When President Bush signed the Intelligence Reform and Terrorism Prevention Act of 2004 into law, the idea behind the legislation was to tie all American intelligence agencies together as a single, unified enterprise. A major component of that initiative is the sharing of information - including information on financial transactions.
The effort will impact the banking industry, raising concerns about additional technology investments and the invasion of consumers' privacy, according to Ariana-Michele Moore, senior analyst, Celent Communications (Boston). "Section 6302 of the [Terrorism Prevention] Act says that somewhere down the road we will need to share the information with the Treasury Department," she says.
One type of transaction that the government will monitor is cross-border transfers, Moore relates. "All the wire transfers will be plopped into a central database," she says. The transfers will be examined to identify potential terrorist activity, Moore explains.
Though the Treasury Department says it does not want the industry to incur additional costs, financial institutions are concerned about the cost of investing in new technologies to establish and maintain databases for customer transactions, according to Moore. "I have to believe that the financial services industry will lobby [against] investing more on technology," she says.
But it still is too early to know how financial institutions will be affected and what systems will have to be in place in order for the government to monitor suspicious activity, Moore notes. "The Treasury will have time to survey what banks will need to do during the next three years," she says.
As for consumer privacy concerns, Moore says the issue is not new. "The USA PATRIOT Act has all the consumer rights and privacy [groups] up in arms about how it goes against all our rules of privacy, but the government is saying we are at war," explains Moore. The Terrorism Prevention Act will "embellish the existing debates," she says.
"The Bank Secrecy Act (BSA) says that financial services institutions need to report wire transfers over $3,000, so there is some reporting that is going on right now," says Moore. "The problem with terrorist financing is that we need to flag the financial institutions that have transfers under the $3,000 limit. But average consumers are probably wiring money to their families."
Enforcement Silver Lining
Not all financial services organizations are worried about the implications of the Terrorism Prevention Act, however. Entities such as the Financial Crimes Enforcement Network (FinCEN; Washington, D.C.) will benefit from the close monitoring of financial crimes and terrorist behavior.
"FinCEN is pleased with the funding and authority it was granted by the Act and is now working to fulfill those provisions," says Anne Marie Kelly, a FinCEN spokeswoman. The Act provides FinCEN with the authorization to spend $35 million for new technologies for detection and prevention of financial crimes and terrorism, and it gives FinCEN the authority to collect reports regarding certain cross-border electronic transmittals of funds, according to Kelly.