Can you track terrorists by following their money trail? Title 3 of the Patriot Act went into effect a year ago. Since then, banks have been required to ask their customers more questions about who they are, what they do and how much money they expect to deposit each month.

Now the Department of Homeland Security is asking them to go a step farther.

“Terrorist financing is very difficult to pick up from a banker’s perspective. Remember, they’re bankers, they’re there to make money. They’re not law enforcement officials,” says John Byrne, American Bankers Association.

And yet, tracking terrorists and money laundering has become an important part of what banks do every day.

“If you give us the name of someone or the name of a charity to look at and report, if there is criminal activity we can see. We can do that. If you don’t give us any leads, terrorist financing becomes virtually impossible for banks to discern,” Byrne says.

Banks are now required to check their customers against a list of possible terrorists.

“That’s done automatically now through the credit bureau seaches, through the check systems searches we use and our core processing group that checks the list very month automatically for us,” says Marc Pershan, New Century Bank.

But all that automation doesn’t come cheap.

“It’s the most expensive regulation and we estimate it runs the entire industry close to several billion dollars,” Byrne says.

“This does cost banks money. And anything that costs banks money is going to cost consumers money because banks have to pass along these costs to consumers,” says Jodi Schneider, Congressional Quarterly.

Ultimately, it’s the consumer and small business owners who pay the price of complying with the Patriot Act, usually through higher fees. But there have been some unintended benefits.

That’s the good news however…

“There’s no direct evidence that these rules or regulations help in terrorist financing detection. Because that’s so difficult. Are there some examples where there’s been matches and investigations? Absolutely. Whether all of that effort is worth what is going on in the industry, I think the jury is still out,” Byrne says.

Legislation has been proposed that would make these Patriot Act banking regulations permanent.. But in the meantime, of the 5,000 customers are New Century Bank, not a single one has matched the list of terrorists.


American Bankers Association

New Century Bank (312) 944-5400

Published: Jun 10, 2004