[Federal Register Volume 67, Number 141 (Tuesday, July 23, 2002)]
[Rules and Regulations]
[Pages 48348-48352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19743]



[[Page 48347]]

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Part VI





Department of the Treasury





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31 CFR Part 103



Financial Crimes Enforcement Network; Anti-Money Laundering Programs; 
Special Due Diligence Programs for Certain Foreign Accounts; Final Rule

  Federal Register / Vol. 67 , No. 141 / Tuesday, July 23, 2002 / Rules 
and Regulations  

[[Page 48348]]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA29


Financial Crimes Enforcement Network; Anti-Money Laundering 
Programs; Special Due Diligence Programs for Certain Foreign Accounts

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

ACTION: Interim final rule.

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SUMMARY: Treasury and FinCEN are issuing an interim final rule 
temporarily deferring for certain financial institutions (as defined in 
the Bank Secrecy Act) the application of the requirements contained in 
section 5318(i) of title 31, United States Code, added by section 312 
of the Uniting and Strengthening America by Providing Appropriate Tools 
Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 
2001 (the Act). Section 5318(i) requires U.S. financial institutions to 
establish due diligence policies, procedures, and controls reasonably 
designed to detect and report money laundering through correspondent 
accounts and private banking accounts that U.S. financial institutions 
establish or maintain for non-U.S. persons. Section 312 takes effect on 
July 23, 2002, whether or not Treasury has issued a final rule 
implementing that provision. Additionally, this interim final rule 
provides guidance, pending issuance of a final rule, to those financial 
institutions for which compliance with section 5318(i) has not been 
deferred.

DATES: This interim final rule is effective July 23, 2002. Written 
comments may be submitted on or before August 22, 2002.

ADDRESSES: Submit comments (preferably an original and four copies) to 
FinCEN, P.O. Box 39, Vienna, VA 22183, Attn: Section 312 Interim 
Regulations. Comments may also be submitted by electronic mail to 
[email protected] with the caption in the body of the text, 
``Attention: Section 312 Interim 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; the Office of 
the Assistant General Counsel for Enforcement (Treasury), (202) 622-
1927; or the Office of the Chief Counsel (FinCEN), (703) 905-3590 (not 
toll-free numbers).

SUPPLEMENTARY INFORMATION: Treasury and FinCEN are exercising the 
authority under 31 U.S.C. 5318(a)(6) to temporarily defer the 
application of 31 U.S.C. 5318(i) to certain financial institutions 
pending issuance by Treasury and FinCEN of a final rule outlining the 
scope of coverage, duties, and obligations under that provision. 
Additionally, for those financial institutions for which compliance 
with section 5318(i) has not been deferred entirely, interim guidance 
is provided for compliance with the statute pending issuance of a final 
rule. Although this interim final rule and the guidance contained 
herein may be relied upon by financial institutions until superseded by 
a final regulation or subsequent guidance, no inference may be drawn 
from this rule concerning the scope and substance of the final 
regulation that Treasury will issue concerning section 5318(i).

I. Background

    Section 312 of the Act adds new subsection (i) to 31 U.S.C. 5318, 
the Bank Secrecy Act (BSA). This provision requires each U.S. financial 
institution that establishes, maintains, administers, or manages a 
private banking account or a correspondent account in the United States 
for a non-U.S. person to take certain anti-money laundering measures 
with respect to such accounts. In particular, financial institutions 
must establish appropriate, specific, and, where necessary, enhanced, 
due diligence policies, procedures and controls that are reasonably 
designed to enable the financial institution to detect and report 
instances of money laundering through those accounts.
    In addition to this general requirement, which applies to all 
correspondent and private banking accounts for non-U.S. persons, 
section 312 of the Act specifies additional standards for correspondent 
accounts maintained for certain foreign banks. For a correspondent 
account maintained for a foreign bank operating under an offshore 
license or a license granted by a jurisdiction designated as being of 
concern for money laundering, a financial institution must take 
reasonable steps to identify the owners of the foreign bank, to conduct 
enhanced scrutiny of the correspondent account to guard against money 
laundering, and to ascertain whether the foreign bank provides 
correspondent accounts to other foreign banks and, if so, to conduct 
appropriate related due diligence.
    Section 312 also sets forth minimum standards for the due diligence 
requirements for a private banking account for a non-U.S. person. 
Specifically, a financial institution must take reasonable steps to 
ascertain the identity of the nominal and beneficial owners of, and the 
source of funds deposited into, the private banking account, as 
necessary to guard against money laundering. The institution must also 
conduct enhanced scrutiny of private banking accounts requested or 
maintained by or on behalf of senior foreign political figures (or 
their family members or close associates). Enhanced scrutiny must be 
reasonably designed to detect and report transactions that may involve 
the proceeds of foreign corruption.
    Section 312(b)(2) provides that subsection 5318(i) takes effect on 
July 23, 2002, regardless of whether Treasury has issued a final rule 
by that date. Furthermore, it indicates that subsection 5318(i) applies 
to all accounts, regardless of when they were opened.

1. The Proposed Rule

    On May 30, 2002, Treasury and FinCEN published in the Federal 
Register a proposed rule implementing section 312. See 67 FR 37,736 
(May 30, 2002). In that proposed rule, Treasury sought to take the 
broad statutory mandate of section 312 and translate it into specific 
regulatory directives for financial institutions to apply. Like the 
statute itself, the rule proposed by Treasury is far reaching, seeking 
to require a wide range of U.S. financial institutions \1\ to apply due 
diligence and enhanced due diligence procedures to a diverse array of 
foreign financial institutions \2\ that maintain ``correspondent 
accounts'' or ``private

[[Page 48349]]

banking accounts'' in the U.S. The proposed rule sets forth a series of 
due diligence procedures that financial institutions covered by the 
rule may, and in many cases must, apply to correspondent accounts and 
private banking accounts. Because section 5318(i) takes effect on July 
23, 2002, regardless of whether Treasury has issued a final 
implementing regulation, Treasury imposed a 30-day period in which 
public comments on the proposed rule would be accepted.
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    \1\ Treasury proposed that the following financial institutions 
would be covered by the regulation: An insured bank (as defined in 
section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(h))); a commercial bank; an agency or branch of a foreign bank 
in the United States; a federally insured credit union; a thrift 
institution; a corporation acting under section 25A of the Federal 
Reserve Act (12 U.S.C. 611 et seq.); a broker or dealer registered, 
or required to register, with the Securities and Exchange Commission 
under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); a 
futures commission merchant registered, or required to register, 
under, and an introducing broker as defined in Sec. 1a23 of, the 
Commodity Exchange Act (7 U.S.C. 1 et seq.); a casino (as defined in 
Sec. 103.11(n)(5)); a mutual fund (as defined in Sec. 103.130); a 
money services business (as defined in Sec. 103.11(uu)); and an 
operator of a credit card system (as defined in Sec. 103.135).
    \2\ Foreign financial institutions include foreign banks and any 
other foreign person that, if organized in the United States, would 
be required to establish an anti-money laundering program pursuant 
to Secs. 103.120 through 103.169 of this part.
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2. The Final Rule

    A final rule implementing section 312 cannot reasonably be 
completed by the statutory effective date of July 23, 2002. Without 
question, the proposed rule implementing section 312 is the furthest 
reaching proposed regulation issued under Title III of the Act thus 
far. The requirements placed on financial institutions under this 
provision are significant, and commenters have raised substantial and 
important concerns about the scope of the regulation as well as the 
major definitions applicable to this section. For example, commenters 
consistently noted that the definitions of ``correspondent account,'' 
``covered financial institution,'' and ``foreign financial 
institution,'' were overly broad and difficult to implement. Likewise, 
commenters expressed concerns regarding the definition of ``senior 
foreign political figure.'' Moreover, the statute does not define many 
important terms with respect to financial institutions other than 
banks, leaving the task for Treasury and FinCEN. Additional time is 
necessary to consider carefully these definitions and the text of the 
proposed rule in light of comments received to determine whether these 
terms should be further defined with respect to each financial 
institution.
    Treasury anticipates issuing a final rule no later than October 25, 
2002.

3. Deferral of Application to Certain Financial Institutions

    Although section 312 is self-executing, in the absence of a final 
rule, many classes of financial institutions, in particular, non-bank 
financial institutions, would not have clear notice of, or guidance 
regarding, their compliance obligations. More pointedly, without 
regulations defining key terms for financial institutions other than 
banks, these financial institutions would not have sufficient guidance 
to comply with all facets of section 312. This situation necessarily 
stems from the fact that the statute seeks to cover a diverse universe 
of financial institutions and seeks to address a multitude of issues 
arising from the panoply of financial relationships that can exist with 
various foreign financial institutions. Treasury's role in this process 
is to draft a regulation, after obtaining public comment, that provides 
clear and unequivocal direction to financial institutions covered by 
the provision. Without clarifying appropriate terms for the various 
industries, enforcement of section 5318(i) against the full range of 
financial institutions proposed to be covered by section 312 will be 
difficult. Therefore, deferral is necessary and appropriate.
    Nor would it be appropriate for Treasury to insist on compliance 
with the terms of the proposed rule pending the completion of a final 
rule. We are still reviewing and analyzing the comments received and 
formulating the terms and scope of the final rule. Were Treasury to 
require strict compliance with the proposed rule, not only would it 
undermine the administrative process, but also it might require 
financial institutions to incur substantial costs to comply with 
provisions of the proposed rule that may be altered or eliminated.\3\ 
Without suggesting that such changes will be made, such a result is 
untenable.
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    \3\ Cf. CFTC v. Schor, 478 U.S. 833, 845 (1986) (noting the 
important distinction between a proposed rule and a final rule 
drafted based on a review of public comment).
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    Accordingly, invoking the authority under section 5318(a)(6) of the 
BSA, this interim final rule defers the application of all provisions 
of section 5318(i) to financial institutions other than banks, 
securities brokers and dealers, futures commission merchants, and 
introducing brokers.\4\ Banks must comply with all provisions of 
section 5318(i). Securities brokers and dealers, futures commission 
merchants, and introducing brokers must comply with the provisions of 
section 5318(i) relating to due diligence and enhanced due diligence 
for ``private banking accounts,'' but they are exempted from provisions 
related to correspondent accounts. The reason for this distinction is a 
practical one-the Act does not define a ``correspondent account'' for 
financial institutions other than banks, and Treasury needs time to 
consider whether the definition in the proposed rule is appropriate. In 
contrast, the definition of a private banking account in section 
5318(i) is not limited to banks and is both applicable and commonly 
understood with the securities and futures industries. Moreover, to the 
extent these financial institutions offer this type of account, the 
risks of money laundering are similar to the risks posed by banks 
offering such accounts. As a result, they will be required to comply 
with the provisions of section 5318(i) regarding private banking 
accounts pending Treasury's issuance of a final rule, consistent with 
the guidance set forth below.
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    \4\ ``Introducing brokers'' refers to those registered, or 
required to register, with the Commodity Futures Trading Commission.
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    In summary:
     Banks must comply with section 5318(i) pending Treasury's 
issuance of a final rule. For the purposes of this interim final rule, 
these include: An insured bank (as defined in section 3(h) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(h))); \5\ a commercial 
bank; an agency or branch of a foreign bank in the United States; a 
federally insured credit union; a thrift institution; and a corporation 
acting under section 25A of the Federal Reserve Act (12 U.S.C. 611 et 
seq.).\6\
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    \5\ This group of covered entities was drawn from the list of 
``covered financial institutions'' in the proposed rule. Treasury is 
evaluating whether to add uninsured national trust banks to this 
list at the final rule stage as these entities are currently 
required to have anti-money laundering programs. See 12 CFR 21.21. 
Treasury also will consider whether non-federally regulated, state 
chartered, uninsured trust companies and trust banks, and non-
federally insured credit unions should be added to the list to the 
extent that they maintain correspondent or private banking accounts 
for non-U.S. persons.
    \6\ For purposes of complying with section 5318(i) pending 
Treasury's issuance of a final rule, foreign branches of insured 
banks are deemed to be foreign banks rather than covered financial 
institutions.
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     Securities brokers and dealers registered, or required to 
register, with the Securities and Exchange Commission (SEC), and 
futures commission merchants and introducing brokers registered, or 
required to register, with the Commodity Futures Trading Commission 
(CFTC) must comply with provisions relating to private banking 
accounts, but their compliance with the remaining provisions of section 
5318(i) is deferred.
     Financial institutions subject to deferment of all 
obligations under section 5318(i) include: Casinos; money services 
businesses; mutual funds; operators of credit card systems; and all 
remaining financial institutions defined in the BSA that are not banks, 
securities brokers and dealers, futures commission merchants, or 
introducing brokers.\7\
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    \7\ The remaining financial institutions include: dealers in 
precious metals, stones, or jewels; pawnbrokers; loan or finance 
companies; private bankers; trust companies; state chartered credit 
unions that are not federally regulated; insurance companies; travel 
agencies; telegraph companies; sellers of vehicles, including 
automobiles, airplanes, and boats; persons engaged in real estate 
closings and settlements; investment companies; commodity pool 
operators; and commodity trading advisors.

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II. Compliance Obligations Pending Publication of the Final Rule

    Under the Act, Treasury is authorized to interpret and administer 
section 312. This interim final rule provides guidance to those 
financial institutions for which the application of section 5318(i) has 
not been deferred. Pending issuance of a final rule, Treasury expects 
compliance with section 5318(i) as set forth below. Treasury does not 
expect compliance with the terms and conditions of the proposed rule 
except to the extent they coincide with the express requirements of the 
statute. However, the interim compliance measures set forth in this 
guidance should not be construed as an indication of the obligations 
that will be imposed by the final rule.

1. Due Diligence for Correspondent Accounts--Banks Only

    With respect to correspondent accounts, section 5318(i)(1) requires 
U.S. financial institutions to establish due diligence policies, 
procedures, and controls reasonably designed to detect and report money 
laundering through correspondent accounts established, maintained, 
administered, or managed in the United States for a foreign financial 
institution. In the interim period before the issuance of a final rule, 
a due diligence program under section 5318(i)(1) will be reasonable in 
Treasury's view if it focuses compliance efforts on the correspondent 
accounts that pose a high risk of money laundering based on an overall 
assessment of the money laundering risks posed by the foreign 
correspondent institution. It is the expectation of Treasury that a 
bank will accord priority to conducting due diligence on high-risk 
foreign banks for which it maintains correspondent deposit accounts or 
their equivalents, and will focus foremost on correspondent accounts 
used to provide services to third parties. Treasury also expects banks 
to give priority to conducting due diligence on high-risk correspondent 
accounts maintained for foreign financial institutions other than 
foreign banks, such as money transmitters. In all cases, Treasury 
expects that a bank will accord priority in applying due diligence to 
accounts opened on or after July 23, 2002.
    Treasury acknowledges that, as a practical matter, banks will be 
unable to craft and implement final comprehensive due diligence 
policies and procedures pursuant to the dictates of section 5318(i)(1) 
until Treasury issues a final rule. However, in the interim, a 
reasonable due diligence policy, in Treasury's view, is one that 
comports with existing best practices standards for banks that maintain 
correspondent accounts for foreign banks,\8\ and evidences good faith 
efforts to incorporate due diligence procedures for correspondent 
accounts maintained for foreign financial institutions posing an 
increased risk of money laundering.
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    \8\ See, e.g., New York Clearing House Association, L.L.C., 
``Guidelines for Counter Money Laundering Policies and Procedures in 
Correspondent Banking,'' (March 2002) at www.nych.org; Basel 
Committee on Banking Supervision, ``Customer Due Diligence for 
Banks'' (October 2001) at www.bis.org. A due diligence program that 
does not adopt all of the best practices and standards described in 
industry and other available guidance also could be considered 
reasonable if there is a justifiable basis for not adopting a 
particular best practice or standard, based on the particular type 
of accounts held by the institution.
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2. Enhanced Due Diligence for High Risk Foreign Banks--Banks Only

    Section 5318(i)(2) requires U.S. financial institutions to 
establish enhanced due diligence policies and procedures applicable 
when opening or maintaining a correspondent account in the United 
States for certain foreign banks designated as high risk. Sections 
5318(i)(2)(B)(i) through (iii) further specify requirements that must 
be incorporated into a financial institution's enhanced due diligence 
policies and procedures.
    An enhanced due diligence program will be reasonable under section 
5318(i)(2)(B), in Treasury's view, if first, it comports with existing 
best practice standards for banks that maintain correspondent accounts 
for foreign banks.\9\ Second, the program must also focus enhanced due 
diligence measures on those correspondent accounts that are maintained 
by a foreign correspondent bank deemed high risk by section 
5318(i)(2)(A) posing a particularly high risk of money laundering based 
on the bank's overall assessment of the risk posed by the foreign 
correspondent bank. As with the previous provision, it is the 
expectation of Treasury that a bank will accord priority in applying 
enhanced due diligence to accounts opened on or after July 23, 2002.
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    \9\ See supra note 7.
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    Within these priorities, as required by the statute, banks must 
take reasonable steps to comply with directives described in sections 
5318(i)(2)(B)(i) through (iii). For purposes of section 
5318(i)(2)(B)(i), an owner is deemed to be any person who directly or 
indirectly owns, controls, or has voting power over 5 percent or more 
of any class of securities of a foreign bank, the shares of which are 
not publicly traded.

3. Due Diligence for Private Banking Accounts--Banks, Securities 
Brokers and Dealers, Futures Commission Merchants, and Introducing 
Brokers

    Sections 5318(i)(1) and (3) set forth due diligence requirements 
for U.S. financial institutions that maintain private banking accounts 
in the United States for non-U.S. persons.\10\ Under the Act, a private 
banking account is an account (or any combination of accounts) that 
requires minimum aggregate deposits of at least $1 million, that is 
established for one or more individuals, and that is assigned to or 
administered or managed by, in whole or in part, an officer, employee, 
or agent of a financial institution acting as liaison between the 
financial institution and the direct or beneficial owner of the 
account. Section 5318(i)(3)(A) requires financial institutions, as 
needed to guard against money laundering, to take reasonable steps to 
ascertain the identity of the nominal and beneficial owners of, and the 
source of funds deposited into, the account. Additionally, the statute 
requires enhanced scrutiny of private banking accounts maintained by or 
on behalf of senior foreign political figures, an immediate family 
member, or close associate, to guard against laundering the proceeds of 
foreign corruption.
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    \10\ For purposes of this interim final rule, a non-U.S. person 
means an individual who is neither a United States citizen nor a 
lawful permanent resident as defined in 26 U.S.C. 7701(b)(6).
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    As with the requirements for correspondent accounts, a private 
banking due diligence program under sections 5318(i)(1) and (3) must be 
reasonably designed to detect and report money laundering and the 
existence of the proceeds of foreign corruption. Treasury believes that 
a due diligence private banking program would be reasonable, pending 
adoption of final regulations to implement section 5318(i), if the 
program is focused on those private banking accounts that present a 
high risk of money laundering. A program that is consistent with 
applicable government guidance on private banking accounts, such as the 
guidance on sound practices for private banking issued by the Federal 
Reserve (SR 97-19 (SUP) ``Private Banking Activities'' (June 30, 1997) 
at www.federalreserve.gov) and the guidance on enhanced scrutiny for 
transactions that may involve the proceeds of foreign corruption issued 
jointly by Treasury, the bank regulators, and the State Department in 
January 2001 (at http://www.treas.gov/press/releases/docs/guidance.htm) 
would be reasonable, so long as it incorporates the

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requirements of section 5318(i)(3).\11\ Treasury expects that an 
institution will accord priority in applying enhanced due diligence to 
accounts opened on or after July 23, 2002.
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    \11\ See also, Wolfsberg Group, ``Global Anti-Money-Laundering 
Guidelines for Private Banking: Wolfsberg AML Principles'' (1st 
Revision May 2002) at www.wolfsberg-principles.com. A program that 
does not follow all of the best practices outlined in this 
government guidance would be reasonable if there is a justifiable 
basis, based on the particular circumstances of the institution 
involved, for not following these practices.
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III. Analysis of the Interim Final Rule

A. Banks, Savings Associations, and Credit Unions--Section 103.181

    The following financial institutions are not subject to the 
deferral contained in this interim final rule and must take steps, in 
light of the guidance provided above, to comply with the requirements 
of section 5318(i) pending issuance of a final implementing regulation: 
An insured bank (as defined in section 3(h) of the Federal Deposit 
Insurance Act (12 U.S.C. 1813(h))); a commercial bank; an agency or 
branch of a foreign bank in the United States; a federally insured 
credit union; a thrift institution; and a corporation acting under 
section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.).

B. Securities Brokers and Dealers, Futures Commission Merchants, and 
Introducing Brokers--Section 103.182

    Securities brokers and dealers registered, or required to register, 
with the SEC, and futures commission merchants and introducing brokers 
registered, or required to register, with the CFTC under the Commodity 
Exchange Act (7 U.S.C. 1 et seq.) are subject to the requirements of 
section 5318(i) relating to due diligence and enhanced due diligence 
relating to private banking accounts. They must take steps, in light of 
the guidance provided above, to comply with the requirements of section 
5318(i) relating to private banking accounts pending issuance of a 
final implementing regulation. Treasury and FinCEN are exercising the 
authority under BSA section 5318(a)(6) to temporarily defer the 
application of all other requirements contained in section 5318(i) for 
securities brokers and dealers, futures commission merchants, and 
introducing brokers.

C. All Other BSA Financial Institutions--Section 103.183

    Treasury and FinCEN are exercising the authority under BSA section 
5318(a)(6) to temporarily defer the application of all requirements 
contained in section 5318(i) for all other financial institutions. This 
temporary deferment applies to casinos; money services businesses; 
mutual funds; operators of credit card systems; dealers in precious 
metals, stones, or jewels; pawnbrokers; loan or finance companies; 
private bankers; \12\ trust companies; state chartered credit unions 
that are not federally insured; insurance companies; travel agencies; 
telegraph companies; sellers of vehicles, including automobiles, 
airplanes, and boats; persons engaged in real estate closings and 
settlements; investment companies; commodity pool operators; and 
commodity trading advisors.
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    \12\ A private banker under the BSA refers to state chartered 
banking entities that are not organized as a corporation. Generally, 
such entities are organized as partnerships. A private banker does 
not refer to those who offer private banking accounts.
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    This temporary deferral does not in any way relieve any financial 
institution from compliance with the existing anti-money laundering and 
anti-terrorism requirements imposed by law, regulation, or rule of a 
self-regulatory organization. Quite to the contrary, the obligations 
contemplated by section 312 will serve to augment and improve the 
existing anti-money laundering activities of financial institutions. To 
that end, Treasury and FinCEN expect financial institutions proposed to 
be subject to the regulation implementing section 312 to begin 
immediately the process of evaluating their due diligence procedures 
when correspondent accounts or private banking accounts are opened or 
maintained on behalf of non-U.S. persons.

IV. Administrative Procedure Act

    The provisions of 31 U.S.C. 5318(i), requiring due diligence 
programs for certain foreign accounts, become effective July 23, 2002. 
This interim rule exempts certain financial institutions from these 
requirements and provides interim compliance guidance for those 
financial institutions not exempted. Accordingly, good cause is found 
to dispense with notice and public procedure as unnecessary and 
contrary to the public interest, 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.

List of Subjects in 31 CFR Part 103

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

Authority and Issuance

    For the reasons set forth in the preamble, 31 CFR part 103 is 
amended as follows:

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

    1. The authority citation for part 103 is revised to read as 
follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5332; 
title III, secs. 312, 314, 352, Pub. L. 107-56, 115 Stat. 307.


    2. Add new undesignated centerheading ``Anti-Money Laundering 
Programs'' to subpart I immediately before Sec. 103.120.

    3. Add new undesignated centerheading and Secs. 103.181 through 
103.183 to subpart I to read as follows:

Special Due Diligence for Correspondent Accounts and Private Banking 
Accounts

Sec.
103.181  Special due diligence programs for banks, savings 
associations, and credit unions.
103.182  Special due diligence programs for securities brokers and 
dealers, futures commission merchants, and introducing brokers.
103.183  Deferred due diligence programs for other financial 
institutions.

Special Due Diligence for Correspondent Accounts and Private Banking 
Accounts


Sec. 103.181  Special due diligence programs for banks, savings 
associations, and credit unions.

    The requirements of 31 U.S.C. 5318(i) shall apply, effective July 
23, 2002, to a financial institution that is:
    (a) An insured bank (as defined in section 3(h) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(h)));
    (b) A commercial bank;
    (c) An agency or branch of a foreign bank in the United States;
    (d) A federally insured credit union;
    (e) A thrift institution; or
    (f) A corporation acting under section 25A of the Federal Reserve 
Act (12 U.S.C. 611 et seq.).

[[Page 48352]]

Sec. 103.182  Special due diligence programs for securities brokers and 
dealers, futures commission merchants, and introducing brokers.

    (a) Private banking accounts. The requirements of 31 U.S.C. 5318(i) 
relating to due diligence and enhanced due diligence for private 
banking accounts shall apply, effective July 23, 2002, to a financial 
institution that is:
    (1) A broker or dealer registered, or required to register, with 
the Securities and Exchange Commission under the Securities Exchange 
Act of 1934 (15 U.S.C. 78a et seq.); or
    (2) A futures commission merchant or introducing broker registered, 
or required to register, with the Commodity Futures Trading Commission 
under the Commodity Exchange Act (7 U.S.C. 1 et seq.).
    (b) Correspondent accounts. A financial institution described in 
paragraph (a) of this section is exempt from the requirements of 31 
U.S.C. 5318(i) relating to due diligence and enhanced due diligence for 
certain correspondent accounts.
    (c) Other compliance obligations of financial institutions 
unaffected. Nothing in this section shall be construed to relieve a 
financial institution from its responsibility to comply with any other 
applicable requirement of law or regulation, including title 31 of the 
United States Code and this part.


Sec. 103.183  Deferred due diligence programs for other financial 
institutions.

    (a) Exempt financial institutions. Except as provided in 
Sec. 103.181 and Sec. 103.182, a financial institution defined in 31 
U.S.C. 5312(a)(2) and (c)(1) or Sec. 103.11(n) is exempt from the 
requirements of 31 U.S.C. 5318(i).
    (b) Other compliance obligations of financial institutions 
unaffected. Nothing in this section shall be construed to relieve a 
financial institution from its responsibility to comply with any other 
applicable requirement of law or regulation, including title 31 of the 
United States Code and this part.

    Dated: July 19, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 02-19743 Filed 7-22-02; 8:45 am]
BILLING CODE 4810-02-P