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Patriot Act: Sanctions with teeth
Posted by: McQ on Wednesday, February 28, 2007

David Ignatius explains how a provision of the Patriot Act has given us a potent tool in the War on Terror and "rogue" nations such as Iran and North Korea:
Authority for the new sanctions, as with so many other policy weapons, comes from the USA Patriot Act, which in Section 311 authorizes Treasury to designate foreign financial institutions that are of "primary money laundering concern." Once a foreign bank is so designated, it is effectively cut off from the U.S. financial system. It can't clear dollars; it can't have transactions with U.S. financial institutions; it can't have correspondent relationships with American banks.
You can obviously see that once cut off from the US financial system, life becomes much harder everywhere because of the interconnectedness of the global financial system.
The new measures work thanks to the hidden power of globalization: Because all the circuits of the global financial system are inter-wired, the U.S. quarantine effectively extends to all major banks around the world. As Levey observed in a recent speech, the impact of this little-noticed provision of the Patriot Act "has been more powerful than many thought possible."
An example:
Treasury applied the new tools to North Korea in September 2005, when it put a bank in Macao called Banco Delta Asia on the blacklist. There was no legal proceeding — just a notice in the Federal Register summarizing the evidence: Banco Delta Asia had been providing illicit financial services to North Korean government agencies and front companies for more than 20 years, according to the Treasury notice. The little Macao bank had helped the North Koreans feed counterfeit $100 bills into circulation, had laundered money from drug deals and had financed cigarette smuggling. North Korea "pays a fee to Banco Delta Asia for financial access to the banking system with little oversight or control," Treasury alleged.

Wham! The international payments window shut almost instantly on Pyongyang's pet bank. Transactions with U.S. entities stopped, but the Treasury announcement also put other countries on notice to beware of Banco Delta Asia. The Macao banking authorities, realizing that they needed the oxygen of the international financial system to survive, took regulatory action on their own and froze the bank's roughly $24 million in North Korean assets. And around Asia, banks began looking for possible links to North Korean front companies — and shutting them down.
Of course the result was to squeeze NoKo financially, which it did, and get them back to the bargaining table, which it did. As Ignatius points out, Iran is now experiencing the same sorts of problems as did NoKo. As Ignatius points out, "they impose — at last — a real price on countries such as North Korea and Iran that have blithely defied U.N. resolutions on proliferation."

The point? To those who reflexively denounce the Patriot Act and call for its complete repeal, think before you squawk. Instead of rejecting all of its provisions, understand that there are some in there such as this one and those which take down the walls between intelligence and law enforcement data sharing which are important improvements in our ability to effectively address the problems of terrorists and rogue nations. Don't throw the baby out with the bath water.

Instead, a careful review of the law is both called for and warranted, and those portions which are deemed to infringe on our freedom and liberty should be modified or eliminated.

But simple-minded revocation means loosing effective tools like the one outlined above and others. The Patriot Act has become the focus of a lot of simple-minded rhetoric from its opponents.

The plea? Consider the full effect of what you're calling for when you call for its complete revocation and understand that you will be effectively lessening our ability as a nation to respond to the global threats we face in the 21st Century by removing potent tools from our arsenal which actually work.
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Previous Comments to this Post 

One more thing about the Macau bank...Kim’s son lives in Macau, a place known for gambling and hookers. I have to wonder what kind of phone call dad got when his son couldn’t pay off his tabs.
Written By: Harun
URL: http://
What? Legislators read, understand, and analyze a piece of legislation to understand how it and its component parts will actually work? Ha! You bright-eyed young idealist, you.
Written By: timactual
URL: http://

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