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 Treasury Department USA Patriot Act Update


Today, the Treasury Department announced three developments in the implementation of the USA PATRIOT Act:

New Industries Covered

The Department announced new regulations that will require key financial sector industries to implement programs designed to prevent the services they offer from being used to facilitate money laundering or the financing of terrorism.

These new regulations will expand the number of financial institutions required to have such a program, as required by the USA PATRIOT Act. ( The financial institutions are defined in the Bank Secrecy Act, 31 U.S.C. 5312(a)(2)(A) thru (X), as amended by the Patriot Act). The Act mandates that all industries defined as financial institutions must have anti money-laundering programs in place by April 24, 2002 unless the Secretary exempts them.

The industries that will have a new obligation to implement an anti-money laundering program as a result of these regulations include: (1) mutual funds; (2) operators of credit card systems; (3) money services businesses, such as money transfer companies and check cashers; (4) securities brokers and dealers registered with the Securities and Exchange Commission; and (5) futures commission merchants and accompanying introducing brokers registered with the Commodity Futures Trading Commission.

These industries, with the exception of broker dealers and futures commission merchants, expected to be covered by these regulations and have ninety days to develop anti-money laundering programs.

Keeping Congress Advised

The Department announced it will provide Congress this week with three reports on a variety of topics. One report analyzes options for improving compliance with the obligation of all U.S. citizens to report their interests in foreign bank accounts. One report addresses difficulties surrounding the ability of domestic financial institutions to identify and verify the identity of foreign nationals seeking to open accounts. And the third report addresses the role of the Internal Revenue Service in the administration of the Bank Secrecy Act.

With these new regulations, Treasury will have issued an unprecedented nine sets of regulations and guidance and three reports to Congress related to money laundering and terrorist financing, affecting the primary industries providing financial services, all in response to passage of the USA PATRIOT Act six months ago.

Studying Some Industry Sectors

The Department is also exercising its authority to defer, for a period of no more than six months, the application of section 352 to the remaining categories of financial institutions under the Bank Secrecy Act to allow Treasury time to study these new industry sectors and develop regulations applicable to them.

The business sectors subject to further study include dealers in precious metals, stones, or jewels; pawnbrokers; loan or finance companies; private bankers; insurance companies; travel agencies; telegraph companies; a business engaged in vehicle sales, including automobiles, airplanes, and boats; persons involved in real estate closings and settlements; investment companies other than mutual funds; and commodity pool operators and commodity trading advisors.

The complexities of requiring anti-money laundering programs for all remaining financial institutions demand that Treasury carefully review each industry before issuing regulations. Many of the remaining financial institutions are small businesses that have never been subject previously to Federal anti-money laundering regulation, and the risks inherent in their operations will vary considerably. Therefore, the program requirements for one industry may not be appropriate for others. With this additional time, Treasury will be able to issue regulations tailored to each industry.

Although Treasury is deferring application of section 352 for a brief period, all such businesses have an existing obligation to file reports of transactions involving cash or currency (Form 8300). Pursuant to another USA PATRIOT Act regulation issued by Treasury in December, such forms were made available to Treasury's Financial Crimes Enforcement Network (FinCEN) for use in the fight against money laundering and terrorist financing. Finally, all financial institutions are encouraged to voluntarily report possible money laundering and terrorist activity to FinCEN by calling its Financial Institutions Hotline ( 1-866-556-3974).

Treasury has formed additional working groups devoted to each remaining industry sector that will be responsible for drafting regulations tailored to each one. Forthcoming regulations will be issued on a rolling basis as they are completed.


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