Waterbury-based Webster Bank, whose Stamford branch is shown above, is among the banks complying with the regulations of the USA Patriot Act.
Almost two months since Article 314(a) of the USA Patriot Act was reinstated, banks in Connecticut are handling their obligation despite a few setbacks and the extra burden placed on workers.
The USA Patriot Act, in which “Patriot” stands for Providing Appropriate Tools Required to Intercept and Obstruct Terrorism, was created in response to the terrorist attacks on Sept. 11, 2001, and will eventually involve regulations and procedures for a large of number of industries.
Basically, Section 314 (a) of the act allows the Financial Crimes Enforcement Network, or FinCEN, to act as a conduit between governmental agencies and financial institutions. Agencies such as Immigration and Naturalization Services and the Federal Bureau of Investigation can request investigations through FinCEN, which then channels the requests to banks and other financial institutions.
The requests deal with significant investigations, most of which are terrorist-related, and banks are asked to search through their records to see if the individuals on FinCEN’s list have done business with their bank in the last year.
Each bank has a point of contact that receives the requests from FinCEN in the form of a biweekly e-mail. The bank then searches its records and reports any “hits” back to FinCEN. If a match is found, then the original requesting agency will contact the bank directly with a warrant, subpoena or other form of due process to obtain the information from the bank.
After a hiatus starting in November of last year, the requests started up again in February.
‘High-Maintenance’
“There’s no question it’s burdensome, but on the other hand, if it’s deemed necessary for the defense of our country it’s then our obligation to be willing and enthusiastic participants,” said Mark Macomber, chief executive officer of Litchfield Bancorp in Litchfield.
“Is it burdensome? Certainly, and it would be preferable to find another way to do this. Apparently the powers that be, in their wisdom, have decided that banks can do this as a contribution to homeland security,” said Macomber.
He noted that his bank hasn’t received too many requests, but said the sister bank, Northwest Community Bank in Winsted, has received quite a few.
“Searching through records is more of a manual process in a bank like ours and we don’t have a lot of staff, but Citicorp has to pay someone to do it, too,” said Macomber, added that “any time taken out of one individual’s day is burdensome to the company.
“This isn’t just a legal obligation, it’s a moral commitment to make sure we follow up on these requests. I’ve talked to various people in the state and it seems that the requests vary from bank to bank, but we’re all doing the job we’re supposed to be doing on these things.”
In the beginning, Macomber said, FinCEN dropped a large number of requests on banks, and it was “like a rat going through a snake.” He added, “I felt that if it was going to be like that every day it would be absolutely unmanageable, but the ways things are going now it seems to be manageable.”
Charles Bassos, president and chief executive officer of Fairfield County Savings Bank in Norwalk, said his bank is complying with the USA Patriot Act.
“I think [FinCEN] has been somewhat inconsistent in their approach,” said Bassos, remarking that aside from the usual batch of names every two weeks, he often receives “high priority” lists that come sporadically and must be completed more rapidly.
“We can get any number of these things on any given day,” he said.
Bassos said at Fairfield County Savings, he acts as the point of contact and the compliance personnel handle the requests.
“We adapted it into our workload,” said Bassos, noting that his bank has handled roughly 25 requests. “They’re looking to see if we’ve had any kind of business with these people. So far the names have come from all over the country, but we haven’t had a hit yet.”
Bassos referred to it as a “pretty simple system,” but remarked, “It seems to me that there are better ways to get at the question than this.”
He added, “It’s the law, so we have to comply. It’s just a ton of paper coming in, and it’s coming in sporadically.”
On one particularly bad day, Bassos said, he received four requests that amounted to roughly 15 different searches.
“Basically we have to search through all of our accounts and loans, and run each name separately. Sometimes it isn’t easy with Arabic names, and it isn’t always clear which is the first name or last name,” said Bassos.
John Byrne, senior counsel for the American Bankers Association in New York, said the ABA received calls from around the country with numerous questions, complaints and concerns when the system was originally put into place last year.
“It’s not simple to drop everything and look for this information,” said Byrne, explaining that banks must research one year for accounts and six months for transactions. “The banks aren’t just searching through electronically held information; they’re manually searching too.”
Initially, there were many problems with points of contact. FinCEN sometimes had the wrong contact, or the contact changed positions, and some banks simply didn’t have them. The U.S. Department of the Treasury quickly put a moratorium on the system last November in order to iron out the kinks.
The initial response was the posting of a “Frequently Asked Questions” page on FinCEN’s website. The page was quickly taken down for fear that it would act as a “roadmap to criminals,” according to Byrne.
Then in February of this year, the lists started coming out again. FinCEN has since been working to streamline the process, releasing new information on a relatively regular basis to keep participants updated.
“When they released the second round in February, banks were having some of the same problems as before,” said Byrne.
Notably, the lists were only issued as Microsoft Word documents that weren’t always translatable to every institution. Also, many smaller banks rely on outside vendors to handle their databases, and under Section 314(a) the lists are considered confidential and banks were prohibited to give copies to their vendors.
Now it is possible to present the vendor with a copy, provided the vendor signs off on it.
Another issue is that the lists are dealing with individuals from all over the country and perhaps from all over the world. Smaller banks that only do business within a particular county, city or town were becoming frustrated that they had to search for individuals that had a very narrow possibility of business with their bank.
Currently, the new lists are provided in both Microsoft Word and Microsoft Excel formats and are required to be completed every two weeks. They had previously gone through different deadlines, sometimes as short as 24 hours.
“The big picture is the question of whether all these individuals are serious priorities,” said Byrne. “The problem is that we’ll never know that. The second go-round had 109 names with 200-plus aliases. I want to know if all of those are necessary or [if you can] handle them through the regular subpoena process,” he said.
Part of the issue is that FinCEN doesn’t regulate priority. It is only the conduit through which requests are made. It is up to the individual agencies to gauge priority on their own.
However, according to the most recent statement from FinCEN, issued on March 21, the group addressed that very issue: “Be assured that FinCEN is carefully vetting all requests from law enforcement through senior levels in the requesting agencies. In turn, law enforcement is verifying that all requests being forwarded to financial institutions represent only the most significant investigations, primarily terrorist-related, and that the corresponding need for the requested information is critical.”
“The bottom line to the community banker is that he or she has the same obligations as the big guys. They also have the dual challenge of many of their systems being outsourced and the potential that they have to do some things manually,” said Byrne.
Some searches ask banks to look up records up to nine years ago. The problem is that many banks don’t keep records that long, some banks haven’t been in existence that long and it’s outside of the scope of what the act requires.
However, according to the latest statement from FinCEN, that problem also has been addressed: “If your institution is unable to conduct this expanded search electronically, the expanded search is not required at this time. However, law enforcement may issue a subpoena for this information at a later date.”
Therefore, banks that don’t have their information relating to those years stored electronically don’t have to search for it yet.
“Larger banks have had to dedicate even more staff to these searches, and had to either bring in extra staff or pull staff from other duties to get these done. There’s no question that it is a high-maintenance requirement,” said Byrne.
At Webster Bank, one of the largest in-state financial instutions in Connecticut, staff members in the Compliance Department are dedicated to handling the requests from FinCEN.
“At a bank of our size we have staff who handle this as part of their duties,” said Clark Finley, spokesman for the Waterbury-based bank. He added that the bank takes the FinCEN issue very seriously and that employees don’t mind the extra work.
“I wouldn’t even say that the work is as strong as a burden. It’s an obligation and something that’s built into our daily and biweekly tasks,” said Finley.
FinCEN keeps the requests highly confidential, and it is unclear if banks receive different requests or if they all get the same list.
