The BSA is a fundamental part of protecting financial institutions from being exploited by criminals. Meeting its obligations involves a mix of record-keeping, reporting, and proactive risk management to identify and mitigate potential threats.

A key aspect of compliance under the BSA is transaction monitoring. Banks must have systems in place to track and flag unusual transactions, particularly those involving large cash deposits, rapid movement of funds, or transactions that don’t align with a customer’s known financial behaviour. These red flags must be escalated internally and, where necessary, reported through SARs.

Customer due diligence (CDD) is another pillar of BSA compliance. Financial institutions need to verify customer identities, understand the nature of their business, and assess their risk profile. Enhanced due diligence (EDD) applies to higher-risk customers, such as politically exposed persons (PEPs) or entities operating in jurisdictions known for lax financial controls.

Record-keeping obligations under the BSA mean financial institutions must retain transaction records for at least five years. This helps regulators and law enforcement trace financial activity and identify patterns of potential wrongdoing. Failure to maintain proper records or submit required reports can lead to hefty fines, regulatory scrutiny, and reputational damage.