USA PATRIOT Act

The USA PATRIOT Act was passed in October of 2001. It stands for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. The terrorist attacks that occurred on September 11, 2001 were the reason that this act was created. The USA PATRIOT Act was designed to prevent future cases of terrorism, fraud, and other criminal behaviors.

USA PATRIOT Act Influence on Financial Institutions

Two sections of the USA PATRIOT Act pertain specifically to preventing fraud and terrorism in financial institutions. Section 314 A requires financial institutions to check customer databases against government watch lists. The Treasury Department and law enforcement agencies help to inform financial institutions about potential money launderers, identity thieves, and terrorists. Ultimately, financial institutions are held accountable for their actions in preventing fraud and terrorism.

The USA PATRIOT Act Section 326 is known as the Customer Identification Program regulation. This section requires that financial institutions verify the identities of all new customers. They must also maintain a database on all accounts for five years after accounts have been closed. Each database entry should include a name, date that the account was opened, method for verification of identity, and verification that identity information was presented.

Many different types of financial institutions are affected by the USA PATRIOT Act. Banks and credit unions are the most common types of financial institutions used by Americans. Therefore, they must actively demonstrate regulatory mandate compliance to remain in business. Other financial institutions that are affected include trust companies, mutual funds, savings associations, industrial banks, futures merchants, transmitters of money abroad, issuers of traveler's checks, securities brokers, and offices of foreign banks.

Other Regulatory Mandates That Affect Financial Institutions

Financial institutions are constantly subjected to new and changing regulations. The Sarbanes-Oxley Act requires control over auditing practices and financial reporting. The Gramm-Leach-Bliley Act is another regulation that requires data protection for financial institutions. OFAC regulations have been around for over 20 years, unlike the USA PATRIOT Act, but have not been under much scrutiny until lately, as they are designed to prevent terrorists from using the U.S. financial system.

OFAC Stands for Office of Foreign Assets Control and is part of the U.S. Department of the Treasury. The OFAC is responsible for enforcing sanctions against targets such as terrorists, money launderers, foreign countries, people helping to generate weapons of mass destruction, and narcotics traffickers. The OFAC publishes and distributes two watch lists for financial institutions to view. These lists are known as the SDN list and the Blocked Countries List and they are compiled bi-weekly.

USA PATRIOT Act Compliance Solutions

Financial institutions that aim to prevent fraud and terrorism within the financial system can use one of many choices in compliance technology solutions. ID Verification is a popular program for financial institutions because it is easy-to-use, web-based, effective, and also cost efficient. This service crosschecks over 23 billion records in the identity verification process. It also helps to organize financial data and allows financial institutions to instantly compare names of applicants to government watch lists. Background Watch is another valuable program because it provides background checks on employees and account applicants for the protection of financial institutions.