International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, Title III of P.L. 107-56

Report for Congress
International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001,
Title III of P.L. 107-56 (USA PATRIOT Act)
December 4, 2001
M. Maureen Murphy
Legislative Attorney
American Law Division

Congressional Research Service ˜ The Library of Congress

International Money Laundering Abatement and Anti-
Terrorist Financing Act of 2001, Title III of P.L. 107-56
(USA PATRIOT Act)
Summary
Title III, of the USA PATRIOT Act, P.L. 107-56 (H.R. 3162), 115 Stat. 272
(2001), the “International Money Laundering Abatement and Financial Anti-
Terrorism Act of 2001,” contains three subtitles that deal with: International Counter
Money Laundering and Related Measures; Bank Secrecy Act Amendments and
Related Improvements; and, Currency Crimes and Protection. It contains a list of 10
findings and 13 purposes, relating the scope of international money laundering to the
financing of global terrorism and focusing on problems in the international banking
system that have facilitated money laundering. Among the purposes of the
legislation are: increasing the strength of U.S. measures to prevent, detect, and
prosecute international money laundering and the financing of terrorism, to provide
a national mandate for subjecting to special scrutiny foreign jurisdictions, financial
institutions operating outside the United States, and classes of international
transactions or types of accounts that pose particular opportunities for criminal abuse,
and 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.
The legislation contains over forty separate sections, each of which is
summarized in this report. Some of them are technical in the sense that they address
criminal and civil judicial or administrative proceedings; others enhance criminal
penalties for various types of financial crimes. Among the provisions that have
garnered the most attention are those that affect financial institutions such as the
grant of authority to the Secretary of the Treasury to impose special measures,
including requiring the closure of certain accounts with foreign banks. To impose
these special measures, the Secretary must find that a jurisdiction, class of
transactions, or institution is of “primary money laundering concern.” In addition,
there are provisions that specifically address and specify increased due diligence for
correspondent accounts, payable-through accounts, and private banking accounts for
non-U.S. persons as well as accounts with off-shore or foreign shell banks. There are
requirements and standards for increased cooperation by financial institutions in
responding to government requests for information and new requirements for
regulations mandating standards for identifying persons opening accounts. The
legislation also requires financial institutions to institute anti-money laundering
programs, and the Secretary of the Treasury, within 3 months, to issue regulations
setting minimum requirements.
Some of the provisions of the legislation went into effect with the President’s
signature. Some need no implementing regulations. Much of the legislation,
however, requires implementing regulations. The full impact, therefore, will emerge
over the course of time. By including many requirements for studies and reports,
Congress has indicated that it is prepared to conduct fine tuning should the need
arise.

Contents
In troduction ......................................................1
Pre-existing Law..................................................2
Implementation ...................................................3
International Money Laundering Abatement and Financial Anti-Terrorism Act.4
SUBTITLE A–International Counter Money Laundering and
Related Measures.........................................4
Special Measures..........................................4
Special Due Diligence for Correspondent Accounts and
Private Banking Accounts...............................5
Prohibition on Correspondent Accounts for Foreign Shell Banks.....5
Cooperative Efforts to Deter Money Laundering.................5
Foreign Corruption Offenses Added to List of Money
Laundering Predicates..................................6
Right to Raise Innocent Property or Innocent Owner Defense in
Terrorist-Related Confiscations or Forfeitures...............6
Long-Arm Jurisdiction Over Foreign Money Laundering...........6
Money Laundering Through a Foreign Bank.....................7
Forfeiture of Funds in U.S. Interbank Accounts..................7
Proceeds of Foreign Crimes..................................7
Credit Unions and Commodity Futures Trading Corporation
Regulatees ...........................................8
Corporation Represented by a Fugitive.........................8
Enforcement of Foreign Judgments............................8
Report ...................................................8
Concentration Accounts.....................................8
Verification of Identification.................................8
Consideration of Anti-Money Laundering Record................8
International Cooperation on Identification of Originators of
Wire Transfers........................................9
Criminal Penalties.........................................9
International Cooperation in Money Laundering Investigations......9
SUBTITLE B–BANK Secrecy Act Amendments and
Related Improvements......................................9
Anti-Money Laundering Programs............................9
Geographic Targeting Orders–Penalties and Extension of
Permissible Period....................................10
Anti-Money Laundering Strategy............................10
Authorization to Include Suspicions of Illegal Activity in
Written Employment References.........................10
Suspicious Activities Reports by Securities Brokers..............10
Special Report on Administration of Bank Secrecy Provisions.....11
Bank Secrecy Provisions and Activities of U.S. Intelligence Agencies
to Fight International Terrorism..........................11
Reporting of Suspicious Activities by Underground

Use of Authority of U.S. Executive Directors...................11
Financial Crimes Enforcement Network (FinCEN)...............12
Establishment of Highly Secure Network......................13
Increase in Civil and Criminal Penalties for Money Laundering.....13
Uniform Protection Authority for Federal Reserve Facilities.......13
Reports Relating to Coins and Currency Received in Non-Financial
Trade of Business.....................................13
Efficient Use of Currency Transaction Report System............13
SUBTITLE C–Currency Crimes and Protection.....................14
Forfeiture in Currency Reporting Cases.......................14
Illegal Money Transmitting Businesses........................14
Counterfeiting Domestic Currency and Obligations..............14
Counterfeiting Foreign Currency and Obligations................15
Laundering the Proceeds of Foreign Terrorism..................15
Extraterritorial Jurisdiction.................................15

International Money Laundering Abatement
and Anti-Terrorist Financing Act of 2001,
Title III of P.L. 107-56 (USA PATRIOT Act)
Introduction
The USA PATRIOT ACT, Pub. L. 107-56, 15 Stat. 272 (2001),¹ which became
law on October 26, 2001, includes as Title III, the “International Money Laundering
Abatement and Financial Anti-Terrorism Act of 2001.” Title III derives from H.R.

3004, ² as passed by the House, and Title III of S. 1510, as passed by the Senate.

Although each of the last several Congresses has examined the adequacy of United
States laws targeting money laundering, there was insufficient support for any
legislation until the September 11 attacks focused attention on the financing of
international terrorism and the role that financial institutions could play in identifying
and cutting off its source of funding.
This legislation, which has been deemed “the most significant anti-money-
laundering legislation in more than 30 years,”³ is designed to prevent terrorists and
others from using the U.S. financial system anonymously to move funds obtained
from or destined for illegal activity. It seeks to impose new requirements on banks,
the institutions that have heretofore been the focus of the anti-money laundering
record keeping and reporting requirements, and on other participants in the financial
services industry–brokers and dealers, investment companies, and informal money
transmitting networks. Although its main target is international money laundering
and terrorists, its reach is broader.
Among the purposes of the legislation are: increasing the strength of U.S.
measures to prevent, detect, and prosecute international money laundering and the
financing of terrorism. Another aim is to provide a national mandate for subjecting
to special scrutiny foreign jurisdictions, financial institutions operating outside the
United States, and classes of international transactions or types of accounts that pose
particular opportunities for criminal abuse. Another significant purpose of the
legislation is 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.

¹ The full title is “Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorists.”
² H.R. Rep. 107-250, 107^th Cong., 1^st Sess. (2001).
³ Todd Stern, Satish M. Kini, and Stephen R. Heifetz, “Array of Regulations to Flow from
Anti-Laundering Law,” American Banker 18 (Nov. 2, 2001) (available in LEXIS-NEXIS,
BANKNG Library, CURNWS file).

The legislation contains over forty separate sections, each of which is
summarized in this report. Some of them are technical in the sense that they address
criminal and civil judicial or administrative proceedings; others enhance criminal
penalties for various types of financial crimes. Among the provisions that have
garnered the most attention are those that affect financial institutions such as section
311' s grant of authority to the Secretary of the Treasury to impose special measures
on financial institutions upon finding a jurisdiction, class of transactions, or
institution to be of “primary money laundering concern” that could include opening
or maintaining accounts. In addition, there are provisions that specifically address
and specify increased due diligence for correspondent accounts, payable-through
accounts, and private banking accounts for non-U.S. persons as well as accounts with
off-shore or foreign shell banks. There are requirements and standards for increased
cooperation by financial institutions in responding to government requests for
information and new requirements for regulations mandating standards for
identifying persons opening accounts. The legislation also requires financial
institutions to institute anti-money laundering programs and the Secretary of the
Treasury, within 3 months, to issue regulations setting minimum requirements.
Since much of the legislation requires implementing regulations, the full impact
will emerge over the course of time. Because many of its provisions impose
requirements for studies and reports, Congress has indicated that it is prepared to
conduct fine tuning should the need arise.
Pre-existing Law
This legislation builds on existing law, which includes substantive criminal
statutes defining and prohibiting money laundering and statutes calling for a
regulatory regime of record keeping and reporting on various financial transactions
and prescribing civil and criminal penalties for violations of that scheme and its
regulations. The major components of this array of anti-money laundering laws are
presented below.
1. 18 U.S.C. § 1956 prohibits anyone from knowingly engaging in various
financial transactions that involve the proceeds of specified illegal activity. A person
may be convicted under this statute if proven to have engaged in any of various types
of financial transactions without actually knowing that the proceeds of illegal activity⁴
are involved provided the prosecution proves willful blindness. It is a crime that
uniquely involves the activities of financial institutions and, therefore, requires their
diligence both to cooperate with law enforcement and to avoid liability.
2. Under 18 U.S.C. § 1957, anyone who knowingly engages in a monetary
transaction in criminally derived property of more then $10,000, that has been
derived from specified unlawful activity, is subject to criminal penalties.

3. Titles I and II of P.L. 91-508, including 12 U.S.C. §§ 1829b, and 1951 - 1959;

31 U.S.C. §§ 5311 et seq., the Bank Secrecy Act (BSA) of 1970 and its major

⁴ United States v. Jensen, 69 F. 3d 906 (8^th Cir. 1995), cert. denied, 517 U.S. 1169.

component, the Currency and Foreign Transactions Reporting Act, 31 U.S.C. §§
5311 et seq., require reports and records of transactions involving cash, negotiable
instruments, or foreign currency and authorize the Secretary of the Treasury to
prescribe regulations to insure that adequate records are maintained of transactions
that have a “high degree of usefulness in criminal, tax, or regulatory investigations
or proceedings.” Violation of the regulations is subject to civil and criminal
penalties.
4. Since April, 1996,⁵ the regulations require that banks and other depository
institutions submit Suspicious Activity Reports (SARs)⁶ of any transaction involving
at least $5,000, which the institution suspects: to include funds from illegal activities;
to have been conducted to hide funds from illegal activities or designed to evade the
BSA requirements; have “no business or apparent lawful purpose;” or are “not the
sort [of transaction] in which the particular customer would normally be expected to
engage, and the bank knows of no reasonable explanation for the transaction after
examining the available facts, including the background and purpose of the
transaction.”⁷

5. Under the Money Laundering Suppression Act of 1994, 31 U.S.C. § 5330(a),

the Secretary of the Treasury is required to establish a system to register money
transmitting businesses. Financial Crimes Enforcement Network (FinCEN”s)
regulations require registration by December 31, 2001. 31 C.F.R. 103.41.
Implementation
While much of the new law will require regulations to be issued by the Treasury⁸
Department in consultation with other federal financial institution regulators, some
provisions take effect immediately. Among them are the following:
1. The prohibition on U.S. correspondent accounts with shell banks, i.e., banks
having no physical presence in their chartering country, becomes effective December

25, 2001. Section 313 of the Act.

⁵ 61 Fed.Reg. 4326 (February 5, 1996). Included in the notice were implementing
regulations applicable to national banks and to state chartered member banks.12 C.F.R. §§
21.11 and 208.20. Promulgated soon thereafter were regulations applicable to state
chartered nonmember banks; 12 C.F.R. § 353.3; federally insured credit unions (12 C.F.R.
§ 748.1); and federally insured savings associations, 12 C.F.R. § 563.180.
⁶ 31 C.F.R. § 103.21. The authority to require suspicious activity reports derives from 31
U.S.C. § 5314(h), authorizing the Secretary of the Treasury to require financial institutions
to report suspicious transactions, originally enacted as section 1518 of the Housing and
Community Development Act of 1992, P.L. 102-550, 106 Stat. 3672,4059.
⁷ 31 C.F.R. § 103.21(a)(2).
⁸ See: Federal Reserve Board, Division of Banking Supervision and Regulation, SR 01-29,
“The USA PATRIOT Act and the International Money Laundering Abatement and Anti-
Terrorist Financing Act of 2001 (November 26, 2001).
[ h t t p : / / www.f e der a l r eser ve go v/ boar ddocs/ SRLET T ERS/ 2001/ sr 0129.HT M ] .

2. A covered financial institution is required to provide records relating to its
anti-money laundering program or its customers within 120 hours of a request from
the appropriate regulator. Section 319(b).
3. Banks holding correspondent accounts for foreign banks are required to
maintain certain records identifying the owners of the foreign bank and the name of
an agent in the U.S. authorized to accept legal process that they might be produced
within seven days of their receipt of a subpoena from the Department of the Treasury
or the Attorney General. Section 319(b).⁹
4. Due diligence standards are required to be in place to detect and report
money laundering by all financial institutions that maintain private banking accounts
or correspondent accounts in the U.S. for non-U.S. persons, including individuals and
entities. Enhanced standards are required for certain correspondent accounts, e.g.,
those with foreign banks with offshore licenses or from particular jurisdictions.
Minimum due diligence standards are specified for private banking accounts,
accounts with minimum deposits of $1 million and managed by a person who acts
as a liaison between the bank and the beneficial owner, held for foreign owners. Sec.

312.

International Money Laundering Abatement and
Financial Anti-Terrorism Act
SUBTITLE A–International Counter Money Laundering and
Related Measures
Special Measures. Sec. 311 authorizes the Secretary of the Treasury (the
Secretary) to impose certain regulatory restrictions, known as “special measures,”
upon finding that a jurisdiction outside the U.S., a financial institution outside the
U.S., a class of transactions involving a jurisdiction outside the U.S., or a type of
account, is “of primary money laundering concern.” To make this finding, the
Secretary must consult with the Secretary of State and the Attorney General and
consider certain factors relating to the foreign jurisdiction or the particular institution
targeted. Among the factors to be considered in imposing special measures relating
to a jurisdiction are: involvement with organized crime or terrorists, bank secrecy
laws and regulations, the existence a mutual legal assistance treaty with the U.S., and
level of official corruption. The special measures generally involve detailed record
keeping and reporting requirements relating to underlying transactions and beneficial
ownership of accounts. Special measures could involve prohibiting the maintenance
of payable-through or correspondent accounts for such institutions or jurisdictions,
provided that there has been consultation with the Secretary of State, the Attorney
General, and the Chairman of the Federal Reserve Board, as well as with other

⁹ On November 20, 2001, Treasury issued “Interim Guidance Concerning Compliance by
Covered U.S. Financial Institutions with New Statutory Anti-Money Laundering
Requirements Regarding Correspondent Accounts Established or Maintained for Foreign
Banking Institutions.” [http://www.treas.gov/press/releases/regs.htm].

appropriate federal banking agencies and consideration has been given to whether
other nations have taken similar action, whether there would be a significant
competitive disadvantage on U.S. financial institutions, and any effect upon the
international payment system. “Account” is defined for banks, with authority
delegated to the Secretary to define the term for other financial services businesses
upon consultation with the appropriate federal regulators.
Generally, unless there are other provisions of law on which the Secretary may
base a special measure, none may remain in effect beyond 120 days unless a
regulation has been promulgated and none may be ordered unless accompanied by
a proposed rule. Moreover, no order prohibiting or imposing conditions on
maintaining correspondent accounts may be issued unless final regulations have been
promulgated. In addition, the Secretary is required to issue a regulation defining
“beneficial ownership” for purposes of this legislation.
Special Due Diligence for Correspondent Accounts and Private
Banking Accounts. Sec. 312 requires every financial institution with a private
banking or correspondent account for a foreign person or bank to establish policies
and controls designed to detect and report money laundering through the accounts.
If a correspondent account is maintained for a foreign bank that operates under an
offshore license–i.e., does not and may not do banking business in the chartering
country–or that is licensed by a jurisdiction designated for special measures or listed
as non-cooperative by an international organization in which the U.S. participates and
concurs, enhanced due diligence policies are required. For correspondent accounts
for foreign banks, U.S. banks, at the minimum, must secure ownership information
on the foreign bank, maintain enhanced scrutiny of the account, and ascertain due
diligence information on the foreign banks for which the target bank provides
correspondent banking services. For foreign private banking clients, i.e., those with
aggregated deposits of $1,000,000, information must be secured on the identity of the
named owners of the accounts and the actual or beneficial owners, and the source of
the funds. Enhanced scrutiny is required for accounts held for senior foreign political
figures. This section becomes effective within 180 days of enactment; regulations
must be issued within 120 days of enactment.
Prohibition on Correspondent Accounts for Foreign Shell Banks.
Sec. 313 prohibits U.S. banks, thrifts, private banks, foreign bank agencies and
branches operating in the U.S., and brokers and dealers licensed under the Securities
Exchanges Act of 1934, 15 U.S.C. 78a et seq., from maintaining correspondent
accounts for foreign shell banks–banks that have no physical presence in any country.
It requires that the covered institutions take reasonable steps to preclude their
providing services to such shell banks through other banks and requires the Secretary
to issue implementing regulations.
Cooperative Efforts to Deter Money Laundering. Sec. 314 requires the
Secretary to issue regulations within 120 days of enactment to encourage further
cooperation among financial institutions and regulatory and law enforcement
authorities to promote sharing information on individuals, entities, and organizations
engaged in or suspected of engaging in terrorist acts or money laundering. In these
regulations, the Secretary may require each financial institution to designate persons
to receive information and to monitor accounts and establish procedures to protect

the shared information. No information received by a financial institution under this
provision may be used for any purpose other than identifying and reporting activities
involving terrorism or money laundering. If a financial institution uses this
information for those purposes, it may not be held liable for unauthorized disclosure
or failure to provide a notice under any law or regulation, state or federal, or any
contract or agreement. The Secretary is required to provide a semiannual report
analyzing suspicious activity reports.
Foreign Corruption Offenses Added to List of Money Laundering
Predicates. Sec. 315 adds to the list of offenses under foreign law, the proceeds of
which may form an element of a federal money laundering prosecution: any crime
of violence; bribery of a public official; theft, embezzlement, or misappropriation of
public funds; certain smuggling or export control violations; and, offenses for which
the U.S. would be obliged to extradite alleged offenders. Also added would be
certain offenses under the U.S. criminal code relating to customs, importation of
firearms, firearms trafficking, computer fraud and abuse, and felony violations of the
Foreign Agents Registration Act.
Right to Raise Innocent Property or Innocent Owner Defense in
Terrorist-Related Confiscations or Forfeitures. Prior to enactment of the
USA PATRIOT Act, the President had authority to order the vesting of seized foreign
assets under the Trading With the Enemy Act § 5(b), 50 U.S.C. App. § 5(b), which
applies when there has been a declaration of war, but not under the International
Emergency Economic Powers Act (IEEPA), 50 U.S. C. 1702, which applies when
the President has declared the existence of an unusual or extraordinary threat to the
U.S. national security, foreign policy, or economy having its source, in whole or
substantial part, outside the United States. Section 106 of the new law amends
IEEPA to authorize the President, “when the United States is engaged in armed
hostilities or has been attacked by a foreign country or foreign nationals,” to
“confiscate any property, subject to the jurisdiction of the United States, of any
foreign person, foreign organization, or foreign country that he determines has
planned, authorized, aided, or engaged in such hostilities or attacks against the
United States.”
Sec. 316 authorizes judicial review of confiscation of terrorist related assets and
sets forth two defenses for those claiming the property that must be proven by a
preponderance of the evidence: (1) that the property is not subject to forfeiture under
the applicable law, and (2) the innocent owner defense detailed in the criminal
forfeiture provision of 18 U.S.C. § 983(d). It also authorizes the government to
offer otherwise inadmissible evidence provided the court finds that complying with
the Federal Rules of Evidence would jeopardize national security. There is also a
clause alluding to the right to raise Constitutional claims and claims under the
Administrative Procedure Act and a savings clause preserving other remedies.
Long-Arm Jurisdiction Over Foreign Money Laundering. Sec. 317
provides jurisdiction over foreign persons, including financial institutions, for
substantive money laundering offenses under 18 U.S.C. §§ 1956 and 1957, provided
there is a valid service of process and either the offense involved a transaction in the
U.S. or the property has been the subject of a forfeiture judgment or a criminal

sentence. The district courts are authorized to appoint a receiver to take control of
the property.
Money Laundering Through a Foreign Bank. Sec. 318 amends the
substantive money laundering criminal statute, 18 U.S.C. § 1956, to cover
laundering money through a foreign bank.
Forfeiture of Funds in U.S. Interbank Accounts. Sec. 319 amends 18
U.S.C. § 981 to permit forfeiture, including forfeiture under the Controlled
Substances laws, of accounts in offshore offices of foreign banks by substituting
funds in interbank accounts in U.S. financial institutions up to the value of the funds
in the targeted account. The section authorizes the Attorney General to suspend or
terminate such a forfeiture action on conflict-of-law grounds or upon a finding that
to do so would be in the interest of justice and would not harm the national interests
of the U.S.
Sec. 319, effective within 60 days of enactment, amends the Currency and
Transaction Reporting Act, 31 U.S.C. § 5311, et seq., to require U.S. banks, thrifts,
private banks, foreign bank agencies and branches operating in the U.S., and brokers
and dealers licensed under the Securities Exchanges Act of 1934, 15 U.S.C.§ 78a et
seq., to provide federal regulators, upon request, information on the institution’s
compliance with anti-money laundering requirements or on a customer’s account,
within 120 hours. It also authorizes the Secretary of the Treasury or the Attorney
General to subpoena records from a foreign bank that has a correspondent account
in the U.S. that relate to that account, including records maintained abroad. It
requires U.S. institutions maintaining correspondent accounts for foreign banks to
maintain records identifying the owners of such foreign banks and indicating the
name and address of a U.S. resident authorized to accept service of legal process for
records relating to the correspondent account. U.S. institutions having such
correspondent accounts are required to provide federal law enforcement officers with
these names and addresses within 7 days of receiving a request and are required to
terminate correspondent accounts within 10 business days of receiving a notice from
the Secretary or the Attorney General that the foreign bank has failed to comply with
a subpoena or to contest its issuance. U.S. financial institutions are not to be held
liable for terminating such accounts and are subject to civil penalties of $10,000 per
day for failing to do so.
This section also amends the criminal forfeiture provisions of the Controlled
Substances Act, 21 U.S.C. §§ 853(p) and 853(e) to permit a court to order return to
the jurisdiction of substitute assets, property that may be substituted for unreachable
property subject to forfeiture, and to issue a pre trial-order to a defendant to repatriate
such substitute assets.
Proceeds of Foreign Crimes. Section 320 authorizes the forfeiture of
property derived from or traceable to felonious violations of foreign controlled
substances laws, provided the offense is punishable by death or a term of
imprisonment of more than one year under the law of the foreign nation and under
U.S. law, had it occurred within the jurisdiction of the U.S.

Credit Unions and Commodity Futures Trading Corporation
Regulatees. Sec.. 321 adds credit unions and CFTC- regulated or registered
futures commission merchants, commodity trading advisors, and commodity pool
operators to the specific list of financial institutions subject to the requirements of the
Currency and Foreign Transaction Reporting Act.
Corporation Represented by a Fugitive. Sec. 322 amends 28 U.S.C. §

2466 to include corporations having a majority stockholder who is a fugitive, thus,

disallowing such corporations to successfully pursue innocent owner claims in a civil
or criminal forfeiture case.
Enforcement of Foreign Judgments. Sec. 323 amends 28 U.S.C. § 2467
to extend authority for judicial enforcement of foreign confiscation from the previous
provisions limiting such enforcement to confiscations related to drug trafficking
offenses. Under the newly enacted provision U.S. district courts may enforce foreign
confiscations related to any offense under foreign law that, if committed under U.S.
law, would have permitted forfeiture.
Report. Sec. 324 requires the Secretary of the Treasury, within 30 months of
enactment, to make a report on operations respecting the provisions relating to
international counter-money laundering measures and any recommendations to
Congress as to advisable legislative action.
Concentration Accounts. Sec. 325 authorizes the Secretary of the Treasury
to prescribe regulations governing maintenance of concentration accounts by
financial institutions. If issued, such regulations must prohibit financial institutions
from allowing clients to direct transactions through those accounts, prohibit financial
institutions from informing customers of the means of identifying such accounts, and
require each financial institution to establish written procedures to document all
transactions involving a concentration account in such a way that amounts belonging
to each customer may be identified.
Verification of Identification. Sec. 326 requires the Secretary of the
Treasury, jointly with appropriate regulators of financial institutions, within a year
of enactment, to prescribe minimum standards for identifying customers opening
accounts at financial institutions. These are to include procedures to verify customer
identity and compare with government lists of terrorists and terrorist organizations.
Under this section, the Secretary is required to submit a report to Congress within six
months of enactment, recommending a means of insuring similarly accurate
identification of foreign nationals, requiring an identification number similar to a
Social Security number or a tax identification number for foreign nationals opening
accounts at financial institutions, and setting up a system for financial institutions to
review information held by government agencies to verify identities of foreign
nationals opening accounts.
Consideration of Anti-Money Laundering Record. Sec. 327 amends the
Bank Holding Company Act and the Federal Deposit Insurance Act, to require that,
before approving certain acquisition or merger applications under the Bank Holding
Company Act or the Federal Deposit Insurance Act, the Board of Governors of the

Federal Reserve System and the Federal Deposit Insurance Corporation must
consider the institution’s effectiveness in combating money laundering.
International Cooperation on Identification of Originators of Wire
Transfers. Sec. 328 requires the Secretary of the Treasury to encourage foreign
governments to require the name of the originator in wire transfer instructions and
include it from origination to disbursement. The Secretary is to report annually on
progress toward this end to the House Financial Services Committee and Senate
Banking, Housing, and Urban Affairs Committee.
Criminal Penalties. Sec. 329 criminalizes the soliciting or acceptance of a
bribe by anyone acting on behalf of an entity of the Federal Government in
connection with the administration of the International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001, subject to a fine of up to three
times the value of the thing constituting the bribe, 15 years imprisonment, or both.
International Cooperation in Money Laundering Investigations. Sec.
330 states the sense of Congress that international negotiations should be pursued for
further cooperative efforts to insure that foreign financial institutions maintain
adequate records relating to foreign terrorist organizations and money launderers and
make such records available to U.S. law enforcement officials and domestic financial
institution supervisors.
SUBTITLE B–BANK Secrecy Act Amendments and Related
Improvements
Amendments Relating to Reporting of Suspicious Activities. Sec. 351 amends
the Currency and Foreign Transactions Reporting Act, 31 U.S.C. § 5318(g)(3), to
extend the safe harbor provisions for financial institutions and their employees who
provide information as to possible law violations to cover all voluntary disclosures
of possible law violations made to any federal government agency. Also covered are
employees or agents of institutions who require others to make such disclosures. The
immunity provided under the legislation covers potential liability under contracts and
other legally enforceable agreements.. Previously, immunity was provided only for
disclosures of violation of law or regulation pursuant to law or regulation; there was
no specific immunity for those requiring others to make disclosures; and, immunity
extended only to liability under laws or regulations of the United States or
constitution, law, or regulation of a state or political subdivision thereof. The section
makes it clear that the liability does not extend to prosecutions brought by
governmental entities. Disclosure to the subject of the tip-off is prohibited.
Information disclosed about potential law violations may be used in employment
references to other financial institutions as well as, under the rules of the securities
exchanges, in termination notices.
Anti-Money Laundering Programs. Sec. 352, effective 180 days after
enactment, requires each financial institution to develop an anti-money laundering
program to include development of internal policies, designation of a compliance
officer, ongoing employee training, and an independent audit function to test the
programs. It authorizes the Secretary of the Treasury to prescribe minimum

standards for such programs and to exempt those financial institutions that are not
covered by the regulations promulgated under the Currency and Foreign Transactions
Reporting Act. It requires the Secretary to prescribe regulations that consider the
extent to which the requirements imposed under this section comport with the size,
location, and activities of the financial institutions to which they apply.
Geographic Targeting Orders–Penalties and Extension of
Permissible Period. Sec. 353 extends the civil and criminal penalties under the
Currency and Foreign Transactions Reporting Act, 31 U.S.C. §§ 5321(a) and 5322,
to include violations of geographic targeting orders issued under that Act and willful
violations of regulations prescribed under the record keeping requirements of the
Bank Secrecy Act, found in Section 21 of the Federal Deposit Insurance Act (FDIA),
12 U.S.C. § 1829(b), or violations of regulations covering uninsured financial
institutions issued by Treasury under the authority of 12 U.S.C. §§ 1951 - 1959.
Before enactment of USA-PATRIOT, 18 U.S.C. § 1829(b) carried no criminal
penalties and set civil penalties for violations of regulations issued under 12 U.S.C.
§ 1829(b) at up to $10,000. Section 1955 of Title 12, U.S.C. carried civil penalties
of up to $10,000; and, 12 U.S.C. § 1956 carried a criminal penalty of up to $1,000
and imprisonment for one year. 31 U.S.C. § 5321(a) permits civil penalties of
$25,000 or the amount of the instrument (not to exceed $100,000); 31 U.S.C. § 5322
permits criminal penalties of up to $250,000 in fines and imprisonment of up to 5
years for a single offense and enhancement for offenses committed in conjunction
with other offenses or as a pattern of criminal activity.
The section also extends the prohibitions on structuring transactions to avoid
reporting requirements, 31 U.S.C. § 5324, to cover structuring to avoid geographic
targeting orders and record keeping requirements of the Bank Secrecy Act, found in
Section 21 of the Federal Deposit Insurance Act, 12 U.S.C. § 1829(b), and 12 U.S.C.
§§ 1951- 1959. It extends the permissible length of geographic targeting orders from

60 to 180 days.

Anti-Money Laundering Strategy. Sec. 354 includes in the list of topics
prescribed for inclusion in the Administration’s annual anti-money laundering
strategy, data regarding the funding of international terrorism acts.
Authorization to Include Suspicions of Illegal Activity in Written
Employment References. Sec. 355 authorizes depository institutions,
“[n]otwithstanding any other provision of law,” to disclose the possible involvement
of institution-affiliated parties in potentially unlawful activity. Such disclosures may
be made to other insured depository institutions requesting employment references,
provided the disclosure is not made with malicious intent.
Suspicious Activities Reports by Securities Brokers. Sec. 356
requires the Secretary of the Treasury, by January 1, 2002, to publish proposed
regulations requiring registered brokers and dealers to file suspicious activity reports
under 31 U.S.C. § 5318(g). It also authorizes the Secretary to prescribe such
regulations for futures commission merchants, commodity trading advisors, and
commodity pool operators registered under the Commodity Exchange Act. It also
requires a report, within one year of enactment, recommending effective regulations
under the Currency and Foreign Transactions Reporting Act for investment

companies, as defined in the Investment Company Act of 1940, and to evaluate the
possibility of requiring trusts and personal holding companies to disclose their
beneficial owners when opening accounts at depository institutions.
Special Report on Administration of Bank Secrecy Provisions. Sec.
357 requires the Secretary of the Treasury to submit a report, within six months of
enactment, on the role of the Internal Revenue Service in administering the Bank
Secrecy Act’s Currency and Foreign Transactions Reporting Act. The report is
specifically to address such issues as whether processing of information is to be
shifted from the Internal Revenue Service and whether the Internal Revenue Service
is to retain authority for auditing compliance by money services businesses and
gaming businesses with BSA requirements.
Bank Secrecy Provisions and Activities of U.S. Intelligence
Agencies to Fight International Terrorism. Sec. 358 authorizes the Secretary
of the Treasury to refer suspicious activity reports to U.S. intelligence agencies for
use in the conduct of intelligence or counterintelligence activities to protect against
international terrorism. It authorizes the release of information under the Currency
and Foreign Transactions Reporting Act and other provisions of the Bank Secrecy
Act, the Right to Financial Privacy Act, and the Fair Credit Reporting Act, to U.S.
intelligence agencies by amending 31 U.S.C. §§ 5311, 5318(g)(4)(b), 5319; 12
U.S.C. § 1829(b), 1953; 12 U.S.C. 3412(a); 15 U.S.C. § 1681x.
Reporting of Suspicious Activities by Underground Banking
Systems. Sec. 359 specifically includes “a licensed sender of money or any other
person who engages as a business in the transmission of funds, including any person
who engages as a business in an informal money transfer system or any network of
people who engage as a business in facilitating the transfer of money domestically
or internationally outside of the conventional financial institutions system” as a
“financial institution” subject to the requirements of the Currency and Foreign
Transactions Reporting Act. It subjects them to any regulations promulgated under
the authority of section 21 of the Federal Deposit Insurance Act, 12 U.S.C. § 1829b.
That section of the law provides authority for the regulations issued under 31 C.F.R.
Part 103, requiring reports of currency and foreign transactions, including those
requiring suspicious activity reports from money services businesses, 31 C.F.R. §

103.20.

Sec. 359 also mandates a report by the Secretary, within a year of enactment, on
whether further legislation is needed with respect to these underground banking
systems, including whether the threshold for reporting suspicious activities ($2,000)
should be lowered for them.
Use of Authority of U.S. Executive Directors. Sec. 360 authorizes the
President to direct the U. S. executive directors of international financial institutions
to use their voices and votes to support countries or entities that have contributed to
the U.S. anti-terrorism efforts and ensure that no funds of their institutions are paid
to persons who threaten to commit or support terrorism. International financial
institutions, as defined in 22 U.S.C. § 262r(c)(2), include the International Monetary
Fund, the International Bank for Reconstruction and Development, the European
Bank for Reconstruction and Development, the International Development

Association, the International Finance Corporation, the Multilateral Investment
Guarantee Agency, the African Development Bank, the African Development Fund,
the Asian Development Bank, the Bank for Economic Development and Cooperation
in the Middle East and North Africa, and the Inter-American Investment Corporation.
Financial Crimes Enforcement Network (FinCEN). Sec. 361, by
enacting 31 U.S.C. § 310, transforms FinCEN from a Treasury Department bureau
established administratively to a statutory bureau in the Treasury Department. It
specifies that it is to be headed by a Director to be appointed by the Secretary. It
details its duties and powers. Subject to applicable legal requirements and guidance
by Treasury, FinCEN is to maintain a government-wide data access service to
information collected under the anti-money laundering reporting laws, information
on currency flows, and other records maintained by other government offices as well
as privately and publically available information;. It is to analyze and disseminate
data : (1) to federal, state, local, and foreign law enforcement officials to identify
possible criminal activity; and (2) to regulatory officials to identify possible
violations of the anti-money laundering reporting requirements. It is to determine
emerging trends and methods in money laundering; and, support intelligence
activities against international terrorism.
FinCEN is to establish and maintain a financial crimes communications center
to furnish law enforcement authorities with intelligence information relating to
investigations and undercover operations. It is to furnish informational services to
financial institutions, federal regulatory agencies, and law enforcement authorities,
in the interest of countering terrorism, organized crime, money laundering, and other
financial crimes. It is to assist law enforcement and regulatory authorities in
combating the use of informal nonbank networks permitting transfer of funds or the
equivalent of funds without records and in insuring compliance with criminal and tax
laws. It is to provide computer and data support and data analysis to the Secretary
of the Treasury for tracking and controlling foreign assets. It is to administer the
anti-money laundering reporting requirements as delegated by the Secretary of the
Treasury.
Sec. 361 further specifies that the Secretary is to prescribe procedures with
respect to the government-wide data access service and the financial crimes
communications center maintained by FinCEN to provide efficient entry, retrieval,
and dissemination of information. This is to include a method for submitting reports
by Internet, cataloguing of information, and prompt initial review of suspicious
activity reports. Sec. 361 requires the Secretary to develop, in accordance with the
Privacy Act, 5 U.S.C. § 552a, and the Right to Financial Privacy Act, 12 U.S.C. §§
3401, et seq., procedures for determining access, limits on use, and “how
information about activities or relationships which involve or are closely associated
with the exercise of constitutional rights are screened out.”
Appropriations of such sums as are necessary are authorized for fiscal years
through 2005.
The Secretary is to study methods for improving compliance with the reporting
requirements under 31 U.S.C. § 5314, relating to foreign currency transactions, and

to submit an annual report to Congress on the subject, beginning six months after
enactment.
Establishment of Highly Secure Network. Sec. 362 requires the
Secretary to establish as operational within nine months, a highly secure network in
FinCEN to allow financial institutions to file electronically reports required under the
Bank Secrecy Act and to provide financial institutions with alerts and other
information regarding suspicious activities warranting immediate and enhanced
scrutiny.
Increase in Civil and Criminal Penalties for Money Laundering. Sec.
363 amends 31 U.S.C. §§ 5321(a) and 5322 to permit the Secretary to impose a civil
money penalty and a court to impose a criminal penalty equal to 2 times the amount
of the transaction, but not more than $1,000,000 for violations of the suspicious
activity reporting requirements, under 31 U.S.C. §§ 5318(i) and (j) or any special
measures imposed under 31 U.S.C. § 5318A. Under pre-existing law, the Secretary
had authority to impose a civil money penalty of the amount of the transaction, up to
$100,000, or $25,000; and, a criminal fine for a violation of the suspicious activity
reporting requirement was set at not more than $250,000.
Uniform Protection Authority for Federal Reserve Facilities. Sec. 364
authorizes the Federal Reserve Board to issue regulations, subject to the approval of
the Attorney General, to authorize personnel to act as law enforcement officers to
protect the Board’s personnel, property, and operations, including the Federal
Reserve banks, and for such personnel to carry firearms and make arrests.
Reports Relating to Coins and Currency Received in Non-Financial
Trade of Business. Sec. 365 adds a new section to the anti-money laundering
reporting requirements, 31 U.S.C. § 5331. It requires anyone engaging in a trade or
business, who receives $10,000 in coins or currency (including foreign currency and
financial instruments) in a single transaction or in two related transactions to file a
report on the transaction to FinCEN as prescribed by the Secretary in regulations.
The form for such reports must include the name and address of the person from
whom the coins or currency are received, the date and nature of the transaction, and
such other information as the Secretary may prescribe. Exemptions are made for
reports filed by financial institutions under 31 U.S.C. § 5313 and its implementing
regulations, and for transactions occurring outside the United States–unless the
Secretary so prescribes. The section also includes a provision that prohibits
structuring transactions to cause such businesses to evade these reporting
requirements or requirements under implementing regulations.¹⁰ “Nonfinancial trade
or business” is defined to mean any trade or business other than a financial institution
subject to reporting requirements under 31 U.S.C. § 5313 and regulations thereunder
Efficient Use of Currency Transaction Report System. Sec. 366
requires the Secretary to study expanding the statutory exemption system to the
currency transaction reporting requirements, under 31 U.S.C. § 5313, authorizing

¹⁰ There appears to be a typographical error in the text of the legislation. The prohibition
on structuring refers to 31 U.S.C. § 5333, rather than to 5331.

exemptions for transactions with various entities and qualified business customers
from the domestic currency and coin reporting requirements. The study is to address
methods for improving financial institutions’ use of these exemptions to reduce the
submission of reports with little or no value for law enforcement purposes. A report
on this is required within one year.
SUBTITLE C–Currency Crimes and Protection
Bulk Cash Smuggling into or out of the United States. Sec. 371 creates a new
criminal offense, knowingly concealing more than $10,000 and transporting it or
attempting to transfer it out of or into the United States. Conviction under the statute
is subject to imprisonment for up to 5 years and forfeiture of any property involved
in the offense. Preexisting law, 31 U.S.C. § 5316, requires a report by anyone
transporting monetary instruments, defined to include currency, of more than $10,000
into or out of the U.S. In United States v. Bajakajian, 524 U.S. 324 (1998), the
Supreme Court ruled it unconstitutional to require forfeiture of $357,144, in cash that
the defendant possessed legitimately and was attempting to carry with him when
leaving the United States. The Court found the penalty disproportional to the gravity
of the offense and a violation of the Excessive Fines Clause of the Eighth
Amendment to the U. S. Constitution. In reaching that decision, the Court
considered the fact that the offense was merely a reporting offense since it was not
illegal to transport the currency.
Forfeiture in Currency Reporting Cases. Sec. 372 authorizes criminal
forfeiture and civil forfeitures for violations of the reporting requirements relating to
monetary instruments and makes the criminal forfeiture procedures of section 413 of
the Controlled Substances Act and the civil forfeiture procedures of 18 U.S.C. §

981(a)(1)(A) (money laundering) applicable to criminal and civil forfeiture,

respectively, under 31 U.S.C. §§ 5313 (reports on domestic coins and currency),
5316 (reports on exporting monetary instruments), and 5324.(structuring transactions
to evade reporting requirements).
Illegal Money Transmitting Businesses. Sec. 373 prohibits anyone from
knowingly conducting, controlling, managing, supervising, directing, or owning a
money transmitting business: (1) without a license in a state that requires such a
license and subjects those operating without a license to state misdemeanor or felony
penalties; (2) not registered with Treasury under 31 U.S.C. § 5330; or (3) involves
the transportation or transmission of funds that the defendant knows to have been
derived from a criminal offense or are intended to be used to promote or support
unlawful activity. The section prescribes a federal penalty of up to five years’
imprisonment and criminal fines and authorizes civil forfeiture of property involved
in transactions in connection with this offense.
Counterfeiting Domestic Currency and Obligations. Sec. 374 extends
the definition of counterfeiting obligations of the United States to cover analogs,
digital or electronic images, as well as “any plate, stone, or other thing or part
thereof, used to counterfeit” such obligations or securities, as provided in pre-existing
law.18 U.S.C. § 470(2). This section is also amended to provide penalties for
offenses committed outside the U.S. as are applicable to those within the U.S. Other
provisions increase the penalties under other counterfeiting statutes to 20 years’

imprisonment: 18 U.S.C. §§ 471 (obligations or securities of the U.S.); 472 (uttering
counterfeit obligations or securities); 473 (dealing in counterfeit obligations or
securities); and, 474 (using plates or stones for counterfeiting).
The section amends 18 U.S.C. § 474 to cover counterfeiting involving an
analog, digital or electronic image of U.S. obligations, unless authorized by Treasury.
It amends 18 U.S.C. § 476 (taking impressions of tools used for obligations or
securities of the U.S.) to increase the penalty from 10 years to 25 years’
imprisonment. It amends 18 U.S.C. § 477 (possessing or selling impressions of tools
used for obligations or securities) to cover an analog, digital, or electronic image. It
raises the penalty for connecting parts of different notes, 18 U.S.C. § 484, from five
years’ to ten years’ imprisonment, and for offenses under 18 U.S.C. § 493 (bonds and
obligations of certain lending agencies), from five to ten years’ imprisonment.
Counterfeiting Foreign Currency and Obligations. Sec. 375 increases
the penalties for violations of various offenses involving foreign currency and
obligations as follows: 18 U.S.C. § 478 (foreign obligations or securities, penalty
raised from five to 20 years; 18 U.S.C. § 479 (uttering counterfeit foreign obligations,
penalty raised from three to twenty years); 18 U.S.C. § 480 (possessing counterfeit
foreign obligations or securities, penalty raised from one to twenty years); 18 U.S.C.
§ 481 (plates or stones for counterfeiting foreign obligations or securities, penalty
raised from five to twenty years); 18 U.S.C. § 482 (foreign bank notes, penalty raised
from two to twenty years); and 18 U.S.C. § 483 (foreign bank notes, penalty raised
from two to twenty years). The section also criminalizes counterfeiting involving an
analog, digital, or electronic image of foreign obligations and securities.
Laundering the Proceeds of Foreign Terrorism.. Sec. 376 adds 18
U.S.C. § 2339B, providing material support to designated foreign terrorist
organizations, as a predicate offense for a money laundering prosecution under 18
U.S.C. § 1956.
Extraterritorial Jurisdiction. Sec. 377 enhances the applicability of 18
U.S.C. § 1029 (computer fraud) by covering offenses committed outside the U.S. that
involve an access device issued by a U.S. entity, such as a credit card, provided the
defendant transports, delivers, conveys, transfers to or through, or otherwise stores,
secrets, or holds within the jurisdiction of the U.S., any article used to assist in the
commission of the offense or the proceeds of such offense or property derived
therefrom