2020 Journal of Community Bank Studies

Mansfield University of Pennsylvania Executive Summary

T he Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations affect all community banks in the country. The regulations exist to promote financial transparency to defer and detect criminals from committing crimes such as money laundering and terrorist financing. However, community banks often find that many BSA/AML policies are outdated, extremely costly, and labor-intensive. Citizens & Northern Bank (known as and hereinafter referred to as C&N), a community bank located in Wellsboro, Pennsylvania, is one of those institutions that diligently comply with BSA/AML yet feels there is a need for certain pieces of legislation to accommodate community banks. In this case study, we will examine how C&N manages its resources to account for BSA/AML compliance and identify potential political reforms that would benefit community banks.

Although Congress passed the Bank Secrecy Act in 1970, it has vastly evolved in the past 50 years. At the time, the act was a monumental bill for financial institutions that laid the framework for the requirements regarding record-keeping and reporting. BSA not only affected banks, but other institutions such as money service businesses, loan companies, and investment firms. They also had to report all cash transactions, using a Currency Transaction Report (CTR), that exceed $10,000; identify the persons conducting the transactions; and keep records of the financial transactions. In 1990, Congress established the Financial Crimes Enforcement Network (FinCEN) as a bureau in the U.S. Department of the Treasury to safeguard the financial system. This became a separate entity to administer the Bank Secrecy Act and collect and analyze data related to financial crimes. However, BSA developed most significantly after the passage

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