Bank Secrecy Act: Deterring Money Laundering in U.S. Finances

The Bank Secrecy Act (BSA), enacted in 1970, is a U.S. law aimed at fighting money laundering and other financial crimes. It requires banks and financial institutions to report suspicious activities and transactions exceeding $10,000, enabling authorities to track illegal funds.

Purpose and Implementation

The BSA serves to identify when money laundering supports criminal enterprises, terrorism, tax evasion, or conceals other illegal activities. It was initially used to disrupt funding for criminal organizations and later adapted to combat the financing of terrorist groups.

Money laundering helps criminals disguise illicit cash as legitimate income, often preferring cash transactions over electronic payments to buy illegal goods.

Role of FinCEN and Law Enforcement

Implemented in partnership with agencies like the Financial Crimes Enforcement Network (FinCEN), the BSA enhances financial transparency and oversight, assisting law enforcement in uncovering criminal activities.

The legislation "supports law enforcement by improving financial transparency and oversight."

Criticism and Challenges

Despite its effectiveness, the BSA faces criticism for burdening institutions with compliance requirements and struggling to keep pace with rapidly evolving financial technologies.

Recent Developments

In February 2024, FinCEN proposed broadening the BSA's definition of "financial institution" to include certain investment advisers, reflecting the need to adapt to changes in the financial sector.

Author's summary: The Bank Secrecy Act plays a crucial role in detecting and preventing money laundering in the U.S. by mandating transaction reporting, though it faces challenges from technological changes and compliance demands.

Investopedia — 2025-11-03