[Federal Register: November 4, 2008 (Volume 73, Number 214)]
[Proposed Rules]
[Page 65567-65568]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04no08-21]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA75
Financial Crimes Enforcement Network; Withdrawal of the Notice of
Proposed Rulemaking; Anti-Money Laundering Programs for Commodity
Trading Advisors
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Withdrawal of notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
withdrawing the notice of proposed rulemaking, dated May 5, 2003, in
which FinCEN proposed requiring commodity trading advisors to establish
and implement anti-money laundering programs.
DATES: The withdrawal is effective November 4, 2008.
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division, Financial Crimes Enforcement Network, (800) 949-2732.
SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''),
Public Law 107-56. Title III of the USA PATRIOT Act amended the anti-
money laundering provisions of the BSA, which is codified at 12 U.S.C.
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-5332. The
amendments were designed to promote the prevention, detection, and
prosecution of international money laundering and terrorist financing.
Regulations implementing the Bank Secrecy Act appear at 31 CFR Part
103. The authority of the Secretary of the Treasury (``the Secretary'')
to administer the Bank Secrecy Act and its implementing regulations has
been delegated to the Director of the Financial Crimes Enforcement
Network.\1\
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\1\ Accordingly, references herein to the Secretary's authority
apply equally to the Director of FinCEN.
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Section 352 of the USA PATRIOT Act amended section 5318(h) of the
BSA. Section 352 requires every financial institution to establish an
anti-money laundering program that includes, at a minimum, (1) The
development of internal policies, procedures, and controls; (2) the
designation of a compliance officer; (3) an ongoing employee training
program; and (4) an independent audit function to test programs.
Section 352 authorizes the Secretary, after consulting with the
appropriate Federal functional regulator,\2\ to prescribe minimum
standards for anti-money laundering programs, and to exempt from the
application of those standards any financial institution that is not
subject to rules implementing the BSA.
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\2\ In the case of commodity trading advisors, the appropriate
Federal functional regulator is the Commodity Futures Trading
Commission (``CFTC'').
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[[Page 65568]]
Commodity trading advisors are defined as financial institutions
under the BSA.\3\ In November 2002, FinCEN temporarily exempted certain
financial institutions, including commodity trading advisors, from the
requirement to establish and implement an anti-money laundering
program.\4\
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\3\ 31 U.S.C. 5312(c).
\4\ 31 CFR 103.170. See also Anti-Money Laundering Programs for
Financial Institutions, 67 FR 67547 (Nov. 6, 2002).
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II. The 2003 Notice of Proposed Rulemaking and Subsequent Developments
A. The 2003 Notice of Proposed Rulemaking
On May 5, 2003, FinCEN issued a notice of proposed rulemaking, in
which it proposed requiring commodity trading advisors to establish and
implement anti-money laundering programs.\5\ FinCEN proposed to apply
the rule to commodity trading advisors that are registered or required
to be registered with the Commodity Futures Trading Commission and that
direct client commodity futures or options accounts.
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\5\ Anti-Money Laundering Programs for Commodity Trading
Advisors, 68 FR 23640 (May 5, 2003).
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The comment period closed on July 7, 2003. FinCEN received three
comment letters in response to the notice of proposed rulemaking. One
of the comment letters was submitted by a registered futures
association, another was submitted by a futures industry trade
association, and the third was submitted by a commodity trading
advisor. Comments focused on four matters: (1) Relief from AML
obligations for certain commodity trading advisors; (2) allocation of
certain money laundering obligations between commodity trading advisors
and futures commission merchants; (3) liability issues for commodity
trading advisors when outsourcing the performance of AML functions; and
(4) access by federal examiners to the BSA records of a commodity
trading advisor.
B. Subsequent Developments
In June 2007, FinCEN announced that it would be taking a fresh look
at BSA regulation to ensure that it is being applied efficiently and
effectively across the industries that FinCEN regulates and the
industries FinCEN has proposed to regulate. As part of that initiative,
FinCEN is considering whether and to what extent it should impose
requirements under the BSA on commodity trading advisors and similar
entities.
As it considers its approach to commodity trading advisors, FinCEN
has determined that it will withdraw the notice of proposed rulemaking
that was published in May 2003. Given the passage of time, FinCEN has
determined that it will not proceed with an anti-money laundering
program requirement for commodity trading advisors without publishing a
new proposal. This will give industry and other interested parties an
opportunity to provide comment on the contents of any such proposal, as
it may be affected by any developments since 2003 in industry
operations as well as functional and BSA regulation.
Finally, since the time that the notice of proposed rulemaking was
published, FinCEN has concluded the major rulemakings required by the
USA PATRIOT Act for banks, broker-dealers, and futures commission
merchants. Each of these institutions is subject to a comprehensive set
of requirements under the BSA including, among other things, the
obligation to establish and implement an anti-money laundering
program,\6\ the obligation to establish and implement a customer
identification program,\7\ the obligation to establish and implement a
special due diligence program for foreign correspondent accounts and
foreign private banking accounts,\8\ the obligation to detect and
report suspicious activity,\9\ and the obligation to file currency
transaction reports.\10\
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\6\ 31 CFR 103.120.
\7\ 31 CFR 103.121-103.123.
\8\ 31 CFR 103.176 and 103.178.
\9\ 31 CFR 103.17-103.19.
\10\ 31 CFR 103.22.
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Commodity trading advisors must conduct financial transactions for
their clients through other financial institutions that are subject to
BSA regulations. A client's commodity interests in particular must be
carried with a futures commission merchant. Thus, as FinCEN continues
to consider the extent to which BSA requirements should be imposed on
commodity trading advisors, their activity is not entirely outside the
current BSA regulatory regime.
III. Withdrawal of the Notice of Proposed Rulemaking
For the foregoing reasons, the notice of proposed rulemaking, in
which FinCEN proposed requiring certain commodity trading advisors to
establish and implement anti-money laundering programs, as published in
the Federal Register on May 5, 2003 (68 FR 23640), is hereby withdrawn.
Dated: October 29, 2008.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. E8-26204 Filed 11-3-08; 8:45 am]
BILLING CODE 4810-02-P