Impact of the USA PATRIOT Act on Records Management, The

Information Management Journal, May/Jun 2005 by Martins, Cristine S, Martins, Sophia J

Section 314 - Financial Institutions

The banking industry is greatly affected by PATRIOT Act provisions relating to stricter anti-money laundering regulations and reporting duties. In September 2002, the U.S. Treasury Department issued new rules effectively implementing the act's new requirements. Among them were provisions for federal law enforcement agencies investigating terrorist or money-laundering activity to submit an information request to the Treasury Department. In turn, Treasury can solicit information from financial institutions. The investigating agency needs only "credible evidence" of terrorist or money laundering activity.

The financial institution that receives an information request from the Treasury Department has an obligation to search its records and respond. Under the final regulations, the search encompasses the following for each named suspect:

* any current account maintained

* any account maintained during the preceding year

* any transaction conducted on the suspect's behalf

* any funds transmittal that the financial institution records as required under law or that it records and maintains electronically in which the suspect was either transmitter or recipient during the preceding six months

In addition, the regulations require that each financial institution maintains adequate procedures to preserve confidentiality. Where adequate procedures to protect, preserve, and ultimately produce the information are expected, records management comes into play. Records managers in the banking sector are very familiar with the multitude of recordkeeping requirements already placed on them by several federal agencies and, as a result, most financial institutions already have well-developed records management policies and systems. However, since the PATRIOT Act was enacted, the requirements have been further tightened, and all financial institutions should already have reviewed their policies and procedures to ensure compliance with the Treasury Department's new rules.

The PATRIOT Act also specifies, in Section 314(b), that financial institutions may share information with one another for the purpose of identifying terrorism or money laundering suspects. According to Carl A. Fornaris and Alan B. Horn's GT Alert article, "New USA PATRIOT Act Regulations that Apply to Banks, Broker Dealers, and Other Financial Institutions," information sharing is allowable provided that

* the financial institution submits a notice to the Treasury Department, effective for a one-year period, as prescribed by the new regulations

* before sharing information, the financial institution takes "reasonable steps" to verify that the other financial institution with which it intends to share information has submitted the same notice to the Treasury Department

* the financial institution maintains the shared information as confidential

* the financial institution submits a new notice for information after the anniversary of the filing of the initial notice

If they have followed the rules on filing notice of information sharing and maintained the shared information as confidential, both financial institutions are protected from liability for sharing information or for failing to notify the entities about whom information was shared.