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Enforcement of the Bank Secrecy Act Requirements: Money Services Businesses, December 13, 2004 1 (December 13, 2004)

handle is hein.tera/crser0045 and id is 1 raw text is: Order Code RS22003 December 13, 2004 CRS Report for Congress Received through the CRS Web Enforcement of Bank Secrecy Act Requirements: Money Services Businesses Nathan Brooks Legislative Attorney American Law Division Summary Questions have been raised regarding the IRS's ability to effectively monitor the compliance of money services businesses (e.g., check cashing and money order businesses) with the Bank Secrecy Act (BSA), given the large number of such institutions and the IRS's limited resources. In response, the IRS has announced a forthcoming model pact for coordination between the IRS and states with regard to money services businesses and BSA enforcement. This report provides background on the BSA, the IRS's BSA responsibilities, and an overview of some of the criticism leveled at the IRS with respect to BSA compliance. This report will be updated as events warrant. Introduction. The Internal Revenue Service (IRS) is charged with monitoring compliance with the Bank Secrecy Act (BSA)1 by most nonbank financial institutions, which include money services businesses (MSBs). Recently, concerns have been raised regarding the IRS's ability to effectively carry out this duty with respect to MSBs,2 as repeated investigations by the Department of the Treasury have found failings in the IRS's BSA compliance program generally, and the New York State Banking Superintendent has called for federal legislation allowing states to enforce the BSA and other federal anti- money laundering/terrorist financing laws3 against MSBs.4 This report provides background on the BSA, an overview of the IRS's examination responsibilities with respect to MSBs, and a discussion of some of the criticism leveled at the IRS. ' Codified, as amended, at 12 U.S.C. §§ 1829b, 1951-1959; 31 U.S.C. § 5311 et seq. 2 See, e.g., IRS May Fail to Detect Noncompliance with Bank Secrecy Act, TIGTA Concludes, BNA's Banking Report, Vol. 82, No. 12, at 499 (March 24, 2004). 3 For a detailed discussion of the anti-money laundering/terrorist financing legal framework, see CRS Report RL32539, Terrorist Financing: Current Efforts and Policy Efforts for Congress, coordinated by Martin Weiss. ' See, e.g., New York Bank Chief Urges Legislation Giving States BSA Authority for Money Firms, BNA's Banking Report, Vol. 83, No. 12, at 518 (October 4, 2004). Congressional Research Service ** The Library of Congress

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