 1, 2013
financial institutions were required to use electronic filing
for most of these forms.
FinCen Forms 103, 104, and 112 (Cash
145
Transaction Report)
Each financial institution (other than a casino, which
instead must file FinCEN Form 103, and the US Postal
Service for which there are separate rules) must file
FinCEN Form 104 (“CTR”) for each deposit, withdrawal,
exchange of currency, or other payment or transfer, by,
though, or to the financial institution which involves a
transaction in currency of more than $10,000.146 Casinos
have the same filing threshold for currency transactions
of more than $10,000.147 However, casinos also must
report suspicious activities of at least $5,000. These filing
requirements apply both to a single transaction and to a
series of related transactions that aggregate to these
specified levels. The CTR must be filed by the 15th day
of the month immediately following the identified
transaction or transactions. The US Postal Service
complies with the AML statutes by having customers file
out a Funds Transaction Report (Form 8105-A) and show
a government ID for purchases of $3,000 or more in postal
money orders and cashing postal money orders of $10,000
or more.148
149

2022 World Cup locations, as well as the handling of the
bids for many previous World Cup matches. FIFA
officials are charged with taking multiple bribes in
relation to granting countries the right to host the World
Cup, one such allegation being an official accepted a bribe
of as much as $10 million in relation to the South African
bid for the 2010 World Cup. This case has already
FinCen Form 111(SAR Report)
The filing of the Suspicious Activity Report (“SAR”)
became required after the effective date of the
Annunzio-Wylie Anti-Money Laundering Act of 1992.
This new report replaced its predecessor the Criminal
Referral Form (“CRF”). The SAR must be filed if the
bank finds any suspicious activity in regard to a

137
See http://www.nytimes.com/2014/10/19/business/of-virtue-and-vice-and-a-vatican-priest.html?_r=0 [Accessed July 13, 2015].
138
See http://www.dici.org/en/news/president-of-the-vatican-bank-dismissed/ [Accessed July 13, 2015].
139
See http://www.reuters.com/article/2013/07/15/vatican-bank-laundering-idUSL6N0FF3CG20130715 [Accessed July 13, 2015].
140
See http://www.antimoneylaundering.us/news_det.php?id=2332&amp&amp [Accessed July 13, 2015].
141
See http://www.bbc.com/news/business-25864499 [Accessed July 13, 2015].
142
See http://www.huffingtonpost.com/2015/06/17/fifa-investigation-swiss-banks_n_7601330.html [Accessed July 13, 2015].
143
See http://www.aljazeera.com/news/2015/06/fifa-probes-show-53-money-laundering-cases-150617085817085.html [Accessed July 13, 2015].
144
See http://www.fincen.gov/forms/bsa_forms/ [Accessed July 13, 2015].
145
See http://www.fincen.gov/whatsnew/html/ctr_faqs.html; http://www.irs.gov/pub/irs-tege/fin103_ctrc.pdf [Accessed July 13, 2015].
146
See http://www.irs.gov/pub/irs-tege/fin104_ctr.pdf [Accessed July 13, 2015].
147
See http://www.irs.gov/pub/irs-tege/fin103_ctrc.pdf [Accessed July 13, 2015].
148
See http://about.usps.com/publications/pub342/welcome.htm [Accessed July 13, 2015].
149
See http://www.fincen.gov/whatsnew/html/sar_faqs.html [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
530 Journal of International Banking Law and Regulation

customer’s account. A suspicious activity is defined as a Foreign Bank Account Reporting-FinCEN

known or suspected violation of Federal law or a Form 214-FBAR
155

suspicious transaction related to a money laundering

activity or a violation of the Bank Secrecy Act.150 If such A US person that has a financial interest in or signature
activity is found the SAR must be filed within 30 days authority over foreign financial accounts must file a
of identification of the suspicious activity. A review of Report of Foreign Bank and Financial Authority
the situation must be conducted by day 120 to determine (“FBAR”) if the aggregate value of the foreign financial
if the suspicious activity continues. If the suspicious accounts exceeds $10,000 at any time during the calendar
activity persist then a second SAR in regard to that year.156
activity must be filed by day 150. If such activity
continues a third report would be required within a Business Cash Transaction Reporting-IRS
157
12-month period. Form 8300
The US Government requires reporting by anyone
FinCen Form 110 (DOEP Designation of
151 engaged in a trade or business for certain cash
Exempt Person) transactions. Each person engaged in a trade or business
The Bank Security Act, as mentioned above, requires who, in the course of that trade or business, receives more
banks to report currency transactions of more than than $10,000 in cash in one transaction or in two or more
$10,000. However, the regulations allow banks to exempt related transactions, must file Form 8300. The following
certain customers’ currency transaction from their cash transactions are exempt from filing IRS Form 8300:
reporting requirement. The regulations allow for banks • cash received in a personal (non-business
to exempt the following customers from its currency transactions);
transaction reporting: government agencies, listed • cash received by a financial institution
companies, listed companies subsidiaries, certain required to file FinCEN Form 112, BSA
non-listed businesses and payroll companies.152 Currency Transaction Report (“BCTR”);
• cash received by a casino required to file
FinCen Form 107 (RMSB Registration of (or exempt from filing) FinCEN Report
153
Money Service Business) 112, if the cash is received as part of its
gaming business;
The Money Laundering Suppression Act of 1994 required
• cash received by an agent who receives the
money service businesses to be registered. Form 107 is
cash from a principal, if the agent uses all
used for initial registration, renewal, and re-registration
of the cash within 15 days in a second
of money service businesses. This form must be filed
transaction that is reportable on Form 8300
within 180 days after the business is established. Failure
or on FinCEN Form 112;
to register is a violation of the Bank Secrecy Act.
• discloses all the information necessary to
complete Pt II of Form 8300 or FinCEN
Reporting for Currency and Monetary Report 112 to the recipient of the cash in
Instruments Transported Outside the the second transaction; and
154
Country-FinCEN Form 105 • cash received in a transaction occurring
entirely outside the US.158
Each person who physically transports, mails, or ships,
or causes to be physically transported, mailed, or shipped 159

currency or other monetary instruments in an aggregate
amount exceeding $10,000 at one time from the US to
any place outside the US or into the US from any place
outside the US, and each person who receives in the US
currency or other monetary instruments in an aggregate
amount exceeding $10,000 at one time which have been
transported, mailed, or shipped to the person from any
place outside the US must file FinCEN Form 105.
Foreign Trust Fund Reporting-Form 3520
The US Government has become very concerned about
US citizens and entities having any interest in foreign
trusts. The major concern of the government of course is
tax avoidance discussed earlier in this article. For that
reason, a US person is required to file IRS Form 3520 if
the person is an owner of a foreign trust or receives a
transfer, gift or bequest from a foreign trust.160

150
See http://definitions.uslegal.com/s/suspicious-activity-report-banking/ [Accessed July 13, 2015]; 12 CFR 21.11 Suspicious Activity Report.
151
See https://www.ffiec.gov/bsa_aml_infobase/documents/forms/Form_110_200508.pdf [Accessed July 13, 2015].
152
31 C.F.R. 1020. 315.
153
See http://www.irs.gov/pub/irs-tege/fin107_msbreg.pdf [Accessed July 13, 2015].
154
See http://www.fincen.gov/forms/files/fin105_cmir.pdf [Accessed July 13, 2015].
155
See http://www.irs.gov/uac/Foreign-Financial-Accounts-Reporting-Requirements [Accessed July 13, 2015].
156
See http://www.fincen.gov/forms/bsa_forms/fbar.html [Accessed July 13, 2015].
157
IRS Publication 1544.
158
See http://www.irs.gov/pub/irs-pdf/f8300.pdf [Accessed July 13, 2015].
159
See http://www.irs.gov/Businesses/International-Businesses/Foreign-Trust-Reporting-Requirements [Accessed July 13, 2015].
160
See http://www.irs.gov/pub/irs-pdf/f3520.pdf [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors
 Anti-Money Laundering: History and Current Developments 531

Conclusion glitches in the AML system. If it is not likely that these

exemptions will be repealed (i.e. too much push back
The fight against money laundering has come a long way
from governments) then other methods have to be devised
since the initial adoption of the BSA. Each successive
to catch money-laundering transactions of corrupt
Act has continued to expand the number of businesses
governments and/or their agencies. Some jurisdictions
subject to its provisions. The scope of the BSA also has
seem to have no current interest in improving their AML
been increased by reducing the size and aggregating
laws. These are known as weak AML jurisdictions. Global
transactions that require reporting. The global initiatives
pressure can be placed on these jurisdictions to encourage
of the FATF in conjunction with the full support of the
them to willingly adopt the AML laws or in the alternative
WB and the IMF have tremendously strengthened the
these jurisdictions can be forced to adopt AML laws under
adoption of AML laws around the world. High profile
the threat of imposing sanctions. The reporting
cases such as House Majority Leader Dennis Hastert,
requirements of the BSA are producing tremendous
Monsignor Nunzio Scarano and FIFA put everyone on
amounts of data that are likely just being filed without
notice that large fines and jail time await BSA violators.
being analysed.161 This information should be continuously
The massive fines imposed on US Ocean Bank of Miami
analysed to determine potential trends in the types of
and Standard Bank of South Africa put banking
activities being reported and constantly monitored for
institutions on notice that “no” or “sloppy” AML
potential weaknesses in the reporting system. How much
procedures will not be an acceptable banking practice.
additional cost can be thrust upon financial institutions
However, everything is not perfect in the AML world.
also is a concern. The cost associated with the due
New advents in technology such as the next cyber
diligence of implementation, monitoring, and reporting
currency and harder to crack encryption software will
under the AML laws will likely reduce the profits of
continue to provide challenges to the money-laundering
strong financial institutions and may even drive smaller
fight. Financial institutions will have to hire the best and
financial institutions completely out of business.
brightest in the tech fields to try to keep up with the
Money-laundering is not a static activity. Those serious
criminals. The reporting exemptions provided for
about winning this fight must continually adjust to an
government transactions seems to be one of largest
ever changing environment.

161
See http://www.assetprotectioncorp.com/bankingandprivacy.html [Accessed July 13, 2015].

(2015) 30 J.I.B.L.R., Issue 10 © © 2015 Thomson Reuters (Professional) UK Limited and Contributors

View publication stats