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Article
Publication date: 14 August 2007

Burak Dolar and William F. Shughart

Title III of the USA Patriot Act obligated the private sector to take a more active role in deterring money laundering and disrupting terrorist financing. Complying with…

Abstract

Purpose

Title III of the USA Patriot Act obligated the private sector to take a more active role in deterring money laundering and disrupting terrorist financing. Complying with the new law has increased the cost of doing business dramatically for firms in the financial services industry. This study aims to apply a heterogeneous‐firm model of regulation to test whether the anti‐money laundering (AML) provisions of the Patriot Act redistributed wealth within the commercial banking and thrift sectors.

Design/methodology/approach

The paper analyzes a dataset comprising more than 150,000 observations.

Findings

The empirical evidence suggests that, owing to scale economies in regulatory compliance, the burden has fallen more heavily on smaller institutions. Moreover, the study does not find that the rules written to implement Title III have differentially impacted banks and thrifts at greater risk of being targeted by money launderers, as a public‐interest theory of regulation would predict.

Originality/value

The paper focuses on the AML provisions of the USA Patriot Act.

Details

Journal of Money Laundering Control, vol. 10 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

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Article
Publication date: 1 January 2002

BETTY SANTANGELO

A thoughtful review of the anti‐money laundering laws and rules with specific application to investment funds. It examines where hedge funds and the like are vulnerable…

Abstract

A thoughtful review of the anti‐money laundering laws and rules with specific application to investment funds. It examines where hedge funds and the like are vulnerable under the new law and what the authorities may be looking at.

Details

Journal of Investment Compliance, vol. 2 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 1 July 2006

Alan E. Sorcher

To summarize three implementing rules issued over the past year under the USA Patriot Act by the US Treasury Department Financial Crimes Enforcement Network (“FinCEN”) and…

Abstract

Purpose

To summarize three implementing rules issued over the past year under the USA Patriot Act by the US Treasury Department Financial Crimes Enforcement Network (“FinCEN”) and to make some basic recommendations designed to help firms improve their overall anti‐money laundering compliance efforts.

Design/methodology/approach

Summarizes three rules issued in the past year that are of particular significance to the securities industry: the final 312 rule for foreign correspondent and private banking accounts; the insurance company AML program and Suspicious Activity Reporting (“SAR”) rules; and the mutual fund SAR rule.

Findings

Makes the following recommendations for firms to improve their anti‐money laundering efforts: suspicious activity monitoring should fit your firm; information sharing may help fact gathering; anti‐money laundering programs should be applied across the firm; invest in training; and audit is an invaluable tool.

Originality/value

The Patriot Act, in a short amount of time, has had a major impact on the way securities firms and all financial institutions conduct business. Notwithstanding the achievements of the public and private sectors in implementing the USA Patriot Act, more can be done. While the USA Patriot Act provides significant tools to combat illicit activity, to be successful law enforcement and industry must continue to coordinate their efforts, and work hand‐in‐hand.

Details

Journal of Investment Compliance, vol. 7 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 3 October 2016

Norman Mugarura

The purpose of this paper is to articulate that ill-defined global prohibition regimes such as anti-money laundering (AML) could potentially cause more harm than good. The

Abstract

Purpose

The purpose of this paper is to articulate that ill-defined global prohibition regimes such as anti-money laundering (AML) could potentially cause more harm than good. The author has carried out a scoping review of some anti-money laundering regimes such as the USA PATRIOT Act to demonstrate how they have been harnessed in some jurisdictions. It deconstructs the broad scope in which money laundering offences are conceptualized and applied by different jurisdictions and its inherent challenges. It has scoped a wide range of issues, often articulating the inherent controversies in some engendered AML regimes such as the USA PATRIOT Act (2001) and its revised Know Your Customer (KYC) model.

Design/methodology/approach

This paper was undertaken by straddling a wide range of issues in relation to the shortcomings that are inherent in AML regulatory regimes and their application in practice. However, the analysis focuses on the failures of some AML regimes concentrating largely on the UK and US jurisdictions and, occasionally, drawing examples from African countries. It uses examples from a small sample of countries and then hypothesized that if a regulatory regime is broadly defined, it could cause confusion in its application, let alone being counterproductive to the purpose it was adopted to achieve. It might, therefore, not be very helpful in streamlining how desired norms should be harnessed in practice.

Findings

The findings of this paper have correlated that broadly and ill-defined regulatory regimes are bound to cause confusion and controversies, let alone being counterproductive to the purpose they were adopted to achieve. The USA PATRIOT Act and KYC are some of the few examples, whereby ill-defined regulatory regimes have provided a recipe for controversies and tensions between regulatory domains and citizens. For instance, the surveillance mandate to US regulatory authorities under the USA PATRIOT Act has generated tensions between citizens and banks. Cases have been filed against banks for over-exercising their powers and interfering with the individual freedoms of US citizens.

Research limitations/implications

The paper was written largely based on analysis of secondary data on AML regimes and the controversies their application often generates in some countries. For instance, the USA PATRIOT Act has generated tensions between the USA and foreign states, banks and citizens, because of excessive use of its surveillance mandate on the privacy of individuals. Bearing this challenge in mind, it would have been better for the analysis to focus on many countries and, probably, interview bankers and internalize their views accordingly.

Practical implications

The paper is informative. It could be used for making desired policy changes and enhancing research on global regulatory regimes and how they are evolved and applied in practice. It has practical relevance for banks, researchers, students, policy/oversight institutions and governments and it is therefore a worthy read.

Social implications

The regulation of money laundering crimes is imperative, because, if left unchecked, it can undermine economies, governments and people and erode the fabric of society. However, as much as it is imperative to enact the desired rules to curtail the threat of money laundering and its predicate offences or even forestall it, regimes should be evolved with caution not to alienate the very purpose they were adopted to achieve. For instance, if the application of engendered rules generates tensions between citizens and regulatory authorities, it cannot reflect well not only on the government’s image but can also be counterproductive.

Originality/value

The paper was written using primary and secondary data sources but evaluated using empirical evidence drawn from different jurisdictions. It is therefore original because it is written and evaluated in its unique way to extend the parameters of knowledge on evolution and conceptualization of money laundering regimes.

Details

Journal of Money Laundering Control, vol. 19 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

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Article
Publication date: 1 October 2003

Stefan D. Cassella

Describes how asset forfeiture works in the USA; both civil and criminal forfeiture of property are used to recover property involved in crime that crosses national…

Abstract

Describes how asset forfeiture works in the USA; both civil and criminal forfeiture of property are used to recover property involved in crime that crosses national borders, and each has its advantages. Shows how the Civil Asset Forfeiture Reform Act 2000 (CAFRA) and the PATRIOT Act 2001 deal with transnational crime and recovery, applying them to various possible cases: the criminal proceeds are in the USA but the defendant is abroad, the money is in the USA but the crime was committed abroad, the criminal is in the USA but the property is abroad, the crime was committed in the USA but the criminal and/or the money is abroad, and the USA needs foreign government assistance to restrain property and obtain bank records. Deals with particular issues in the last case, such as bank records, attorneys’ fees, and challenges abroad to the restraint on the merits; lastly, mentions how forfeiture of terrorist assets is now covered. Concludes that the PATRIOT Act and its predecessor, CAFRA, have given US law enforcement new powers to seize and confiscate assets involved in international crime; terrorism is the immediate focus, but all criminal activity crossing frontiers can be combated effectively.

Details

Journal of Financial Crime, vol. 10 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

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Article
Publication date: 1 January 2003

Vincent Manning, Marc Spitzner, Ralph C. Martin Ralph C. Martin II and Donald J. Savery

The financial markets are still sorting through the lengthy list of compliance measures created by the Sarbanes‐Oxley legislation and other reforms being proposed by the

Abstract

The financial markets are still sorting through the lengthy list of compliance measures created by the Sarbanes‐Oxley legislation and other reforms being proposed by the SEC, NASDAQ, state attorneys general, institutional investors, and others. This preoccupation should not derail corporate efforts to comply with the mandates of the USA Patriot Act, an especially important measure that is applicable to companies defined as “financial institutions” by the Act. The Act has several purposes: to better detect and deter incidents of money laundering; prevent financing of terrorist activity; and more severely penalize those who launder money by strengthening, broadening, and clarifying federal money‐laundering laws.

Details

Journal of Investment Compliance, vol. 4 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 1 April 2003

Betty Santangelo and Margaret Jacobs

The anti‐money‐laundering provisions of the USA Patriot Act of 2001 (thePatriot Act”) continue to cause a profound transformation in the way the United States investment…

Abstract

The anti‐money‐laundering provisions of the USA Patriot Act of 2001 (thePatriot Act”) continue to cause a profound transformation in the way the United States investment industry conducts its business. Over the past year under the authority of the Patriot Act, which amended the Bank Secrecy Act (“BSA”), the United States Department of Treasury (“Treasury”) and the relevant federal regulators have issued rules requiring a broad range of compliance mechanisms, including: the establishment of anti‐money‐laundering (“AML”) programs; the filing of suspicious activity reports; the prohibition against providing financial services to foreign shell banks (i.e., banks without physical locations); the maintenance of records with respect to accounts for foreign banks; and the sharing of transactional information among financial institutions and between financial institutions and law enforcement.

Details

Journal of Investment Compliance, vol. 4 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 4 May 2012

Yoram Danziger

This article seeks to examine approaches to combating the “scourge of international terrorism” by targeting the financial resources of terrorist organizations and their supporters.

Abstract

Purpose

This article seeks to examine approaches to combating the “scourge of international terrorism” by targeting the financial resources of terrorist organizations and their supporters.

Design/methodology/approach

The article begins with the disputed issue of how to define a “terrorist”, “terrorism”, “terrorist organizations” and “acts of terrorism”. In a global financial system, differences between the definitions of those terms could have significant implications because terrorists have the means and will to operate their financing infrastructure from the least effectively regulated jurisdictions. There are many methods by which terrorists finance both their organizations and specific attacks. By concentrating on three examples of recent terrorist activity, namely the 9/11 attacks in New York, the 7/7 bombings in London, and the transfer of funds from the “Union of Good” to Hamas to fund terrorist attacks in Israel by means of a certain charitable association, the article illustrates the problems facing legal regimes seeking to limit terrorist funding.

Findings

The article notes a broad convergence in the methods of those jurisdictions when combating the financing of terrorism.

Originality/value

The paper provides a discussion of financial resources of terrorism from a legal professional in an area where terrorism is a real danger.

Details

Journal of Money Laundering Control, vol. 15 no. 2
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 1 January 2002

TODD STERN, SATISH M. KINI and STEPHEN R. HEIFETZ

An exhaustive analysis of the current state of play of both the old and new law and the regulations promulgated thereunder. A one‐stop analysis of the state of the

Abstract

An exhaustive analysis of the current state of play of both the old and new law and the regulations promulgated thereunder. A one‐stop analysis of the state of the requirements under the USA Patriot Act and particularly how it affects broker‐dealers.

Details

Journal of Investment Compliance, vol. 2 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 23 November 2010

Betty Santangelo and Amber Stokes

The purpose of this paper is to describe guidance (“the Guidance”) issued by the Financial Crimes Enforcement Network (“FinCEN”), the Federal Banking Regulators and the

Abstract

Purpose

The purpose of this paper is to describe guidance (“the Guidance”) issued by the Financial Crimes Enforcement Network (“FinCEN”), the Federal Banking Regulators and the Securities and Exchange Commission on obtaining beneficial ownership information for certain accounts and customer relationships.

Design/methodology/approach

The paper summarizes the principal content of the Guidance, including the importance of customer due diligence (CDD) policies as the cornerstone of a Bank Secrecy Act/Anti‐Money‐Laundering program, the need for a CDD program to identify and verify the beneficial owners of an account, steps that should be included in CDD procedures to protect against heightened risks related to the beneficial owners of an account, enhanced due diligence that is appropriate for accounts that pose heightened risk, the suggestion in the Guidance to implement CDD policies and procedures on an enterprise‐wide basis, and requirements for private bank account and correspondent bank account due diligence programs.

Findings

The Guidance appears to expand certain concepts previously applied to banks by the Federal Banking Regulators to other financial institutions, including broker‐dealers, futures commission merchants, mutual funds, insurance companies, and money services businesses. It also appears to expand concepts set forth in Rule 312 of the PATRIOT Act beyond private banking and correspondent banking.

Originality/value

The paper provides expert guidance from experienced financial services lawyers.

Details

Journal of Investment Compliance, vol. 11 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

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