Certifications to the State Treasurer Concerning Sudan
Many Illinois banks recently received a letter from the Illinois State Treasurer’s office regarding a law entitled the “Act to End Atrocities and Terrorism in the Sudan” (i.e., the “Act to EAT Sudan”), which becomes effective today (January 27, 2006). This letter was accompanied by a form entitled “Certification for Financial Institutions,” and many Illinois bankers are wondering whether they must return this certification today. The answer is no.
In essence, the Act to EAT Sudan prohibits the State Treasurer from depositing funds or otherwise transacting business with any financial institution unless an authorized officer of that institution certifies that it has not at any time following the effective date of the law loaned to or invested in the Republic of Sudan or any entities doing business with or in the Republic of Sudan (the “forbidden entities” referenced in the certification form). The certification form requires financial institutions to certify that their loan customers have certified to them that they are not “forbidden entities.”
The Act also amends the Illinois Pension Code to provide that a fiduciary of a retirement system or pension fund established under the Pension Code may not directly or through a fund manager transact any business with any company unless an authorized officer of that company certifies that it has not transacted business with any “forbidden entities.”
The certification requirements in the Act to EAT Sudan do not apply to the Treasurer’s “linked deposit programs,” nor do they apply to “the purchase of depository, custodial, processing, and advisory services that are necessary to fulfill the Treasurer’s obligations and responsibilities.” We have been advised by the Treasurer’s office that this latter exception applies to all banking service contracts that the Treasurer has with Illinois banks. What is subject to certification, then?
The Treasurer maintains “market rate deposits” of state funds in over 200 Illinois banks throughout the state for liquidity purposes and to provide capital to local communities. The Treasurer’s office has informed us that these are the only deposits that will be subject to the Act to EAT Sudan’s certification requirement. However, your bank does not need to provide certification for existing “market rate deposits.” As the Treasurer’s letter states, “you must complete a new certification form before a new deposit is made or an existing deposit is renewed.” In other words, you only need to return the certification form today if you are accepting a new non-linked state deposit or renewing a non-linked state deposit today.
Keep in mind that if and when you do sign and return the certification form, you are certifying in good faith that your organization has implemented policies and practices that require all of your loan applicants to certify to you that they are not “forbidden entities.” If you have not implemented these policies and practices and you are not obtaining such certifications from your loan customers, you should neither sign nor return this form, and you may not accept new non-linked state deposits or renew non-linked state deposits.
We will continue to keep you posted as issues relating to this new law develop. Meanwhile, if you are an IBA member and have any questions, please feel free to call us at 1-800-GO-TO-IBA, or you may call Dan Wabut at the Treasurer’s office at (312)814-1700.
W. Alison Huszar
and Senior Compliance Counsel
Illinois Bankers Association