USA Patriot Act and Other Recent Money Laundering Developments Have Broad Impact on Financial Institutions
Posted: 11 Mar 2002
On October 26, President Bush signed into law the USA Patriot Act (the "Act"), which creates a new sweeping arsenal of tools to combat international money laundering and the financing of terrorism. Title III of the legislation, the "International Money Laundering Abatement and Anti-Terrorism Financing Act of 2001," makes extensive changes to the Bank Secrecy Act of 1970 (BSA) and the Money Laundering Control Act of 1986 (MLCA), as amended, that will have a far-reaching impact on the whole financial community, defined to include all banks, brokers and dealers, investment and insurance companies, as well as all those involved in real estate closings and settlements. A number of the provisions of the Act became effective as early as December 25, 2001, while others will go into effect on April 24, 2002, or by July 1 or 23, 2002. The legislation substantially broadens existing coverage and the extraterritorial jurisdiction of the United States, imposes new compliance and due diligence obligations, creates new crimes and penalties, compels the production of documents located both inside and outside the United States, including those of foreign institutions that merely have a correspondent relationship in the United States, and clarifies the safe harbor from civil liability to customers. The Act mandates the Treasury to issue a number of regulations which are likely to further expand its breadth and increases the already severe criminal and civil penalties for financial institutions to a fine of at least twice the amount of a transaction but not more than $1 million and expands the equally draconian forfeiture provisions. The requirements imposed by the USA Patriot Act compel each institution covered by the statute to reevaluate the way it conducts business. Some will have to expand existing compliance and Know-Your-Customer programs to bring them in line with the new standards. All affected businesses will have to reconsider the way they report suspicious transactions and activities to law enforcement authorities and do so more diligently. Banking institutions and brokers and dealers will also have to fashion new policies and procedures for the use of concentration, payable-through and correspondent accounts, and obtain the required certifications from the numerous foreign counterparts with whom they conduct business. Private bankers and trust companies will need to further enhance their anti-money laundering programs and record-keeping procedures.
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