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Car Dealers And Terrorism - What Are The Rules?

There’s a lot of confusion in the car business right now about what’s going on with the Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 – the USA PATRIOT Act. We have received a number of emails from dealers who say they’ve been told that the USA PATRIOT Act requirements have been delayed.

That’s partly true. The USA PATRIOT Act contained several requirements that affected dealers. Some provisions are in force now – others have been delayed. Provisions dealing with the reporting of cash and cash-like transactions and provisions dealing with responding to governmental inquiries are in force now. The requirement that car dealers set up anti-money laundering programs has been delayed.

The anti-money laundering requirements, originally to become effective in April of 2002, were delayed until October of 2002, and then delayed again for an indefinite period. The purpose of the delays was to permit the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to noodle over whether car dealers ought to be subject to the anti-money laundering rules, and if so, what the rules for car dealers ought to look like.

On February 24, FinCEN published in the Federal Register an “Advance Notice of Proposed Rulemaking.” FinCEN is asking for comment on four issues:

  1. What is the potential money laundering risk posed by vehicle sellers? Do money laundering risks vary by (1) vehicle type (e.g., Boat, Airplane, Automobile); (2) market (Wholesale vs. Retail); or (3) business line (International Sales, Sales to Governments)?
  2. Should vehicle sellers be exempt from coverage under Sections 352 and 326 of the Patriot Act?
  3. If vehicle sellers, or some subset of the industry, should be subject to the Anti-Money Laundering Program requirements, how should the program be structured?
  4. How should a vehicle seller be defined? Should there be a minimum threshold value in the definition? Should it include wholesale and retail sellers? Should sellers of used vehicles be included?

FinCEN says that written comments may be submitted on or before April 10. You can email your comments to [email protected],, with the caption in the body of the text “ATTN: ANPRM-Sections 352 and 326 – Vehicle Seller Regulations.”

Our experience is that these folks need all the help they can get in understanding how the industry works and how their regulations affect the folks on the firing line. Now’s your chance to give them an earful.

And a P.S., by the way – don’t confuse these FinCEN delayed regulations dealing with money laundering with the “bad guy” list. The Office of Foreign Assets Control (OFAC) requirement to check your customer’s name against their list of terrorists, drug dealers and other assorted miscreants IS IN EFFECT NOW. And the penalties for failing to comply with OFAC’s requirements are very, very harsh, indeed – including 30 years in jail, fines up to $10 million against corporations, $5 million against individuals and civil penalties of up to $1 million per incident. With penalties like these, you’ve got to comply with OFAC – this isn’t one of those “we’ll take the risk” deals when you can try to fly under the radar.
*Written with Elena Lovoy


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