USA Patriot Act notice: Overview, definition, and example
What is USA Patriot Act notice?
USA Patriot Act notice is a clause commonly found in loan agreements, subscription agreements, and other financial contracts. It informs the counterparty that financial institutions are required by law to collect identifying information to help the U.S. government detect and prevent terrorism and money laundering, as mandated by the USA Patriot Act of 2001.
Why is USA Patriot Act notice important?
This notice ensures transparency about the due diligence process financial institutions must follow. It helps set expectations that the party entering into the agreement may be asked to provide documentation such as a government-issued ID or business registration documents. Including this clause also supports regulatory compliance and protects the financial institution from claims of improper information collection.
Understanding USA Patriot Act notice through an example
A small business applies for a term loan with a U.S. bank. Before funding, the bank requests the company’s certificate of formation and a driver’s license from the authorized signer. The agreement includes a USA Patriot Act notice clause, making it clear that this request is legally required—not discretionary—and part of the standard onboarding process under federal law.
Example of a USA Patriot Act notice clause
Here's how a USA Patriot Act notice clause may look like in a contract:
"Pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56), the Lender is required to obtain, verify, and record information that identifies each person or legal entity that enters into a formal relationship with it. This information includes the name and address of such person or entity and other information that will allow the Lender to identify them in accordance with the Act."
Conclusion
The USA Patriot Act notice clause communicates a federally mandated process that helps prevent financial crimes. It sets clear expectations for identity verification and supports legal compliance for both parties. If you're entering into a financing or investment agreement, expect to see this clause and be prepared to provide basic identifying information.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.