Originally published in the May 2004 issue of The European Lawyer.
Since its adoption, America’s Patriot Act has caused a storm of controversy among politicians, attorneys and civil liberties activists. Lawyers the world over need to be aware that its impact reaches far beyond the borders of the United States and, some say, rides roughshod over a number of basic human rights.
On 26 October 2001 President George W. Bush signed into law the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” – better known as the US Patriot Act. With the memory of the September 11 terrorist attacks still fresh in their minds, Congress passed the act swiftly and with little debate. Since its passage, however, a great deal of controversy has surrounded the Patriot Act because of its potentially wide-reaching effects on law-abiding citizens and businesses.
The statutory punch of the Act is provided by the expansion of three primary federal powers. First, the Act grants broader surveillance powers to investigative authorities such as the FBI, the CIA and other government intelligence services. Second, the Act expands the detention and deportation powers of the federal government. Finally, it greatly expands the scope of anti-money laundering laws in an effort to stop the flow of money to terrorist groups. These three “Patriot powers” affect non-US nationals and businesses in a host of ways.
Surveillance
The Act significantly increases the scope and nature of surveillance activities that US investigative agencies may undertake. Non-US residents and visitors should be aware that much of what they do while in the United States might be subject to monitoring or review, including potential surveillance of e-mail communications, letters, health records and business documents. The Act provides for new government authority to identify and intercept criminal communications through electronic surveillance, thus extending the government’s ability to monitor internet and e-mail activities. The owner of a computer can now allow authorities to monitor the activities of a computer trespasser without obtaining an order for a wiretap. Newly authorised surveillance can include not only document review and electronic eavesdropping (including voicemail) but also so-called ‘pen register’ and ‘track and trace’ devices which record in-coming and out-going telephone numbers. Investigators are no longer limited to listening in on one telephone line but may instead track the target on whichever devices they use.
Warrants are no longer required for some forms of surveillance. Warrantless searches for tangible things (which can include library, travel, genetic, health, business or firearms records) are allowed upon certification that the investigation is necessary “to protect against international terrorism or clandestine intelligence activities.” The Act simultaneously loosens restrictions on foreign intelligence gathering and allows for easier sharing of “foreign intelligence information” including sharing of grand-jury information regarding US citizens between federal agencies. The Act further authorises ‘sneak and peek’ search warrants; this added flexibility allows law enforcement officials to delay notification of searches and warrants until long after the search has been completed.
Under some of the Act’s provisions, a person need not be a suspected terrorist to be the target of a search. Even completely innocent individuals can get caught up in government surveillance under certain circumstances. One such provision allows a search regardless of the target, so long as the government is conducting “an authorised investigation… to protect against international terrorism.” Under other provisions, searches may be conducted if the information sought is “relevant to an ongoing investigation,” or when “a significant purpose” of the search is to gather intelligence. Thus, just being in the wrong place at the wrong time or having the wrong casual acquaintance might result in a search under the Act.
Unfortunately, there is little that lawyers can do to protect clients before such searches, seizures and surveillance. In most cases, both the client and their attorney will be unaware that any sort of surveillance is underway. With respect to the Act’s surveillance powers, therefore, attorneys might want to make clients aware of the potential scope of such activities. In addition, attorneys may find it useful to stay informed about possible changes in applicable law.
Detention and Deportation
For non-US citizens, the detention and deportation powers added by the Act carry the most significant potential impact. In particular, the Act’s alien “certification” process presents a cause for concern. Under the certification provisions, the Attorney General is granted the power to certify aliens if he has “reasonable grounds to believe… the alien is engaged in activity that endangers the national security of the United States.” Once certified, an alien must be taken into custody, after which the Attorney General has up to seven days to commence deportation proceedings or to charge the detainee with a crime.
Custody under the certification process may continue indefinitely and only ceases if the certified alien is either “removed from the United States” or deemed no longer a danger to national security by the Attorney General. The only requirement for continuing detention is that the Attorney General determines that releasing the detainee “will threaten the national security… or the safety of the community or any person.” Only a cumbersome habeas corpus proceeding can overturn a mistaken detention.
In addition to the certification process, the Act also allows the government to deport aliens who are associated with “terrorist organisations”. More than a mere blind association with a terrorist organisation is required. The Attorney General, in consultation with the Secretary of State, must also conclude that the alien “intends to engage… in activities that could endanger… the United States.”
Despite the devastating effect that the Act’s expanded detention and deportation powers might potentially have on a particular individual, it should be noted that the US government has been using these powers sparingly. In fact, as of May 2003 only three individuals had been denied admission to the US pursuant to the new Patriot powers. This may be surprising given the wide media attention the Guantanamo detainees have received. Those controversial detentions, however, have been attributed to the President’s powers as Commander-In-Chief and not the Patriot Act.
The detention and surveillance provisions of the Act should also be distinguished from the new fingerprinting requirements being implemented at airports and many other points of entry around the United States. By 30 September this year, travellers from 27 countries (including the UK and Germany) will be photographed and fingerprinted by the Department of Homeland Security. This programme, called the US-VISIT programme, finds its source in a statute passed before the September 11 attacks even took place. Nevertheless, it is worth pondering whether the negative reaction of some to US-VISIT has been exacerbated by the bad publicity generated by many of the Patriot Act’s provisions.
Anti-Money Laundering
The Act’s new anti-money laundering provisions are quite extensive. Among the changes are the creation of multiple new money laundering crimes and two new forfeiture provisions that allow the seizure of funds of individuals and entities that are involved in terrorism. While designed to target the financing of terrorism, the Act’s anti-money laundering provisions may also significantly affect law-abiding aliens.
Most significant for legitimate non- American businesses is the requirement that virtually all “financial institutions” with substantial US contacts implement anti-money laundering programmes. This entails, at a minimum, the development of special internal “policies, procedures, and controls” to detect and report money laundering, designation of a “compliance officer” ongoing employee training, and independent audits for testing the programme.
These requirements are made applicable to foreign businesses through the Act’s significantly expanded definition of “financial institution”. Under this new definition, an entity is required to create an anti-money laundering programme if it meets two requirements. First, the entity must be one of the types specified by the regulations. Specified businesses include insured banks, commercial banks and trust companies, agencies or branches of foreign banks that are located in the United States, credit unions, brokers, dealers, investment bankers and investment companies, operators of credit card systems, insurance companies, travel agencies, telegraph companies, persons involved in real estate closings, casinos and various transmitters of funds. Second, the entity must be regulated by one of several US “financial” agencies, including the SEC, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and other regulatory agencies.
Non-US businesses looking to do a merger with an American-based company may be surprised to learn that the Act requires special consideration of an entity’s anti-money laundering record before certain mergers can be effected. Thus the government might derail a merger sought by a foreign entity if it suspects the entity took part in prior money laundering. Individuals may become the subject of a suspicious activity report (SAR) that is designed to identify potential money laundering activity and many non- American individuals will be subject to new “identification” procedures that are designed to make sure the individual is, in fact, who they say they are. In addition,reports must be made to the Treasury Department regarding cash transactions in excess of $10,000.
In light of these money-laundering provisions, the most important job for lawyers in the EU is to understand their clients’ businesses. To that end, attorneys should first determine whether their clients are “financial institutions” that are regulated in the US. If a client falls under this category, counsel should inform the client of the necessity of creating an antimoney laundering programme, and be clear on what such a programme must include. Additional steps may be necessary if the client is required to create SARs or if it deals in large cash transactions. Counsel should also make clear to clients contemplating a merger with a US company that their money-laundering record may be examined. Failure to do so may result in a failed merger, even after the deal is otherwise virtually completed.
Ultimately, any non-US individual or entity with significant contacts with the United States may fall under the Act’s broad reach. In many cases, the Act’s effect will be minor and may even go unnoticed. In some circumstances, however, the Act may have a very substantial, perhaps devastating, effect on non-US citizens. In these cases, the only real defence is to know how the Act will apply. This is made more difficult because certain of the provisions are set to “sunset” or expire, on 31 December 2005. However, in his 2004 State of the Union address, President Bush requested the Act be renewed. Thus, with a closely divided Congress and an upcoming presidential election, the scope of provisions in the Patriot Act will likely undergo some changes.