US Treasury Introduces Money Laundering Regulations

by Mike Godfrey, Tax-News.com, New York

25 April 2002

Yesterday the US Treasury Department announced several major steps in the implementation of the USA PATRIOT Act, passed after the September 11th terrorist attacks last year to clamp down on money laundering and terrorist financing. New federal money-laundering rules will cover a wide range of financial services companies, although the insurance industry has been exempted for the time being.

The Act required that all industries defined as financial institutions must have anti money-laundering programs in place by April 24, 2002 unless the Secretary exempts them. The industries that will have a new obligation to implement an anti-money laundering program as a result of these regulations include mutual funds, operators of credit card systems, money services businesses such as money transfer companies and check cashers, securities brokers and dealers registered with the Securities and Exchange Commission, and futures commission merchants and accompanying introducing brokers registered with the Commodity Futures Trading Commission.

These industries, with the exception of broker dealers and futures commission merchants, expected to be covered by these regulations and have ninety days to develop anti-money laundering programs.

The Department also announced it will provide Congress this week with three reports on a variety of topics. One report analyzes options for improving compliance with the obligation of all US citizens to report their interests in foreign bank accounts, a second addresses difficulties surrounding the ability of domestic financial institutions to identify and verify the identity of foreign nationals seeking to open accounts, and a third report addresses the role of the Internal Revenue Service in the administration of the Bank Secrecy Act.

The Department has exercised its authority under the Act to defer, for a period of no more than six months, the application of the new regulations to the remaining categories of financial institutions under the Bank Secrecy Act to allow Treasury time to develop appropriate regulations. These sectors include dealers in precious metals, stones, or jewels, pawnbrokers, loan or finance companies, private bankers, insurance companies, travel agencies, telegraph companies, a business engaged in vehicle sales, including automobiles, airplanes, and boats, persons involved in real estate closings and settlements, investment companies other than mutual funds, and commodity pool operators and commodity trading advisors.

For those sectors covered by the new regulations, firms are required to implement comprehensive money-laundering compliance programs by designating a special compliance officer, training employees to detect money laundering, commissioning independent audits, and establishing policies and procedures to identify risks and minimize opportunities for abuse.

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