8.4. Anti–Money Laundering Rules

Money laundering is the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate business. If the dirty money can be “laundered” by sending it abroad or using it to finance local businesses, commingling it with “clean” money, the authorities will have a hard time linking it to crime. There are three stages of money laundering as traditionally defined:

1. Placement is the state of moving criminal (“dirty”) money into the financial system.

2. Layering is the shifting of funds among various accounts to confuse the origin of the assets.

3. Integration is the movement of the layered funds back into authentic investments (yielding “clean” money).

The Bank Secrecy Act (BSA) requires financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering. The BSA is sometimes referred to as an anti–money laundering (AML) law, and you may also see terms such as BSA/AML compliance. The USA PATRIOT Act broadened the scope of the BSA to focus on terrorist financing as well as money laundering.

The documents filed by businesses under the BSA requirements are use