[Federal Register: December 24, 2002 (Volume 67, Number 247)]
[Rules and Regulations]
[Page 78383-78384]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24de02-16]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA35
Financial Crimes Enforcement Network; Anti-Money Laundering
Requirements--Correspondent Accounts for Foreign Shell Banks;
Recordkeeping and Termination of Correspondent Accounts for Foreign
Banks
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: FinCEN is issuing this final rule to extend the time by which
certain financial institutions must obtain information from each
foreign bank for which they maintain a correspondent account concerning
the foreign bank's status as ``shell'' bank, whether the foreign bank
provides banking services to foreign shell banks, certain owners of the
foreign bank, and the identity of a person in the United States to
accept service of legal process.
DATES: This final rule is effective December 24, 2002.
FOR FURTHER INFORMATION CONTACT: Office of the Chief Counsel (FinCEN),
(703) 905-3590; Office of the Assistant General Counsel for Banking &
Finance (Treasury), (202) 622-0480, or Office of the Assistant General
Counsel for Enforcement (Treasury), (202) 622-1927 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
I. Background
On September 26, 2002, FinCEN published a final rule (67 FR 60562)
implementing sections 313(a) and 319(b) of the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (the
Act). Section 313(a) of the Act added subsection (j) to 31 U.S.C. 5318,
which prohibits a ``covered financial institution'' from providing
``correspondent accounts'' in the United States to foreign banks that
do not have a physical presence in any country (foreign shell banks).
Section 313(a) also requires those financial institutions to take
reasonable steps to ensure that correspondent accounts provided to
foreign banks are not being used to provide banking services indirectly
to foreign shell banks. Section 319(b) of the Act added subsection (k)
to 31 U.S.C. 5318, which requires any covered financial institution
that provides a correspondent account to a foreign bank to maintain
records of the foreign bank's owners and to maintain the name and
address of an agent in the United States designated to accept service
of legal process for the foreign bank for records regarding the
correspondent account.
The September 26, 2002, final rule provided that a covered
financial institution could satisfy the requirements of section 313(a)
and 319(b) by obtaining from a foreign bank a certification that
contained the necessary information, or by otherwise obtaining
documentation of the required information. With respect to
correspondent accounts that existed on October 28, 2002, the final rule
required a covered financial institution to close a correspondent
account, within a commercially reasonable time, if the covered
financial institution did not receive the certification from the
foreign bank, or otherwise obtain documentation of the required
information, on or before December 26, 2002.
A significant number of covered financial institutions, principally
in the securities industry, have noted that the December 26, 2002,
deadline to obtain the required information is proving to be
inadequate. Many securities firms indicated that providing an effective
explanation of their duties under the Act to a wide variety of foreign
banks, which may speak different languages and operate in different
ways than their U.S. counterparts, has, in some cases, lengthened the
process. Moreover, the broad definition of a correspondent account
found in the final rule has increased the number of accounts subject to
these requirements and, consequently, has increased the burden on U.S.
banks and broker-dealers to secure the required information. Finally,
because the Act has generally increased the overall level of regulatory
requirements for securities firms and depository institutions, they
have been managing an increased overall workload as a result of
additional regulations, within a finite set of resources. For these
reasons, the process of gathering the necessary information to comply
with section 313(a) and 319(b) of the Act is taking longer than the
time provided in the September 28 final rule.
II. The Current Rulemaking
This rule extends the time by which a covered financial institution
must obtain the information required to satisfy the requirements of
sections 313(a) and 319(b) from December 26, 2002, to March 31, 2003.
Treasury and FinCEN do not anticipate granting a further extension
beyond March 31 and expect that covered financial institutions will
comply with the September 26, 2002, final rule with respect to
correspondent accounts established for foreign banks that have not
provided the required information by that date.
III. Procedural Requirements
Because this rule extends the time by which a covered financial
institution must obtain the information necessary to satisfy the
requirements of section 313(a) and 319(b) of the Act before taking
actions to terminate a correspondent account, it has been determined
that notice and public procedure are unnecessary pursuant to 5 U.S.C.
553 (b)(B) and that a delayed effective date is not required pursuant
to 5 U.S.C. 553(d)(1).
It has been determined that this rule is not a significant
regulatory action for
[[Page 78384]]
purposes of Executive Order 12866. Because no notice of proposed
rulemaking is required, the provisions of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) do not apply.
List of Subjects in 31 CFR Part 103
Banks and banking, Brokers, Counter money laundering, Counter-
terrorism, Currency, Foreign banking, Reporting and recordkeeping
requirements.
Authority and Issuance
For the reasons set forth in the preamble, 31 CFR part 103 is
amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 is revised to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314
and 5316-5332; title III, secs. 312, 313, 314, 319, 352, Pub. L.
107-56, 115 Stat. 307.
2. Section 103.177 is amended by revising paragraph (d)(1) to read
as follows:
Sec. 103.177 Prohibition on correspondent accounts for foreign shell
banks; records concerning owners of foreign banks and agents for
service of legal process.
* * * * *
(d) Closure of correspondent accounts. (1) Accounts existing on
October 28, 2002. In the case of any correspondent account that was in
existence on October 28, 2002, if the covered financial institution has
not obtained a certification (or recertification) from the foreign
bank, or has not otherwise obtained documentation of the information
required by such certification (or recertification), on or before March
31, 2003, and at least once every three years thereafter, the covered
financial institution shall close all correspondent accounts with such
foreign bank within a commercially reasonable time, and shall not
permit the foreign bank to establish any new positions or execute any
transaction through any such account, other than transactions necessary
to close the account.
* * * * *
Dated: December 18, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 02-32333 Filed 12-23-02; 8:45 am]
BILLING CODE 4810-02-P