Account Info Sought to Combat Terror

The New York Times http://www.nytimes.com/reuters/business/business-economy-treasury-sharing.html

Katherine Krueger klkruege@uiuc.edu

Overview:

As part of a the PATRIOT Act, an anti-terror law enacted last year, the Treasury Department proposed a set of new guidelines for banks and other financial institutions to follow. The proposed regulation requires that banks share account information with the government and other banks to prevent terrorism and money laundering. The governmental agency that keeps track of suspect cash flows is called the Treasury’s Financial Crimes Enforcement Network, or FinCEN.

Details:

On Tuesday, February 26, 2002, the Treasury Department proposed a new set of guidelines that would require banks and other financial institutions to share account information with the Treasury’s Financial Crimes Enforcement Network, or FinCEN. This agency is in charge of tracking suspect money flows within the financial system in order to prevent terrorism and money laundering.

Under the proposed guidelines, banks would be required to report account information at the request of an individual or group from FinCEN during investigations of terrorism or money laundering. The account information that banks will be required to report includes: the identity of the account holder, the number of the account, information given in the account, and transactions with the account holder. To protect the confidentiality of account information revealed to FinCEN, financial institutions would be required to set up privacy procedures.

This regulation is part of an anti-terror law enacted last year called the PATRIOT Act. At the time of this act Congress gave the Treasury Department three months to set up specific guidelines in which banks would share information on suspected terrorism with FinCEN, and in a separate proposal, to share information with each other. The proposal for banks to share information between themselves will begin on an interim basis, and both are subject to a 30-day comment period after publication.

Some of the other financial institutions that must also follow requests made from FinCEN include: credit unions, securities broker dealers, money transfer businesses, and issuers of travelers’ checks.

Relation To Class:

Financial institutions are one of the most highly regulated industries in the world. Since the tragedies occurring on September 11^th, it is even more important for financial institutions to regulate against terrorism. The government proposed this new legislation in order to further protect against terrorist attacks affecting the banking industry, as well as to protect consumers who invest directly within the industry.

An attack against the banking industry could also disrupt the financial market. Banks could collapse or consumer confidence could decrease and therefore cause a need for monetary assistance by regulatory institutions. Regulation is therefore necessary to maintain stability within the market.