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Thursday, December 1, 2016

USA Patriot Act Disclosure Form and the Freedom Act

We are a lender with a client that is very passionate about NOT signing the Patriot Act Disclosure that is included in our initial closing package. He is a permanent resident alien and claims that the Patriot Act has not been in existence since June 2015 and that a lender should not be requiring him to sign the U.S. Patriot Act Information Disclosure form. The client has no difficulties with providing the identification documents we require, but he feels that the disclosure form is a legal document which is inaccurate, as it is now the Freedom Act that governs. Is the client correct and how should we respond?  

Actually, the client is incorrect. He is operating under a common misconception that the entire USA Patriot Act expired. In reality, the vast majority of the Act, including Title III, which carries a great majority of the requirements for financial institutions, remains in effect. Thus, financial institutions are still required to (1) monitor for customers and transactions that could be related to terrorist activities through section 314(a) & (b); (2) verify the identity of customers through a customer identification program under section 326; and (3) have an established AML Program under section 352.

The sections that “expired” were section 215, which included the so-called “Lone Wolf” and “Roving Wiretap” provisions. The “Lone Wolf” provision allowed U.S. intelligence and law enforcement agencies to target surveillance at suspected terrorists who are not part of any group and without direct ties to terrorist groups. The “Roving Wiretap” provision permitted the monitoring of a specific person regardless of the devices used. The National Security Agency used section 215 as a basis for the mass collection and monitoring of phone records of millions of Americans who were not necessarily under investigation, a program Edward Snowden exposed in 2013. The USA Freedom Act essentially restored and amended section 215 through 2019.    

It is not clear which version of the USA Patriot Act Disclosure form you are using.  However, in all likelihood, just above the signature loan there is a statement to the effect of “By signing the form, you acknowledge receipt of this disclosure”. So, the client’s difficulty with acknowledging receipt of the form is difficult to grasp. If you are keeping the loan in portfolio, depending on your policies, you could have a documented exception, as there is no legal requirement that it be signed.

Joyce Wilkins Pollison 
Director/Legal & Regulatory Compliance 
Lenders Compliance Group