Twenty years after the Patriot Act was passed, banking experts say the landmark law brings many security benefits but also potentially permanent, time-consuming responsibilities.
The Patriot Act, enacted Oct. 26, 2001, following the Sept. 11 terrorist attacks and anthrax scare, has required banks to obtain, verify and record information identifying everyone who opens an account or changes an existing account. Banks are also expected to check customer names against a number of federal wanted criminal lists. In passing the legislation, the U.S. government found those it holds responsible for 9/11 were able to open bank accounts within the United States by completing applications with fraudulent Social Security numbers.
United Bankers’ Bank President/CEO Dwight Larsen said those requirements have substantially expanded the role of the Bank Secrecy Act, causing financial institutions to dedicate much more time to security measures. One downside Larsen sees for community banks is the landmark law allowing the government to gather information from financial institutions without a subpoena. However, Larsen said the Patriot Act also benefits community banks in many ways, through enabling information-sharing on money laundering and terrorist financing between banks, criminalizing terrorist financing, strengthening and clearly defining the Customer Identification Program, and increasing the civil and criminal penalties for money laundering.
The Patriot Act has also faced numerous legal challenges and much criticism for its authorization of indefinite detention without trial for immigrants deemed as threats to national security. Though the Patriot Act contained sunset provisions beginning at the end of 2005, extensions have since been passed, keeping most of the law intact. President Barack Obama signed the PATRIOT Sunset Extensions Act of 2011, which extended several provisions, including the “roving wiretap power” allowing federal authorities to listen in on conversations of foreign suspects even when they change phones or locations. Another granted the government access to the personal records of terrorism suspects, and the third allowed authorities to investigate foreigners with no known affiliations with terrorist groups.
Darlys Hulme, president of Traer, Iowa-based Farmers Savings Bank & Trust, said her $206 million bank adopted those more stringent requirements without adding staff. The responsibility was especially felt at smaller financial institutions, where employees were less likely than larger banks to have previous related experience. To Hulme, loosening the standards for smaller banks to accommodate those challenges, however, could incentivize terrorists to use smaller banks to commit illegal acts.
Julie Copeland, a partner with the global advisory firm StoneTurn, said the Patriot Act essentially “deputized” banks to help the government fight money laundering and terrorism and will likely never be repealed. She noted that banks now face even more pressure to prevent illicit activities than when the bill was passed, after a 2018 addition to the Bank Secrecy Act required financial institutions to identify and verify the identity of any person who owns 25 percent or more of a legal entity, and the person who controls the legal entity.
Though Copeland said the United States is likely safer because of the Patriot Act, she said security is a constantly evolving issue and consistently causes new laws. A bipartisan bill introduced earlier this month, the Establishing New Authorities for Business Laundering and Enabling Risks to Security Act, is intended to close loopholes for those seeking to launder money into the United States.
“All of these laws have ripple effects,” Copeland noted.