USA Patriot Act: Overview, definition, and example
What is USA Patriot Act?
The USA Patriot Act is a federal law passed in 2001 that expanded the U.S. government’s surveillance and investigation powers to combat terrorism and financial crimes. In contracts, especially with banks or financial institutions, references to the Patriot Act usually relate to compliance with anti-money laundering (AML) regulations. A common clause might state that the parties are not engaging in or supporting unlawful or terrorist activities.
Why is USA Patriot Act important?
Many financial institutions, service providers, and government contractors include USA Patriot Act language to confirm that they are complying with federal laws meant to detect and prevent financial crimes, such as money laundering or terrorist financing. These clauses are especially common in contracts involving banks, investors, or foreign entities operating in the U.S. They help protect businesses from regulatory risk and reputational damage.
Understanding USA Patriot Act through an example
Here’s how a USA Patriot Act clause might come up in practice.
Nova Capital, a U.S.-based private equity firm, enters into a subscription agreement with a new investor, Arcadia Ventures Ltd., based in Europe. As part of the onboarding process, Nova includes a clause requiring Arcadia to confirm that it is not involved in illegal activity and is not on any government watchlists. This step helps Nova meet its obligations under the USA Patriot Act and avoid penalties or scrutiny from regulators.
Example of a USA Patriot Act clause
Here’s how an example USA Patriot Act clause may look like in a contract:
Each party represents and warrants that it is not, and will not become, a person or entity listed on the Specially Designated Nationals and Blocked Persons List maintained by the U.S. Department of the Treasury. Each party further represents that it is in compliance with all applicable anti-money laundering laws, including the USA Patriot Act, and agrees to provide any information reasonably requested by the other party to comply with applicable laws and regulations.
Conclusion
References to the USA Patriot Act in contracts help businesses meet their legal obligations and avoid unknowingly doing business with bad actors. While the clause may seem like boilerplate, it plays a key role in maintaining compliance and protecting the parties from serious legal and regulatory consequences. If you see this in a contract, it’s about verifying legitimacy—not accusing anyone.
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.