Posted on: Sunday, February 29, 2004

Patriot Act places burden on business

By Toni Locy
USA Today

For New York businessman Joseph Coleman, the USA Patriot Act has turned his 11 check-cashing stores in Harlem and the Bronx into evidence collectors for federal law enforcement.

Under the act, Coleman must keep track of customers whose transactions seem suspicious — for whatever reason — in case the FBI, IRS or some other U.S. law-enforcement agency is interested.

"Now, business people have to be cops," says Coleman, 54, president of RiteCheck Financial Service Centers.

The Patriot Act, passed by Congress after the Sept. 11, 2001, terrorist attacks, is better known for provisions that allow government agents more latitude in conducting surveillance in criminal and terrorism investigations. But several little-known provisions of the law amount to what business owners describe as one of the U.S. government's most significant demands on them in decades.

Timothy Lynch, associate director of the Cato Institute's Center for Constitutional Studies, says the act's financial rules have "tremendous implications" for privacy.

Under the act, financial institutions must collect information about their customers and monitor their spending habits if the customers seem "suspicious," or if their transactions reach certain amounts. If businesses don't comply, they can face criminal charges or civil penalties.

The government's definition of suspicious — what a reasonable person would consider possibly illegal — troubles business owners. Coleman says he hires local people because they know the neighborhoods' customs. "What's suspicious to one culture isn't suspicious to another."

U.S. law has long required banks to monitor transactions for suspicious spending. But the Patriot Act ratcheted up the requirements by expanding the range of financial institutions that must collect and keep information about customers.

An increasing number of businesses — from check cashers to jewelers — also are, or soon will be, required to create anti-money laundering programs to help authorities detect and prevent terrorism financing.

Coleman says his employees gather as much information as they can when a customer engages in a transaction of $2,000 or more. Such information includes the customer's name, tax identification number, Social Security number, occupation and date of birth.

It's unclear how much the act is costing businesses. But Coleman estimates that he is spending $100,000 a year to train and hire more workers. He says that includes time he spent setting up an anti-money laundering program rather than scouting for new stores and improving service.

Since 1970, banks have filed currency transaction reports on transactions of more than $10,000. Since 1996, banks, thrifts and credit unions have had to file suspicious activity reports if they believe that a customer might be involved in something illegal. SAR filings have increased since the Patriot Act was passed.

Coleman says he is being pressured for more details about his customers from the company that sells him money orders and from Western Union, which he uses for wire transfers.

"Because they've got the government on their backs, they're on my back," he says. "Everybody is running scared."

The law also allows U.S. agents to ask 29,000 financial institutions to run names of terrorism or money-laundering suspects through customer databases — without prior approval of a judge.

Agents must "certify" that they have exhausted all other means to find suspects' bank accounts before names are put on a list that the Treasury Department sends out to businesses every two weeks.

If businesses have a match, they need only say so. They are not required to provide any other information, and they are barred from telling customers that federal agents were asking about them. If agents want more, they must obtain a subpoena or warrant.

Last year, federal agents asked businesses to run 1,302 names. The searches led to 472 grand jury subpoenas, 11 search warrants and three indictments.

"It's not a fishing expedition," says William Fox, director of the Treasury Department's Financial Crimes Enforcement Network. "But I think it does help find the needle in the haystack."