Cryptocompliance 101: What Is A BSA Compliance Officer And Why Do You Need One?

November 5, 2018
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“Cryptocurrencies are a new asset class, one at war with fiat money, and that war will be fought on regulatory issues.”

That’s what bank analyst Yann Quelenn says about cryptocurrencies like bitcoin. We agree with him. The future of cryptocurrency is fraught with regulatory battles. If the cryptocurrency industry is going to thrive, it has a lot of growing up to do.

A good first step would be embracing the four pillars of effective BSA/AML programs: strong internal controls designed to thwart money laundering, implementing ongoing and relevant training, coordinating independent AML audits, and the designation of a qualified BSA compliance officer.

Of course, there are challenges to abiding these pillars. That’s why we’ve dedicated an entire blog series to breaking down the basics of financial compliance for cryptocurrency businesses.

Therein, one of the first major steps every crypto business must take is the appointment of a competent BSA Compliance Officer.

Stick around to find out what a BSA Compliance Officer is and why your crypto business needs one.

What Is A BSA Compliance Officer?

In order to answer this question, we must first explain what the “BSA” component of the job title refers to.

Established in 1970, the Bank Secrecy Act (BSA) laid the groundwork for contemporary laws which fight money laundering in the U.S. The BSA tasks businesses with keeping records and reports of certain information. Law enforcement agencies use this information to do things such as:

  • Tackle major regulatory issues
  • Prosecute criminals
  • Identify and address tax evasion

BSA Compliance Officers are required to have extensive knowledge of the Bank Secrecy Act. They use this knowledge to implement strategies which help businesses (most often money services businesses or MSBs) identify and combat money laundering.

Implementing these strategies often requires that BSA Compliance Officers take on a wide range of duties. For instance, they are responsible for providing other employees with basic BSA training. Not only that, but he or she is also in charge of monitoring the BSA/AML tools and software on which your business relies.

What exactly does a BSA Compliance Officer do?

Now that you know what a BSA Compliance Officer is, let’s talk a bit more about what they do. We’ve already briefly touched on a couple of their responsibilities.

But in truth, their jobs are much more complex than BSA training and tool management.

BSA Compliance Officer

First and foremost, staying up-to-date on BSA legislation is akin to fighting a never-ending war. That’s because the Bank Secrecy Act isn’t the only legislation compliance officers must familiarize themselves with. They must also, for example, have knowledge of and devise strategies which adhere to the USA PATRIOT Act.

In addition to drinking from the firehose of ever-evolving rules and regulations governing crypto institutions, the BSA Compliance Officer is also responsible for overseeing day-to-day AML compliance activities.

Simply put, he or she is charged with managing all aspects of the BSA/AML compliance program and adherence to the BSA as well as implementing and supporting rules and regulations. It’s a big job.

The Board of Directors plays an important role in the proper allocation of resources in support of this mission. They are responsible for ensuring that the BSA Compliance Officer has sufficient authority and resources (monetary, physical, and personnel) to administer an effective BSA/AML compliance program.

What’s more, this is not a mere formality or a budgetary decision. The Board itself is ultimately responsible for the institution’s BSA/AML compliance, according to regulators.

To that end, the BSA Compliance Officer and Board must establish a line of communication that enables seamless information sharing, thoughtful decision making, and compliance strategy. The BSA Compliance Officer should regularly apprise the Board of Directors, and senior management, of ongoing compliance with the BSA.

Pertinent BSA-related information, including the reporting of SARs filed with FinCEN, should be reported to the Board so that its members can make informed decisions about the overall BSA/AML compliance strategy.

In summary, the BSA Compliance Officer is responsible for carrying out the direction of the Board and ensuring that employees adhere to the bank’s BSA/AML policies, procedures, and processes.

BSA Compliance Officers In Crypto Businesses

As you can see, the job of a BSA Compliance Officer is extremely nuanced. One must be thorough and have excellent attention to detail. Even a single misstep or oversight can cost a business dearly.

In many ways, that’s even truer in the cryptocurrency space, which arguably has an even greater need for BSA Compliance Officers than other spaces.

According to Rob Wainwright, the head of Europol, about 4 percent of the money criminals launder annually is laundered in the form of cryptocurrency. That number may seem small right now, but there are two things to consider:

  • That 4 percent amounts to $5.6 billion
  • The dollar amount is likely to increase as cryptocurrency becomes more mainstream

This is where BSA specialists with knowledge of the crypto industry come in. Not only do they fully understand BSA requirements, but they understand what makes cryptocurrency so different from fiat money.

Understanding what makes cryptocurrency different from traditional currency makes developing crypto-specific AML strategies easier. Regulators expect the BSA Compliance Officer understand the institution’s unique products, services, customers, entities, and geographic locations, and the potential money laundering and terrorist financing risks associated with those activities.

Bottom line, the appointment of a BSA Compliance Officer is not sufficient to meet the regulatory requirement if that person does not have the expertise, authority, or time to satisfactorily complete the job.

Need help building your compliance strategy?

You now have a good idea of what a BSA Compliance Officer does. More importantly, you also understand what value a BSA Officer adds to any crypto business.

Which means you no longer have an excuse NOT to have one.

Today is the day to start investing in compliance. Doing so is as easy as contacting us for a free consultation.

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