Grocery Stores - Beware of Bank Secrecy Act Requirements or Face Stiff Penalties

Outside of the banking world, business owners may hear of the Bank Secrecy Act, or BSA, and assume it is a law that only applies to banks, so they do not need to concern themselves with it. Many business owners – especially owners of grocery stores, convenience stores, and check-cashing businesses – would be surprised to learn that the BSA does apply to their business and that, by not complying with the Act, they are putting not only their business, but also their personal assets and livelihood at serious risk.

The BSA is a federal law enforced by the IRS and an organization called the Financial Crimes Enforcement Network (FINCEN) to prevent the concealment of the sources of illegal proceeds so that criminals can use funds without detection of their illegal activities – also known as money laundering. Contrary to what its name may imply, the BSA does not only apply to banks. In fact, if your business sells traveler’s checks, money orders, or stored value cards, provides money wire transfer or check cashing services, or acts as a currency exchange, your business very well may be deemed a “Money Service Business,” meaning it is required to comply with the BSA.

What does it mean if your business is a Money Service Business? First, your business generally must register with FINCEN. Failure to take this step alone could subject you and your business to a fine of $5,000 per day. Also, you must implement an Anti-Money Laundering Compliance Program that governs how your business and its employees comply with the BSA and respond to suspicious activities. As part of this program, your employees must be trained in the BSA’s requirements, you must designate a compliance officer in charge of overseeing the implementation of the program, and your business must undergo a periodic third-party audit to ensure its compliance with the BSA.

In addition to taking these steps, there are reports that must be filed with FINCEN to report certain types of transactions. For instance, many businesses must file Suspicious Activity Reports within 30 days of any transaction in excess of $2,000 that is deemed “suspicious.” Furthermore, Currency Transaction Reports must be filed to report cash transactions in excess of $10,000. There are several more record-keeping and reporting requirements that Money Service Businesses must strictly adhere to.

           

The IRS conducts random examinations of Money Service Businesses to ensure their compliance with the Bank Secrecy Act. If any willful violations are found, the IRS is authorized to assess penalties of up to $100,000 per day, while negligent violations are subject to penalties of up to $500 per day. Violations that are deemed to be criminal can result in penalties of up to $500,000 and/or up to 10 years imprisonment.

 

If you have any questions about the requirements of the Bank Secrecy Act or to determine whether you operate a Money Service Business, please contact Lavelle Law at 847-705-7555 to schedule a free consultation.