Lesson 3 of 9

Module 03: Development of Anti-Money Laundering

Regulation
Juno Education

Money laundering is the process of making illegally obtained funds appear legitimate (i.e.,
"clean"). There are typically three steps involved: placement, layering, and integration. First,
illicit funds are introduced clandestinely into the legitimate financial system. The funds are then
often wired or transferred through multiple accounts in order to create confusion. Finally, the
"dirty money" is integrated into the financial system via additional transactions until it appears
"clean." Money laundering can aid in the commission of crimes such as drug tra cking and
terrorism and can have a negative impact on the global economy.

The Financial Crimes Enforcement Network is the designated administrator of the Bank Secrecy
Act (BSA) as part of its mission to "protect the financial system from the abuses of financial
crime, such as terrorist financing, money laundering, and other illegal activity." The BSA was
founded in 1970 and has since become one of the most vital instruments in the fight against
money laundering. Since then, numerous additional laws have enhanced and amended the BSA
in order to provide law enforcement and regulatory agencies with the most e ective tools to
combat money laundering. Below is a chronological index of anti-money laundering laws
enacted since 1970, along with their respective requirements and objectives.
Bank Secrecy Act (1970)

Establishing recordkeeping and reporting requirements for private individuals,

banks, and other financial institutions

Designed to assist in identifying the source, volume, and movement of currency and
other monetary instruments transported into or out of the United States or
deposited in financial institutions.

Banks are required to (1) report cash transactions over $10,000 using the Currency
Transaction Report, (2) properly identify individuals conducting transactions, and
(3) maintain a paper trail by keeping appropriate records of financial transactions.
Money Laundering Control Act (1986)

Instituting money laundering as a federal o ense

Prohibited transaction structuring to avoid CTR filings

Introduced civil and criminal forfeiture for violations of the Alcoholic Beverage
Control Act

Instructed banks to establish and maintain procedures to ensure and monitor

compliance with the BSA's reporting and documentation requirements.

Anti-Drug Abuse Act of 1988

Expanded the definition of financial institution to include automobile dealerships

and real estate closing agents, and required them to file reports on large currency
transactions.

Mandated the identity verification of purchasers of monetary instruments over

$3,000

Money Laundering Suppression Act (1994)

 Required banking agencies to review and improve training, as well as develop anti-
money laundering examination procedures

Required banking agencies to review and improve referral procedures to law

enforcement

Streamlined exemption process for CTR

Each Money Services Business (MSB) is required to be registered by its owner or

controlling person.

Criminalized the operation of an unregistered small business.

Recommendation that states adopt uniform MSB legislation

The Money Laundering & Financial Crimes Strategy Act (1998)

Required banking agencies to train examiners against money laundering.

Required the Treasury Department and other agencies to create a National Money
Laundering Strategy

The High Intensity Money Laundering and Related Financial Crime Area (HIFCA)
Task Forces were established to concentrate federal, state, and local law
enforcement e orts in zones where money laundering is prevalent. HIFCAs can be
defined geographically or created to combat money laundering in a particular
industry, financial institution, or group of financial institutions.