The USA PATRIOT Act: new adventures in American extraterritoriality

DOIhttps://doi.org/10.1108/13590790310808664
Date01 April 2003
Published date01 April 2003
Pages104-116
AuthorEthan Preston
Subject MatterAccounting & finance
Journal of Financial Crime Ð Vol. 10 No. 2
ANALYSIS
The USA PATRIOT Act: New Adventures in
American Extraterritoriality
Ethan Preston
INTRODUCTION
On 11th September, 2001, Al Qaeda operatives ¯ew
one commercial jetliner into the Pentagon outside of
Washington, DC; two planes into the towers of the
World Trade Center in New York and crashed a
fourth in Pennsylvania. In response to these horri®c
acts, the American Congress passed the Uniting
And Strengthening America By Providing Appro-
priate Tools Required To Intercept And Obstruct
Terrorism Act Of 2001 (`USA PATRIOT.')
1
Title III of USA PATRIOT, the International
Money Laundering Abatement and Financial Anti-
Terrorism Act of 2001, reformed American money
laundering laws to better combat the ®nancial
networks which support Al Qaeda and other terrorist
organisations.
2
Title III of USA PATRIOT was
meant, in part, to deal with ®nancial secrecy
jurisdictions.
3
As terrible as the attacks of 11th September were,
the USA PATRIOT Act may do more harm than
good. The International Money Laundering Abate-
ment and Financial Anti-Terrorism Act of 2001
amounts to another extension of American's extrater-
ritorial enforcement power which could be justi®ed
in the immediate emotional reaction to the 11th
September terrorist attacks, but emerges as inconsis-
tent with international comity and cooperation
after the emotional reaction to the tragedy of 11th
September subsides. Ultimately, USA PATRIOT
may threaten America's primacy in the international
®nancial system.
At the minimum, USA PATRIOT will require
foreign banks maintaining correspondent (or inter-
bank) accounts in the USA to adopt new procedures
and to recognise new risks to their property and their
trade, on pain of forfeiting those accounts. These
accounts are used to transmit payments between
banks and facilitate transactions between bank custo-
mers.
4
Terminating these accounts is the equivalent
to cutting o ®nancial ties with a country. Therefore,
as the international community's uncritical sympathy
for the USA begins to wane,
5
foreign ®nancial
institutions will begin to evade USA PATRIOT's
punitive provisions by severing ties to the USA.
The USA's previous aggressive forays into extra-
territoriality have engendered sharp criticism and
retributive legal responses by the international com-
munity before; things may well be headed in that
direction again.
6
THE ANTAGONISM OF AMERICAN
COURTS TOWARDS FINANCIAL
SECRECY
American courts have often expressed dim views
of the interference foreign ®nancial secrecy provi-
sions cause in domestic discovery.
7
From 1958 to
1987, the Supreme Court's decision in Societe Inter-
nationale pour Participations Industrielles et Commerciales
v Rodgers (`Societe Internationale') provided the
analytic framework for US courts ordering produc-
tion of documents (such as banking records) from
jurisdictions with secrecy laws.
8
Societe Internationale, along with several Second
Circuit cases, represented the zenith of comity
between American jurisprudence and other jurisdic-
tions' practices or traditions of ®nancial secrecy.
9
While Societe Internationale focused on considerations
limiting sanctions when they con¯icted with foreign
secrecy laws, it did not erect an in¯exible bar against
such sanctions.
10
Pre-1987 commentary on comity
with secrecy laws is often dismal. First National City
Bank v Internal Revenue Service stated that `[i]f [a
corporation] cannot, as it were, serve two masters
and comply with the lawful requirements both of
the United States and [another nation], perhaps it
should surrender to one sovereign or the other the
privileges received therefrom.'
11
Likewise, Westing-
house Electric Corporation v Rio Algom, Ltd ruled
that, where two jurisdictions' laws con¯ict `each
defendant [should] feel the full measure of each sover-
eign's con¯icting commands, so that ...it...must
Page 104
Journal of Financial Crime
Vol.10,No. 2, 2002,pp.104 ±116
#HenryStewart Publications
ISSN 1359-0790

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