Posted on Mon, Sep. 08, 2003
Rules fight terrorist financing
Firms will seek, verify customer identification
SHANNON MCCAFFREY
Knight Ridder
WASHINGTON - Two years after the Sept. 11 terrorist attacks, banks, investment houses and other financial service providers are asking more questions about their customers under new Treasury Department guidelines designed to fight terrorist financing.
The new antilaundering regulations, which take effect in three weeks, arise from the USA Patriot Act, the broad antiterrorism law that has been praised by some for protecting Americans from additional attacks and criticized by others for trampling on civil liberties.
Some of the Sept. 11 hijackers opened bank accounts using fake Social Security numbers and were never detected, according to the FBI.
The complex financial rules reflect some of the fundamental changes that Americans now face in a world where terrorists can be a threat by blowing up a building or writing a check.
The antilaundering provisions are likely to be more broadly felt by consumers, since the government's other antiterrorism measures largely have targeted immigrants and those caught up in criminal probes, experts say.
For instance, the rules require new customers to supply identification, which then must be verified. Submitting incorrect personal data can result in an account being closed. Names are checked against a 111-page terrorist watch list full of aliases. Many accounts must be investigated for suspicious trades or transactions, such as a sudden flurry of wire transfers.
Life insurance providers, credit card companies, investment advisers, even casinos and pawnbrokers are scrambling to comply with the costly rules. They could apply eventually to car dealers, travel agents and jewelry dealers as well.
While most banks have had stringent money-laundering protections in place for years arising from the drug war, the mandate is new for many in the investment sector, where privacy and discretion have been the norm.
Some complain that the guidelines deputize business to aggressively police its clients.
Charles O'Neill, a money-laundering expert for the Boston-based consulting firm Dalbar Inc., said the changes represented a "sea change in the way banks relate" to their customers.
"It's really going to hit home when an investor gets a call from a compliance officer with their (mutual) fund asking why they're moving money or where they got the cash to make a particular deposit," O'Neill said. "I think most people would be very surprised to get a phone call like that, but it's coming."
The new disclosure requirements come amid an increase in reported cases of fraud and identity theft.
A senior official at the Treasury Department, which is writing the regulations mandated by the Patriot Act, said the rules were designed to enhance the vigilance of financial service providers, not to intrude into private financial dealings.
The department has scaled back some proposals and revised others in response to complaints from the financial sector that they were too rigid and cumbersome. But the rules' complexity still has some institutions confused about what they're required to do.
Henry Walcott, the treasurer of a Cape Cod land conservation trust, said he was startled when, to open a brokerage account, he was asked not only for his personal data but also that of all the other trustees. An official at the Cape Cod Bank and Trust explained that the information was required by the Patriot Act. In fact, Treasury Department officials said early plans to require data from board members had been abandoned. Officials at the Cape Cod Bank and Trust declined to comment.
Lynda Scullin, a senior vice president with PFF Bank, based in Pomona, Calif., said that as a small community bank it is difficult to keep up with the changes, and some requirements remain vague, such as whether the bank needs to keep photocopies of customer IDs at the bank.
One of the biggest questions is what kinds of IDs will be acceptable. The Bush administration has flip-flopped on whether the Mexican identification cards, called matricular consular cards, will be permitted, for example.
Immigrant groups that said they'd been unfairly penalized by the government's antiterrorism measures fear they may get caught in the net cast by the anti-money laundering provisions.
Muslim and Latino groups said there already had been delays and questions for customers who had common names that matched those on the Treasury Department's watch list.
Carolinas Impact
At Charlotte-based Wachovia Corp., a spokeswoman said employees are being trained to follow the new regulations. Under the new rules, the bank's customers will be asked their date of birth when they open an account and will be informed of the regulations, spokeswoman Carrie Ruddy said.
Charlotte-based Bank of America Corp. said it is reviewing the procedures in all of its business lines and will notify customers of changes. |
