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Reprieve for dealers on Treasury's anti-money laundering rule

November 24, 2010

The U.S. Treasury Department has temporarily exempted automobile dealers from the requirement in the USA PATRIOT Act that each financial institution must establish a formal antimony laundering program. The USA PATRIOT Act is the post-Sept. 11 federal measure to strengthen law enforcement's ability to investigate and penalize money laundering and to disrupt terrorist financial networks.

Section 352 of the law requires "financial institutions" (which includes automobile dealers) to establish an anti-money laundering program with four minimum elements:

• the development of internal policies, procedures and controls; 
• the designation of a compliance officer; 
• an ongoing employee training program; and 
• an independent audit function to test programs.

The Interim Rule defers this requirement for automobile dealers and other industries, which never were required to develop antimony laundering programs, for up to six months. During this period, the Treasury intends to analyze each temporarily exempted industry and delineate minimum anti-money laundering program standards tailored to that particular industry.

A Treasury Department statement indicated: "The need for a temporary exemption is a practical one. . . . In the six months since the enactment of the Act, Treasury and the Financial Crimes Enforcement Network have not had sufficient time and opportunity to analyze the nature of the businesses of [these] financial institutions. "An inadequate understanding of the affected industries could result in poorly conceived regulations that impose unreasonable regulatory burdens with little or no corresponding antimony laundering benefits."

The temporary exemption does not affect the Treasury Department's ongoing requirement to file IRS Form 8300/FinCEN Form 8300 when a business receives ore than $10,000 in cash in one transaction or two or more related transactions. A redesigned cash reporting form has been in effect since Jan. 1. The new form resembles IRS Form 8300 and may be accessed on the IRS Web site,

The Treasury's temporary exemption also does not extend to FinCEN's proposed rule implementing section 314(a) of the USA PATRIOT Act. This proposed rule would require dealers (and other financial institutions) to respond to information requests from FinCEN on persons the dealer has entered into a transaction with or with whom the dealer previously or presently maintains an account.