FINANCIAL SERVICES KNOWLEDGE BRIEF

BSA-AML COMPLIANCE Internal audit’s role

Table of Contents

Introduction ..................................................................................................................................... 1

Trouble for Al Capone ..................................................................................................................... 1

BSA fights money laundering .......................................................................................................... 1

Internal auditors must understand BSA-AML compliance .............................................................. 2

A new 2018 requirement ................................................................................................................ 2

Internal audit has multiple roles to play ........................................................................................... 3

Internal controls are key to compliance .......................................................................................... 5

Stay vigilant ..................................................................................................................................... 6

1

BSA-AML COMPLIANCE

Introduction

Internal audit plays a critical, yet independent, role in assessing an organization’s compliance with

regulatory requirements and documented policies and procedures, as well as regulatory expectations.

Internal audit also plays a significant and specific role in compliance with the Bank Secrecy Act (BSA) as

the primary U.S. anti-money laundering (AML) law, or BSA-AML Compliance. The purpose of the BSA,

aside from making money laundering more difficult to propagate, is to prevent banks from becoming

unknowing intermediaries in illicit activity. This knowledge brief provides insight into the current

requirements and expectations of internal audit as it relates to assessing BSA-AML Compliance,

understanding trends and their implications, and understanding the constantly evolving practices.

Trouble for Al Capone

The notorious Al Capone’s name was seldom mentioned without the terms crime and money laundering

somewhere within the conversation. No matter how risky, no matter how illegal, Al Capone and other leaders

of criminal organizations were convinced that money laundering was an important and necessary way of

“conducting business.”

Money laundering is a method of hiding profits gained from illegal activity and corruption by comingling the

illegal profits with legitimate money and assets. In a number of legal and regulatory systems, the term has

become melded with other forms of financial and business crime, including misuse of an organization’s

financial system (e.g., securities, traditional and digital currencies, and credit cards) and evasion of

international sanctions. Today, “conducting business” would be more difficult for Al Capone.

BSA fights money laundering

In 1970, Congress passed the BSA — the first U.S. law to fight money laundering. The BSA requires

businesses to keep records and file reports that are heavily used by law enforcement agencies — both

domestic and international — to identify, detect, and deter money laundering, whether it is in furtherance of a

criminal enterprise, terrorism, tax evasion, or other unlawful activity. The IRS is a shoulder-to-shoulder partner

in the 2007 National Money Laundering Strategy, and seeks to achieve a balance between enforcement of

money laundering laws and education.

However, even with AML regulations such as the BSA in place, money laundering is still a global problem.

Banks and other depository institutions remain the primary gateway to the U.S. financial system. Money

services businesses offer an alternative to banks for both financial services and money laundering. And often

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