US Tax Professionals Impacted By Patriot Act

by Leroy Baker, Tax-News.com, New York

14 March 2005

The US Patriot Act, passed in the wake of 9/11, has resulted in major changes to the Bank Secrecy Act, particularly for Money Service Businesses (MSBs) and the tax professionals who advise them. A recent IRS-sponsored panel described these changes.

On the March 8 Webcast of Tax Talk Today, a distinguished panel of IRS officials and tax experts discussed the latest changes to the Bank Secrecy Act (BSA), stating the importance of registering and filing correctly to comply with new anti-money laundering regulations that impact a host of businesses.

The panel encouraged tax practitioners to help their business clients meet recent changes in BSA requirements brought on by the USA Patriot Act in a national effort to crack down on money laundering activities that can be used to fund terrorist activities. "The USA Patriot Act may be even more sweeping than the Bank Secrecy Act itself at its inception," said Don Temple, Director of Anti-Money Laundering Investigations, Commerce Bank.

According to the IRS and tax professionals, tax practitioners need to help their business clients pay close attention to the BSA's definition of a Money Service Business (MSB) and file accordingly. MSBs have very specific registration and reporting requirements that help the government investigate and ultimately prosecute money laundering activities.

An MSB is defined as any business that offers one or more of the following services: money orders, traveler's checks, stored value, check cashing and currency dealing and exchanges; and conducts more than $1,000 in money services business activity with the same individual, in one type of activity, on the same day; or provides wire or money transfer services in any amount. A business qualifies as an MSB even if the MSB activity itself is ancillary to the primary business. Examples include: a travel agent selling traveler's checks; a grocery store offering check cashing and/or wire transfers; a convenience store selling money orders.

Because MSBs are tasked with helping to maintain a paper trail for possible future money laundering investigations, it is critical that these businesses maintain accurate, up-to-date records for all registration and transaction reporting as required under the latest BSA regulations. These records become vital if a BSA examination or a criminal investigation is launched.

"MSBs need to ensure that they keep a copy of that registration confirmation letter on file as were going to ask for that when we go out to do our exams," commented Charlotte McGuffin, Bank Secrecy Act Examiner, IRS.

"The transaction reports are very important, because law enforcement uses them as a tool for investigations," added Theresa McGill, Senior Bank Secrecy Act Specialist, IRS. "We have to remember that fighting crime is the work of everybody and this is one way in which MSB's can help."

MSBs are also required to have anti-money laundering compliance programs in place to ensure that requirements are being met. The Financial Crimes Enforcement Network (FinCEN) provides guidance for the creation of MSB compliance programs at www.FinCEN.gov.

Neil Fishman, CPA, CFE, and Principal, Fishman Associates, emphasized the importance of a dedicated, responsible Compliance Officer and adequate, ongoing employee training for a successful MSB anti-money laundering (AML) compliance program.

"The Compliance officers' main job is to ensure that the businesses AML Compliance program and written policy, is not just a pretty book sitting on a shelf somewhere," said Fishman. "He or she needs to be knowledagble about the regulations and ensure that all of the program requirements are being met."

In addition to the usual currency transaction reports, MSBs are also required to file suspicious activity reports (SARs). Once required only of banks and other financial institutions, SARs are a key tool in criminal investigations and are now the responsibility of any MSB that knows, suspects, or has reason to suspect that a transaction or pattern of transactions is suspicious. MSBs need to be ever vigilant and aware of customers that seem to be trying to "operate outside the box," counseled Fishman.

"Helping the IRS and other government agencies enforce anti-money laundering laws is a big responsibility, because it ultimately impacts the safety of every American," said Ellen Murphy, IRS Area Director. "We hope tax professionals will take this to heart and encourage their clients to meet all of the new BSA reporting requirements."

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