FROM THE OFFICE OF PUBLIC AFFAIRS

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The Treasury Department today sent to the Federal Register a final rule extending by 90 days the deadline for U.S. depository institutions and securities broker-dealers to confirm that correspondent accounts maintained for foreign banks are not being used to provide services, directly or indirectly, to foreign shell banks.  This final rule similarly extends the deadline for the requirement that these two types of financial institutions obtain certain information from foreign banks for which they maintain correspondent accounts. The new deadline is March 31, 2003. 

Section 313 of the USA PATRIOT Act prohibits U.S. depository institutions and securities broker-dealers (“covered financial institutions”) from maintaining correspondent accounts for foreign shell banks, and requires that they take reasonable steps to ensure that they are not providing banking services to foreign shell banks indirectly through correspondent accounts maintained for other foreign banks.  A shell bank is a foreign bank with no physical presence in any jurisdiction. 

Section 319(b) of the Act requires any covered financial institution that provides a correspondent account to a foreign bank to maintain records of the owners of the foreign bank 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.  Final Treasury regulations issued in September 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.  Despite diligent efforts by U.S. financial institutions, the Treasury has learned that many covered financial institutions have not been able to obtain all required certifications from their foreign bank customers by this deadline.  Accordingly, the Treasury has determined that it is necessary and appropriate to extend this deadline for a brief period of 90 days to afford covered financial institutions an opportunity to secure the necessary certifications before terminating correspondent accounts.

The Treasury expects that this extension will be published in the Federal Register prior to December 26, 2002.  However, should publication be delayed, covered financial institutions will not be expected to begin the process of terminating accounts on that date.

Related Documents:

• Final Extention Rule