Author: Arabella Saker (2002)

Arabella Saker looks at the extent of the provisions of the US Patriot Act and its
implications for non-US financial institutions
(taken from Issue No 21  – October 2002

`You’re either with us, or against us` was President Bush’s message to the world once the dust had settled on Manhattan. President Bush added in the same speech that `a coalition partner must do more than just express sympathy, a coalition partner must perform` and if not, `it’s going to be important for nations to know they will be held accountable for inactivity`.

President Bush’s ‘action, not words’ tone finds echoes in the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001, known as the USA Patriot Act, particularly Title III (the International Money Laundering Abatement and Anti-Terrorism Act 2001, `IMLAA`). Among other things, IMLAA requires US financial institutions to have enhanced due diligence procedures when providing correspondent or private banking accounts to foreign banks operating under an offshore banking licence or a licence issued by any country designated as non-co-operative with international anti-money-laundering principles (e.g. which has been `blacklisted`) by the Financial Action Task Force (`FATF`). IMLAA prohibits US financial institutions from establishing or maintaining a correspondent account with a shell bank (i.e. one that does not have a physical presence in any country). There are further due diligence requirements aimed at spotting the proceeds of corruption, especially where political figures, or their affiliates, open private banking accounts.