The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11, 2001 attacks. It has ten titles, each containing numerous sections. Title III: International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 is actually an act of Congress in its own right as well as being a title of the USA PATRIOT Act, and is intended to facilitate the prevention, detection and prosecution of international money laundering and the financing of terrorism. The title's sections primarily amend portions of the Money Laundering Control Act of 1986 and the Bank Secrecy Act of 1970.
The provisions of Title III are divided into three subtitles. The first deals primarily with strengthening banking rules specifically against money laundering, especially on the international stage. Communication between law enforcement agencies and financial institutions, as well as among institutions, is expanded by the second subtitle, which also increases record keeping and reporting requirements. The final portion of the title deals with currency smuggling and counterfeiting, including quadrupling the maximum penalty for counterfeiting foreign currency.
Findings, purposes and review
Findings The United States Congress found that money laundering "provides the financial fuel that permits transnational criminal enterprises to conduct and expand their operations to the detriment of the safety and security of American citizens" and that it is critical to the financing of global terrorism and terrorist attacks. Money laundering is used "as protective covering for the movement of criminal proceeds and the financing of crime and terrorism". Findings (4) and (5) state that:
certain jurisdictions outside of the United States that offer `offshore' banking and related facilities designed to provide anonymity, coupled with weak financial supervisory and enforcement regimes, provide essential tools to disguise ownership and movement of criminal funds, derived from, or used to commit, offenses ranging from narcotics trafficking, terrorism, arms smuggling, and trafficking in human beings, to financial frauds that prey on law-abiding citizens... [T]ransactions involving such offshore jurisdictions make it difficult for law enforcement officials and regulators to follow the trail of money earned by criminals, organized international criminal enterprises, and global terrorist organizationsUSA PATRIOT Act, Title III, Section 302 (5) & (6)
Congress in particular noted that correspondent accounts are vulnerable to use by money launderers as it is easier to obscure the identities of the owners of such accounts than with other types of bank accounts, and that private banking services can be susceptible to manipulation by money launderers.
Congress also found that:
United States anti-money laundering efforts are impeded by outmoded and inadequate statutory provisions that make investigations, prosecutions, and forfeitures more difficult, particularly in cases in which money laundering involves foreign persons, foreign banks, or foreign countriesUSA PATRIOT Act, Title III, Section 302 (8)
and
the ability to mount effective counter-measures to international money launderers requires national, as well as bilateral and multilateral action, using tools specially designed for that effortUSA PATRIOT Act, Title III, Section 302 (9)
Purposes The purposes of the title are defined in section 302. It states that:
The purposes of this title are—
(1) to increase the strength of United States measures to prevent, detect, and prosecute international money laundering and the financing of terrorism;
(2) to ensure that--
(A) banking transactions and financial relationships and the conduct of such transactions and relationships, do not contravene the purposes of subchapter II of chapter 53 of title 31, United States Code, section 21 of the Federal Deposit Insurance Act, or chapter 2 of title I of Public Law 91-508 (84 Stat. 1116), or facilitate the evasion of any such provision; and
(B) the purposes of such provisions of law continue to be fulfilled, and such provisions of law are effectively and efficiently administered;
(3) to strengthen the provisions put into place by the Money Laundering Control Act of 1986 (18 U.S.C. 981 note), especially with respect to crimes by non-United States nationals and foreign financial institutions;
(4) to provide a clear national mandate for subjecting to special scrutiny those foreign jurisdictions, financial institutions operating outside of the United States, and classes of international transactions or types of accounts that pose particular, identifiable opportunities for criminal abuse;
(5) to provide the Secretary of the Treasury (in this title referred to as the `Secretary') with broad discretion, subject to the safeguards provided by the Administrative Procedure Act under title 5, United States Code, to take measures tailored to the particular money laundering problems presented by specific foreign jurisdictions, financial institutions operating outside of the United States, and classes of international transactions or types of accounts;
(6) to ensure that the employment of such measures by the Secretary permits appropriate opportunity for comment by affected financial institutions;
(7) to provide guidance to domestic financial institutions on particular foreign jurisdictions, financial institutions operating outside of the United States, and classes of international transactions that are of primary money laundering concern to the United States Government;
(8) to ensure that the forfeiture of any assets in connection with the anti-terrorist efforts of the United States permits for adequate challenge consistent with providing due process rights;
(9) to clarify the terms of the safe harbor from civil liability for filing suspicious activity reports;
(10) to strengthen the authority of the Secretary to issue and administer geographic targeting orders, and to clarify that violations of such orders or any other requirement imposed under the authority contained in chapter 2 of title I of Public Law 91-508 and subchapters II and III of chapter 53 of title 31, United States Code, may result in criminal and civil penalties;
(11) to ensure that all appropriate elements of the financial services industry are subject to appropriate requirements to report potential money laundering transactions to proper authorities, and that jurisdictional disputes do not hinder examination of compliance by financial institutions with relevant reporting requirements;
(12) to strengthen the ability of financial institutions to maintain the integrity of their employee population; and
(13) to strengthen measures to prevent the use of the United States financial system for personal gain by corrupt foreign officials and to facilitate the repatriation of any stolen assets to the citizens of countries to whom such assets belong. (Source: Wikisource)
Review The Act has provisions to allow title III to expire after the first day of fiscal year 2005. The title would terminate if Congress enacted a joint resolution with the text after the resolving clause being:
That provisions of the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, and the amendments made thereby, shall no longer have the force of law.
However, in 2005 no such joint resolution was made, and the title remains in effect to this day.
Subtitle A—International Counter Money Laundering and Related Measures International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 U.S. Congress Long title: International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 Introduced by: Rep. Frank James Sensenbrenner, Jr. Wisconsin, 2001-10-23 Dates Date passed: October 24, 2001 (House), October 25, 2001 (Senate) Date signed into law: 2001-10-26 Amendments: Related legislation: USA PATRIOT Act, Federal Deposit Insurance Act, Gramm-Leach-Bliley Act, Foreign Agents Registration Act of 1938, Administrative Procedures Act, International Emergency Economic Powers Act, International Banking Act of 1978, Right to Financial Privacy Act of 1978 Subtitle A (titled "International Counter Money Laundering and Related Measures") is the first part of title III and is designed to put measures into place that counter international money laundering. It does this in several ways: it makes financial institutions undertake several new special measures against money laundering (identification is dealt with particularly); by restricting or prohibiting the use of certain types of bank accounts; through adding further legislation that regulates a financial institution's dealing with foreign concerns; by adding new penalties for corruption and through regulations that are designed to facilitate and encourage reporting and communication between financial institutions and the U.S. government.
Special measures There are several sections that establish special measures that financial institutions must undertake. Section 311 requires the maintenance of records of the aggregate amount of all transactions that are made outside the U.S. in areas where money-laundering has been identified as a concern; that reasonable steps be undertaken by a financial institution to obtain and retain information on foreigners who gain a benefit of ownership of an account which is opened and maintained in the U.S., and yet who do not own the account itself (also known as beneficial ownership); and that the financial institution identify any foreign customers who are authorised to use or route transactions through a payable-through account in the U.S.. Section 314 adds regulations that attempt to foster cooperative efforts to deter money laundering. This was mainly done by ordering the U.S. Treasury and other agencies to create regulations that set out how information was to be shared,This was done through in 31 CFR 103.100 and 31 CFR 103.110. and by allowing financial institutions to share information with other financial institutions when so allowed by the Secretary of Treasury. Section 327 makes it harder for bank holding companies or banks to merge or consolidate with another bank holding company if they have not got a good track record in combating money laundering activities, and also makes it harder for insured depository institutions to merge with non-insured depository institutions if the insured depository institution has a bad track record in combating money laundering activities. A number of sections (sections 312, 313, 319 and 325) deal with the forfeiture of goods if international terrorism or money laundering is suspected.
To deal with problems of identifying those who undertake money laundering activities, section 326 of the subtitle was designed to make it harder to mask the identity of individuals or groups who perform transactions or open accounts in the United States. Under this section, the Secretary of the Treasury was given the task of prescribing regulations that set forth the minimum standards that financial institutions must undertake to verify the identity of customers who open accounts. These rules became effective on June 9, 2003, although financial institutions had until October 1, 2003 to