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Managing America: War on Terror

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Week Ending July 11, 2008

H.R.4049 To amend section 5318 of title 31, United States Code, to eliminate regulatory burdens imposed on insured depository institutions and money services businesses and enhance the availability of transaction accounts at depository institutions for such business, and for other purposes.

In the fury after 911, the PATRIOT Act imposed regulations on banks aiming to identify large money transfers and similar transactions that might have been related to money-laundering and terrorist activities. Over time, banks found the regulations burdensome and many banks refused to comply or closed money services businesses’ accounts to avoid the burden, risk and potential liability and to avoid sanction for not complying.

Over time it became clear that the money service businesses are subject to federal anti-money laundering laws and reporting requirements, themselves. The bill establishes that a “federally insured depository institution shall have no obligation…to conduct any review of the compliance by a money transmitting business for which the depository institution maintains an account, or any agent of such business if the institution has on file a certification submitted by the money transmitting business that meets the requirements, or, in the case of an agent of a money transmitting business, the certification required; and a certification from the business that the named agent is authorized to act as the principal's agent.”

A money-transmitting business or an agent of any such business making a material misrepresentation in a certification … shall be subject to the civil penalties without regard to whether such violation was willful.

Sponsor:  Rep. Carolyn Maloney (D-NY-14^th)

Vote:  Passed House by voice vote July 22, 2008

Cost to the taxpayers: "CBO estimates that enacting the
bill would have no significant impact on spending subject to appropriation. CBO estimates that enacting this bill would have a negligible effect on net revenues from civil or criminal penalties over the 2008-2018 period because of the relatively small size and number of assessments likely to be affected. Collections of criminal penalties are deposited in the Crime Victims Fund and later spent without further appropriation. CBO estimates that any additional direct spending that would result from such penalties also would be negligible."

Earmark Certification:  

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MORE INFORMATION

The Congress finds as follows:

(1) Check cashers, money transmitters, and other legally authorized and regulated money transmitting businesses (also designated as money services businesses) provide a wide range of necessary financial services and products to customers from all walks of life, including the under-banked and urban communities.

(2) Those services include domestic and international funds transfers, check cashing, money order and traveler's check sales, and electronic bill payments.

(3) Regulatory guidance issued by, and expectations of, the Federal banking agencies and the Secretary of the Treasury urge insured depository institutions to conduct reviews of money services businesses' anti-money laundering compliance programs, placing such depository institutions in the position of quasi-regulators.

(4) Consequently, many insured depository institutions have refused or closed money services businesses' accounts in order either not to incur the burden, risk or potential liability for undertaking a de facto regulatory function, or else to avoid supervisory sanctions for not exercising such oversight.

(5) This trend endangers the existence of legitimate, regulated money services businesses industry and the ability of such businesses to deliver financial services and products.

(6) Loss of depository institution accounts by money services businesses threatens to drive the customer transactions of such businesses underground through unregulated channels, including bulk cash smuggling or other means.

(7) It is critical to the interests of national security that transparency of money services business transactions be maintained by ensuring such businesses have a reasonable process to demonstrate to insured depository institutions the compliance by such businesses with anti-money laundering and counter-terrorism financing obligations.

(8) Money services businesses are subject to Federal money laundering and terrorist financing control programs and reporting requirements as enforced by State and Federal regulators, including the Secretary of the Treasury, which are authorized to conduct compliance oversight and to impose sanctions through licensing, registration or other powers.

(9) These State and Federal regulators have committed to coordinate their supervision and enforcement of such money services businesses obligations.

(10) Insured depository institutions and Federal banking regulators should be able to rely on a regulatory process for conducting oversight of money services businesses' compliance with subchapter II of chapter 53 of title 31, United States Code, as well as on a process of self-certification by legitimate money services businesses that attest to such compliance.

(11) Accordingly, to eliminate regulatory burden imposed on insured depository institutions and promote access by money services businesses to the banking system and to give full recognition to Federal and State agency authority to supervise and enforce money services businesses' compliance with anti-money laundering and counter-terrorism financing obligations and their implementing regulations, it is appropriate and necessary to provide for the self-certification process established pursuant to this Act.

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