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For more than seven years, Edna Gritz has owned and operated Soul Travel, a two-person travel agency in North Miami Beach, Fla. Were it not for a short extension granted by the U.S. Treasury Department on Tuesday, Gritz, whose company specializes in tour packages to Brazil, would have committed a felony when she opened her business Thursday. At the eleventh hour, the Treasury Department granted a reprieve to hundreds of thousands of small business owners, as the USA Patriot Act was set to take effect. The Patriot Act, a new set of anti-money-laundering and anti-terrorism laws passed in the wake of the 9-11 terrorist attacks, requires travel agencies, money exchangers and auto dealers, as well as more traditionally regulated companies such as banks and mutual funds, to meet a slew of requirements in order to avoid violating federal law. Late Tuesday, the Treasury Department gave many businesses covered by the USA Patriot Act “no more than six months” to comply with the act, which took effect Thursday. The types of companies granted the extension include travel agencies, pawn brokers, auto dealers, insurance companies and jewelry companies. Under the USA Patriot Act, Gritz would be required to hire a full-time compliance officer, retain outside auditors, establish an anti-money-laundering policy and have an employee training program in place to heighten awareness of money laundering. She readily admits her company would have been in violation of the USA Patriot Act were it not for the extension. Until contacted by the Daily Business Review, she didn’t even know the law was passed, much less that it was set to take effect Thursday at 12:01 a.m. “Of course we should be on alert, but to be required to pay for all of this will be very hard,” Gritz said. “Because of government regulation, airlines have cut our commissions to zero and so I think the government should pay [for the compliance programs].” Hundreds of thousands of other business owners and companies in South Florida and across the country will be guilty of the same type of offense under the new USA Patriot Act. With little opposition, Congress passed the USA Patriot Act requiring that a wide range of businesses — no matter how big or small — comply with a complex set of anti-money-laundering provisions. While attorneys contacted by the Daily Business Review said it is unlikely that the federal government will immediately prosecute under the statute, violators face criminal penalties of five years in prison and fines of up to $250,000. The law — part of President Bush’s war on terrorism — is intended to combat money-laundering techniques used to fund terrorist activities. Businesses affected include large banks, mutual fund companies, credit card issuers and brokerage houses, as well as small used-car dealers, pawnshops, boat dealers and travel agencies. Whether a business is a mom-and-pop outfit or a multinational conglomerate, those covered by the law must establish internal policies and controls, designate a compliance officer, conduct ongoing employee training and arrange for an independent audit. “This is one of the most extraordinary pieces of legislation I’ve seen,” said Carlos Loumiet, a partner at Hunton & Williams in Miami who practices in the fields of banking and corporate law. “The fact that the regulations are coming out the day before hardly gives people time to comply.” While the cost of complying will be a major problem for many business owners, few small business owners even know about the law. Indeed, of a dozen travel agencies contacted by the Daily Business Review, none had heard of the new federal requirements. “There are an enormous amount of people out there who are completely uninformed,” said Clemente L. Vazquez-Bello, a partner at Gunster & Yoakley in Miami who practices in the field of banking law. “Eighty to 90 percent of the companies have no idea the law is out there.” Even some larger businesses, which presumably have legal counsel, remain unaware, observers say. “Among the bigger businesses, it is only a small percentage that are prepared,” said John Daly of Americas Software, a Miami-based company that sells anti-money-laundering software to financial institutions. But it’s primarily the small and medium-sized business owners who will be caught off guard. “Banks, broker-dealers, large insurance companies, basically know about the new law,” said Rebekah Poston, a partner at Steel Hector & Davis in Miami. “But the small businesses don’t know.” By and large, big businesses know about the law because of efforts by law firms and other private interests to get the word out and generate compliance business related to the new law, Poston said. For example, Steel Hector sent out a mass mailing to its clients about the money-laundering provisions of the USA Patriot Act. But most small businesses don’t have a major law firm on retainer, so they’ve been on their own in finding out about the law. Loumiet criticized the federal government for failing to properly inform business owners ahead of time about the looming requirements. Congress should have allocated money to conduct public education about the new money-laundering provisions, he said. In the past, he noted, the government has funded TV and radio campaigns. But not this time. “There was no budget established to inform people,” Loumiet said. “There was no publicity.” Of course, the fact that millions of businesses will be in violation of the law on April 25 does not mean that businesses will be shut down and citizens will be arrested across Miami. “It is true that April 24th is the drop-dead deadline and it is true that many businesses will be in violation,” said Richard Serafini, a former prosecutor with the Justice Department in Washington, D.C., and currently of counsel at Broad and Cassel in Fort Lauderdale, Fla. “But there is a big difference between being in violation of the law and being prosecuted.” No attorney contacted by the Review predicted that there would be prosecutions under the law. But several foresee prosecutors using a business’s failure to establish an anti-money-laundering program as an add-on to other charges — the way police tack on failure to buckle up to other traffic violations. “Most likely, violations [of the anti-money-laundering program law] will be combined with separate substantive wrongdoing,” Serafini said. Loumiet questions whether applying the money-laundering compliance provisions to small businesses is necessary. He said that while bigger companies may need such mechanisms to spot illegal financial transactions and money movements, owners of smaller businesses generally don’t. “The smaller businesses know if money laundering is going on,” he said. However, according to Peggy Petterson, spokeswoman for the U.S House Committee on Financial Services, a primary goal of the legislation was to expand the federal government’s focus to nontraditional financial institutions. “There is a lot of money laundering going on that escapes current structures,” Petterson said. “When trying to include hawala, it is necessary to be broad. We felt like we need to cover the waterfront to get at this.”

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