E mployers have longstanding obligations to safe- 1. attacking - PDF document

This article was originally published in the October 2007 issue of New Jersey Lawyer Magazine, a publication of the New Jersey State Bar Association, and is reprinted here with permission. Employers and Homeland Security: The United States’ Strategy for Combating Terrorism and its Direct Impact on Employers by Zulima V. Farber and Khizar A. Sheikh The events of Sept. 11, 2001, and subsequent federal and state efforts to combat terrorism and crime, have increased exponentially the duties and responsibilities of employers of all sizes and in all industries, as they are called upon to assist in preventing future terrorist attacks. Principally, that assistance revolves around the government’s efforts to limit the flow of people from and money to terrorist and criminal groups. But the new and increased duties and responsibilities placed on employers in this regard go much further. E mployers have longstanding obligations to safe- 1. attacking terrorists and their capacity to operate; guard their employees’ privacy, and to provide 2. denying terrorists entry to the United States and disrupting discrimination- and harassment-free, safe work- their travel internationally; and places for every employee. However, now more 3. defending potential targets of attack. 2 than ever, employers, their human resources staff, and their attorneys will have to be extra vig- This article discusses the impact these post-Sept. 11 require- ilant in monitoring legislative and regulatory activity, and be ments have had on employers, and offers recommendations prepared to implement new policies and procedures to adapt intended to make employers’ compliance easier and less cost- quickly to the changing employment landscape, as circum- ly, and to minimize employers’ risks of noncompliance. stances and anti-terrorism procedures and related technologies Attacking Terrorists and Their Capacity to Operate advance. The federal government’s overall plan and objectives to In devising the National Strategy, the government looked fight terrorism are set forth in a document titled The National closely at the evidence showing that terrorists and criminals Strategy for Combating Terrorism. That plan, which became use our financial systems to transfer money and secure various effective in Sept. 2006, is premised on the fact that, like all gov- forms of material support necessary for the operation and sur- vival of terrorist organizations. 3 Not surprisingly, to hide their ernments, the United States has “no higher obligation than to protect the lives and livelihoods of its citizens.” 1 The National activities, terrorist organizations and criminals launder money Strategy consists of several action items that, implemented in through, and use, legitimate businesses and financial institu- concert, will help the government protect its citizens from the tions. So, a part of the National Strategy is directed at making threat of terrorism. Three of those action items are of particu- it difficult or nearly impossible for terrorists to engage in lar interest to employers because they require their participa- money laundering or criminal financing. tion in implementation. Those three are: To be sure, the government’s anti-money-laundering 36 N EW J ERSEY L AWYER | October 2007

efforts have been ongoing for almost 40 definition and be required to comply. Nationals and Blocked Persons List (SDN years. The Bank Secrecy Act of 1970 For example, the USA Patriot Act list) of the United States Treasury Office (BSA) 4 and related legislation required extends the reach of its anti-money- of Foreign Assets Control (OFAC), and insured depository institutions, and laundering provisions to financial insti- from participating in a transaction later other specified financial institu- tutions that previously had not been involving an SDN’s property or interest in property. 14 Because Executive Order tions, to maintain certain records and subjected to BSA regulation, such as report certain currency transactions as a mutual funds, futures commission mer- 13224 applies to all U.S. persons and way to permit law enforcement authori- chants, commodity trading advisors, companies, not just to financial institu- and commodity pool operators. 8 The tions, 15 it has had an immediate impact ties to investigate suspicious transac- tions. 5 reach goes even further to include “any on all employers. That is because, in Since the events of Sept. 11, however, business or agency which engages in effect, the order requires all employers new laws and regulations have been any activity which the Secretary of the to have procedures in place that will per- enacted that have significantly broad- Treasury determines, by regulation, to mit them to determine whether persons ened the number and types of compa- be an activity which is similar to, related or entities with whom they do business nies falling within the definition of to, or a substitute for any activity in (including employees) appear on the “financial institution,” and thus requir- which any business described in this SDN list. ing compliance with anti-money-laun- paragraph is authorized to engage,” and The SDN list is updated frequently, so dering procedures. For example, just “any other business designated by the companies need the means to periodi- weeks after Sept. 11, 2001, on Oct. 26, Secretary whose cash transactions have cally verify that they are not transacting Congress enacted the USA Patriot Act, 6 a high degree of usefulness in criminal, business with a listed party (and prove tax, or regulatory matters.” 9 Further, sus- which, at Title III, amends the BSA to their compliance). The authors recom- require financial institutions to adopt picious transactions can include viola- mend, in addition to ensuring strict and implement internal anti-money- tions such as securities fraud. 10 compliance with these requirements, laundering policies and procedures that Arguably, then, there is a risk that any that companies include in all contracts comply with specific rules issued by, employer who deals with money trans- and agreements a provision by which among others, the Securities and actions, and any transaction that may the party or parties on the other side cer- Exchange Commission and the Treasury violate federal or state law, is subject to tify under oath that they have no ties to Department. In addition, the act the USA Patriot Act’s anti-money-laun- terrorist organizations, and are not requires many of these financial institu- dering provisions. (New Jersey’s money- engaged in any illegal activities. The tions to verify the identity of those with laundering law is patterned after the authors caution that this practice, if federal law.) 11 Complying with these new whom they do business, and of those adopted, must be used uniformly to with whom they enter into financial requirements can result in changes in avoid or minimize potential liability for transactions, and to be able to recognize the very nature of a business’s practices. violating federal or state anti-discrimi- “red-flags” that trigger the required fil- By way of example, consider the risk nation laws. ing of suspicious activity reports (SARs). 7 posed by an employee whose job it is to Denying Terrorists Entry to the U.S. and Not only did the USA Patriot Act receive payment or investment funds, Disrupting Their Travel Internationally expand and toughen anti-money-laun- and who accepts funds that, in fact, turn dering policies, but it also expanded the out to be derived from terrorist or crimi- Despite pre-Sept. 11 laws requiring types of institutions covered. In the nal activity. The challenge to the foreigners to present specific forms of past, anti-money-laundering laws and employer is to implement procedures identification and valid visas to enter the United States, 16 thousands of people regulations had defined “financial insti- and safeguards that minimize this risk. tutions” to include certain specified Lesser known but just as important to enter this country each year with false businesses. But the definitions of “finan- employers as the USA Patriot Act is Exec- or no documents. Most are otherwise utive Order 13224, 12 issued on Sept. 23, cial institutions” and “suspicious trans- law-abiding individuals looking for actions” are not entirely specific, and 2001. The order prohibits any U.S. per- work and a better life for their families. much more fluid, a circumstance that son or entity, as that term is defined in But many criminals and terrorists have may require all employers, not just the order, 13 from entering into any trans- taken advantage of our lax border secu- those specified in the pre-Sept. 11 laws, action or conducting any business with rity measures, and have entered and to be cognizant of the requirements any person or entity whose name continue to enter this country with because they may well fall within the appears on the Specially Designated stolen or forged identification docu- 37 N EW J ERSEY L AWYER | October 2007