[Federal Register Volume 62, Number 14 (Wednesday, January 22, 1997)]
[Proposed Rules]
[Pages 3249-3252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1403]


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DEPARTMENT OF THE TREASURY
31 CFR Part 103

RIN 1506-AA15


Financial Crimes Enforcement Network; Proposed Amendments to the 
Bank Secrecy Act Regulations Regarding Reporting of Cross-Border 
Transportation of Certain Monetary Instruments

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is 
proposing to amend the regulations implementing the statute generally 
referred to as the Bank Secrecy Act to include instruments drawn by 
foreign banks on accounts in the United States within the definition of 
monetary instruments for purposes of the requirement under those 
regulations to report the physical transportation of currency or 
monetary instruments in an aggregate amount exceeding $10,000 into or 
out of the United States.

DATES: Written comments must be received on or before April 22, 1997.

ADDRESSES: Written comments should be submitted to: Office of 
Regulatory Policy and Enforcement, Financial Crimes Enforcement 
Network, Department of the Treasury, 2070 Chain Bridge Road, Vienna, 
Virginia 22182-2536, Attention: NPRM--Foreign Bank Drafts. For 
additional instructions on the submission of comments, see 
SUPPLEMENTARY INFORMATION under the heading ``Request for Comments on 
Specific Subjects.''
    Inspection of comments. Comments may be inspected at the Department 
of the Treasury between 10:00 a.m. and 4:00 p.m., in the Financial 
Crimes Enforcement Network (``FinCEN'') reading room, on the third 
floor of the Treasury Annex, 1500 Pennsylvania Avenue, N.W., 
Washington, D.C. 20220. Persons wishing to inspect the comments 
submitted should request an appointment by telephoning (202) 622-0400.

FOR FURTHER INFORMATION CONTACT: Roger G. Weiner, Assistant Director 
(Compliance and Enforcement), Office

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of Regulatory Policy and Enforcement, FinCEN, at (202) 622-0400, or 
Stephen R. Kroll, Legal Counsel, FinCEN, at (703) 905-3534.

SUPPLEMENTARY INFORMATION:

Introduction

    The Department of the Treasury (``Treasury'') proposes to expand 
the definition of ``monetary instrument'' for purposes of the Bank 
Secrecy Act rules. The expansion, contained in a proposed new paragraph 
(u)(1)(vi) of 31 CFR 103.11, would treat as a monetary instrument any 
bank draft, bank or cashier's check or similar instrument drawn by a 
bank operating outside of the United States on an account of that bank 
at a financial institution in the United States. The change in the 
definition of ``monetary instrument'' would apply for purposes of 31 
CFR 103.23 and other provisions of Part 103 that implement the 
provisions of 31 U.S.C. 5316 (Reports on exporting and importing 
monetary instruments). The proposed rule reflects the authority 
contained in 31 U.S.C. 5312(a)(3)(C), which was added to the Bank 
Secrecy Act by section 405(a) of the Money Laundering Suppression Act 
of 1994 (the ``Money Laundering Suppression Act''), Title IV of the 
Riegle Community Development and Regulatory Improvement Act of 1994, 
Pub. L. 103-325 (September 23, 1994).

Background

    The statute popularly known as the ``Bank Secrecy Act,'' Titles I 
and II of Pub. L. 91-508, as amended, codified at 12 U.S.C. 1829b, 12 
U.S.C. 1951-1959, and 31 U.S.C. 5311-5330, authorizes the Secretary of 
the Treasury, inter alia, to issue regulations requiring financial 
institutions to keep records and file reports that are determined to 
have a high degree of usefulness in criminal, tax, and regulatory 
matters, and to implement counter-money laundering programs and 
compliance procedures. Regulations implementing Title II of the Bank 
Secrecy Act (codified at 31 U.S.C. 5311-5330), appear at 31 CFR Part 
103. The authority of the Secretary to administer the Bank Secrecy Act 
has been delegated to the Director of FinCEN.
    The reporting of the transportation of currency or monetary 
instruments into or out of the United States at any one time in 
aggregate amounts exceeding $10,000 (and of the receipt of currency or 
monetary instruments in that amount transported into the United States) 
has long been a major component of the Department of the Treasury's 
implementation of the Bank Secrecy Act. The reporting requirement is 
imposed by 31 CFR 103.23, a rule issued under the broad authority 
granted to the Secretary of the Treasury by 31 U.S.C. 5316. Reports 
required by 31 CFR 103.23 are made on United States Customs Service 
Form 4790 (Report of International Transportation of Currency or 
Monetary Instruments); the form is commonly called a ``CMIR'' and the 
reporting requirement is sometimes referred to below as the ``CMIR 
reporting requirement.''
    As indicated, the CMIR reporting requirement applies to 
transportation not just of currency but also of certain non-currency 
monetary instruments. The statutory boundaries of the monetary 
instrument definition are set by 31 U.S.C. 5312(a)(3). Prior to 
enactment of the Money Laundering Suppression Act, paragraph (a)(3) 
provided that:

`monetary instruments' means--
    (A) United States coins and currency; and
    (B) as the Secretary may prescribe by regulation, coins and 
currency of a foreign country, travelers' checks, bearer negotiable 
instruments, bearer investment securities, bearer securities, stock 
on which title is passed on delivery, and similar material.

    Implementing rules reflecting the statutory language defined the 
term ``monetary instrument'' to include traveler's checks in any form; 
all negotiable instruments in bearer form, endorsed without 
restriction, made out to a fictitious payee, or otherwise in such form 
that title thereto passes upon delivery; incomplete instruments; and 
securities or stock in bearer form (or, again, otherwise in such form 
that title thereto passes upon delivery). See 31 CFR 103.11(u)(1) (ii)-
(iv).
    Section 405 of the Money Laundering Suppression Act added a third 
category to the definition of monetary instrument in 31 U.S.C. 
5312(a)(3), specifically for purposes of the CMIR reporting 
requirement. Under the new language, the definition could include:

    (C) as the Secretary of the Treasury shall provide by regulation 
for purposes of section 5316 [the CMIR reporting requirement], 
checks, drafts, notes, money orders, and other similar instruments 
which are drawn on or by a foreign financial institution and are not 
in bearer form.

    Enactment of the new, potentially extremely broad, authority 
reflected Congressional concern that the effect of the CMIR reporting 
requirement was being vitiated, and money laundering fostered, by the 
increasing flow into the United States of drafts (often called 
``foreign bank drafts'') drawn by banks outside the United States on 
dollar accounts of those banks at financial institutions in the United 
States. Although the foreign bank drafts were not in bearer form, and 
hence not subject to the CMIR reporting requirements under the existing 
terms of the rules, the drafts were the practical equivalent of 
currency or bearer instruments. The Conference Report on the Money 
Laundering Suppression Act explains:

    The Conferees' concern about these instruments stems from 
reports by Treasury that they are frequently used in money 
laundering schemes. . . . These drafts are U.S. dollar-denominated 
checks drawn by the foreign bank on its own account at a U.S. bank 
and sold to customers like cashier's checks.

    See H.R. Rep. 130-652 (the ``Conference Report''), 103d Cong., 2nd 
Sess. 189 (August 2, 1994). As the Conferees Noted, section 405 of the 
Money Laundering Suppression Act reflected descriptions of the problem 
and the need for corrective legislation to meet it, presented by the 
Assistant Secretary of the Treasury (Enforcement), the Director of 
FinCEN, and the United States Customs Service. See Conference Report, 
supra, at 189-190.1
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    \1\  The statement of Brian Bruh, then the Director of FinCEN, 
referred to at page 189 of the Conference Report, can be found in 
Serial No. 103-53, ``Anti-Money Laundering Efforts in Texas,'' Field 
Hearing Before the Committee on Banking, Finance and Urban Affairs 
of the House of Representatives, 103d Cong., 1st Sess. 110, 115-16 
(July 8, 1993). The statement of Ronald K. Noble, then Assistant 
Secretary of the Treasury (Enforcement), also referred to at page 
189 of the Conference Report, can be found in Serial No. 103-79, 
``H.R. 3235; The Anti-Money Laundering Act of 1993, Hearing before 
the Subcommittee on Financial Institutions Supervision, Regulation 
and Deposit Insurance, of the Committee on Banking, Finance and 
Urban Affairs of the House of Representatives, 103d Cong., 1st Sess. 
2, 6 (oral statement), 17 (questions from Chairman Neal) (October 
20, 1993) ; Assistant Secretary Noble's prepared statement can be 
found in Serial No. 103-79, supra, at 58, 64-65. See also, S. Hrg. 
103-574, the Anti-Money Laundering Act of 1993--S. 1664, Hearing 
before the Committee on Banking, Housing, and Urban Affairs, United 
States Senate, 103d. Cong., 2d Sess. 2, 4 (oral statement of 
Assistant Secretary Noble), 35, 37-38 (prepared statement of 
Assistant Secretary Noble) (March 15, 1994).
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    The resultant legislation was drawn broadly, to permit the 
Secretary of the Treasury as much flexibility as was necessary to deal 
with the use of non-bearer instruments to move the proceeds of crime 
into or out of the United States. The present notice of proposed 
rulemaking thus implements only so much of the permitted authority as 
the Department of the Treasury believes is required to deal with the 
issue that sparked the legislation: the sale outside the United States 
of bank drafts drawn on U.S. dollar accounts within the United States.

[[Page 3251]]

Explanation of Provisions

A. Overview

    The proposed regulations would expand the definition of monetary 
instrument, for purposes of the CMIR reporting requirement and related 
rules, to include official bank checks, cashier's checks, drafts, and 
similar instruments issued or made out by a foreign bank on an account 
in the name of, or maintained on behalf of, such foreign bank in the 
United States. Such instruments would hence become subject to the CMIR 
reporting requirements--i.e., reports would be required upon their 
transportation into or out of the United States in amounts that, by 
themselves or combined with currency or other instruments treated as 
monetary instruments for purposes of the reporting requirements, 
exceeded $10,000.

B. Expanded Definition of ``Monetary Instrument''

    The expanded definition of monetary instrument is contained in a 
proposed new paragraph 31 CFR 103.11(u)(1)(vi). 2 The definition 
itself is straightforward and relies to the extent possible upon the 
terms used in paragraph (u)(1)(iii) relating to negotiable instruments 
in bearer form. Similarly, the new definition does not change the CMIR 
reporting requirement's procedures or the placement of the filing 
obligation. Rather, it simply adds instruments drawn by foreign banks 
3 on accounts in the United States to the classes of monetary 
instruments that are to be counted in determining whether a cross-
border transportation of monetary instruments exceeding $10,000 has 
occurred.
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    \2\  No language in the monetary instrument definition is being 
deleted; the word ``and'' that separates current paragraphs (u)(1) 
(iv) and (v) of 103.11 is simply being moved to reflect the addition 
of a new paragraph (u)(1)(vi).
    \3\  ``Foreign bank'' is already a defined term in the Bank 
Secrecy Act regulations. See 31 CFR 103.11(o).
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C. Exemption for Interbank Collection and Reconciliation Process

    The Conference Report states that Congress intended that the 
expanded definition of monetary instrument should be implemented in 
such a way as to ``avoid unnecessary burdens on routine financial 
transactions of foreign financial institutions,'' and specifically 
notes that:

    An exemption should be prescribed with regard to CMIRs when the 
monetary instruments cross the border as part of the interbank 
collection and reconciliation process.

    Conference Report, supra, at 190. However, it is unclear whether 
any change in the relevant rules is necessary to accomplish that 
result, in light of the exemptions from the CMIR reporting requirement 
already contained in 31 CFR 103.23(c). Treasury intends to implement 
the new requirements consistently with the Congressional intent, and 
comments are thus specifically requested below upon whether additional 
language is required to avoid, or where that is impossible, to minimize 
burden, by virtue of the expanded definition of monetary instrument, 
upon either the interbank collection and reconciliation process or 
other aspects of routine financial transactions of foreign banks.

D. Coverage or Exemption of Instruments From Particular Nations

    Congress was aware, in considering the Money Laundering Suppression 
Act, that an expanded definition of monetary instrument for purposes of 
the CMIR reporting requirements would affect certain nations more than 
others. However, in light of the general obligations of the United 
States with respect to the trade in financial services, and in 
recognition of the continued ingenuity and flexibility of those who 
seek to launder the proceeds of crime, the authorizing legislation was 
general in scope. Congress noted only that:

    The Conferees * * * believe that Treasury, in adopting 
regulations under this section, should consider whether a foreign 
country is participating in the Financial Action Task Force (FATF), 
has implemented the FATF's recommendations for combatting money 
laundering, and has appropriate currency recordkeeping or reporting 
requirements.

    Conference Report, Id. Comments are specifically requested below on 
the best way to incorporate these considerations.

E. Request for Comments on Specific Subjects

    FinCEN specifically seeks comment on the following questions:
    1. Are additional changes necessary to prevent the imposition of 
burden on routine transactions of foreign banks as a result of the 
expanded definition of monetary instrument proposed in this document?
    2. Does commercial practice provide a basis for distinguishing 
between instruments drawn by foreign banks on dollar accounts in the 
United States and instruments drawn on such accounts by financial 
services providers outside the United States that are not banks?
    3. Are changes to the language of 31 CFR 103.23(c) necessary to 
exempt from the CMIR reporting requirements the transportation of the 
proposed new class of monetary instrument in the course of the 
interbank reconciliation and clearance process?
    4. Are other changes to the exemptions in 31 CFR 103.23(c) 
necessary to prevent unnecessary interference with commercial 
activities?
    5. What steps can and should be taken at this time, consistent with 
the obligations of the United States generally, to differentiate among 
particular nations in the application of the CMIR reporting 
requirements to the proposed new class of monetary instrument?
    6. What steps should be taken to publicize the new reporting 
requirement in advance of its effective date?
    In seeking guidance on these and other issues raised by this notice 
of proposed rulemaking, FinCEN is interested in hearing from all 
parties potentially affected by the proposed rule.
    Treasury is continuing to consider the need for modernization of 
the CMIR reporting requirements generally. Comments are requested on 
this matter as well.

Submission of Comments

    Comments on all aspects of the proposed regulation are welcome and 
will be considered if submitted in writing prior to April 22, 1997. An 
original and four copies of any comments must be submitted. All 
comments will be available for public inspection and copying, and no 
material in any such comments, including the name of any person 
submitting comments, will be recognized as confidential. Accordingly, 
material not intended to be disclosed to the public should not be 
submitted.

Proposed Effective Date

    The amendments to 31 CFR Part 103 proposed in this notice of 
proposed rulemaking will become effective 90 days following publication 
in the Federal Register of the final rule to which this notice of 
proposed rulemaking relates.

Special Analyses

    It has been determined that this notice of proposed rulemaking (i) 
is not subject to the ``budgetary impact statement'' requirement of 
section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4), and (ii) is not a significant regulatory action as defined in 
Executive Order 12866. It is not anticipated that this proposed rule, 
if adopted as a final rule, will have an annual effect on the economy 
of $100 million or more. Nor will it, if so adopted, affect adversely 
in a material

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way the economy, a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or state, local or 
tribal governments or communities. The proposed rule is neither 
inconsistent with, nor does it interfere with, actions taken or planned 
by other agencies. Finally, it raises no novel legal or policy issues.
    A ``description of the reasons why action by the agency is being 
considered'' and a ``succinct statement of the objectives of, and legal 
basis for, the proposed rule''--all as required by 5 U.S.C. 553(b)--are 
found elsewhere in this preamble.

Paperwork Reduction Act

    FinCEN hereby presents the following information concerning the 
retention of information on currency and monetary instruments, in 
accordance with requirements of the Paperwork Reduction Act of 1995, 44 
U.S.C. 3501 et seq., to assist those persons wishing to comment on the 
proposed information retention requirement.
    Title: Report of International Transportation of Currency or 
Monetary Instruments.
    Form Number: U.S. Customs Service Form 4790.
    OMB Number: 1506-0005.
    Description of Respondents: All persons.
    Estimated Number of Respondents: 250,000.
    Frequency: As required.
    Estimate of Total Annual Burden on Respondents: Reporting burden 
estimate = approximately 54,167 hours; recordkeeping burden estimate = 
8,333 hours. Estimated combined total of 62,500 hours per year.
    Estimate of Total Annual Cost to Respondents for Hour Burdens: 
Based on $20 per hour, the total cost of compliance with the proposed 
recordkeeping rule is estimated to be approximately $1,250,000.
    Estimate of Total Other Annual Costs to Respondents: None.
    Type of Review: Extension.
    FinCEN specifically invites comments on the following subjects: (a) 
Whether the proposed collection of information is necessary to further 
the purposes of the Bank Secrecy Act, including whether the information 
retained shall have practical utility; (b) the accuracy of FinCEN's 
estimate of the burden of the proposed collection of information; (c) 
ways to enhance the quality, utility, and clarity of the information to 
be retained; and (d) ways to minimize the burden of the collection of 
information on the affected industry, including through the use of 
automated storage and retrieval techniques or other forms of 
information technology.
    In addition, the Paperwork Reduction Act of 1995, supra, requires 
agencies to estimate the total annual cost burden to respondents or 
recordkeepers resulting from the retention of information. Thus, FinCEN 
also specifically requests comments to assist with this estimate. In 
this connection, FinCEN requests commenters to identify any additional 
costs associated with the retention of the information covered by the 
requirement.
    The information collection in the proposed rule has been submitted 
to the Office of Management and Budget for review under section 3507(d) 
of the Paperwork Reduction Act of 1995. Comments on the proposed 
collection may be directed to FinCEN, Office of Regulatory Policy and 
Enforcement, 2070 Chain Bridge Road, Suite 200, Vienna, VA 22182-2536, 
Attn: Paperwork Reduction Act, and to the Office of Information and 
Regulatory Affairs of OMB, Attn: Desk Officer for the Treasury 
Department. Responses to this request for comments from FinCEN will be 
summarized and included in the request for Office of Management and 
Budget approval. All comments will become a matter of public record.

List of Subjects in 31 CFR Part 103

    Authority delegations (Government agencies), Banks, banking, 
Currency, Foreign banking, Gambling, Investigations, Law enforcement, 
Reporting and recordkeeping requirements, Taxes.

Proposed Amendments to the Regulations

    Accordingly, 31 CFR Part 103 is proposed to be amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FOREIGN TRANSACTIONS

    1. The authority citation for Part 103 continues to read as 
follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.

    2. Section 103.11 is amended by:
    a. Removing the word ``and'' at the end of paragraph (u)(1)(iv);
    b. Removing the period and adding ``; and'' at the end of paragraph 
(u)(1)(v); and
    c. Adding new paragraph (u)(1)(vi).
    The addition reads as follows:


Sec. 103.11  Meaning of terms.

* * * * *
    (u) * * *
    (1) * * *
    (vi) For purposes of Sec. 103.23 and other provisions of this part 
implementing 31 U.S.C. 5316, official bank checks, cashier's checks, 
drafts, and similar instruments issued or made out by a foreign bank on 
an account in the name of, or maintained on behalf of, such foreign 
bank in the United States.
* * * * *
    Dated: January 15, 1997.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 97-1403 Filed 1-21-97; 8:45 am]
BILLING CODE 4820-03-P