[Federal Register Volume 67, Number 82 (Monday, April 29, 2002)]
[Rules and Regulations]
[Pages 21117-21121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10454]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA28


Financial Crimes Enforcement Network; Anti-Money Laundering 
Programs for Mutual Funds

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Interim final rule.

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SUMMARY: FinCEN is issuing this interim final rule to prescribe minimum 
standards applicable to mutual funds pursuant to the revised provision 
in the Bank Secrecy Act that requires financial institutions to 
establish anti-money laundering programs.

DATES: This interim final rule is effective April 24, 2002. Written 
comments may be submitted to FinCEN on or before May 29, 2002.

ADDRESSES: Submit comments (preferably an original and four copies) to 
FinCEN, P.O. Box 39, Vienna, VA 22183, Attn: Section 352 Mutual Fund 
Regulations. Comments may also be submitted by electronic mail to 
[email protected] with the caption in the body of the text, 
``Attention: Section 352 Mutual Fund Regulations.'' Comments may be 
inspected at FinCEN between 10 a.m. and 4 p.m. in the FinCEN Reading 
Room in Washington, DC. Persons wishing to inspect the comments 
submitted must request an appointment by telephoning (202) 354-6400 
(not a toll-free number).

FOR FURTHER INFORMATION CONTACT: Office of the Assistant General 
Counsel for Banking & Finance (Treasury), (202) 622-0480; Office of the 
Assistant General Counsel for Enforcement (Treasury), (202) 622-1927; 
or Office of Chief Counsel (FinCEN), (703) 905-3590 (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 are 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. Section 352(a) of the Act, which becomes 
effective on April 24, 2002, amends section 5318(h) of the BSA. As 
amended, section 5318(h)(1) requires every financial institution to 
establish an anti-money laundering program that includes, at a minimum 
(i) the development of internal policies, procedures, and controls; 
(ii) the designation of a compliance officer; (iii) an ongoing employee 
training program; and (iv) an independent audit function to test 
programs. Section 5318(h)(2) authorizes the Secretary, after consulting 
with the appropriate Federal functional regulator,\1\ to prescribe 
minimum standards for anti-money laundering programs, and to exempt 
from the application of those standards any financial institution that 
is not otherwise subject to BSA regulation.
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    \1\ The Federal functional regulator for mutual funds is the 
Securities and Exchange Commission (Commission).
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    Although the BSA includes ``an * * * investment company'' \2\ among 
the entities defined as financial institutions, FinCEN has not 
previously defined the term for purposes of the BSA. The Investment 
Company Act of 1940 (codified at 15 U.S.C. 80a-1 et seq.) (the 1940 
Act) defines investment company broadly \3\ and subjects those entities 
to comprehensive regulation by the Commission. However, entities 
commonly known as hedge funds, private equity funds and venture capital 
funds are specifically excluded from the 1940 Act definition of 
investment company.\4\ For purposes of the section 352 requirement that 
financial institutions establish anti-money laundering programs 
effective April 24, 2002, Treasury is limiting the application of this 
interim rule to those investment companies falling within the category 
of ``open-end company'' contained in section 5(a)(1) of the 1940 Act, 
which are commonly referred to as ``mutual funds.'' \5\
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    \2\ 31 U.S.C 5312(a)(2)(I).
    \3\ Section 3(a)(1) defines ``investment company'' as any issuer 
which (A) is or holds itself out as being engaged primarily, or 
proposes to engage primarily, in the business of investing, 
reinvesting, or trading in securities; (B) is engaged or proposes to 
engage in the business of issuing face-amount certificates of the 
installment type, or has been engaged in such business and has any 
such certificate outstanding; or (C) is engaged or proposes to 
engage in the business of investing, reinvesting, owning, holding, 
or trading in securities, and owns or proposes to acquire investment 
securities having a value exceeding 40 per centum of the value of 
such issuer's total assets (exclusive of Government securities and 
cash items) on an unconsolidated basis.
    \4\ Section 356 of the Act requires that the Secretary, the 
Federal Reserve and the Commission jointly submit a report to 
Congress, not later than October 26, 2002, on recommendations for 
effective regulations to apply the requirements of the BSA to 
investment companies as defined in section 3 of the 1940 Act, 
including persons that, but for the provisions that exclude entities 
commonly known as hedge funds, private equity funds, and venture 
capital funds, would be investment companies.
    \5\ By interim rule published elsewhere in this separate part of 
this issue of the Federal Register, Treasury is temporarily 
exempting investment companies other than mutual funds from the 
requirement that they establish anti-money laundering programs. 
Treasury is also temporarily deferring determining the definition of 
``investment company'' for purposes of the BSA. However, it is 
likely that those entities excluded from the definition of 
``investment company'' in the 1940 Act will be required to establish 
anti-money laundering programs pursuant to section 352.
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    Mutual funds are by far the predominant type of investment company. 
Other types of investment companies regulated by the Commission include 
closed-end companies and unit investment trusts. Closed-end companies 
typically sell a fixed number of shares in traditional underwritten 
offerings. Holders of closed-end company shares then trade their shares 
in secondary market transactions, usually on a securities exchange or 
in the over-the-counter market. Unit

[[Page 21118]]

investment trusts are pooled investment entities without a board of 
directors or investment adviser that offer investors redeemable units 
in an unmanaged, fixed portfolio of securities. Treasury will continue 
to consider the type of anti-money laundering program that would be 
appropriate for the issuers of these products, including the extent to 
which they pose a money laundering risk that is not more effectively 
covered by the anti-money laundering program of another financial 
institution involved in their distribution (e.g., a broker-dealer).
    Currently, almost 3000 active mutual funds are registered with the 
Commission. At the end of fiscal year 2001, these companies managed or 
sponsored 8,313 mutual fund portfolios. During the last few years, 
mutual fund assets have dramatically increased. Since 1980, the number 
of mutual fund portfolios has increased 1370 percent and their assets 
have increased 4,659 percent. During fiscal year 2000 alone, assets 
managed by mutual funds increased by more than $1.3 trillion. At the 
end of fiscal year 2001, mutual funds held $6.4 trillion--more than 
double the $3 trillion of insured deposits at commercial banks, and 
more than 95 per cent of the assets held by all investment companies 
regulated by the Commission. Approximately one-third of the assets 
managed by mutual funds are held in retirement accounts--both employer-
sponsored plans and Individual Retirement Accounts (``IRAs'').\6\
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    \6\ See The 1990s: A Decade of Expansion and Change in the U.S. 
Mutual Fund Industry, Perspective, Investment Company Institute 
(Vol. 6, No. 3, July 2000).
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    A mutual fund offers its shares continuously and is required to 
provide its shareholders the right to redeem shares at net asset value 
on a daily basis. Virtually all mutual funds are externally managed. 
Their operations are conducted by affiliated organizations and third 
party service providers. An investment adviser is primarily responsible 
for selecting portfolio investments consistent with the objectives and 
policies stated in the mutual fund's prospectus.\7\ Administrative 
services are usually conducted by an investment adviser or an 
unaffiliated third party.
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    \7\ Advisers to mutual funds must register with the Commission 
and comply with the requirements of the Investment Advisers Act of 
1940 (codified at 15 U.S.C. 80b-1 et seq.).
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    Mutual funds usually offer their shares to the public through a 
principal underwriter. Principal underwriters are regulated as broker-
dealers and are subject to National Association of Securities Dealers, 
Inc. rules.\8\ Mutual funds employ transfer agents to conduct 
recordkeeping and related functions. Transfer agents maintain records 
of shareholder accounts, calculate and disburse dividends, and prepare 
and mail shareholder account statements, federal income tax 
information, and other shareholder notices. Some transfer agents 
prepare and mail statements confirming shareholder transactions and 
account balances, and maintain customer service departments to respond 
to shareholder inquiries.
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    \8\ On April 22, 2002, the Commission approved NASD Regulation 
Rule 3011, which requires its member firms to develop, and a member 
of the firm's senior management to approve, programs designed to 
achieve and monitor compliance with the BSA and related regulations. 
See Securities Exchange Act Release No. 45798 (April 22, 2002).
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    A mutual fund is governed by a board of directors or trustees, 
which is responsible for overseeing the management of the fund's 
business affairs. In order to avail themselves of certain Commission 
exemptive rules, most funds' boards have a majority of directors who 
are independent of the fund's investment adviser or principal 
underwriter.
    In addition to purchasing shares directly from some mutual funds 
(``direct-sold funds''), investors may purchase mutual fund shares 
through a variety of distribution channels including broker-dealers 
(including sponsors of fund ``supermarkets'' where investors can 
purchase shares of several different mutual funds), insurance agents, 
financial planners, and banks. These alternative distribution channels 
usually maintain omnibus accounts with the mutual funds that they 
distribute. In these cases, the funds and their transfer agents do not 
know the identities of the individual investors. Only the distributor 
(e.g., a broker-dealer) will have contact with the individual 
investors, will receive and process individual investment and 
redemption requests, and will have access to individuals' trading 
activity.
    Because mutual funds do not usually receive from or disburse to 
shareholders significant amounts of currency, they are not as likely as 
banks to be used during the initial placement stage of the money 
laundering process. However, some structuring schemes used in the 
placement stage involve monetary instruments such as money orders, and 
money launderers could attempt to use mutual funds that accept these 
forms of payment. Money launderers would more likely attempt to use 
mutual fund accounts in the layering and integration stages of money 
laundering, rather than the placement stage. ``Layering'' involves the 
distancing of illegal proceeds from their criminal source through the 
creation of complex layers of financial transactions. Money launderers 
could use mutual fund accounts to layer their funds by, for example, 
sending and receiving money and wiring it quickly through several 
accounts and multiple institutions, or by redeeming fund shares 
purchased with illegal proceeds and then reinvesting the proceeds 
received in another fund. Layering could also involve purchasing funds 
in the name of a fictitious corporation or an entity designed to 
conceal the true owner. Mutual funds could also be used for integrating 
illicit income into legitimate assets. ``Integration'' occurs when 
illegal proceeds appear to have been derived from a legitimate source. 
For example, if an individual were to redeem fund shares that were 
purchased with illegal proceeds and direct that the proceeds be wired 
to a bank account in the person's own name, the transfer would appear 
legitimate to the receiving bank.
    A recent survey conducted by the General Accounting Office of 310 
direct-sold fund groups found that approximately 40 percent of those 
groups currently have some type of voluntary measures designed to 
prevent money laundering.\9\ However, those measures rarely go beyond 
restrictions on accepting currency, and thus do not address possible 
use by money launderers during the layering and integration phases.\10\ 
In light of this vulnerability, and after consultation with the 
Commission, Treasury has determined not to exercise its authority to 
exempt temporarily mutual funds from the section 352 requirement to 
implement anti-money laundering programs. Accordingly, the interim rule 
sets forth the minimum requirements applicable to such programs.
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    \9\ Before passage of the Act, the Investment Company Institute, 
a national association of the investment company industry, 
recommended procedures for funds to adopt to avoid being used by 
money launderers. See Money Laundering Compliance for Mutual Funds, 
Investment Company Institute, May 1999.
    \10\ Report to the Chairman, Permanent Subcommittee on 
Investigations, Committee on Governmental Affairs, U.S. Senate, 
Anti-Money Laundering Efforts in the Securities Industry, GAO-02-
111, October 2001.
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II. The Anti-Money Laundering Program

    The interim final rule requires that, by July 24, 2002, mutual 
funds develop and implement an anti-money laundering program reasonably 
designed to prevent them from being used to launder money or finance 
terrorist activities, which includes achieving and monitoring

[[Page 21119]]

compliance with the applicable requirements of the BSA and Treasury's 
implementing regulations.
    The legislative history of the Act explains that the requirement to 
have an anti-money laundering program is not a one-size-fits-all 
requirement. The general nature of the requirement reflects Congress' 
intent that each financial institution should have the flexibility to 
tailor its program to fit its business, taking into account factors 
such as size, location, activities, and risks or vulnerabilities to 
money laundering. This flexibility is designed to ensure that all firms 
subject to the statute, from the largest to the very small firms, have 
in place policies and procedures appropriate to monitor for anti-money 
laundering compliance.\11\
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    \11\ See USA PATRIOT Act of 2001: Consideration of H.R. 3162 
Before the Senate (October 25, 2001) (statement of Sen. Sarbanes); 
Financial Anti-Terrorism Act of 2001: Consideration Under Suspension 
of Rules of H.R. 3004 Before the House of Representatives (October 
17, 2001)(statement of Rep. Kelly)(provisions of the Financial Anti-
Terrorism Act of 2001 were incorporated as Title III in the Act).
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    In order to assure that this requirement receives the highest level 
of attention throughout the industry, the proposed rule requires that 
each company's program be approved in writing by its board of directors 
or trustees.\12\ The four required elements of the anti-money 
laundering program are discussed below.
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    \12\ The board's approval could be given at its first regularly 
scheduled meeting after the program is adopted.
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(1) Establish and Implement Policies, Procedures, and Internal Controls 
Reasonably Designed To Prevent the Mutual Fund From Being Used To 
Launder Money or Finance Terrorist Activities, Including But Not 
Limited to Achieving Compliance With the Applicable Provisions of the 
Bank Secrecy Act and the Implementing Regulations Thereunder

    Written policies and procedures, which form the basis of any 
compliance program, should set forth clearly the details of the 
program, including the responsibilities of the individuals and 
departments involved. Because mutual funds operate through a variety of 
different business models, one generic anti-money laundering program 
for this industry is not possible; rather, each mutual fund must 
develop a program based upon its own business structure. This requires 
that each mutual fund complex identify its vulnerabilities to money 
laundering and terrorist financing activity, understand the BSA 
requirements applicable to it, identify the risk factors relating to 
these requirements, design the procedures and controls that will be 
required to reasonably assure compliance with these requirements, and 
periodically assess the effectiveness of the procedures and controls.
    Policies, procedures, and internal controls should be reasonably 
designed to detect activities indicative of money laundering. 
Transactions that could indicate potential money laundering include the 
use of fraudulent checks and unusual wire activity. For example, an 
investment in a fund by check or checks drawn on the account of a third 
party or parties, or by one or more wire transfers from an account of a 
third party or parties, in each case unrelated to the investor, could 
be indicative of attempted money laundering. Other examples of ``red 
flags'' that may indicate potential illegal activity include frequent 
wire transfer activity to and from a cash reserve account, coming from 
or sent to the same bank; large deposits with relatively small fund 
investments; frequent purchases of fund shares followed by large 
redemptions, particularly if the resulting proceeds are wired to 
unrelated third parties or bank accounts in foreign countries; and 
transfers to accounts in countries where drugs are known to be produced 
or other high-risk countries.\13\
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    \13\ 18 U.S.C. 1956 and 1957 make it a crime for any person, 
including an individual or company, to engage knowingly in a 
financial transaction with the proceeds from any of a long list of 
crimes or ``specific unlawful activity.'' Although the standard of 
knowledge required is ``actual knowledge,'' actual knowledge 
includes ``willful blindness.'' Thus, a person could be deemed to 
have knowledge that proceeds were derived from illegal activity if 
he or she ignored ``red flags'' that indicated illegality.
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    Policies, procedures, and internal controls should also be 
reasonably designed to assure compliance with BSA requirements. The 
only BSA regulatory requirement currently applicable to mutual funds is 
the obligation to report on Form 8300 the receipt of cash or certain 
noncash instruments totaling more than $10,000 in one transaction or 
two or more related transactions.\14\ In order to develop a compliant 
anti-money laundering program, the program should be reasonably 
designed to detect and report not only transactions required to be 
reported on Form 8300, but also to detect activity designed to evade 
such requirements. Such activity, commonly known as ``structuring,'' 
may involve the purchase of more than $10,000 in fund shares with 
multiple money orders, travelers' checks, or cashiers' checks or other 
bank checks, each with a face amount of less than $10,000. Such methods 
of payment may be indicative of money laundering, particularly when the 
payment instruments were obtained from different sources or the 
payments were made at different times on the same day or on consecutive 
days or close in time.
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    \14\ See 31 CFR 103.30. If a mutual fund complex includes a 
registered broker-dealer (as principal underwriter) or a bank (as 
transfer agent), then those financial institutions would also be 
subject to separate BSA requirements.
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    We also note that mutual funds will be required to comply with BSA 
requirements regarding accountholder identification and verification 
pursuant to section 326 of the Act, as set forth in joint Treasury/
Commission regulations required to be issued by October 26, 2002, and 
are likely to become subject to additional BSA requirements, including 
filing suspicious activity reports. As mutual funds become subject to 
additional requirements, their compliance programs will obviously have 
to be updated to include appropriate policies, procedures, training, 
and testing functions.
    Because mutual funds typically conduct their operations through 
separate entities, which may or may not be affiliated, some elements of 
the compliance program will best be performed by personnel of these 
separate entities. It is permissible for a mutual fund to contractually 
delegate the implementation and operation of its anti-money laundering 
program to another affiliated or unaffiliated service provider, such as 
a transfer agent. Any mutual fund delegating responsibility for aspects 
of its anti-money laundering program to a third party must obtain 
written consent from the third party ensuring the ability of federal 
examiners to obtain information and records relating to the anti-money 
laundering program and to inspect the third party for purposes of the 
program. However, the mutual fund remains responsible for assuring 
compliance with this regulation. That means that it must take 
reasonable steps to identify the aspects of its operations that may 
give rise to BSA regulatory requirements or are vulnerable to money 
laundering or terrorist financing activity, develop and implement a 
program reasonably designed to achieve compliance with such regulatory 
requirements and prevent such activity, monitor the operation of its 
program and assess its effectiveness. For example, it would not be 
sufficient to simply obtain a certification from its delegate that it 
``has a satisfactory anti-money laundering program.''
    With respect to omnibus accounts, a mutual fund's anti-money 
laundering program could have a more limited scope. Typically, a fund 
has little or no

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information about the identities and transaction activities of the 
individual customers represented in an omnibus account. For example, 
when fund shares are sold through a broker-dealer, the broker-dealer 
has all of the relevant information about the customer. When that 
customer places an order for fund shares with her broker-dealer, her 
individual order is combined with all other purchase or redemption 
orders to the fund (or its transfer agent). That net order is then 
processed in the omnibus account. This rule does not require that a 
mutual fund obtain any additional information regarding individual 
transactions that are processed through another entity's omnibus 
account. Consequently, given Treasury's risk-based approach to anti-
money laundering programs for financial institutions generally, 
including mutual funds, it is not expected that mutual funds will 
scrutinize activity in omnibus accounts to the same extent as 
individual accounts. Nevertheless, mutual funds would need to analyze 
the money laundering risks posed by particular omnibus accounts based 
upon a risk-based evaluation of relevant factors regarding the entity 
holding the omnibus account, including such factors as the type of 
entity, its location, type of regulation, and of course, the viability 
of its anti-money laundering program.

(2) Provide for Independent Testing for Compliance To Be Conducted by 
Company Personnel or by a Qualified Outside Party

    It is necessary that a mutual fund conduct periodic testing of its 
program, in order to assure that the program is indeed functioning as 
designed. Such testing should be accomplished by personnel 
knowledgeable regarding BSA requirements. Such testing may be 
accomplished either by employees of the fund, its affiliates, or 
unaffiliated service providers so long as those same employees are not 
involved in the operation or oversight of the program. The frequency of 
such a review would depend upon factors such as the size and complexity 
of the mutual fund complex and the extent to which its business model 
may be more subject to money laundering than other institutions. A 
written assessment or report should be a part of the review, and any 
recommendations resulting from such review should, of course, be 
promptly implemented or submitted to the board for consideration.

(3) Designate a Person or Persons Responsible for Implementing and 
Monitoring the Operations and Internal Controls of the Program

    The mutual fund must charge an individual (or committee) with the 
responsibility for overseeing the anti-money laundering program. The 
person (or group of persons) should be competent and knowledgeable 
regarding BSA requirements and money laundering issues and risks, and 
empowered with full responsibility and authority to develop and enforce 
appropriate policies and procedures throughout the fund complex. 
Whether the compliance officer is dedicated full time to BSA compliance 
would depend upon the size and complexity of the fund complex. Although 
in many cases the implementation and operation of the compliance 
program will be conducted by entities (and their employees) other than 
the mutual fund, the person responsible for the supervision of the 
overall program should be a fund officer.

(4) Provide Ongoing Training for Appropriate Persons

    Employee training is an integral part of any anti-money laundering 
program. Employees of the fund (and of its affiliated and third-party 
service providers) must be trained in BSA requirements relevant to 
their functions and in recognizing possible signs of money laundering 
that could arise in the course of their duties, so that they can carry 
out their responsibilities effectively. Such training could be 
conducted by outside or in-house seminars, and could include computer-
based training. The level, frequency, and focus of the training would 
be determined by the responsibilities of the employees and the extent 
to which their functions bring them in contact with BSA requirements or 
possible money laundering activity. Consequently, the training program 
should provide both a general awareness of overall BSA requirements and 
money laundering issues, as well as more job-specific guidance 
regarding particular employees' roles and functions in the anti-money 
laundering program.\15\ For those employees whose duties bring them in 
contact with BSA requirements or possible money laundering activity, 
the requisite training should occur when the employee assumes those 
duties. Moreover, these employees should receive periodic updates and 
refreshers regarding the anti-money laundering program.
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    \15\ Appropriate topics for an anti-money laundering program 
include, but are not limited to: BSA requirements, a description of 
money laundering, how money laundering is carried out, what types of 
activities and transactions should raise concerns, what steps should 
be followed when suspicions arise, and OFAC and other government 
lists.
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    Finally, in addition to complying with the requirements of this 
interim regulation, mutual funds are encouraged to adopt procedures for 
voluntarily filing Suspicious Activity Reports with FinCEN and for 
reporting suspected terrorist activities to FinCEN using its Financial 
Institutions Hotline (1-866-566-3974).
    As an administrative matter, this rulemaking includes an amendment 
to the delegation of examination authority by FinCEN to the Commission, 
to enable the Commission to examine mutual funds for compliance with 
this regulation.

III. Implementation Date

    Pursuant to section 103.130(b), a mutual fund is required to comply 
with the anti-money laundering program requirements of 31 CFR 103.130 
by July 24, 2002.

IV. Administrative Procedure Act

    The provisions of 31 U.S.C. 5318(h)(1), requiring all financial 
institutions to establish anti-money laundering programs with at least 
four identified elements, become effective April 24, 2002. This interim 
rule provides guidance to mutual funds on how to comply with the law in 
effect on that date and does not impose any obligation on any financial 
institution that is not required by section 352 of the Act. 
Accordingly, good cause is found to dispense with notice and public 
procedure as unnecessary pursuant to 5 U.S.C. 553(b)(B), and to make 
the provisions of the interim rule effective in less than 30 days 
pursuant to 5 U.S.C. 553(d)(1) and (3).

V. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required for this 
interim final rule, the provisions of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.) do not apply.

VI. Executive Order 12866

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

VII. Paperwork Reduction Act

    This regulation is being issued without prior notice and public 
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). 
For this reason, the collection of

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information contained in this interim final rule has been reviewed 
under the requirements of the Paperwork Reduction Act (44 U.S.C. 
3507(j)) and, pending receipt and evaluation of public comments, 
approved by the Office of Management and Budget (OMB) under control 
number 1506-0020. An agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless it 
displays a valid control number assigned by OMB.
    Comments concerning the collection of information should be sent to 
the Office of Management and Budget, Attn: Alexander T. Hunt, Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
New Executive Office Building, Room 3208, Washington, DC 20503, with 
copies to FinCEN at Department of the Treasury, Financial Crimes 
Enforcement Network, Post Office Box 39, Vienna, Virginia, 22183.
    FinCEN specifically invites comments on the following subjects: (a) 
Whether the collection of information is necessary for the proper 
performance of the mission of FinCEN, including whether the information 
shall have practical utility; (b) the accuracy of FinCEN's estimate of 
the burden of the collection of information; (c) ways to enhance the 
quality, utility, and clarity of the information to be collected; (d) 
ways to minimize the burden of the collection of information on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and (e) estimates 
of capital or start-up costs and costs of operation, maintenance, and 
purchase of services to provide information.
    The collection of information in this interim final rule is in 31 
CFR 103.130(b). The information will be used by federal agencies to 
verify compliance by mutual funds with the provisions of 31 CFR 
103.130. The collection of information is mandatory. The likely 
recordkeepers are businesses.
    In accordance with the requirements of the Paperwork Reduction Act 
of 1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 
CFR 1320, the following information concerning the collection of 
information as required by 31 CFR 103.130(a) is presented to assist 
those persons wishing to comment on the information collection.
    Description of Recordkeepers: Mutual funds, as defined in 31 CFR 
103.130(a).
    Estimated Number of Recordkeepers: 3,000.
    Estimated Average Annual Burden Hours Per Recordkeeper: The 
estimated average burden associated with the collection of information 
in this interim final rule is 1 hour per recordkeeper.
    Estimated Total Annual Recordkeeping Burden: 3,000 hours.

List of Subjects in 31 CFR Part 103

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

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. 5311-5331; 
title III, secs. 314, 352, Pub. L. 107-56, 115 Stat. 307.


    2. In Subpart E, revise Sec. 103.56(b)(6) to read as follows:


Sec. 103.56  Enforcement.

* * * * *
    (b) * * *
    (6) To the Securities and Exchange Commission with respect to 
brokers and dealers in securities and investment companies as that term 
is defined in the Investment Company Act of 1940 (15 U.S.C. 80-1 et 
seq.);
* * * * *

    3. In subpart I, add new Sec. 103.130 to read as follows:


Sec. 103.130  Anti-money laundering programs for mutual funds.

    (a) For purposes of this section, ``mutual fund'' means an open-end 
company as defined in section 5(a)(1) of the Investment Company act of 
1940 (15 U.S.C. 80a-5(a)(1)).
    (b) Effective July 24, 2002, each mutual fund shall develop and 
implement a written anti-money laundering program reasonably designed 
to prevent the mutual fund from being used for money laundering or the 
financing of terrorist activities and to achieve and monitor compliance 
with the applicable requirements of the Bank Secrecy Act (31 U.S.C. 
5311, et seq.), and the implementing regulations promulgated thereunder 
by the Department of the Treasury. Each mutual fund's anti-money 
laundering program must be approved in writing by its board of 
directors or trustees. A mutual fund shall make its anti-money 
laundering program available for inspection by the Commission.
    (c) The anti-money laundering program shall at a minimum:
    (1) Establish and implement policies, procedures, and internal 
controls reasonably designed to prevent the mutual fund from being used 
for money laundering or the financing of terrorist activities and to 
achieve compliance with the applicable provisions of the Bank Secrecy 
Act and the implementing regulations thereunder;
    (2) Provide for independent testing for compliance to be conducted 
by the mutual fund's personnel or by a qualified outside party;
    (3) Designate a person or persons responsible for implementing and 
monitoring the operations and internal controls of the program; and
    (4) Provide ongoing training for appropriate persons.

    Dated: April 23, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 02-10454 Filed 4-24-02; 4:09 pm]
BILLING CODE 4810-02-P