By Smuckler, Gary S.; Bravin, Mark N.; O'Donald, Lisa E.; Conway, Amy J.
Mortgage Banking , Vol. 62, No. 9
The U.S. government has new laws and rules intended to stop financial transactions involving known terrorists and their organizations. Mortgage bankers and brokers need to know how these rules apply to them and the stiff penalties for breaking them.
MANY OF YOU MIGHT BE SURPRISED TO HEAR THAT several provisions of the anti-terrorism laws apply to mortgage bankers. Over the past few years, lawmakers have cast the legal net broadly to prohibit the financing of certain terrorists, terrorist organizations and countries that support them.
In the wake of Sept. 11, Congress and President Bush put renewed emphasis on enforcement tools to thwart the ability of terrorists to finance attacks on U.S. citizens and interests. We expect that new regulations will follow in the coming months.
The anti-terrorism laws apply to all U.S. persons and entities here and abroad. ("U.S. persons" refers to any U.S. citizen, permanent resident alien, entity organized under the laws of the United States - including foreign branches - or any person or entity in the United States.) As a result, industries not typically thought of as terrorist havens - including mortgage banking - are included under this broad umbrella and must be wary when engaging in any kind of financial transaction. As recent events have demonstrated, people, companies and industries without their guard up and protections in place may be exactly where terrorists seek to hide their assets.
This article addresses the applicability on the mortgage banking industry of a new executive order and statute arising out of the Sept. 11 attacks on New York and Washington. It also examines, to a lesser extent, other expansive regulations that prohibit transactions with terrorists, terrorist organizations and countries that support terrorism.
The article also discusses compliance issues that are important to the industry. We anticipate that the government will now enforce these laws more vigorously, particularly if the violation relates to an investigation or prosecution of a listed terrorist or terrorist organization. For this reason, it is important for the mortgage banking industry to understand fully its compliance obligations and the significant, and potentially crippling, penalties for noncompliance. The stakes are high.
State of the law
The U.S. government has numerous methods for combating terrorism that affect the everyday business practices of American companies. All businesses should be aware of the statutes and regulations that apply to them.
Although numerous government agencies monitor and enforce statutes and regulations relating to the prevention of terrorism, foremost among them is the Department of the Treasury's Office of Foreign Assets Control.
OFAC develops, promulgates, administers and enforces economic and trade sanctions (including the freezing and blocking of assets) against targeted foreign countries, terrorism-sponsoring organizations and international narcotics traffickers under a number of statutes. Over the last four decades, and most recently in response to the Sept. 11 attacks, OFAC has had several expansive laws and regulations at its disposal to block and freeze assets of known individuals and organizations associated with international terrorism. These include the following:
* Executive Order 13224 - Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism;
* Uniting and Strengthening America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (The Patriot Act);
* 31 Code of Federal Regulations (C.F.R.) Part 595 (Terror- ism Sanctions Regulations);
* 31 C.F.R. Part 596 (Terrorism List Governments Sanc- tions Regulations); and
* 31 C.F.R. Part 597 (Foreign Terrorist Organizations Sanc- tions Regulations).
The executive order, statute and regulations identify certain designated individuals, organizations and countries and essentially bar U. …