Following the Money Trail

Article excerpt

Following the devastating Sept. 11 terrorist attacks in New York and Washington, Congress and President George W. Bush rushed to enact tougher money laundering laws to "starve terrorists of funding." Clues that the terrorist's attacks may have been funded using the U.S. financial system have provided momentum and a platform for anti-money laundering legislation.

Shortly after the attacks, both houses of Congress began drafting legislation to bolster law enforcement's ability to find and thwart the financing of terrorists and terrorist organizations. The legislation Congress passed, "The USA PATRIOT Act," attempts to prevent terrorists from conducting financial transactions through U.S. and foreign financial institutions or through the underground "hawala" system, a trust-based Asian underground money transfer system. It also bolsters law enforcement's ability to find and thwart the financing of terrorists and terrorist organizations.

House and Senate leaders melded the differences between anti-terrorism and anti-money laundering bills to put a single piece of legislation before President Bush, who quickly signed the measure into law.

The Two Shall Meet

Most of the anti-money laundering provisions in the new financial anti-terrorism law will impact larger banks active in foreign banking. However, several provisions could affect community banks.

The financial anti-terrorism law requires the Treasury to set "reasonable and practicable" regulations mandating that all banks verify (and keep record of) the identity of any persons opening an account. When prescribing the regulations, the Treasury is required to consider the types of accounts, types of financial institutions, various methods of opening accounts, and various types of identification available. Treasury may exempt some banks from this requirement.

The law requires U.S. banks to establish "minimum due diligence" procedures for correspondent and private banking relationships with non-U.S. persons and banks. It also mandates that all banks implement anti-money laundering programs, including minimum requirements to develop internal policies controls and ongoing employee training. …