The Bank Secrecy Act (BSA) of 1970 was the first piece of anti-money laundering (AML) legislation enacted in the U.S. and continues to provide the foundation for AML compliance in the financial services industry. Several laws have since amended portions of the BSA, clarifying, adding to, and expanding its requirements. One of these laws is the Annunzio-Wylie Anti-Money Laundering Act (Annunzio-Wylie Act) of 1992.
For additional information on the history of compliance legislation, view our timeline of key BSA/AML regulations.
The Annunzio-Wylie Anti-Money Laundering Act (1992)
In 1992 Congress passed the Annunzio-Wylie Act, at least partially in response to the Bank of Credit and Commerce International (BCCI) debacle, and turned the focus of AML regulation away from law enforcement and bureaucratic supervision and onto financial institutions. Policymakers reasoned that banks and other financial institutions were in a better position to spot illicit financial activity since criminal proceeds must enter and move through financial institutions. Legislators further noted that the financial expertise of financial institutions makes them better suited to recognizing suspicious financial transactions.
The BCCI Scandal Provides Impetus for Annunzio-Wylie Act
Although banking is now one of the most heavily regulated industries in the world, this wasn’t always the case. The AML regime we have in place today was still very much in its infancy as late as the 1970s and 1980s. The minimal regulatory oversight and lack of effective AML controls in the banking sector enabled the misuse of financial institutions in furtherance of illicit activity and eventually led to what is still considered the biggest fraud in banking history.
Founded in 1972 by a Pakistani businessman, the now-defunct BCCI was once the seventh-largest private bank in the world. The international bank was registered in Luxembourg, had head offices in Karachi and London, and at its height reached over 400 branches in 78 countries. But beginning in the 1980s, BCCI came under intense regulatory scrutiny due to mounting concerns over poor regulation.
In fact, BBCI was deliberately structured so that no single government had regulatory supervision over it. Without adequate oversight, illicit activity prevailed throughout the institution. Eventually, investigations revealed that BCCI was involved in massive money laundering, pervasive corruption, sanctions evasion, fraud, and other significant financial crimes, all of which were facilitated by exploiting gaps and weaknesses in international financial regulations.
BCCI operated largely in secrecy havens, conducting illicit transactions anonymously. Nominees, third parties, and intermediaries were used to hide its activities, and even infiltrate the U.S. financial system and illegally gain controlling interests in major American banks. Some of BCCI’s more notorious customers, and on whose behalf the bank was accused of laundering money, included the likes of Saddam Hussein, Panamanian ruler Manuel Noriega, the Medellín Cartel, and Abu Nidal, among others. As a result, BCCI earned the nickname “Bank of Crooks and Criminals International.” The bank finally collapsed in 1991 although many of the major figures involved in the scandal were never tried.
Requirements Under the Annunzio-Wylie Act
The Annunzio-Wylie Act brought about several notable changes to money laundering laws in the United States, including changes to the Money Laundering Control Act (MCLA) of 1986 and the Bank Secrecy Act.
According to the Financial Crimes Enforcement Network (FinCEN), some of the major changes under the Annunzio-Wylie Act include:
- A significant increase in criminal and civil penalties for violating money laundering laws, including BSA violations. Among other penalty enhancements under the Act, financial institutions convicted for criminally violating the BSA may be subject to termination proceedings. Similarly, individual bank officials convicted of money laundering may be banned from the industry.
- The requirement to file Suspicious Activity Reports (SARs), supplanting the previously used Criminal Referral Forms. The SAR is intended to be easier to complete and quicker to file than its predecessor. Related to this change, the Annunzio-Wylie Act also provided a safe harbor for financial institutions and their employees from civil liability for reporting known or suspected criminal offenses or suspicious activity by filing a SAR. The scope of that statutory protection was reaffirmed by the 2004 federal court case, Whitney National Bank v. Karam. Additionally, the Act provides whistleblower protections for employees who notify authorities of BSA violations.
- The imposition of verification and recordkeeping requirements for both domestic and international wire transfers.
- The establishment of the Bank Secrecy Act Advisory Group (BSAAG). The BSAAG is made up of representatives from federal agencies, and other individuals and financial institutions who are subject to BSA requirements, with the director of FinCEN serving as the chair. The group provides advice to the U.S. Treasury on BSA reporting requirements and informs representatives from the private sector about how the information they provide is used.
The Annunzio-Wylie Act was one of several pieces of legislation that amended the Bank Secrecy Act, imposing new requirements on financial institutions. As the U.S. AML regime continues to evolve, it is critical that financial institutions stay on top of changing laws and regulations.
Alessa can help ensure that your compliance program is adaptable to legislative developments and that your company remains in compliance with the most recent regulatory requirements with our comprehensive AML compliance solution, which includes regulatory reporting, sanctions screening, and risk scoring. Contact an Alessa representative today to learn more.
Tucker, O. M. (2022). The Flow of Illicit Funds: A Case Study Approach to Anti-Money Laundering Compliance. Georgetown University Press.