‘I am not a terrorist,” proclaimed Ben, my 16-year old son, as we walked out of a Citibank branch in New York on Saturday.

We went to the bank to open a savings account and introduce Ben to the world of managing personal finances. After waiting nearly an hour, then filling out and signing lots of forms, I explained to Ben, in my typical lawyer-like way, how banks collect information to ensure that they are not doing business with terrorists, drug traffickers and other criminals trying to “launder” money.

While standing on line at an ATM, few people think – or care – about the things banks and other financial institutions do behind the scenes to spot potential terrorists. But there is a beehive of electronic activity on the other side of the wall, and you never know when the bank may be sending information about you to law enforcement agencies.

Following the September 11, 2001 attacks, Congress rushed through a comprehensive law, called the USA Patriot Act. The law was intended to make it easier for the feds to prevent, detect and prosecute international money laundering and the financing of terrorism.

Money laundering, which is a crime, is the process that criminals use to conceal the origins of illegally-obtained money, by gradually introducing it into the financial system.

The new law gives the government powerful tools to collect information about financial transactions, including yours, if they suspect criminal activity.

Laws that give the government the right to collect this information have been on the books for a long time, were not fully utilized. The USA Patriot Act required federal regulators to put these laws on the fast track, and few people realize the breadth of their scope.

These laws, for example, apply to many kinds of “financial institutions,” which include banks, securities brokers, mutual funds, travel agencies, casinos, automobile dealerships, and even “persons involved in real estate closings.” (Was Congress trying to tell us something by lumping mutual funds and casinos in the same category?)

What can the feds require these “financial institutions” to do?

The law requires banks and other “traditional” financial institutions to “know your customers.” This requires banks to collect information, like your street address and social security number, and to demand to see proof of your identity.

The USA Patriot Act also lets the Treasury Department’s Financial Crimes Enforcement Network (known as “FinCEN”) reach out to financial institutions to locate accounts and transactions of people it suspects to be involved in terrorism or money laundering. Every other week, FinCEN blankets 25,000 financial institutions with requests for information about transactions of people of interest to law enforcement agencies.

The law requires your local bank and other financial institutions periodically to check your name against the government’s “bad boy” list of potential terrorists and criminals, published by the Office of Foreign Asset Control (known as “OFAC”).

If you deposit $10,000 in cash (or lesser amounts totaling $10,000 over several days), your bank must file a report with the Internal Revenue Service.

If you buy a money order or travelers checks for more than $3,000, the bank must verify your identity. This is done to weed out potential money launderers seeking to “structure” cash transactions to avoid the $10,000 reporting threshold.

Finally, the law requires your bank to file a “suspicious activity report” with the government if it suspects that your financial transactions may be related to money laundering or financing terrorism. For example, your account may raise eyebrows if it receives frequent wire transfers from abroad. The law prohibits the bank from telling you that it has filed this report.

Ben seems untroubled that the government may learn about his personal finances, probably because his finances are limited to earnings from a summer job, supplemented by an allowance, and he expects to receive few, if any, wires from abroad. His older brother, Sam, a college sophomore, seems a bit more concerned, on the principle that he doesn’t like the government looking over his shoulder.

Whether or not the USA Patriot Act effectively prevents money laundering – or needlessly tramples on individual privacy – remains to be seen. But Sam was quick to point out the law’s weakness. He opened an account near his college using for identification an official-looking but legally useless ID card from a local food cooperative.

Mr. Baris, a partner in the law firm of Kramer Levin Naftalis & Frankel in New York, is a financial services lawyer.