FORT LAUDERDALE, Fla. – If it’s not doing so already, expect your bank to ask for loads more personal information when you open any new account, because the deadline for complying with some major provisions of the USA Patriot Act has arrived.

Passed two months after the Sept. 11, 2001, attacks, the law aims to stem money laundering and terrorist financing. The new rules, which went into effect Tuesday, require banks and other financial institutions to gather more detailed information on their clients to prove their identities and make sure they’re not on any government watch list.

Consumers and businesses can expect to dole out more private data, especially if they aren’t citizens or based in the United States.

While the Patriot Act may cause headaches for consumers, smaller community banks are having to allocate a greater portion of their budgets than larger banks to comply. Large banks like Wachovia and Bank of America already comply with many federally imposed anti-money- laundering requirements and have had extensive identifying systems in place, spokeswomen said, so their customers may not see much of a change.

But the task is estimated to cost some small banks as much as 20 percent of profits, and it is time-consuming, according to experts and local bankers, who use documents from tax returns to utility bills to verify clients’ identities.

Some bankers even travel across borders to confirm that a client’s business really exists.

First Southern Bank in Boca Raton, Fla., asks customers for everything from voter registration cards to firearm licenses.

“We’re running into some resistance,” said R. Moyle Fritz Jr., CFO. “Most of the customers have heard of the Patriot Act but they’re not really aware of how it’s going to impact them.”

Fritz estimates the bank has spent about $150,000 to $200,000 this year on software, new personnel and training to comply with the new rules.

While the law requires banks to verify identities, keep records of their efforts and make sure customers aren’t on any watch list, how banks go about getting to know their customers ranges from collecting an employer’s address to assessing the client’s tax status.

Other items may include investigating sources of a customer’s funds, looking into other accounts linked to that person and asking what a client intends to use funds for.

Banks and financial institutions must confirm customer identities with identification that includes a name, date of birth, address and identification number such as a taxpayer identification number, for citizens, or a government-issued document for non-citizens. It sometimes takes several documents to validate information now where a driver’s license once sufficed.

“It is both good and onerous,” said Jack Trufelli, compliance director for BAC Florida Bank in Coral Gables, Fla. “It’s a burden, but it’s something we obviously have to do.”

Many other banks have complained that the new rules have strained relationships with longtime customers, according to initial results of a study by Florida Atlantic University professor David Wernick on the effects post-Sept. 11 security on the South Florida economy.

“The due diligence is significantly greater, and a lot of the customers resent being put through the third degree, especially if they’ve been with the bank for a while,” Wernick said. Some customers, especially those from abroad, may take their business to other countries.


Where banks can draw the line as financial police is unclear. Now that the U.S. Attorney’s office has formed a task force to investigate allegations of foreign money laundering in six Latin American countries, many international bankers are wondering where their duties end, said Bowman Brown, who serves as chairman of the Florida International Bankers Association’s regulatory affairs committee.

The Patriot Act requires financial companies to more closely scrutinize private banking accounts requested by foreign political figures and their family members and associates.

“What’s enough in terms of due diligence to determine whether your client is or isn’t a close associate?” Brown asked.

While it’s critical to fight foreign corruption, Brown said the policing could also have negative political effects.

“It seems to me it could help eradicate political corruption in these foreign jurisdictions, but also could be seen as the U.S. exporting its morality again to other jurisdictions on an imperialistic and colonial basis,” he said. “It depends on your perspective.”

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(c) 2003 South Florida Sun-Sentinel.

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AP-NY-09-30-03 2103EDT