|Posted on Monday, April 14, 2003|
We Mean Business. Illinois Business.
Patriot Act powerful in fight against terrorism
A passport or visa is no longer enough for foreign clients to open a bank account in the United States. Banks and other institutions are expected to go much further in order to verify clients' claims that they are who they say they are.
The United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, commonly known as the USA Patriot Act, was passed by Congress and signed into law by President George W. Bush on Oct. 26, 2001, in initial response to the terrorism of Sept. 11.
The Patriot Act gives broader powers to federal government and entities such as the president, vice president, the director of the Federal Bureau of Investigation, the Attorney General, the Justice Department and the Immigration and Naturalization Service. It enables them to seize accounts and requires financial firms to do a lot more investigating in determining a customer's identity.
Debbie Carbonell, internal auditor, compliance and security officer for Security Bank in Springfield, said that while some sections of the act are already in place, others are still being phased in.
"Section 326, which implements procedures for verifying the identity of persons opening accounts, should go into full effect later this year," she said.
Carbonell said that what the Patriot Act is primarily focusing on is the control of money laundering in the United States to help nip terrorism in the bud by more closely identifying a customer and keeping an eye out for any suspicious banking activity.
Specifically, banks are required to have a customer identification program for people opening accounts. Financial institutions are required to identify the person and the business to determine that identities check out. Details of the law are still being ironed out as far as what type of information should be kept and for how long.
"Banks really should have had similar programs in place even before Sept. 11, and many of them did, but now the controls are really tightened up and it's mandatory that a program is in place," she said.
Regulatory representatives performing exams when they come into the bank will regulate procedures verifying the identities of customers. They will look at procedures and records that were used when new accounts were opened. Such facts as addresses, birth dates and Social Security information should be verified to make sure that it all makes sense and coincides with believable Social Security numbers issued in a year when such a number was actually distributed.
Institutions that do not comply with the new procedures will incur large penalties in the form of fines.
Regulatory agencies who have worked together to form the USA Patriot Act include the Federal Deposit Insurance Corp., the Treasuries Financial Crimes Enforcement Network, Office of Comptroller of the Currency, the Federal Reserve, Office of Trust Supervision, the National Credit Union Administration, Office of Thrift Supervision, the Securities and Exchange Commission, and the Commodities Futures Trading Commission.
"It will help financial institutions in tightening up the procedures that they should have already been using," Carbonell said. "The Bank Secrecy Act was put into place in the 1970s to help eliminate money laundering, but of course then it wasn't really addressed at terrorism."
The Bank Secrecy Act is supposed to help prevent money laundering. Money laundering is the means used to get money in and out of this country to fund such terrorist acts as the attack on the World Trade Center. It involves turning illegally obtained funds into legitimate money.
But aspects of the Bank Secrecy Act can aid in the abatement of terrorist funding. Banks are required to complete currency transaction reports for deposits or withdrawals of more than $10,000. There are certain reports that are to be filed for currency transactions of more than $10,000. A currency transaction report is filed with the U.S. Department of Treasury.
Also a suspicious activity report must be completed if it is suspected that a customer is performing illegal acts through the bank.
Suspicious activities may include large sums of money going into or out of an account that are uncommon to the account transaction history. Examples include wire transfers that are going to different countries; multiple deposits; large deposits or withdrawals just under the $10,000 limit; and a customer who comes in with a deposit more than the $10,000 limit who suddenly changes his mind when he finds out there will be a report filed with personal information.
Other suspicious red flags might be a lot of activity not normal (incoming cash, or a lot going out); wire transfers sent overseas and other activity that have nothing to do with terrorism but are still illegal. This might include check hiding or check fraud, Carbonell said.
"The biggest thing we will have to do under the new law that we weren't doing before is to copy all identification that we take from customers and keep it on file," Carbonell said. "Other than that, most things we had been doing already."
The Office of Foreign Assets Control at the U.S. Treasury issues a published list of suspected terrorists and terrorist organizations. OFAC, combined with the Federal Bureau of Investigation list, is used to also verify that a client is not someone that is not allowed to do business in the United States.
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