Small Business Reading Room

Monday, February 14, 2005

More FinCEN News

Director Fox, of the Financial Crimes Enforcement Network, made a speech in Miami recently in which he encapsulated the whole idea of the Bank Secrecy Act and the PATRIOT Act.

His summary, from the FinCEN website:

Not surprisingly, the USA PATRIOT Act is almost singularly focused on the flow of funds from abroad. The premise is simple: if a U.S. financial institution chooses to do business with a foreign entity, there is some modicum of risk and it is incumbent upon the institution to mitigate or manage that risk. This regime is sensible, fair and smart.

Indeed, as I have already said, few are better qualified to assess risk unique to their business, and to tailor programs of maximum effect at minimum cost. Similarly, foreign financial institutions seeking access to the U.S. market must be prepared to provide U.S. financial enterprises with information sufficient to make the judgment that no one is being misled by terrorists, criminals or kleptocrats. The willingness to share such crossborder information is now a license required to do business in America. The key “international” provisions of the U.S.A. PATRIOT Act are known to most of you.
The Act –
  • Prohibits transactions with shell banks,
  • Requires off shore banks to nominate agents for service of process,
  • Authorizes interbank accounts to be frozen to reach the assets of terrorist suspects maintained abroad in correspondent banks,
  • Requires enhanced due diligence for private banking accounts in excess of $1.0 million and when dealing with prominent political figures and their families,
  • It further requires U.S. financial institutions to examine the quality of the regulatory regime abroad and publicly available information about institutions seeking to establish correspondent relationships and, finally,
  • Empowers the U.S. Government to subpoena records held abroad by any correspondent bank.

I think that sums up the approach of the US Government. It is worth repeating here because many non-US businesses are encountering resistance from bankers they have worked with for years. This explains the extraordinary pressure bankers are under now.


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