USA PATRIOT Act: Anti-Money Laundering Provisions

Instructor: Patricia Jankowski

Patricia is an experienced registered nurse who has worked in various acute care areas as well as in legal nurse consulting. She also has a BSChE.

The USA Patriot Act, which was passed in 2001, has anti-money laundering provisions that are designed to uncover and prevent the financing of terrorist activities. This lesson will examine these provisions and related programs set up to enforce them.

Terrorism Costs Money

While the best things in life may be free, terrorism certainly isn't one of them. The activities of terrorists require a constant supply of incoming funds, especially those of large international terrorist organizations. It costs money to recruit members to the groups, to train and indoctrinate them, and to arm them. However, a terrorist leader can't just go to the local bank and take out a loan. He's got to be a bit more subtle than that, and terrorists usually are. They're good at money laundering, which is the process of taking money that is earned or meant for criminal activity and making it look like it's coming from a legitimate source. The cost of money laundering is very high in dollars as well as in terms of what it does to compromise the financial stability of the global economy.

Money laundering makes dirty money look clean
money laundering

Title III Of The USA Patriot Act

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, or USA Patriot Act, was passed by President Bush in October of 2001, shortly after the terrorist attack on the World Trade Center. The purpose of this act is to promote cooperation among law enforcement officials and to expand their investigative powers in pursuing and capturing terrorists.

Title III of the USA Patriot Act is known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, and it is dedicated to preventing and uncovering the illegal money laundering activity that terrorists often use to finance their endeavors. Title III, in many ways, was not a totally new piece of legislation, as there were concerns about gaps in existing laws that affected money laundering before it was ever passed. For the most part, Title III simply amended two already existing statutes, which were the Bank Secrecy Act of 1970 and the Money Laundering Control Act of 1986.

The Bank Secrecy Act Of 1970

The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act, is legislation that requires U.S. banks and financial institutions to work with the government when cases of money laundering are suspected. Any large (more than $10,000) transactions enacted by a single person must be reported to the government. This law does not only govern banks, but also casinos and dealers in gold and gems. Title III of the Patriot Act increased the scope of the BSA.

The Money Laundering Control Act Of 1986

The Money Laundering Control Act of 1986 was written to make money laundering a federal crime. It also made violating or not meeting the requirements of the Bank Secrecy Act punishable by criminal and civil penalties, including imprisonment for up to 20 years.

Developing Anti-Money Laundering Programs

One of the most urgent requirements of Title III of the USA Patriot Act was that all financial institutions must set up an anti-money laundering program of some kind by April 24, 2002. The Secretary of the Treasury was then to provide more specific regulations on how this must be done for different types of financial institutions, like dealers in mutual funds, banks, credit unions, or others.

Basic Program Features

Regardless of the type of financial institution, the anti-money laundering programs were to have some basic features in common. These included:

  • Designated Compliance Officer - The financial institution must appoint a person or committee to manage the anti-money laundering compliance program and make certain that all of its components are operational.
  • Continuing Training -The employees of the financial institution must be provided with continuing education regarding prevention of money laundering, reporting of suspicious activity, and regulations and updates.
  • Auditing - The financial institution must audit its anti-money laundering program to see if it's working. This does not have to be done by an external firm and can be done internally.
  • Customer Identification - This may be one of the most important requirements. All financial institution personnel are to get identification from every customer who does business with them and compare this to lists and databases that give information about known or suspected terrorists. Any suspicious activity must be reported.

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