Anti‐money laundering regulations: Treasury Department enacts final rules implementing Section 312 of the PATRIOT Act relating to foreign correspondent accounts and private banking accounts

Abstract

Purpose

To describe and to discuss the implications of the US Department of the Treasury's PATRIOT Act regulations requiring “covered financial institutions” (including broker‐dealers, banks, and mutual funds) to maintain risk‐based procedures to ensure that: correspondent accounts held on behalf of specified non‐US financial institutions; and private banking accounts, are subject to due diligence procedures to ensure that those accounts, and the financial institutions holding those accounts, are not being used for money laundering purposes.

Design/methodology/approach

Summarizes and analyzes the adopted rules.

Findings

Since the passage of the USA PATRIOT Act, regulation relating to anti‐money laundering has been among the highest profile – and highest priority – activity of securities and financial institution regulation. Consequently, anti‐money laundering rules and regulations have become a major aspect of compliance programs at financial institutions such as banks and broker‐dealers. The rules that are the subject of this article are noteworthy in part because they continue the trend of widening the universe of “financial institutions” that are now subject to substantial anti‐money laundering regulation. The rules described in this article add substantially to the complexity of anti‐money laundering regulation at financial institutions for a number of reasons, including: firstly, placing new, broad‐based requirements on financial institutions; secondly, requiring those financial institutions to make judgments regarding both the level of risk posed by certain accounts and the appropriate diligence that may be necessary for each such account; and thirdly, interpretive and implementation challenges.

Originality/value

A summary and analysis of new anti‐money laundering regulation, which comes at a time when US regulators are placing substantial emphasis on anti‐money laundering.

Citation

Gittleman, C.S. and Sacks, R.D. (2005), "Anti‐money laundering regulations: Treasury Department enacts final rules implementing Section 312 of the PATRIOT Act relating to foreign correspondent accounts and private banking accounts", Journal of Investment Compliance, Vol. 6 No. 4, pp. 13-24. https://doi.org/10.1108/15285810510681865