GaryMrMets
05-15-2002, 02:21 PM
http://aol1.bankrate.com/aol/news/bank/20020507a.asp
Banks get drafted into the war on terrorism
By Jay MacDonald • Bankrate.com
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 cash flow
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 Terrorism.
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:
1. 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.
2. 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 following 9-11.
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."
Proliferation of fake IDs
Banks of all size have long had ID and verification procedures in place. The problem, according to Byrne, is that fake IDs are both easier to obtain and much harder to detect today. He and many of his colleagues say the identification onus shouldn't fall on banking.
"The governments need to do a better job of ensuring that when they issue an identification document, they've done their due diligence," he says. "It shouldn't be up to the bank to make a determination of whether the Florida license is stronger than the Georgia license. We should be able to rely with some comfort on something issued by a governmental entity. It shouldn't be our obligation."
But don't be surprised if later this year your banker looks more closely at your state driver's license, compares the information (address, telephone number, date of birth, etc.) on two or more documents, or takes a thumbprint in the course of opening an account.
Bankers are hoping you'll see it as a good thing. After all, the No. 1 fraud-related complaint to the Federal Trade Commission's Bureau of Consumer Protection involves identity theft for the purpose of opening new accounts. The forthcoming USA Patriot ID and verification regs could make it harder for others to swipe your financial life.
The high cost of compliance
The bigger question that has bankers holding their breath these days is what it may cost them -- and eventually you -- to comply with new reporting procedures and requests from law enforcement.
Banks are used to reporting suspicious transactions to the government; it's part of their federal charter and failure to do so can close their doors for good. But detecting possible terrorist account activity is problematic at best because of the low dollar amounts and the conventional accounts they use.
"I don't think anyone would say they were against it," says Rowe. "I think the concern of our membership is, how do we do it? A lot of the things that are getting under the radar screen are very small transactions that are very hard to catch. It's not a matter of willingness to support the government's efforts. It's more what do we do and how do we do it?"
Rowe doesn't like the worst-case scenario: "Just with the hundreds and hundreds of thousands of checks going through the system, if the government requires banks to start examining individual checks, the economy will come to a grinding halt. It isn't doable."
Byrne says Treasury is carefully weighing the need to track terrorist financing with the financial burden it could place on banks due to increased software and manpower needed to perform the records searches.
"The issue is really going to be how aggressive will law enforcement be in taking advantage of additional authority?" he says.
Will the money-laundering provisions of the USA Patriot Act drive up banking costs?
"Oh, no question," says Rowe. "And that will come from the customers. What we've tried to get through to the government agencies is, all of these things are costs of doing business. It doesn't just happen. It does cost money. And eventually that cost gets built back into individual account fees."
But Briggs isn't so sure.
"In terms of cost, it's too premature because I think that is something that the banking industry probably feels is its contribution to the fight."
Jay MacDonald is a contributing editor based in Florida.
-- Posted: May 7, 2002
Banks get drafted into the war on terrorism
By Jay MacDonald • Bankrate.com
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 cash flow
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 Terrorism.
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:
1. 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.
2. 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 following 9-11.
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."
Proliferation of fake IDs
Banks of all size have long had ID and verification procedures in place. The problem, according to Byrne, is that fake IDs are both easier to obtain and much harder to detect today. He and many of his colleagues say the identification onus shouldn't fall on banking.
"The governments need to do a better job of ensuring that when they issue an identification document, they've done their due diligence," he says. "It shouldn't be up to the bank to make a determination of whether the Florida license is stronger than the Georgia license. We should be able to rely with some comfort on something issued by a governmental entity. It shouldn't be our obligation."
But don't be surprised if later this year your banker looks more closely at your state driver's license, compares the information (address, telephone number, date of birth, etc.) on two or more documents, or takes a thumbprint in the course of opening an account.
Bankers are hoping you'll see it as a good thing. After all, the No. 1 fraud-related complaint to the Federal Trade Commission's Bureau of Consumer Protection involves identity theft for the purpose of opening new accounts. The forthcoming USA Patriot ID and verification regs could make it harder for others to swipe your financial life.
The high cost of compliance
The bigger question that has bankers holding their breath these days is what it may cost them -- and eventually you -- to comply with new reporting procedures and requests from law enforcement.
Banks are used to reporting suspicious transactions to the government; it's part of their federal charter and failure to do so can close their doors for good. But detecting possible terrorist account activity is problematic at best because of the low dollar amounts and the conventional accounts they use.
"I don't think anyone would say they were against it," says Rowe. "I think the concern of our membership is, how do we do it? A lot of the things that are getting under the radar screen are very small transactions that are very hard to catch. It's not a matter of willingness to support the government's efforts. It's more what do we do and how do we do it?"
Rowe doesn't like the worst-case scenario: "Just with the hundreds and hundreds of thousands of checks going through the system, if the government requires banks to start examining individual checks, the economy will come to a grinding halt. It isn't doable."
Byrne says Treasury is carefully weighing the need to track terrorist financing with the financial burden it could place on banks due to increased software and manpower needed to perform the records searches.
"The issue is really going to be how aggressive will law enforcement be in taking advantage of additional authority?" he says.
Will the money-laundering provisions of the USA Patriot Act drive up banking costs?
"Oh, no question," says Rowe. "And that will come from the customers. What we've tried to get through to the government agencies is, all of these things are costs of doing business. It doesn't just happen. It does cost money. And eventually that cost gets built back into individual account fees."
But Briggs isn't so sure.
"In terms of cost, it's too premature because I think that is something that the banking industry probably feels is its contribution to the fight."
Jay MacDonald is a contributing editor based in Florida.
-- Posted: May 7, 2002