New Money Laundering Rules Cover Wide Swath. (News and Trends)

By Gips, Michael A. | Security Management, June 2002 | Go to article overview

New Money Laundering Rules Cover Wide Swath. (News and Trends)


Gips, Michael A., Security Management


Forget about organized gangs, dishonest employees, and smash-and-grab thieves. Today's jewelers must now concern themselves with a more multifaceted threat: terrorism. That's because last year's USA Patriot Act adopts a broad definition of "financial institutions," which are required under the law to take steps to prevent money laundering. Such businesses as travel agencies, jewelers, and car dealerships now have until October 26 to implement minimum standards for preventing money laundering. For example, one provision, Section 326, requires that financial institutions verify and identify all foreign and domestic customers who open a new account. This month, the Treasury Department is expected to release draft regulations that set the minimum standards for creating such a program.

The nature of money laundering has also changed since 9-11. Before 9-11, detection efforts focused on large amounts of "dirty" money coming into the system and coming out clean, says James H. Vaules, chief executive officer of the National Fraud Center (NFC), a consulting firm operated by LexisNexis. "Now we see small sums of apparently legal money being used for illegal purposes. That creates new detection issues," he says.

In addition to requiring that companies know their customers, the Patriot Act encourages businesses to share the personal financial data of clients with other financial institutions or government agencies when necessary to aid efforts to combat money laundering. But the act does not address the legal ramifications. Consequently, says Vaules, efforts are afoot to expand civil liability immunity for financial institutions that share this information.

Some businesses newly defined as financial institutions may not fully recognize that they have responsibilities under the act, says Norman A. Willox, Jr., chairman of the NEC. Associations and trade groups contacted by Security Management generally said they planned to educate their members about the new provisions. …

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