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Tech Talk with SIP Print's Jonathan Fuld: the Bank Secrecy Act

January 27, 2010

By TMCnet Special Guest
Jonathan Fuld, Chief Technology Officer, SIP Print,

The Bank Secrecy Act, or “BSA,” was implemented in 1970 to deter money laundering and secret bank accounts.
 
Question: Prior to his conviction of tax evasion in 1931, who owned the largest number of laundromats in Chicago, Illinois?
 
Answer: Al Capone – some say this is where the term money laundering was first derived. A search produces its first sightings in newspapers following the Watergate scandal and illegal campaign funds donated to the committee to re-elect the president.
 
The BSA demands a paper trail for large currency transactions by establishing reporting requirements for financial institutions. It aids in detection of criminal tax and regulatory violations.
 
The teeth of this act comes from the Patriot (News - Alert) Act. The Patriot Act in part deleniates that banking entities must have a board approved BSA compliance program:
 
  • Internal Controls
  • Annual training of personnel
  • Designated compliance officer
  • Complaince testing and auditing – independent)
  • Customer Identification Program policy
 
The Patriot Act gives the government the right to pursue audit inquiries and question records without due process.
 
There are many ways to launder money through the banking system. There are many ways to move illegal funds through the local branch office of a bank, credit union, stock broker's office, title insurance company or other financial institution. One way to implement a BSA policy is through full time call recording, such as that provided by SIP-based VoIP call recording provider SIP Print (News - Alert) – not on demand recording or random recording, but full time recording. Full time recording provides an electronic audit trail of a financial transaction.
 
When a customer calls in to transfer cash, order smart cards, buy money orders or cashier's checks, make medical payments, insurance payments, loan payments, or other financial transactions, the full time call recording solution implemented at the financial insitution provides a record of the transaction by way of a paper trail. Unique to full-time call recording is the finger-print of the audio of the caller.
 
For example: a customer calls up and orders 200 smart cards at $2,000 per card. The customer comes in and later picks them up; then flys to Europe and sells them. If that financial institution has full time call recording, then their record keeping program is far more in compliance with a risk policy than a bank that does not have full time recording. There is a paper trail and with full time call recording there is also an electronic audio trail of this transaction.
 
The BSA and associated governmental agencies suggest that financial institutions that offer a wide array of e-banking products and services, such as account transfers, e-bill payment or accounts opened via the internet, are considered high risk. This means that a telephone banking system that uses voice response along side touch tone response may reduce BSA risk via a full time call recording system.
 
The more a financial institution uses electronics to provide better services and products, the more subject it is to a higher risk of the violation of the BSA. Enacting a policy of reviewing calls of a full-time call recording system can reduce the level of risk and keep it within compliance.

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Edited by Kelly McGuire

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