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Last October, when Congress passed the Patriot Act, banks and financial institutions suddenly found themselves drafted in the country’s war on terrorism. But though sweeping in scope, the law was vague on how its requirements should be met. Congress gave the U.S. Department of the Treasury the task of filling in the blanks — and a grueling series of deadlines for the job. Skeptics wondered whether the agency could get everything done on time. However, in-house attorneys at financial institutions report that so far, Treasury appears to be holding its own. At 342 pages, the Patriot Act is a kitchen-sink law that aims to protect America on a wide variety of fronts. One key goal is to prevent future terrorists from funding their operations through the U.S. financial system [see " On the Home Front"]. Over the past few months, Treasury has issued various rules spelling out, among other things: � when and how securities dealers must report suspicious transactions to the government; � what procedures must be instituted by issuers of travelers’ checks and other so-called money services businesses to prevent money laundering; and � what steps credit card issuers should take to stop terrorists from using their services. IT’S COMING, IT’S COMING … In order to cope with the insistent deadlines of the act, however, Treasury officials have occasionally bought time by issuing proposed or interim rules, asking for public comment, and then delaying the due date for adopting final regulations. Attorneys at financial institutions say that while this is unusual, they understand the pressures Treasury faces. In-housers point to how the department recently handled a congressional requirement that American banks learn more about the identities of foreign customers who transfer funds through the U.S. financial system. The department issued draft regulations in May, and gave industry 30 days to comment. Bankers criticized the proposals as onerous and ineffectual. In late July, just four days before the act required final regulations to be adopted, Treasury officials took industry’s concerns to heart. Agreeing that bankers’ criticisms were “substantial and important,” the department decided to issue interim rules, and extended the deadline for adopting final regs by three months. I HEAR WHAT YOU’RE SAYING While the delays are frustrating, lawyers at banks and other financial institutions say that they’re grateful that their opinions seem to matter to government officials. John Byrne, senior counsel for the American Bankers Association, says, “It doesn’t mean that we like everything, or that all of the final rules will be easily implemented. But, in good faith, [Treasury officials] are trying to find out what we’re thinking.” Still, industry representatives have their beefs with the department. Byrne, for one, doesn’t like the way Treasury is handling a provision in the act that’s designed to make it easier for banks to share customer information with each other and the government. In his view, department officials are trying to create a one-way street in which the government can easily obtain information, but banks have to jump through numerous hurdles. At press time Treasury had not issued final rules on information-sharing. However, most observers admit that even if the department writes the most comprehensive regulations possible, and industry implements them flawlessly, future terrorists may still exploit the U.S. financial system. “Is any system foolproof?” wonders Stephen Shine, senior counsel and head of compliance at Prudential Securities Inc. “In all candor, I don’t think it is. [The ability] to get bad money into the system is limited only by the imaginations of some very, very smart people with an awful lot of money at stake.”

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