The second subtitle, entitled Subtitle B: Bank Secrecy Act Amendments and Related Improvements, largely modifies the Bank Secrecy Act (BSA) to make it harder for money launderers to operate, and to make it easier for law enforcement and regulatory agencies to police money laundering operations.
Title III of the USA PATRIOT Act was passed with very little debate and the final vote in the United States House of Representatives was 412-1.
[citation needed] Congressman Paul stated in Congress: Among the most obnoxious provisions of this bill are: expanding the war on cash by creating a new federal crime of taking over $10,000 cash into or out of the United States; codifying the unconstitutional authority of the Financial Crimes Enforcement Network (FinCEN) to snoop into the private financial dealings of American citizens; and expanding the `suspicious activity reports' mandate to broker-dealers, even though history has shown that these reports fail to significantly aid in apprehending criminals.
[13] The BSA specifies that "the President, acting through the Secretary and in consultation with the Attorney General, shall develop a national strategy for combating money laundering and related financial crimes.
The Federal Deposit Insurance Act was amended[16] to allow written employment references to contain suspicions of involvement in illegal activity in response to a request from another financial institution.
Part (a) states that the Secretary of Treasury was required to create regulations that require brokers and dealers registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 to submit suspicious activity reports under section 5318(g) of title 31, United States Code.
Part (c) specified that a report be produced jointly by the Secretary of Treasury, the Board of Governors of the Federal Reserve System, and the Securities and Exchange Commission with recommendations for effective regulations to apply the requirements of the BSA with regards to investment companies.
The report also similarly found that unit investment trusts (UITs) to be of low risk of being used for money-laundering purposes.
The report was also meant to look into anti-money regulations for personal holdings accounts, but no recommendations were given as this was an issue the U.S. Treasury decided they needed to continue to study.
A report was required to be submitted to Congress on the role of the Internal Revenue Service (IRS) in the administration of the BSA.
The report also needed to recommend whether, "in light of the objective of both anti-money-laundering programs and Federal tax administration, the Internal Revenue Service to retain authority and responsibility for audit and examination of the compliance of money services businesses and gaming institutions with those Bank Secrecy Act provisions".
The IRS has cultivated substantial anti-money laundering expertise over the years and contributed significantly to the administration of the BSA since its enactment in 1970.
In recent years, the partnership forged by the IRS and FinCEN has been aimed at improving the administration of the BSA and prioritizing the challenges both agencies recognize need to be addressed....
[20] The stated purposes of the BSA,[21] Section 123(a) of Public Law 91-508[22] and Section 21(a) of the Federal Deposit Insurance Act[23] were amended to allow reports or records to be provided to agencies who conduct intelligence or counterintelligence activities, including analysis, in order to protect against international terrorism.
[26] None of the special procedures spelled out in the Financial Privacy Act under section 1114 apply to U.S. government authorities who conduct investigations or intelligence or counter-intelligence activities in relation to domestic or international terrorism.
The report found that: The Patriot Act allows the United States President to instruct any United States Executive Directors of the international financial institutions (for example, the International Monetary Fund and the World Bank) to use their authority (termed "voice and vote") to support any loan or other utilization of the funds of respective institutions for countries that have shown to "take actions that contribute to efforts of the United States to respond to, deter, or prevent acts of international terrorism".
This section of the Patriot Act makes it a requirement of the Secretary of Treasury to report yearly on how to improve compliance of 31 U.S.C.
[38] The U.S. Secretary of Treasury was charged with establishing a highly secure network to allow financial reports required under the BSA, chapter 2 of Public Law 91-508 or section 21 of the Federal Deposit Insurance Act to be filed electronically.
The legislation also requires the secure network to send alerts and other information in relation to suspicious activities to financial institutions.
According to the testimony of Dennis Lormel, Chief of the Terrorist Financing Operations Section of the Federal Bureau of Investigation's Counterterrorism Division, the USA Patriot Act Communication System was developed by FinCEN from such requirements.
[42] The Board of Governors of the Federal Reserve System are given authority to authorize personnel to act as law enforcement officers to protect the premises, grounds, property and personnel of any U.S. Federal reserve bank, as well as any operations conducted by or on behalf of the Board.
Law enforcement personnel are authorized to carry firearms and to make arrests for felonies committed while on the grounds or within the buildings of the Board or a reserve bank.
[43] Section 5331 ("Reports relating to coins and currency received in nonfinancial trade or business") was added to the BSA.
Therefore, in 1986, Congress passed the Money Laundering Control Act (MLCA), which did two things: firstly, it made it easier to report this information (previously, tellers had to contact an agent directly, the Act allowed tellers to merely fill in a form and submit it to the agency); and secondly, it gave legal immunity to financial institutions that did report such transactions.
In 2001, however, Congress found that some financial institutions were not utilizing the exemption system and, once again, the volume of reports was interfering with law enforcement.