What is Section 311 of the USA Patriot Act?
What is the USA Patriot Act?
The USA Patriot Act was enacted in 2001 after the 9/11 terrorist attacks. The full title of the USA Patriot is “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001”. The Department of Justice drafted a document, to which Congress made sizable modifications and additions. The purpose of the Act is to enable law enforcement officials to track and punish those responsible for the attacks and to prevent any further similar attacks. Federal officials have the power to trace and intercept communications from terrorists for law enforcement and foreign intelligence purposes.
Anti-money laundering laws and regulations are reinforced under the USA Patriot Act in order to deny terrorists the resources necessary for future attacks. Along with tightening the immigration laws to close borders to foreign terrorists, it also assures to put the rest in exile.
The USA Patriot Act also helped mend and strengthen the BSA.
Under the Patriot Act compliance, a number of AML obligations were imposed:
- AML compliance programs
- customer identification programs
- monitoring, detecting, and filing reports of suspicious activity
- due diligence on private banking accounts and foreign correspondent accounts, including prohibitions on transactions with foreign shell banks
- mandatory information-sharing
- compliance measures imposed to address particular AML concerns
What is Money Laundering?
According to the law and Patriot Act, money laundering is the flow of cash or other valuables derived from a criminal offence and the same which can facilitate further crime. The authorities combat money laundering through numerous regulations, international cooperation, criminal sanctions, with efforts in each area.
Section 314 of the USA Patriot Act
The Act was introduced on 26th October 2001 and was later appended into the law by President George Bush. The USA Patriot Act’s main purpose is to curb terrorism and prevent any related activities both in the US and around the globe. It aimed at enhancing security and enforcing the law around the world through necessary investigatory tools.
The USA Patriot Act is divided into various sections, which may affect financial institutions directly or indirectly. Some of them are 311, 312, 313, 314(a)(b), 319(b). Section 314 of the USA Patriot Act, including both 314(a) and 314(b) is dedicated to preventing money laundering, which implies both individuals and financial institutions. The Bank Secrecy Act (BSA) includes various institutions as financial, some of which include insured banks, private bankers, credit unions, and commercial banks.
Section 314 of the USA Patriot Act with subsection 314(a), whose objective is to detect and prevent suspicious terrorist activities. It is meant to encourage cooperation amongst law enforcement bodies, regulators, and financial organizations. The Financial Crimes Enforcement Network (FinCEN) which comes under the US Department of the Treasury encompasses the provision of Section 314(a). It achieves its objectives through encouraging the sharing of information between above mentioned financial institutions and others which may include inter-government bodies such as FATF and agencies that enforce the law.
The Secretary of the Treasury formulates and adopts the regulation which governs the sharing of information between the two parties mentioned above. This information which is shared covers individuals, entities, or organizations under observation for terrorist acts and money laundering. The information is used further by law enforcement agencies to gather further evidence, which is useful in prosecution. Section 314 and its extension, 314(a), have both enabled the nation and the rest of the world to achieve its main objective of deterring crime and more.
FinCEN regulations in Section 314(a) enables the local, federal, and state law enforcement agencies along with the foreign agencies to access the shared information. An estimate of more than 37,000 points made by law enforcement agencies to gain contact through FinCEN. There is additional access to records of over 16,000 financial institutions.
On the other hand, Section 314 of the USA Patriot Act also includes Section 314(b) another subsection of 314, aimed at encouraging the sharing of information between financial entities voluntarily. Subsection 314(b) involves the sharing of information between similar entities, such as financial institutions while Section 314(a), involves common access and cooperation between the financial establishments and agencies that enforce the law.
Although sharing of information is mandatory in Section 314(a) as stipulated in the federal laws. In contrast, Section 314(b) is not mandatory or compulsory but rather voluntary. Despite that, the sharing of information under Section 314(b) is highly encouraged and recommended by FinCEN.
The purpose of sharing information is to increase the capacity of identification of any suspected money laundering activities in order to report it further for investigation. The section was provided by Congress for extra safety and to eliminate the risks associated with any liability on the consumer. It is beneficial to both customers or clients of the financial institutions because it eliminates liability from any violation of privacy or sharing any false information.
Another benefit of Section 314(b) to the financial organizations is for those who would like to share information freely with the rest. It increases the capacity of dealing with money-laundering, terrorism, and related activities to promote mutual understanding and trust among the entities. Financial institutes will share a united and strengthened level of scrutiny of suspicious money wiring, transactions, and accounts.
Anti-Money Laundering Programs
According to Congress, each and every financial institution should have the power to tailor an AML program to its own structure and address particular money-laundering risks or vulnerabilities. The Department of the Treasury prescribes regulations that consider the extent to which the requirements that implement a compliance program are comparable with the size, location, and activities of the financial institutions.
All Financial Institutions must develop and implement anti-money laundering programs which should include the following:
(1) development of internal policies, procedures, and controls
(2) designation of a compliance officer
(3) ongoing training function
(4) independent audit function to test the programs.
The USA Patriot Act requirements include that financial Institutions should design their own patriot act compliance programs to implement procedures and policies that can reasonably be expected to detect and report activity associated with patriot act money laundering. Money-laundering detection procedures are important in order to avoid possible criminal liability. In addition, an anti-money laundering program will help avoid the damage to a financial institution’s reputation that would occur if they were found to be laundering money that belonged to terrorists.
For investment companies that are structured in this manner, the investment company must rely on third parties to effectuate an anti-money laundering program that would know more about reconciliation, an important financial reporting process of every institution or other money laundering policies.
Under the patriot act compliance, the anti-money laundering program must also include a designated compliance officer who is a money laundering reporting officer (MLRO) , an ongoing training program, and an independent audit function. Informal guidance presented at the ICI Conference suggests that an investment company’s compliance officer serves as the AML compliance officer and has a managerial position that allows them to effectively oversee the anti-money laundering program. To ensure that employees are fully trained to recognize suspicious account activity and know how to report such activity to a supervisor, the training program has been put in place.
Leave a Comment
Money Laundering via Cryptocurrencies: All You Need to Know
Technological advancements have given criminals faster and safer options to wash their ill-gotten money. There is no doubt that cryptocurrencies are very useful technology innovation that helps individuals and institutions access financial products a...
CNA 938 radio interviews Tookitaki Co-founder Jeeta Badopadhyay
Tookitaki Co-founder and COO Jeeta Bandopadhyay was named among the Singapore 100 Women in Tech (SG100WIT) List in September 2020. A collaboration between the Singapore Computer Society (SCS), IMDA, SG Women in Tech and Mediacorp, the inaugural SG100...
Need for New Customer Risk Rating Models: Not All Customers Are Created Equal
Being estimated at between US$800 billion to US$2 trillion every year, money laundering is a serious problem for the global economy. While regulators and financial institutions are working hard to prevent and reduce the crime, launderers are becoming...
Is AML Compliance Heading for a New Normal in the Age of Digital Payments?
Increased digitization has influenced various businesses and brought in a paradigm shift in the way they create business models and approach growth opportunities. Moving away from conventional transaction modes such as cash and checks, banks and FIs ...
Excel to AI: How Reconciliation Tools Evolve for Better
In the world of finance, reconciliation is the process of comparing two related sets of records or two accounts at the end of a specific accounting period to find out if account balances are matching in both records. Periodic reconciliation of accoun...
Lessons Not Well Learned: 2020 AML Fines Cross 2019 Total
If research is to be believed, institutions across the globe have not done enough in the anti-money laundering (AML) compliance area. Data from consultancy Duff & Phelps revealed that AML fines in the first six months of 2020 reached US$706 milli...
Exploring AML Risks in COVID-Era and the Ways to Address Them
The world continues to battle the COVID-19 pandemic and the crisis it brought in is unprecedented in the history of humankind. While there are a number of pandemic-related factors contributing to the expected crisis with financial services, financial...
AML Amid COVID-19: Watch out for These FBI-listed Fraud Schemes
There has been a rise in the number of cybercrimes and fraud schemes across the globe ever since the proliferation of the COVID-19 pandemic. Criminals, in general, are taking advantage of people’s scare, helplessness, and the need for immediate fin...
OCC Spring Risk Perspective: 5 Takeaways on Compliance Risk
Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of the Comptroller of the Currency (OCC) published i...
How Criminals Used COVID-19 Sales Pitch to Defraud, Launder Money
As the world is working hard to contain the spread of the COVID-19, criminals continue to take advantage of the pandemic. They are devising sophisticated methods to defraud people and launder the criminal proceeds using the financial system. The late...
5 Top Myths and Facts about AI Implementation in AML Programs
We are more confirmed about the power of Artificial Intelligence (AI) to transform lives and businesses now. There are countless possible applications of AI and machine learning at present, and we see and hear exciting ways how these modern technolog...
Typology Repository Management: Solving AML Problems Via Collective Intelligence and Continuous Learning
Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of the Comptroller of the Currency (OCC) published i...
Money Laundering Amid COVID-19: What Regulators Across Globe Say
As the world continues to fight against the COVID-19 pandemic, there are reports that criminals are taking advantage of the difficult situation. They are seizing the moment to proliferate their criminal activities, earn undue profits and transfer of ...
How will Art Cease to Be a Preferred Money Laundering Vehicle?
Money laundering via high-end art and antiquities is not new yet it is difficult to detect. Art-related money laundering amounts to about US$3 billion per year, according to this blog, quoting the United Nations Office on Drugs and Crime. Criminals o...
Beware! Money Mules in Demand amid COVID-19. Here’s an Effective Cure
If reports are to be believed, cybercrooks are taking advantage of the COVID-19 situation. They are targeting people who were laid off or working from home due to the pandemic to work for them as money mules. For those who are new to the term, money ...
Roundtable Rewind: Embracing Next-gen Tech & Collaboration Key to Sustainability
As a regtech player with a vision to enable sustainable compliance programs in financial institutions, Tookitaki organized a first-of-its-kind industry roundtable in Charlotte, NC, USA to discuss opportunities to innovate current AML programs and mee...
Tookitaki Appoints Industry Veteran Joe Friscia as Advisor
Tookitaki Holding Pte. Ltd. appointed industry veteran Joe Friscia, former President of NICE Actimize and BAE Systems as Advisor to the Company’s Advisory Board. Joe brings over 25 years’ extensive experience in the financial crime and enterpris...
Tookitaki Raises Another US$11.7 million in Series A; Closes Round at US$19.2 million
– by Abhishek Chatterjee, Founder & CEO The Tookitaki team and I are excited to announce that we have raised an additional US$11.7 million in Series A funding, taking the total investment in the round to US$19.2 million. The current round w...
30 Years of FATF: Notable Facts About Global AML Watchdog
The Financial Action Task Force (FATF), the intergovernmental body formed in 1989 to combating money laundering, is celebrating its 30th anniversary this year. Since its inception, the global agency played a key role in identifying and preventing the...
Tookitaki Joins Aite Financial Crime Forum as Sponsor
Technological advances have fundamentally changed the operational landscape of financial institutions. However, there are also new risks emerging in forms of sophisticated financial frauds and complex money laundering patterns. These risks can signif...
Will Machine Learning Replace Compliance Professionals?
The impact of modern technologies such as artificial intelligence (AI) and machine learning on job security has been a widely discussed topic today. Of course, AI has advanced very quickly in the last few years and evolved to outperform humans in a n...
6 Most Prevalent Cyber-Laundering Methods in APAC
Despite being a medium to exchange information in real-time and with scale, the Internet is being misused in several ways. Among the slew of financial crimes facilitated by the Internet, money laundering draws importance due to its gigantic size and ...
ABA Regulatory Compliance Conference: 10 Sessions You Can’t Miss
The 2019 edition of the American Bankers Association (ABA) Regulatory Compliance Conference is a few more days away. Organized by the Washington, D.C.-based trade association, the conference is touted as the “one-stop shop to discuss today’s—an...
Tookitaki AMLS Wins SBR Technology Excellence Award 2019
Tookitaki’s Anti-Money Laundering Suite (AMLS), an end-to-end machine learning-powered transaction monitoring and names screening solution, has bagged the inaugural Singapore Business Review Technology Excellence Award 2019 in the category R...
Watchdogs Grow Optimistic about AI Prospects at Banks
Proper regulation of banking operations is important as any failure in the banking system would affect the wider economy. Therefore, banking is one of the most regulated industries across the globe. Financial regulators ensure that services to the cu...
Pitfall of Black Box AI at Banks: Explaining Your Models to Regulators
The use cases of artificial intelligence (AI) and machine learning in front-office, middle-office and back-office activities at banks are growing slowly but steadily. The major areas of AI play include customer service (virtual assistants, chatbots, ...
AI for Regulatory Compliance at Banks: 4 Assessments Before You Okay the Solution Proposal
Banking is one of the industries where artificial intelligence and machine learning find their applications at a rapid pace. Regulatory compliance within banking is an area which has become a costly and inefficient affair due to complex and never-sta...
We Believe in Innovation, the Key to Survival and Growth
“Innovation distinguishes between a leader and a follower.” -Steve Jobs What comes on the top of your screen when you google the meaning of the word innovation is – the introduction of something new and relevant such as a new idea, method o...
Compliance Functions in Need of a Technological Overhaul. Can Machine Learning be the Game-Changer?
McKinsey in its latest compliance benchmarking survey found that compliance function at financial institutions has reached “an inflection point” and current compliance standards are in an “inchoate state”. The firm has suggested five critical...
Tookitaki Raises US$7.5 mn Series A from Global VCs to Transform Regulatory Compliance
Tookitaki, a regulatory technology company that aims to enable financial institutions to develop sustainable compliance programs, has raised US$7.5 million in Series A round. The round was co-led by London-based Illuminate Financial, an early-stage e...
From Wachovia to Danske Bank: Biggest Money Laundering Cases in Recent Times
Money laundering – the criminal activity of processing criminal proceeds to disguise their origin – is one of the gravest problems faced by the global economy, and its size is growing rapidly. It is estimated that 2- 5% of the global GDP, or US$8...
A Modern Approach to Address the Reconciliation Challenges of Financial Services
Reconciliation of transactions is deemed critical for the smooth running of every financial institution. The speed and accuracy of data reconciliation can distinguish a successful institution from its counterparts. The process is primarily used to id...
Busting a Myth: Compliance Officer’s Job is All About Risk
Regulatory compliance has become a dreadful task for banks after regulators across the globe set stricter norms in the aftermath of the 2008 financial crisis in an effort to prevent financial crimes such as money laundering. Rules have been changed t...
SocGen Goes Next-Gen with Tookitaki Reconciliation Suite
Société Générale leveraged Tookitaki’s Reconciliation Suite to automate the bank’s existing break reconciliation system. Key Challenges Addressed The bank’s finance department was unable to handle new breaks unless code is updated. Current ...
Attending ACAMS Conference in Singapore? Tookitaki Awaits You with Its Disruptive AML Solution
“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it.”- Jeff Bezos Singapore is hosting ACAMS’ 11th Annual AML & Financial Crime Conference ...
MAS’ Stress on Transaction Monitoring for Effective AML/CFT Compliance and Machine Learning is the Answer
Singapore is known for its top-notch AML/CFT regime created through up-to-date legislation, stringent policy and uncompromising supervision to safeguard against the abuse of the city state’s financial system for criminal activities. The country’s...
Mifid II and the Pressing Need for a New Reconciliation Approach
The financial services industry in the EU has been confused with the introduction of a revamped version of the Markets in Financial Instruments Directive (Mifid II). The ambitious regulatory reforms that took almost seven years to be materialized wer...
Is Automated Reconciliation Next to Impossible in Today’s Complex Financial World?
The 2008 global financial crisis and fairly new regulatory requirements like Basel III asked financial institutions (FIs) to cut operating costs and adopt a lean operations structure, pushing FIs to rethink on current reconciliation measures. Most of...
Modern Tech to Reshape US AML Compliance with Regulators’ Recent Handshake
George Bernard Shaw once said: “Those who cannot change their minds cannot change anything.” The past week has seen a significant change of mind from financial regulators in the US in their ardent attempt to combat and prevent financial crimes, e...
Skills Development: We Have Talents and We Strive to Multiply Them
“Mastery lies on an infinite continuum, and as a result, we will never reach the end. We can, however, see to it that we are as far along that continuum as our circumstance allows.” ― Chris Matakas Having continuous learning as one of its core...
It’s Our Fourth Founding Day; Taking a Pause to Cherish Our Simple but Awesome Journey
Today, as we step into our 4th year of foundation, I feel proud and honored to be leading Tookitaki that has been successful in creating added value to all its stakeholders. I was never a CEO and Tookitaki is my first company. I had the passion and d...
Tookitaki Expands into the US with New Office in Charlotte
SINGAPORE, Sept. 24, 2018: Tookitaki Holding Pte Ltd, a leading regulatory technology company, is pleased to announce the official opening of its North American office in Charlotte, NC, in the United States. This new location will serve as the comp...
5 Methods That Modern Money Launderers Use To Beat Detection
Society prepares the crime, the criminal commits it. DID YOU KNOW? Every year, an estimated amount in the range of US$800 billion-US$2 trillion (2-5% of global GDP) is being laundered globally Regulators across the globe imposed US$1.7 billion in fin...
Risk Management Conference: Positive Vibes from All Corners
The Risk Management Association’s (RMA) premier annual event, the Risk Management Conference, came to an end on 6 November, and Tookitaki had the privilege to attend the event which we believe was a success in a number of ways. As a modern-era tec...
Singapore Fintech Festival: Tookitaki to showcase advanced machine learning solutions in financial services
Singapore is assured of the Fintech world’s unwavering attention next week, as the city state, is hosting this year’s Fintech Festival during 12-16 November. Touted as the world’s largest platform for the global FinTech community, the event att...
The RMA Clarion Call to Address Risks and the Tookitaki Way
Risk officers, doing your best today is good while preparing hard for tomorrow is extraordinary. Risk management at banks has become difficult due to operational and regulatory changes. The Risk Management Association’s (RMA) premier annual event, ...
Typology Repository Management: Solving AML Problems Via Collective Intelligence and Continuous Learning
Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...
MAS’ Stress on Transaction Monitoring for Effective AML/CFT Compliance and Machine Learning is the Answer
Singapore is known for its top-notch AML/CFT regime created through up-to-date legislation, stringent policy and uncompromising supervision to safeguard against the abuse of the city state’s financi...
Singapore Fintech Festival: Tookitaki to showcase advanced machine learning solutions in financial services
Singapore is assured of the Fintech world’s unwavering attention next week, as the city state, is hosting this year’s Fintech Festival during 12-16 November. Touted as the world’s largest platfo...
