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Thursday, 25 April, 2002, 23:11 GMT 00:11 UK
New US laws target terror funding
Canadian Finance Minster Paul Martin, US Treasury Secretary Paul O'Neill and British Chancellor of the Exchequer Gordon Brown
G7 ministers seek to freeze assets to combat terrorism

New money-laundering rules imposed by the US government this week have triggered concerns over bureaucratic interference in everyday financial transactions.

The new rules are part of the recently passed USA Patriot Act, signed into law by US President George W Bush in response to the 11 September terrorist attacks.

Newly covered transactions
Mutual Funds
Visa credit-card transactions
Cash wire transfers
Cheque cashers
Securities brokers
Commodities traders

Source: US Treasury

The regulations threaten to impose a huge paperwork burden on the financial-services industry.

And civil liberties supporters worry Americans' personal information could be subject to further abuse.

Dealings such as credit-card purchases, wire transfers and stock trades are now subject to the same scrutiny usually reserved to banking matters such as current accounts.

The newly covered industries have 90 days to develop initiatives targeting money-laundering programmes, the process in which the proceeds of illegal activities are disguised in legitimate accounts.

Careful review

With the new guidelines, the Treasury Department has issued a record number of regulations since the Patriot Act was passed six months ago.

The US Treasury has already implemented parts of the law, including rules requiring banks to share suspect customers' account data with the government agency responsible for tracking cash flows, FinCen.

US Treasury Secretary Paul O'Neill
O'Neill: International cooperation is helping combat terrorist funding
Some argue the new regulations bring parity to a system that focused previously mainly on the banking industry.

Only the insurance industry is exempt from the new requirements.

"The complexities of requiring anti-money laundering programmes for all remaining financing institutions require that Treasury carefully review each industry before issuing regulations," said an official at the Treasury Department.

Secondary uses

The new regulations illustrate the Bush administration's determination to cut off sources of terrorist funding and bring to justice those responsible for the September attacks that left over 3,000 dead.

Others see the new rules, which require financial institutions to collect information and conduct greater surveys of their customers, as further unnecessary intervention into the private lives of US citizens.

"In my worst vision of what's going on, the administration is violating the financial privacy of millions of law abiding Americans citizens and allowing terrorists to hide even better than before," says Veronique de Rugy, fiscal policy analyst with Cato Institute, a Washington, DC-based think tank.

Former Nicaraguan tax chief Byron Jerez faces investigation into money laundering after the US refused him a visa.
A former Nicaraguan official was questioned after US suspicions
The information gathered could be abused by financial institutions, now in charge of collecting and maintaining such data, for their own commercial gain, says Edmund Mierzwinski, a consumer advocate at the US Public Interest Research Group.

"Anytime you create a database there may be secondary uses," he told BBC News Online, adding that the latest government efforts will not help to prevent terrorism.

International efforts

Efforts to combat terrorist funding has taken on global scope since September's suicide attacks.

To date, about $100m (70m) has been seized by law-enforcement authorities the world over, affecting about 200 people or organisations US officials say have links to terrorism.

At the recent spring meetings of the International Monetary Fund (IMF) and the World Bank, finance ministers from the Group of Seven (G7) industrialised nations recommitted themselves to combating the financing of terrorism.

The group said it would jointly designate a list of terrorists and freeze assets in member countries to assist in the fight against terrorist financing.

In a statement following the meeting, G7 ministers said they are "working to ensure that legitimate institutions, organisations and networks are not misused by terrorists and their supporters".

See also:

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