Academic journal article Vanderbilt Law Review

Leaving No Loopholes for Terrorist Financing: The Implementation of the USA PATRIOT Act in the Real Estate Field

Academic journal article Vanderbilt Law Review

Leaving No Loopholes for Terrorist Financing: The Implementation of the USA PATRIOT Act in the Real Estate Field

Article excerpt

I. INTRODUCTION

September 11, 2001 began like any other day but took a drastic turn at 8:45 a.m. Eastern Daylight Time when a plane, hijacked by terrorists, crashed into the northern tower of the World Trade Center, setting it afire.1 As Americans mourned in silence, a second plane rammed through the southern tower of the World Trade Center at 9:05 a.m. and set it aflame.2 The horror continued, as a third plane crashed into the Pentagon, a fourth diverted into a field in Pennsylvania, and both towers of the World Trade Center collapsed.3

It did not take long for Americans to realize they had been attacked on their own soil by an impervious enemy - terrorists.4 This kind of attack was unprecedented in U.S. history, and the death toll reached nearly 3,000 within a few hours.5 President George W. Bush addressed the nation on the night of September 11, stating:

Terrorist acts can shake the foundations of our biggest buildings, but they cannot touch the foundation of America. These acts shatter steel but they cannot dent the steel of American resolve. . .Today, our nation saw evil, the very worst of human nature, and we responded with the best of America.

Americans quickly determined that not only had terrorists attacked on U.S. soil, but also that terrorists had taken advantage of the U.S. financial system to fund the horrific events of September 11.7 Government officials suspected that the terrorists laundered money through banks in the United States and abroad, and through other highly valuable assets, including real estate.8 Consequently, not only did the events of September 11 leave an indelible mark in the hearts and minds of Americans, but these events dramatically changed the country's economy, government, industry, and politics.

One area of the economy remained stable despite the tragic events of September 11: real estate. It remains to be seen, however, whether this sector of the U.S. economy will escape the consequences of the tragedy. On October 26, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act ("Patriot Act") was signed into law.9 The stated purpose of the law was "to deter and punish terrorist acts in the United States and around the world, to enhance law enforcement investigatory tools, and for other purposes."10 Towards that end, the Patriot Act enhanced the requirements of the Bank Secrecy Act to eliminate money laundering as Congress determined that money laundering had partially funded the terrorist activities.11

Included in the Bank Secrecy Act's definition of financial institutions, adopted by the Patriot Act, were "persons involved in real estate closings and settlements."12 The Bank Secrecy Act required the creation of a paper trail of important financial records when a transaction involved large amounts of currency to further its goal of "protect[ing] against international terrorism."13 The Patriot Act expanded these existing reporting requirements and strengthened communication among the reporting entities.14 The Act also empowered the Treasury Department to determine the extent to which it would regulate certain financial institutions under the Patriot Act. The Department, however, has yet to render a decision regarding the real estate sector.15

Implementation of the Patriot Act in the real estate industry, particularly on lawyers in the field, presents a unique question of how to balance the protection of attorney-client communications against the need to reduce terrorist financing activities. Real estate professionals generally support combating money laundering but are hesitant to impose stringent measures on the field because of a variety of concerns.16 Part II of this Note analyzes the background behind the Patriot Act, other counter-terrorism laws, and money laundering laws. Part III discusses several hurdles in the effort to implement the law and examines different ways the real estate sector can contribute to the war on terror. …

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