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USA PATRIOT Act

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by Mary Beth Guard

HR 3162, known by the acronym USA PATRIOT Act (which stands for "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism"), was signed into law October 26, 2001. Title III of the law is the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 ("the Act") which contains new provisions relating to money laundering and terrorist access to the financial system in our country.

First, the good news, in terms of compliance. Most of the provisions of the new law:

  • place burdens on government entities (ssuch as Section 357, which requires the Secretary of Treasury to submit a report to Congress on the role of the IRS in the administration of the Bank Secrecy Act); or
  • broaden the application of certain statutes (such as forfeiture laws) to additional situations; or
  • widen the applicability of certain anti-money laundering or anti-terrorism provisions to a broader group of entities; or


In terms of direct compliance responsibilities for financial institutions, many of the provisions have delayed effective dates or require interpretive regulations to be adopted to implement them. In fact, we count 14 different sets of regulations that are either required or authorized to be promulgated under Title III. In addition, some of the new provisions simply clarify existing law and do not compose new compliance burdens. The bottom line is that, despite all the hoopla, this bill doesn't give you a raft of new items for your to-do list.

These Provisions Became Effective Immediately

  • The Safe Harbor provision in the Bank Secrecy Act is amended by Section 351 of the Act to clarify that an institution does not have protection from civil liability for reporting suspicious activity if the action against the institution is brought by a government entity.
  • The prohibition against disclosure that a SAR has been filed is extended to include a disclosure by a federal, state, or local government employee, except as necessary to fulfill that employee's official duties.
  • The circumstances under which funds in a U.S. interbank account may be subject to forfeiture are expanded under Section 319 of the Act.
  • The prohibition on disclosure of SAR filings and the safe harbor provision have been amended slightly to permit an institution l) to disclose in a written employment reference or a written termination notice provided to a self-regulatory agency the information that has been reported as suspicious, and 2) to disclose suspicions of illegal activity to other insured depository institutions in written employment references. You cannot disclose, however, in either instance, that a SAR was filed. (And it should be noted that you are not required to disclose suspicions of illegal activity in these written employment references. You are merely given the option to do so.)

Took Effect December 25, 2001

  • Financial institutions are prohibited from establishing, maintaining, administering, or managing correspondent accounts with foreign banks that have no physical presence in any jurisdiction, with certain limited exceptions.
  • Financial institutions must take "reasonable steps" to ensure that accounts for foreign banks are not used to indirectly provide banking services to shell banks.
  • A financial institution must, upon request of the appropriate federal banking agency, produce records relating to its anti-money laundering compliance or its customers within 120 hours of the request.
  • The Treasury and the U.S. Attorney General are given the power to issue a subpoena or summons to any foreign bank with a correspondent account in the U.S. and request records relating to the account. A financial institution that has a correspondent account for a foreign bank must maintain certain delineated records in the U.S. relating to that foreign bank.
  • The Treasury and the U.S. Attorney General are given the power to direct a financial institution to terminate its relationship with a foreign correspondent bank that has failed to comply with a subpoena or summons or that has failed to initiate proceedings to contest a subpoena or summons. The directive must be by written notice and non-complying financial institutions are subject to civil money penalties of up to $10,0000 per day.

Effective for applications submitted after 12/31/01

  • The federal banking regulators must take into consideration the effectiveness of the applicants' anti-money laundering activities when deciding upon applications submitted under applicable provisions of the Bank Holding Company Act and the Federal Deposit Insurance Act, such as merger applications.

Provisions with later effective dates will impact:

  • Due diligence for private banking and correspondent accounts (Rules are to be proposed by April 24, 2002);
  • Special measures for certain jurisdictions, financial institutions, international transactions and accounts (to be determined by future regulation; no deadline set);
  • Standards for Verifying Customer Identity (Rules to be effective by October 25, 2002);
  • Government and Financial Institution Information Sharing (An Interim Rule on information sharing among financial institutions and financial institution associations went into effect March 4, 2001; a proposed rule on information sharing between financial institutions and the government is pending);
  • Restrictions on concentration accounts (to be determined by future regulation; no deadline set);
  • Anti-money laundering program requirement (Effective April 24, 2002; rules expected prior to that time);
  • Secure Filing Network to be established by FinCEN (Network to be operational by July 23, 2002)
  • A report Treasury is required to file by October 25, 2002 of how the cash transaction reporting system can be made more efficient.

For handy links to all the USA PATRIOT Act issuances, information, statute and more, use our USA PATRIOT Act links on the BOL Launch Pad.

Updated 3/22/02. The original version appeared in the November 2001 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 3/25/02

First published on 03/25/2002

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