[Federal Register Volume 66, Number 249 (Friday, December 28, 2001)]
[Proposed Rules]
[Pages 67460-67476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31849]



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Part IV





Department of the Treasury





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31 CFR Part 104



Departmental Offices; Counter Money Laundering Requirements--
Correspondent Accounts for Foreign Shell Banks; Recordkeeping and 
Termination of Correspondent Accounts for Foreign Banks; Proposed Rule

  Federal Register / Vol. 66 , No. 249 / Friday, December 28, 2001 / 
Proposed Rules  

[[Page 67460]]


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DEPARTMENT OF THE TREASURY

31 CFR Part 104

RIN 1505-AA87


Departmental Offices; Counter Money Laundering Requirements--
Correspondent Accounts for Foreign Shell Banks; Recordkeeping and 
Termination of Correspondent Accounts for Foreign Banks

AGENCY: Departmental Offices, Department of the Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of the Treasury (Treasury) is issuing a 
proposed rule to implement new provisions of the Bank Secrecy Act that: 
Prohibit certain financial institutions from providing correspondent 
accounts to foreign shell banks; require such financial institutions to 
take reasonable steps to ensure that correspondent accounts provided to 
foreign banks are not being used to indirectly provide banking services 
to foreign shell banks; require certain financial institutions that 
provide correspondent accounts to foreign banks to maintain records of 
the ownership of such foreign banks and their agents in the United 
States designated for service of legal process for records regarding 
the correspondent account; and require the termination of correspondent 
accounts of foreign banks that fail to turn over their account records 
in response to a lawful request of the Secretary of the Treasury 
(Secretary) or the Attorney General of the United States (Attorney 
General).

DATES: Written comments on the proposed rule may be submitted to the 
Treasury Department on or before February 11, 2002.

ADDRESSES: Submit comments (preferably an original and three copies) to 
Office of the Assistant General Counsel (Enforcement), Attention: 
Official Comment Record, Room 2000, Department of the Treasury, 1500 
Pennsylvania Ave., NW., Washington, DC 20220. Comments will be 
available for public inspection by appointment only at the Reading Room 
of the Treasury Library by advance arrangement. To make appointments, 
call (202) 622-0990 (not a toll-free number).

FOR FURTHER INFORMATION CONTACT: Gary W. Sutton, Senior Banking 
Counsel, Office of the Assistant General Counsel (Banking & Finance), 
(202) 622-1976, or William Langford, Attorney-Advisor, Office of the 
Assistant General Counsel (Enforcement), (202) 622-1932 (not toll-free 
numbers).

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 (USA PATRIOT) Act of 2001 (Public Law 
107-56) (the Act). Title III of the Act makes a number of amendments to 
the anti-money laundering provisions of the Bank Secrecy Act (BSA), 
which is codified in subchapter II of chapter 53 of title 31, United 
States Code. These amendments are intended to make it easier to 
prevent, detect, and prosecute international money laundering and the 
financing of terrorism. Two of these provisions become effective on 
December 26, 2001.
    First, section 313(a) of the Act adds a new subsection (j) to 31 
U.S.C. 5318 that prohibits a ``covered financial institution'' from 
providing ``correspondent accounts'' in the United States to foreign 
banks without a physical presence in any country (shell banks) and 
requires those financial institutions to take reasonable steps to 
ensure that correspondent accounts provided to foreign banks are not 
being used to indirectly provide banking services to foreign shell 
banks. The Department of the Treasury expects that covered financial 
institutions, as required by 31 U.S.C. 5318(j), will immediately 
terminate all correspondent accounts with any foreign bank that it 
knows to be a shell bank that is not a regulated affiliate as defined 
in the proposed rule, and will terminate any correspondent account with 
a foreign bank that it knows is being used to indirectly provide 
banking services to a foreign shell bank.
    Second, section 319(b) of the Act adds a new subsection (k) to 31 
U.S.C. 5318 that requires any covered financial institution that 
provides a correspondent account to a foreign bank to maintain records 
of the foreign bank's owners and agent in the United States designated 
to accept service of legal process for records regarding the 
correspondent account. Subsection (k) also authorizes the Secretary and 
the Attorney General to issue a summons or subpoena to any foreign bank 
that maintains a correspondent account in the United States and to 
request records relating to such account, including records maintained 
outside the United States relating to the deposit of funds into the 
foreign bank. If a foreign bank fails to comply with or contest the 
summons or subpoena, any covered financial institution with which the 
foreign bank maintains a correspondent account must terminate the 
account upon notice from the Secretary or the Attorney General.
    Under the Act, Treasury is authorized to interpret and administer 
these provisions. On November 20, 2001, Treasury issued Interim 
Guidance to banks, savings associations, and other depository 
institutions to assist them in meeting their compliance obligations 
under sections 5318(j) and (k).\1\ The Interim Guidance, published in 
the Federal Register on November 27, 2001 (66 FR 59342), included 
definitions of key terms in sections 5318(j) and (k) and a model 
certification that depository institutions may use as an interim means 
to assist them in meeting their obligations related to dealing with 
foreign shell banks under section 5318(j) and recordkeeping under 
section 5318(k). In issuing the Interim Guidance, Treasury stated that 
it may be relied upon by financial institutions until superseded by 
regulations or a subsequent notice. Treasury now is proposing to codify 
the Interim Guidance, with some modifications, as regulatory standards, 
and proposing standards applicable to securities brokers and dealers.
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    \1\ Treasury issued the interim guidance after consultation with 
the Department of Justice, the Office of the Comptroller of the 
Currency, the Office of Thrift Supervision, the staff of the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, the Commodity Futures Trading Commission, and 
the Securities and Exchange Commission. Treasury also consulted with 
these agencies in preparing this proposed rule.
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    When issuing the Interim Guidance, Treasury deferred addressing the 
compliance obligations of securities brokers and dealers with respect 
to the requirements of sections 5318(j) and (k), because the Act 
requires Treasury to define by regulation, after consultation with the 
Securities and Exchange Commission (SEC), the types of accounts 
maintained by brokers and dealers for foreign banks that are similar to 
correspondent accounts that depository institutions maintain for 
foreign banks. As further discussed below, Treasury is proposing to 
apply the requirements of sections 5318(j) and (k)(3)(B)(i) to brokers 
and dealers in the same manner that they apply to other covered 
financial institutions.
    The proposed rule also carries forward from the Interim Guidance, 
with some modifications, the model certification that covered financial 
institutions may use to assist them in meeting the requirements of 
sections 5318(j) and (k). Use of the model certification (Appendix A to 
part 104) will provide a covered financial institution with a safe 
harbor for

[[Page 67461]]

purposes of compliance with those sections. Treasury is proposing that 
covered financial institutions must verify the information provided by 
a foreign bank, or otherwise relied upon for purposes of sections 
5318(j) and (k), every two years or at any time a covered financial 
institution has reason to believe that the previously provided 
information is no longer accurate. The proposed rule also includes a 
model recertification (Appendix B to part 104), which also will provide 
a covered financial institution with a safe harbor in connection with 
the verification of previously provided information.
    Proposed section 104.40(f) provides special rules and safe harbors 
for a covered financial institution that, consistent with the Interim 
Guidance or this notice of proposed rulemaking, requests information 
from a foreign bank before the effective date of the final rule and 
receives such information not later than the date that is 90 days after 
the publication of the final rule. Such information will be deemed to 
satisfy the covered financial institution's obligations for purposes of 
the final rule until such time as the information must be verified.
    As an administrative matter, the proposed rule also establishes a 
new part 104 of title 31 of the Code of Federal Regulations. Part 104 
eventually will include other regulations implementing the anti-money 
laundering provisions of the Act for which Treasury is authorized or 
required to issue regulations. At this point, most of part 104 has been 
reserved for these future regulations.

II. Description of the Proposed Rule

 A. Limitations on Correspondent Accounts for Foreign Shell Banks

    Section 5318(j) provides that a ``covered financial institution'' 
shall not establish, maintain, administer, or manage a ``correspondent 
account'' in the United States for, or on behalf of, a shell bank that 
is not a regulated affiliate (as described below). In addition, a 
covered financial institution must take reasonable steps to ensure that 
any correspondent account established, maintained, administered, or 
managed by the covered financial institution in the United States for a 
foreign bank is not being used by that foreign bank to indirectly 
provide banking services to a foreign shell bank that is not a 
regulated affiliate.
1. What Is a Covered Financial Institution?
    For purposes of section 5318(j), the term ``covered financial 
institution'' is defined as: (1) Any insured bank (as defined in 
section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h))); 
(2) a commercial bank or trust company; (3) a private banker; (4) an 
agency or branch of a foreign bank in the United States; (4) a credit 
union; (5) a thrift institution; or (6) a broker or dealer registered 
with the SEC under the Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.). See 31 U.S.C. 5318(j)(1), 5312(a)(2). The proposed rule 
incorporates this statutory definition. Covered financial institutions 
include insured banks organized in U.S. territories, Puerto Rico, Guam, 
American Samoa, and the Virgin Islands, and corporations organized 
under section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.).
2. What Is a Correspondent Account?
    Section 5318(j) applies to any ``correspondent account'' 
established, maintained, administered, or managed by the covered 
financial institution in the United States for a foreign bank. For 
purposes of section 5318(j), ``correspondent account'' is defined with 
respect to banking institutions as ``an account established to receive 
deposits from, make payments on behalf of a foreign financial 
institution, or handle other financial transactions related to such 
institution.'' See 31 U.S.C. 5318A(e)(1)(B). The Act also defines the 
term ``account'' as ``a formal banking or business relationship 
established to provide regular services, dealings, and other financial 
transactions [and] includes a demand deposit, savings deposit, or other 
transaction or asset account and a credit account or other extension of 
credit.'' See 31 U.S.C. 5318A(e)(1)(A).
    Treasury, after consultation with the SEC, is required under the 
Act to define the types of accounts that come within the definition of 
``correspondent account'' for purposes of securities brokers' and 
dealers' compliance with section 5318(j). See 31 U.S.C. 5318A(e)(2). In 
addition, Treasury may further define the terms ``correspondent 
account'' and ``account'' as the Secretary deems appropriate. See 31 
U.S.C. 5318A(e)(4). Treasury intends to maintain parity in treatment 
between accounts provided to foreign banks by banks and broker-dealers, 
and to treat functionally equivalent accounts, whether maintained by 
banks or broker-dealers, in the same manner.
    The statutory definition of ``correspondent account'' is broadly 
worded; it is not limited to any particular type of account. The 
proposed rule incorporates the statutory definition of ``correspondent 
account.'' It includes, for example, any account that falls within the 
definition of ``transaction account'' under Regulation D of the Board 
of Governors of the Federal Reserve System (Federal Reserve).\2\ It 
also includes clearing and settlement accounts (which may also fall 
within the definition of ``transaction account''). Such accounts are 
typically used by foreign banks for remittance of funds in settlement 
of U.S. dollar transactions with parties other than the U.S. bank at 
which the account is maintained. In addition, foreign banks maintain 
fiduciary accounts with U.S. banks for the benefit of such foreign 
banks or their customers, including custody and escrow accounts. U.S. 
banks also establish time deposit accounts for foreign banks that are 
used by foreign banks primarily as funding mechanisms, as well as money 
market deposit accounts (``MMDAs'') that share limited use for 
transactions processing. In addition, U.S. banks engage in transactions 
with foreign banks in securities, derivatives, repurchase agreements, 
foreign exchange, and other instruments. To the extent that these 
transactions involve an account, they would be covered by the 
definition of ``correspondent account.''
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    \2\ 12 CFR 204.2(e).
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    In light of the broad statutory definitions of ``correspondent 
account'' and ``account'' for banking institutions, Treasury is 
proposing to apply the same definition for purposes of the types of 
broker-dealer accounts that are covered by section 5318(j). Thus, under 
the proposed rule, brokers and dealers must comply with section 5318(j) 
with respect to any account they provide in the U.S. to a foreign bank 
that permits the foreign bank to engage in securities transactions, 
funds transfers, or other financial transactions through that account. 
Such accounts would include, for example, the following: (1) Accounts 
to purchase, sell, lend or otherwise hold securities, either in a 
proprietary account or an omnibus account for trading on behalf of the 
foreign bank's customers on a fully disclosed or non-disclosed basis; 
(2) prime brokerage accounts that consolidate trading done at a number 
of firms; (3) accounts for trading foreign currency; (4) various forms 
of custody accounts for the foreign bank and its customers; (5) over-
the-counter derivatives accounts; and (6) futures accounts to purchase 
futures, which would be maintained primarily by broker-dealers that are 
dually registered as futures commission merchants.
    Treasury requests comments on the breadth of the definition of

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``correspondent account'' as applied to accounts maintained by 
depository institutions and brokers and dealers for foreign banks. 
Comments are requested on the extent to which different types of 
accounts may be used to provide financial services directly or 
indirectly to foreign shell banks. Comments are requested on the extent 
to which different types of accounts may be used to facilitate money 
laundering, terrorist financing, or other criminal transactions, 
including the extent to which different types of accounts may be used 
to disguise the nature, location, source, ownership, or control of the 
proceeds of unlawful activity. Treasury also seeks comments on whether 
particular types of accounts pose so little vulnerability to criminal 
transactions as to merit exclusion from the broad definition of 
``correspondent account,'' together with the reasons therefor. Comments 
also are requested on the adverse business implications for covered 
financial institutions, if any, of adopting a broad definition of 
``correspondent account'' for purposes of section 5318(j).
    Covered financial institutions may through their foreign branches 
establish, maintain, administer, or manage correspondent accounts for 
foreign banks. Because these foreign branches legally are part of 
covered financial institutions, Treasury considers these correspondent 
accounts to be maintained in the United States for purposes of section 
5318(j). In addition, Treasury has broad authority under the Act to 
establish anti-money laundering standards for U.S. financial 
institutions and their foreign branches. See 31 U.S.C. 5318(h). 
Therefore, the proposed rule applies to any correspondent accounts 
provided by a foreign branch of a covered financial institution to a 
foreign bank. Treasury requests comments on the extent to which such 
accounts are in fact established, maintained, administered or managed 
in the United States, as well as whether imposing this requirement on 
foreign branches of covered financial institutions is commensurate with 
the size, location, and activities of such institutions.
3. What Is a Foreign Bank?
    The Act does not define ``foreign bank.'' For purposes of the 
proposed rule, ``foreign bank'' is any organization that (1) Is 
organized under the laws of a foreign country, (2) engages in the 
business of banking, (3) is recognized as a bank by the bank 
supervisory or monetary authority of the country of its organization or 
principal banking operations, (4) and receives deposits in the regular 
course of its business. A ``foreign bank'' also includes a branch of a 
foreign bank located in a territory of the United States, Puerto Rico, 
Guam, American Samoa, or the Virgin Islands. A ``foreign bank'' does 
not include an agency or branch of a foreign bank located in the United 
States or an insured bank organized in a territory of the United 
States, Puerto Rico, Guam, American Samoa, or the Virgin Islands. Those 
entities are ``covered financial institutions'' under the statute. In 
addition, a foreign central bank or foreign monetary authority that 
functions as a central bank is not a ``foreign bank.'' Comments are 
requested on whether the term ``foreign bank'' should be defined more 
specifically.
4. What Is a Foreign Shell Bank?
    For purposes of section 5318(j), a foreign shell bank is a foreign 
bank without a physical presence in any country. See 31 U.S.C. 
5318(j)(1). ``Physical presence'' means a place of business that is 
maintained by a foreign bank and is located at a fixed address, other 
than solely a post office box or an electronic address, in a country in 
which the foreign bank is authorized to conduct banking activities, at 
which location the foreign bank: (1) Employs one or more individuals on 
a full-time basis; (2) maintains operating records related to its 
banking activities; and (3) is subject to inspection by the banking 
authority that licensed the foreign bank to conduct banking activities. 
See 31 U.S.C. 5318(j)(4)(B).
5. What Is a Regulated Affiliate?
    The limitations on the direct and indirect provision of 
correspondent accounts to foreign shell banks do not apply to a foreign 
shell bank that is a ``regulated affiliate.'' A regulated affiliate is 
a foreign shell bank that: (1) Is an affiliate of a depository 
institution, credit union, or foreign bank that maintains a physical 
presence in the United States or a foreign country, as applicable; and 
(2) is subject to supervision by a banking authority in the country 
regulating such affiliated depository institution, credit union, or 
foreign bank. An affiliate is a foreign bank that is controlled by or 
is under common control with a depository institution, credit union, or 
foreign bank. See 31 U.S.C. 5318(j)(3).
6. What Steps Must a Covered Financial Institution Take To Comply With 
Section 5318(j)?
    In order to comply with the limitations on the direct and indirect 
provision of correspondent accounts to foreign shell banks, a covered 
financial institution must ensure that each foreign bank to which it 
provides a correspondent account is not a shell bank, and take 
reasonable steps to ensure that correspondent accounts provided to such 
foreign banks are not being used to indirectly provide banking services 
to foreign shell banks. Although the proposed rule does not prescribe 
the manner in which a covered financial institution must satisfy its 
obligations under section 5318(j), it does provide a safe harbor if a 
covered financial institution uses the model certifications in Appendix 
A and Appendix B for these purposes. A covered financial institution 
that does not obtain, from a foreign bank or otherwise, the information 
necessary to fulfill its obligations under section 5318(j) within the 
prescribed time periods must terminate its correspondent account 
relationship with the concerned foreign bank.
    The Department of the Treasury expects that covered financial 
institutions, as required by 31 U.S.C. 5318(j), will immediately 
terminate all correspondent accounts with any foreign bank that it 
knows to be a shell bank that is not a regulated affiliate, and will 
terminate any correspondent account with a foreign bank that it knows 
is being used to indirectly provide banking services to a foreign shell 
bank. Because some correspondent accounts, at the time of termination, 
may contain open securities or futures positions, a covered financial 
institution may exercise its commercially reasonable discretion in 
liquidating such open positions (including, but not limited to, 
following its ordinary practices upon the default of a client). 
However, a covered financial institution must take reasonable steps to 
ensure that an account that is in the process of being terminated is 
not permitted to establish new positions.

B. Recordkeeping and Termination Requirements for Correspondent 
Accounts of Foreign Banks

    Under 31 U.S.C. 5318(k), as added by section 319(b) of the Act, any 
covered financial institution that maintains a correspondent account in 
the United States for a foreign bank shall maintain records in the 
United States identifying: (1) the owner(s) of such foreign bank; and 
(2) the name and address of a person (as defined in 31 CFR 103.11(z)) 
who resides in the United States and is authorized to accept service of 
legal process for records regarding the correspondent account.
    Section 5318(k) authorizes the Secretary and the Attorney General 
to issue a summons or subpoena to any

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foreign bank that maintains a correspondent account in the United 
States and request records related to such correspondent account, 
including records maintained outside of the United States relating to 
the deposit of funds into the foreign bank. The summons or subpoena may 
be served on the foreign bank in the United States if the foreign bank 
has a representative in the United States, or in a foreign country 
pursuant to any mutual legal assistance treaty, multilateral agreement, 
or other request for international law enforcement assistance.
    A covered financial institution must terminate any correspondent 
relationship with a foreign bank not later than 10 business days after 
receipt of written notice from the Secretary or the Attorney General 
(in each case, after consultation with the other) that the foreign bank 
has failed either: (1) to comply with the summons or subpoena issued; 
or (2) to initiate proceedings in a United States court contesting such 
summons or subpoena. See 31 U.S.C. 5318(k)(3)(C).
    If a covered financial institution fails to terminate the 
correspondent relationship upon receiving notice from the Secretary or 
the Attorney General, it is subject to a civil penalty of up to $10,000 
per day until the correspondent relationship is so terminated. A 
covered financial institution is not liable to any person in any court 
or arbitration proceeding for terminating a correspondent relationship 
in accordance with section 5318(k).
1. What Is a Covered Financial Institution?
    There is no statutory definition of ``covered financial 
institution'' for purposes of section 5318(k). For the following 
reasons, Treasury believes that ``covered financial institution'' in 
section 5318(k) should be read to have the same meaning as the 
identical term in section 5318(j), which includes brokers and dealers.
    Both sections 5318(j) and (k) deal with anti-money laundering 
efforts related to correspondent relationships between U.S. financial 
institutions and foreign banks. Congress expressly included brokers and 
dealers in the category of ``covered financial institutions'' under 
section 5318(j) and required Treasury to identify the types of accounts 
that brokers and dealers maintain for foreign banks that are similar to 
correspondent accounts. In addition, Congress provided that the same 
definition of ``correspondent account'' applies in both sections 
5318(j) and (k).
    Excluding brokers and dealers from the category of ``covered 
financial institutions'' subject to the recordkeeping requirements and 
account termination safeguards under section 5318(k) would be 
inconsistent with the statutory scheme and would not reflect a 
comprehensive approach to implementing the Act's anti-money laundering 
requirements. In addition, Treasury has broad authority under the Act 
to establish anti-money laundering standards for securities brokers and 
dealers. See 31 U.S.C. 5318(h). Consequently, under the proposed rule, 
brokers and dealers are covered financial institutions subject to 
section 5318(k).
2. What Accounts Are Covered?
    Section 5318(k) applies to ``correspondent accounts,'' which has 
the same meaning as in section 5318(j), i.e., an account established to 
receive deposits from, make payments on behalf of a foreign financial 
institution, or handle other financial transactions related to such 
institution. In light of the Act's use of the same definition of 
correspondent account in both sections 5318(j) and (k), Treasury 
believes that both sections should be read as coextensive in the types 
of accounts to which they apply.
3. Who Is an Owner of a Foreign Bank?
    Section 5318(k) does not define ``owner'' for purposes of the 
requirement that a covered financial institution maintain records of 
the owners of foreign banks to which it provides correspondent 
accounts. Treasury is proposing to define an ``owner'' as any person 
who is a ``large direct owner,'' an ``indirect owner,'' and a 
``reportable small direct owner.'' The proposed definition of each of 
these terms is discussed below. For purposes of these definitions, 
``person'' means any individual, bank, corporation, partnership, 
limited liability company, or any other legal entity, except that 
members of the same family \3\ shall be considered one person, and each 
family member who has an ownership interest in the foreign bank must be 
identified. ``Voting shares or other voting interests'' means shares or 
other interests that entitle the holder to vote for or select directors 
(or individuals exercising similar functions).
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    \3\ The same family means parents, spouses, children, siblings, 
uncles, aunts, grandparents, grandchildren, first cousins, second 
cousins, stepchildren, stepsiblings, parents-in-law and spouses of 
any of the foregoing.
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    The definition of ``owner'' applies only with respect to the 
provisions of section 5318(k), which are designed to facilitate the 
service of legal process. No inference may be drawn as to the 
applicability of this definition to other provisions of the Act, 
including the enhanced due diligence requirements of 31 U.S.C. 5318(i) 
(as added by section 312 of the Act), which sets forth different 
standards for reporting ownership information.
    Foreign banks that maintain U.S. branches or agencies are required 
by the Federal Reserve to file an Annual Report (FR Y-7), which lists 
the foreign bank's agent for service of process in the U.S. and 
information on the ownership of the foreign bank. The current FR Y-7 
generally requires the reporting of persons who own, directly or 
indirectly, 5 percent or more of any class of the voting shares of a 
foreign bank. A U.S. branch or agency of a foreign bank or other 
covered financial institution may use the relevant portions of a 
current FR Y-7 filed by the foreign bank to meet its recordkeeping 
obligations under section 5318(k) with respect to a correspondent 
account the U.S. branch or agency or other covered financial 
institution maintains for the foreign bank.
    The definition of ``owner'' in the proposed rule is intended to 
minimize reporting burdens by focusing on those persons who are likely 
to have the ability to exert influence over the operations of a foreign 
bank. The proposed definition necessarily reflects the complexity of 
ownership relationships, including those that can be used or structured 
to obscure controlling or influential owners of a foreign bank. The 
Department recognizes that the reporting regime of FR Y-7 is 
significantly simpler that the proposed definition, but believes that 
it would be more burdensome for foreign banks. Comments are 
specifically requested concerning whether the Treasury should use the 
ownership criteria of FR Y-7 in lieu of the definition of ``owner'' in 
the proposed rule.
a. Who Is a Small Direct Owner of a Foreign Bank?
    A ``small direct owner'' of a foreign bank is a person who owns, 
controls, or has power to vote less than 25 percent of the voting 
shares or other voting interests of the foreign bank. The identity of a 
small direct owner is not subject to reporting unless such person is a 
``reportable small direct owner.''
    A ``reportable small direct owner'' is: (1) Each of two or more 
small direct owners that in the aggregate own 25 percent or more of any 
class of the voting shares or other voting interests of the foreign 
bank and are majority-owned by the same person, or by a chain of

[[Page 67464]]

majority-owned persons; or (2) each of any one or more small direct 
owners that are majority-owned by another small direct owner and in the 
aggregate all such small direct owners own 25 percent or more of the 
voting shares or other voting interests of the foreign bank. In 
determining who is a ``reportable small direct owner,'' a small direct 
owner that owns or controls less than 5 percent of the voting shares or 
other voting interests of the foreign bank need not be taken into 
account.
b. Who Is a Large Direct Owner of a Foreign Bank?
    A ``large direct owner'' of a foreign bank is a person who: (1) 
Owns, controls, or has power to vote 25 percent or more of any class of 
voting shares or other voting interests of the foreign bank; or (2) 
controls in any manner the election of a majority of the directors (or 
individuals exercising similar functions) of the foreign bank. A 
covered financial institution must obtain the identity of each large 
direct owner of a foreign bank.
c. Who Is an Indirect Owner of a Foreign Bank?
    An indirect owner is any person in the ownership chain of any large 
direct owner or a reportable small direct owner who is not majority-
owned by another person. In determining who is an ``indirect owner,'' a 
small direct owner that owns or controls less than 5 percent of the 
voting shares or other voting interests of the foreign bank need not be 
taken into account. A covered financial institution must obtain the 
identity of each indirect owner of a foreign bank.
    For example, if any two or more small direct owners of a foreign 
bank (1) in the aggregate own, control, or have power to vote 25 
percent or more of any class of voting securities or other voting 
interests of the foreign bank, and (2) are majority-owned by the same 
person, or by the same chain of majority-owned persons, the ``indirect 
owner'' is any person in the ownership chain of those small direct 
owners who is not majority-owned by another person.
    Similarly, if one or more small direct owners of a foreign bank is 
majority-owned by another small direct owner and in the aggregate all 
such small direct owners own, control, or have power to vote 25 percent 
or more of any class of voting shares or other voting interests of the 
foreign bank, the ``indirect owner'' is (1) the small direct owner that 
is the majority-owner of the other small direct owner(s), or (2) any 
person in the ownership chain of the small direct owner that is the 
majority-owner of the other small direct owner(s) that is not majority-
owned by another person.
    Examples of reportable owners.
    Example 1. FB-1 is a foreign bank. Voting securities of FB-1 are 
owned by Person C (15 percent), Person D (35 percent), Person E (10 
percent), Person F (20 percent), and Person G (20 percent).
    Persons C and G are both majority-owned by Person X, which is 
majority-owned by Person Y, which is majority-owned by Person Z, 
which is not majority-owned by another person.
    Person D is majority-owned by Person V, which is majority-owned 
by Person W, which is not majority-owned by another person.
    Persons E and F are not owned by another person.
    Persons C, E, F, and G are small direct owners because each owns 
less than 25 percent of the voting securities of FB-1. The 
identities of Persons C and G are reportable small direct owners 
because: (1) In the aggregate they own more than 25 percent of the 
voting securities of FB-1; and (2) they are majority-owned by the 
same indirect owner Z. The identities of Persons E and F are not 
subject to reporting.
    Person D is a large direct owner because it owns 25 percent or 
more of the voting securities of FB-1. The identity of Person D is 
subject to reporting.
    Person W is an indirect owner because it is a majority-owner of 
Person V, which is a majority-owner of Person D. The identity of 
Person W is subject to reporting. The identity of Person V is not 
subject to reporting.
    Person Z is an indirect owner because it is a majority-owner of 
Person Y, which is a majority-owner of Person X, which is a 
majority-owner of Persons C and G, which are small direct owners 
that in the aggregate own 25 percent or more of the voting 
securities of FB-1. The identity of Person Z is subject to 
reporting. The identities of Persons Y and X are not subject to 
reporting.
    Example 2. FB-2 is a foreign bank. Voting securities of FB-2 are 
owned by Person K (20 percent) and Person L (10 percent). Person K 
is majority-owned by Person L. Person L is not majority-owned by 
another person. Persons K and L are small direct owners. However, 
Person L is also an indirect owner subject to reporting because: (1) 
Person L is a majority-owner of Person K; and (2) in the aggregate 
Persons K and L own more than 25 percent of the voting securities of 
FB-2. Person K is a reportable small direct owner for the same 
reason.
    Example 3. Same facts as in Example 2, except that Person L is 
majority-owned by Person M, who is majority-owned by Person N, who 
is not majority-owned by another person. In this example, Person N 
is an indirect owner subject to reporting because Person N is the 
person in the ownership chain of small direct owner Person L and is 
not majority-owned by another person. Persons K and L are reportable 
small direct owners. The identity of Person M is not subject to 
reporting.
    Example 4. FB-3 is a foreign bank. 30 percent of the voting 
securities of FB-2 are owned by 6 members of the same family (as 
defined in the proposed rule) in amounts ranging from 2 percent to 
10 percent. The 6 family members are considered to be one person who 
is a large direct owner of the bank. The identity of each of the 6 
family members is subject to reporting. Other family members who do 
not own voting securities in FB-3 are not subject to reporting.
4. What Steps Must a Covered Financial Institution Take To Comply With 
Section 5318(k)(3)(B)(i)?
    Although the proposed rule does not prescribe the manner in which a 
covered financial institution must obtain information concerning the 
identity of owners of foreign banks and their agents in the U.S. 
authorized to receive service of legal process, it does provide a safe 
harbor if a covered financial institution uses the model certifications 
in Appendix A and Appendix B for these purposes. A covered financial 
institution that does not obtain, from a foreign bank or otherwise, the 
information necessary to fulfill its obligations under section 
5318(k)(3)(B)(i) must terminate its correspondent account relationship 
with the concerned foreign bank.

III. Submission of Comments

    All comments will be available for public inspection and copying, 
and no material in any comments, including the name of any person 
submitting comments, will be recognized as confidential. Material not 
intended to be disclosed to the public should not be submitted.

IV. Regulatory Flexibility Act

    It is hereby certified that this proposed rule is not likely to 
have a significant economic impact on a substantial number of small 
entities. Covered financial institutions that are subject to the 
recordkeeping requirements in the statute and the proposed rule tend to 
be large institutions. Moreover, any economic consequences that might 
result from the prohibition on dealings with foreign shell banks, or 
from the failure of a foreign bank to provide the information necessary 
for a covered financial institution to fulfill its recordkeeping 
obligations, flow directly from the underlying statute. Accordingly, 
the analysis provisions of the Regulatory Flexibility Act (5 U.S.C. 601 
et seq.) do not apply.

V. Executive Order 12866

    This proposed rule is not a ``significant regulatory action'' as 
defined in Executive Order 12866. Accordingly, a regulatory assessment 
is not required.

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VI. Paperwork Reduction Act

    The collections of information contained in Appendix A to proposed 
31 CFR part 104 rulemaking have been previously reviewed and approved 
by the Office of Management and Budget (OMB) in accordance with the 
requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), 
and assigned OMB Control Number 1505-0184.
    The collection of information contained in Appendix B to proposed 
31 CFR part 104 and the recordkeeping requirement in proposed 31 CFR 
104.40(e) have been submitted to OMB for review in accordance with the 
requirements of the Paperwork Reduction Act. An agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid OMB control number.
    Comments concerning the collection of information should be 
directed to OMB, Attention: Desk Officer for the Department of the 
Treasury, Office of Information and Regulatory Affairs, New Executive 
Office Building, Washington, DC 20503, and to the Department of the 
Treasury at the address previously specified in the ADDRESSES portion 
of this preamble. Any such comments should be submitted not later than 
February 26, 2002.
    Comments are specifically requested concerning:
    Whether the collection of information is necessary for the proper 
performance of the functions of the Department of the Treasury, 
including whether the information will have practical utility;
    The accuracy of the estimated burden associated with the collection 
of information (see below), which was developed in part on the basis of 
discussions with industry representatives. The Department is 
particularly interested in comments concerning the number of covered 
financial institutions and the number of foreign banks for which 
correspondent accounts are maintained.
    How to enhance the quality, utility, and clarity of the information 
to be collected;
    How to minimize the burden of complying with the collection of 
information, including the application of automated collection 
techniques or other forms of information technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    This information will enable financial institutions to comply with 
the requirements of sections 31 U.S.C. 5318(j) and (k), and will be 
used by Federal agencies to verify compliance by covered financial 
institutions with these provisions. The respondents are foreign banks 
that establish or maintain correspondent accounts with U.S. financial 
institutions. The reporting of this information by foreign banking 
institutions is voluntary; however failure to provide the information 
may preclude the establishment or the continuation of correspondent 
accounts with U.S. financial institutions. The recordkeepers are 
covered financial institutions. The recordkeeping requirement 
concerning owners and agents of foreign banks is required by statute.
    Estimated total annual reporting burden for Appendix B: 45,000 
hours.
    Estimated number of respondents (foreign banks): 9,000.
    Estimated average annual reporting burden per respondent: 5 hours.
    Estimated frequency of responses: Once every 2 years.
    Estimated total annual recordkeeping burden: 18,000 hours.
    Estimated number of recordkeepers (covered financial institutions): 
2000.
    Estimated average annual recordkeeping burden per recordkeeper: 9 
hours.

List of Subjects in 31 CFR Part 104

    Banks, banking, Brokers, Counter money laundering, Counter-
terrorism, Currency, Foreign banking, Reporting and recordkeeping 
requirements.

    Dated: December 19, 2001.
David D. Aufhauser,
General Counsel.

Authority and Issuance

    For the reasons set forth in the preamble, the Treasury is 
proposing to amend 31 CFR subtitle B, chapter I by adding part 104 to 
read as follows:

PART 104--COUNTER MONEY LAUNDERING REQUIREMENTS

Subpart A--Definitions
Sec.
104.10   Definitions.
Subpart B--Anti Money Laundering Programs [Reserved]
Subpart C--Special Due Diligence for Correspondent Accounts and Private 
Banking Accounts
104.40   Records concerning owners of foreign banks and agents 
designated to receive service of legal process; prohibition on 
correspondent accounts for foreign shell banks.
104.50   [Reserved]
Subpart D--Law Enforcement Access to Foreign Bank Records
104.60   Summons or subpoena of foreign bank records.
104.70   Termination of correspondent relationship.
Subpart E--Cooperative Efforts to Deter Money Laundering [Reserved]
Appendix A to Part 104--Certification Regarding Correspondent 
Accounts
Appendix B to Part 104--Recertification Regarding Correspondent 
Accounts

    Authority: 31 U.S.C. 5318, 5318A; title III, secs 311, 313, 319, 
352, Pub. L. 107-56, 115 Stat. 298, 306, 311, 322.

Subpart A--Definitions


Sec. 104.10  Definitions.

    For purposes of subparts C and D of this part:
    (a) Attorney General means the Attorney General of the United 
States.
    (b) Correspondent account means an account established to receive 
deposits from, make payments on behalf of a foreign bank, or handle 
other financial transactions related to such bank.
    (c) Covered financial institution means:
    (1) An insured bank (as defined in section 3(h) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(h)) and any foreign branch of an 
insured bank;
    (2) A commercial bank or trust company;
    (3) A private banker;
    (4) An agency or branch of a foreign bank in the United States;
    (5) A credit union;
    (6) A thrift institution;
    (7) A corporation organized under section 25A of the Federal 
Reserve Act (12 U.S.C. 611 et seq.); and
    (8) A broker or dealer registered with the Securities and Exchange 
Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.).
    (d) Foreign bank. (1) The term foreign bank means any organization 
that:
    (i) Is organized under the laws of a foreign country;
    (ii) Engages in the business of banking;
    (iii) Is recognized as a bank by the bank supervisory or monetary 
authority of the country of its organization or principal banking 
operations; and
    (iv) Receives deposits in the regular course of its business.
    (2) For purposes of this definition:
    (i) The term foreign bank includes a branch of a foreign bank in a 
territory of the United States, Puerto Rico, Guam, American Samoa, or 
the Virgin Islands.
    (ii) The term foreign bank does not include:
    (A) A U.S. agency or branch of a foreign bank;

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    (B) An insured bank organized under the laws of a territory of the 
United States, Puerto Rico, Guam, American Samoa, or the Virgin 
Islands;
    (C) A foreign central bank or foreign monetary authority that 
functions as a central bank; and
    (D) The African Development Bank, Asian Development Bank, Bank for 
International Settlements, European Bank for Reconstruction and 
Development, Inter-American Development Bank, International Bank for 
Reconstruction and Development (the World Bank), International Finance 
Corporation, International Monetary Fund, North American Development 
Bank, African Development Bank, International Development Association, 
Multilateral Investment Guarantee Agency, and similar international 
financial institutions of which the United States is a member or as 
otherwise designated by the Secretary.
    (e) Foreign shell bank means a foreign bank without a physical 
presence in any country.
    (f) Majority-owned means a person who is owned 50 percent or more 
by another person.
    (g) Owner means any large direct owner, indirect owner, and 
reportable small direct owner. For purposes of this definition:
    (1) Large direct owner means a person who:
    (i) Owns, controls, or has power to vote 25 percent or more of any 
class of voting shares or other voting interests of the foreign bank; 
or
    (ii) Controls in any manner the election of a majority of the 
directors (or individuals exercising similar functions) of the foreign 
bank.
    (2) Small direct owner means a person who owns, controls, or has 
power to vote less than 25 percent of any class of voting shares or 
other voting interests of the foreign bank.
    (3) Reportable small direct owner. (i) Subject to paragraph 
(g)(3)(ii) of this section, the term reportable small direct owner 
means:
    (A) Each of two or more small direct owners who in the aggregate 
own 25 percent or more of any class of voting shares or other voting 
interests of the foreign bank and are majority-owned by the same 
person, or by the same chain of majority-owned persons; and
    (B) Each of one or more small direct owners who are majority-owned 
by another small direct owner and in the aggregate all such small 
direct owners own 25 percent or more of any class of voting shares or 
other voting interests of the foreign bank.
    (ii) In determining who is a reportable small direct owner for 
purposes of paragraph (g)(3)(i) of this section, a small direct owner 
who owns or controls less than 5 percent of the voting shares or other 
voting interests of the foreign bank need not be taken into account.
    (4) Indirect owner. (i) The term indirect owner means:
    (A) Any person in the ownership chain of any large direct owner who 
is not majority-owned by another person.
    (B) Any person, including a small direct owner who is a majority-
owner as described in paragraph (g)(3)(i)(B) of this section, in the 
ownership chain of any reportable small direct owner who is not 
majority-owned by another person.
    (ii) A person who is a reportable small direct owner as defined in 
paragraph (g)(3) of this section need not also be reported as an 
indirect owner under this paragraph (g)(4).
    (5) Person means any individual, bank, corporation, partnership, 
limited liability company, or any other legal entity. For purposes of 
this definition:
    (i) Members of the same family shall be considered to be one 
person.
    (ii) The term same family means parents, spouses, children, 
siblings, uncles, aunts, grandparents, grandchildren, first cousins, 
second cousins, stepchildren, stepsiblings, parents-in-law and spouses 
of any of the foregoing.
    (iii) Each member of the same family who has an ownership interest 
in a foreign bank must be identified if the family is an owner because 
of the aggregate ownership interests of the members of the family. In 
determining the ownership interests of the same family, any voting 
interest of any family member shall be taken into account.
    (6) Voting shares or other voting interests means shares or other 
interests that entitle the holder to vote for or select directors (or 
individuals exercising similar functions).
    (h) Person. Except with respect to paragraph (g) of this section, 
the term person shall have the same meaning as provided in 
Sec. 103.11(z) of this chapter.
    (i) Physical presence means a place of business that:
    (1) Is maintained by a foreign bank;
    (2) Is located at a fixed address (other than solely an electronic 
address or a post-office box) in a country in which the foreign bank is 
authorized to conduct banking activities, at which location the foreign 
bank:
    (i) Employs 1 or more individuals on a full-time basis; and
    (ii) Maintains operating records related to its banking activities; 
and
    (3) Is subject to inspection by the banking authority that licensed 
the foreign bank to conduct banking activities.
    (j) Regulated affiliate. (1) The term regulated affiliate means a 
foreign shell bank that:
    (i) Is an affiliate of a depository institution, credit union, or 
foreign bank that maintains a physical presence in the United States or 
a foreign country, as applicable; and
    (ii) Is subject to supervision by a banking authority in the 
country regulating such affiliated depository institution, credit 
union, or foreign bank.
    (2) For purposes of this definition:
    (i) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (ii) Control means:
    (A) Ownership, control, or power to vote 25 percent or more of any 
class of voting shares or other voting interests of another company; or
    (B) Control in any manner the election of a majority of the 
directors (or individuals exercising similar functions) of another 
company.
    (k) Secretary means the Secretary of the Treasury.

Subpart B--Anti Money Laundering Programs [Reserved]

Subpart C--Special Due Diligence for Correspondent Accounts and 
Private Banking Accounts


Sec. 104.40  Records concerning owners of foreign banks and agents 
designated to receive service of legal process; prohibition on 
correspondent accounts for foreign shell banks.

    (a) Requirements for covered financial institutions--(1) Records of 
owners and agents. A covered financial institution that maintains a 
correspondent account in the United States for a foreign bank shall 
maintain records in the United States identifying the owners of each 
such foreign bank and the name and address of a person who resides in 
the United States and is authorized, and has agreed to be an agent to 
accept service of legal process for records regarding each such 
account. For purposes of this section, any correspondent account 
maintained by a foreign branch of a covered financial institution for a 
foreign bank shall be deemed to be maintained in the United States.
    (2) Prohibition on correspondent accounts for foreign shell banks. 
(i) A covered financial institution shall not establish, maintain, 
administer, or manage a correspondent account in the United States for, 
or on behalf of, a foreign shell bank.
    (ii) A covered financial institution shall take reasonable steps to 
ensure

[[Page 67467]]

that any correspondent account established, maintained, administered, 
or managed by that covered financial institution in the United States 
for a foreign bank is not being used by that foreign bank to indirectly 
provide banking services to a foreign shell bank.
    (iii) Nothing in this paragraph (a)(2) prohibits a covered 
financial institution from providing a correspondent account or banking 
services to a regulated affiliate.
    (iv) For purposes of this paragraph (a)(2), any correspondent 
account established, maintained, administered, or managed by a foreign 
branch of a covered financial institution shall be deemed to be 
established, maintained, administered, or managed in the United States.
    (b) Safe harbor. Subject to paragraph (d) of this section, a 
covered financial institution will be deemed to be in compliance with 
the requirements of paragraph (a) of this section with respect to a 
foreign bank if the covered financial institution obtains from the 
foreign bank the certification described in Appendix A to this part 
(including all annexes thereto).
    (c) Verification requirements--(1) Biennial verification. At least 
once every 2 years, a covered financial institution shall verify the 
information previously provided by each foreign bank for which it 
maintains a correspondent account, or otherwise relied upon by the 
covered financial institution for purposes of this section.
    (2) Interim verification. If at any time a covered financial 
institution has reason to believe that any information provided by a 
foreign bank or otherwise relied upon by the covered financial 
institution for purposes of this section is no longer correct, the 
covered financial institution shall request that the foreign bank 
verify such information.
    (3) Safe harbor. Subject to paragraph (d) of this section, a 
covered financial institution will be deemed to continue to be in 
compliance with the requirements of this paragraph (c) and paragraph 
(a) of this section if the covered financial institution obtains from 
the foreign bank:
    (i) A revised Appendix A certification (including all annexes 
thereto); or
    (ii) The recertification described in Appendix B to this part.
    (d) Closure of correspondent accounts--(1) Accounts existing on 
[the date that is 30 days after the date of publication of the final 
rule in the Federal Register]. In the case of a foreign bank with 
respect to which a covered financial institution maintains a 
correspondent account that was in existence on [the date that is 30 
days after the date of publication of the final rule in the Federal 
Register], the covered financial institution shall close all 
correspondent accounts with such foreign bank not later than [the date 
that is 90 days after the date of publication of the final rule in the 
Federal Register] if the covered financial institution has not 
obtained, from the foreign bank or otherwise, the information described 
in Appendix A to this part (including all annexes thereto).
    (2) Accounts established after [the date that is 30 days after the 
date of publication of the final rule in the Federal Register]. In the 
case of a foreign bank with respect to which a covered financial 
institution establishes a correspondent account after [the date that is 
30 days after the date of publication of the final rule in the Federal 
Register], the covered financial institution shall close such account 
if the covered financial institution has not obtained, from the foreign 
bank or otherwise, the information described in Appendix A to this part 
(including all annexes thereto), or the information described in 
Appendix B to this part, not later than the date that is:
    (i) In the case of an account established before January 1, 2003, 
60 calendar days after the date the account is established; or
    (ii) In the case of an account established after December 31, 2002, 
30 calendar days after the date the account is established.
    (3) Verification of previously provided information. In the case of 
a foreign bank from which a covered financial institution requests a 
verification of information or with respect to which the covered 
financial institution otherwise undertakes to verify information 
pursuant to paragraph (c)(1) or (2) of this section, the covered 
financial institution shall close all correspondent accounts with such 
foreign bank if the covered financial institution has not obtained, 
from the foreign bank or otherwise, the information described in 
Appendix A to this part (including all annexes thereto) or the 
information described in Appendix B to this part, not later than the 
date that is:
    (i) In the case of a verification initiated before January 1, 2003, 
90 calendar days after the date of the request or otherwise undertaking 
the verification; or
    (ii) In the case of a verification initiated after December 31, 
2002, 60 calendar days after the date of the request or otherwise 
undertaking the verification.
    (4) Reestablishment of closed accounts and establishment of new 
accounts. A covered financial institution shall not reestablish any 
account closed pursuant to this paragraph, and shall not establish any 
other correspondent account with the concerned foreign bank, until it 
obtains, from the foreign bank or otherwise, the information described 
in Appendix A to this part (including all annexes thereto) or the 
information described in Appendix B to this part, as appropriate.
    (5) Limitation on liability. A covered financial institution shall 
not be liable to any person in any court or arbitration proceeding for 
terminating a correspondent relationship in accordance with this 
paragraph (d).
    (e) Recordkeeping requirement. A covered financial institution 
shall retain the original of any document provided by a foreign bank, 
and the original or a copy of any document otherwise relied upon by the 
covered financial institution, for purposes of this section, for at 
least 5 years after the date that the covered financial institution no 
longer maintains any account for such foreign bank. A covered financial 
institution shall retain such records with respect to any foreign bank 
for such longer period as the Secretary may direct.
    (f) Special rules concerning information requested prior to (the 
date that is 30 days after the date of publication of the final rule in 
the Federal Register)--(1) Definition. For purposes of this paragraph 
(f) the term ``Interim Guidance'' means:
    (i) The Interim Guidance of the Department of the Treasury dated 
November 20, 2001 \1\ and published in the Federal Register on November 
27, 2001; or
---------------------------------------------------------------------------

    \1\ The November 20, 2001 Interim Guidance may be found on the 
Treasury Internet site at http://www.treas.gov/press/releases/po813.htm.
---------------------------------------------------------------------------

    (ii) The provisions of this part as published in the Federal 
Register on December 28, 2001.
    (2) Safe harbors. (i) For purposes of paragraph (b) of this 
section, a covered financial institution that requested a foreign bank 
to provide the information described in the Interim Guidance prior to 
[the date that is 30 days after the date of publication of the final 
rule in the Federal Register] will be deemed to be in compliance with 
the requirements of paragraph (a) of this section with respect to such 
foreign bank if the foreign bank provides such information to the 
covered financial institution on or before [the date that is 90 days 
after the date of publication of the final rule in the Federal 
Register].
    (ii) Nothing in this section shall be construed to cause any 
information obtained pursuant to the Interim Guidance to be considered 
incorrect for

[[Page 67468]]

purposes of paragraph (c)(2) of this section if such information was 
obtained pursuant to a request to a foreign bank made prior to [the 
date that is 30 days after the date of publication of the final rule in 
the Federal Register] and received on or before [the date that is 90 
days after the date of publication of the final rule].
    (iii) For purposes of paragraph (d)(1) of this section, the 
reference in paragraph (d)(1) of this section to ``the information 
described in Appendix A to this part (including all annexes thereto)'' 
shall be deemed to refer to such information as described in the 
Interim Guidance if such information was obtained pursuant to a request 
to a foreign bank made prior to [the date that is 30 days after the 
date of publication of the final rule in the Federal Register] and 
received on or before [the date that is 90 days after the date of 
publication of the final rule].
    (3) Verification of information. For purposes of paragraph (c)(1) 
of this section, information obtained pursuant to a request to a 
foreign bank made prior to [the date that is 30 days after the date of 
publication of the final rule in the Federal Register] and received on 
or before [the date that is 90 days after the date of publication of 
the final rule] shall be verified in accordance with the definitions 
and requirements of this section.
    (4) Recordkeeping requirement. Paragraph (e) of this section shall 
apply to any document provided by a foreign bank, or otherwise relied 
upon by a covered financial institution, for purposes of the Interim 
Guidance.


Sec. 104.50  [Reserved]

Subpart D--Law Enforcement Access to Foreign Bank Records


Sec. 104.60  Summons or subpoena of foreign bank records.

    (a) Issuance to foreign banks. The Secretary or the Attorney 
General may issue a summons or subpoena to any foreign bank that 
maintains a correspondent account in the United States and request 
records related to such correspondent account, including records 
maintained outside of the United States relating to the deposit of 
funds into the foreign bank. The summons or subpoena may be served on 
the foreign bank in the United States if the foreign bank has a 
representative in the United States, or in a foreign country pursuant 
to any mutual legal assistance treaty, multilateral agreement, or other 
request for international law enforcement assistance.
    (b) Issuance to covered financial institutions. Upon receipt of a 
written request from a Federal law enforcement officer for information 
required to be maintained by a covered financial institution under 
Sec. 104.40, the covered financial institution shall provide the 
information to the requesting officer not later than 7 days after 
receipt of the request.


Sec. 104.70  Termination of correspondent relationship.

    (a) Termination upon receipt of notice. A covered financial 
institution shall terminate any correspondent relationship with a 
foreign bank not later than 10 business days after receipt of written 
notice from the Secretary or the Attorney General (in each case, after 
consultation with the other) that the foreign bank has failed:
    (1) To comply with a summons or subpoena issued under 
Sec. 104.60(a); or
    (2) To initiate proceedings in a United States court contesting 
such summons or subpoena.
    (b) Limitation on liability. A covered financial institution shall 
not be liable to any person in any court or arbitration proceeding for 
terminating a correspondent relationship in accordance with paragraph 
(a) of this section.
    (c) Failure to terminate relationship. Failure to terminate a 
correspondent relationship in accordance with this section shall render 
the covered financial institution liable for a civil penalty of up to 
$10,000 per day until the correspondent relationship is so terminated.

Subpart E--Cooperative Efforts To Deter Money Laundering [Reserved]

Appendix A to Part 104--Certification Regarding Correspondent Accounts

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