|Banks get drafted into the war on
Will America's war on terrorism
change the way you bank? Maybe.
The 9-11 attacks already have
dramatically changed the way we live. Public buildings, bridges
and national monuments, once symbols of America's many freedoms,
are now under guard. Airport security may require you to remove
your shoes, your belt, even your bra before boarding a flight. We
no longer take our postal workers or our firefighters for granted.
Now, the way your money is
handled is about to be drafted into the war on terrorism. And the
cost to arm America's new financial troops is likely to be passed
on to bank customers.
Stopping the terrorist
On Oct. 26, 2001, President Bush signed into law the USA Patriot
Act. The name is an acronym for Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct
The far-reaching measure gives
unprecedented powers to the FBI, CIA and other government agencies
to ferret out potential terrorists. Among the tools deemed appropriate
by the bill are two specific ways to stop money laundering, viewed
by law enforcement as the lifeblood of terrorism:
Identification and verification: The law calls for minimum
procedures by which banks and other financial institutions (including
insurance companies and securities dealers and brokers) identify
and verify a customer seeking to open a new account.
Compliance: The act underscores and broadens existing laws
requiring financial institutions to report suspicious activity
and comply with requests from law enforcement for financial records.
The Treasury Department must
come up with final regulations by Oct. 26 to govern identification
and verification of new account holders.
If all goes as the banking
industry hopes, when the deadline arrives most customers won't notice
a major change when they go to open an account. Nonresidents, however,
will likely encounter greater scrutiny.
Closing the identity gap
John Byrne, senior counsel for the American Bankers Association,
helped an eight-member team of bankers draft a new-account
identification and verification guide in the weeks immediately
Noting the ease with which
false identification can be obtained, the guide lists four vulnerabilities
in identifying customers:
- Lack of uniform procedures for official state identifications;
- Lack of governmental verification processes;
- Lack of meaningful biometric identifiers, and
- Lack of real-time commercial verification products.
"The guide is just that,
a guide," says Byrne. "We felt it was important just to
get a document out there for the compliance officers who need to
figure what makes sense going forward when we don't know what the
regulations are going to look like.
"Certainly Treasury has
said that for this to work, it needs to be generic, it needs to
be flexible, and you cannot make it a one-size-fits-all."
Getting to know the customer
America's smaller banks certainly share that last sentiment. They
have long prided themselves on knowing their customers, and don't
relish the idea of asking them for proof of the obvious.
"The larger banks tend
to be in situations where they have more to watch. They may be involved
in large international operations and a lot of our members aren't,"
says Rob Rowe, regulatory counsel for the Independent Community
Bankers of America.
"Many of our members
are located in rural communities where they do know their customers,"
says Rowe. "In fact, they probably went to high school together,
which does make the need for some kind of sophisticated screening
software less necessary. A bank is not a bank is not a bank. They're
not all the same."
Michael Briggs, regulatory
counsel for America's Community Bankers, agrees.
"Depending on how the
regulations are proffered, there might be some changes in terms
of account opening procedures," he says. "But these new
provisions, when they are implemented, need to take into account
the size and complexity of an individual institution and the nature
of their customer relationship."