Assessing the impact of the USA PATRIOT Act on the financial services industry
| Published date | 01 July 2005 |
| Pages | 243-251 |
| DOI | https://doi.org/10.1108/13685200510620939 |
| Date | 01 July 2005 |
| Author | James Fisher,James Gilsinan,Ellen Harshman,Muhammed Islam,Fred Yeager |
| Subject Matter | Accounting & finance |
Assessing the Impact of the USA PATRIOT
Act on the Financial Services Industry
James Fisher, James Gilsinan, Ellen Harshman, Muhammed Islam and Fred Yeager
INTRODUCTION
On 26th October, 2001, President Bush signed into
law the USA PATRIOT Act.
1
The Act was passed
under a suspension of Congressional rules and in a
highly expedited manner while the country was reel-
ing from the devastating terrorist attacks of 11th Sep-
tember.
2
The Act signi®cantly amended several
existing laws including the Bank Secrecy Act and
the Foreign Intelligence Surveillance Act. It vests the
Secretary of Treasury with enhanced regulatory
powers to combat corruption of US ®nancial insti-
tutions for money laundering purposes. It also creates
new crimes, penalties and procedural eciencies for
use against domestic and international terrorists. It
set into motion a rede®nition of the ®nancial services
industry together with a host of reporting and surveil-
lance requirements that were to be imposed on the
industry and designed for the purpose of interrupting
money ¯ows in support of terrorist activities.
Together with subsequent legislation, the Act caused
a dramatic expansion of surveillance activities by the
®nancial community and has alarmed some observers
who view the expanded powers of law enforcement as
an intrusion on the fundamental rights of American
citizens.
`On the same day Saddam Hussein was captured by
US troops in Iraq, President Bush signed into law a
new bill giving the FBI increased surveillance
powers, eectively expanding the reach of the
USA PATRIOT Act Ð even though part of the
Act was recently struck down as unconstitutional.
The Intelligence Authorization Act for Fiscal Year
2004, which funds all intelligence activities of the
federal government, grants the FBI unprecedented
power to obtain ®nancial records for institutions
without a court order to access such records.
Now, agents do not need to obtain prior judicial
approval or demonstrate probable cause or a
reason to believe that a targeted individual is
involved in terrorist activity Ð or even a crime.'
3
Indeed, similar money laundering legislation was pro-
posed in the previous year during the Clinton Admin-
istration and was rejected on privacy and other
grounds. Many observers, however, point to the
need for extraordinary steps in response to the events
of 11th September, 2001. The research in this paper
is designed to assess the impact of the USA PATRIOT
Act on the ®nancial services sector. A cost-bene®t
analysis of the Act in quantitative terms is not possible,
since the volume and extent of terrorist activities that
may have been or will be thwarted by virtue of the
new rules may never be known. Sucient data exist
however, to provide an assessment of the impact of
the Act on the ®nancial services industry and thus to
gain some understanding of the magnitude of the
cost, both ®nancial and in terms of liberties lost by
virtue of this legislation.
WHAT DOES THE ACT REQUIRE?
Basically, the Act requires all ®nancial institutions to:
Establish a more formalised anti-money launder-
ing (AML) programme;
Designate an AML compliance ocer;
Implement an ongoing employee training pro-
gramme;
File Suspicious Activity Reports (SARs) on an
ongoing basis;
Verify identity of new account customers;
Determine whether potential customers appear
on any list of known or suspected terrorists pro-
vided to ®nancial institutions by any government
agencies;
Continual reporting and information sharing.
Financial institutions must now report through a unit
of the Treasury Department called the Financial
Crimes Enforcement Network (FinCEN). FinCEN
administers the Bank Secrecy Act as amended within
the USA PATRIOT Act. According to FinCEN's
website, its mission is to support law enforcement
investigative eorts and foster interagency and
global cooperation against domestic and international
®nancial crimes; and to provide US policy makers
with strategic analysis of domestic and worldwide
Page 243
Journal of Money Laundering Control Ð Vol. 8 No. 3
Journalof Money Laundering Control
Vol.8, No. 3, 2005, pp. 243± 251
#HenryStewart Publications
ISSN1368-5201
To continue reading
Request your trial