[Federal Register Volume 67, Number 247 (Tuesday, December 24, 2002)]
[Rules and Regulations]
[Pages 78383-78384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32333]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA35


Financial Crimes Enforcement Network; Anti-Money Laundering 
Requirements--Correspondent Accounts for Foreign Shell Banks; 
Recordkeeping and Termination of Correspondent Accounts for Foreign 
Banks

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

ACTION: Final rule.

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SUMMARY: FinCEN is issuing this final rule to extend the time by which 
certain financial institutions must obtain information from each 
foreign bank for which they maintain a correspondent account concerning 
the foreign bank's status as ``shell'' bank, whether the foreign bank 
provides banking services to foreign shell banks, certain owners of the 
foreign bank, and the identity of a person in the United States to 
accept service of legal process.

DATES: This final rule is effective December 24, 2002.

FOR FURTHER INFORMATION CONTACT: Office of the Chief Counsel (FinCEN), 
(703) 905-3590; Office of the Assistant General Counsel for Banking & 
Finance (Treasury), (202) 622-0480, or Office of the Assistant General 
Counsel for Enforcement (Treasury), (202) 622-1927 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

I. Background

    On September 26, 2002, FinCEN published a final rule (67 FR 60562) 
implementing sections 313(a) and 319(b) of the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (the 
Act). Section 313(a) of the Act added subsection (j) to 31 U.S.C. 5318, 
which prohibits a ``covered financial institution'' from providing 
``correspondent accounts'' in the United States to foreign banks that 
do not have a physical presence in any country (foreign shell banks). 
Section 313(a) also requires those financial institutions to take 
reasonable steps to ensure that correspondent accounts provided to 
foreign banks are not being used to provide banking services indirectly 
to foreign shell banks. Section 319(b) of the Act added subsection (k) 
to 31 U.S.C. 5318, which requires any covered financial institution 
that provides a correspondent account to a foreign bank to maintain 
records of the foreign bank's owners and to maintain the name and 
address of an agent in the United States designated to accept service 
of legal process for the foreign bank for records regarding the 
correspondent account.
    The September 26, 2002, final rule provided that a covered 
financial institution could satisfy the requirements of section 313(a) 
and 319(b) by obtaining from a foreign bank a certification that 
contained the necessary information, or by otherwise obtaining 
documentation of the required information. With respect to 
correspondent accounts that existed on October 28, 2002, the final rule 
required a covered financial institution to close a correspondent 
account, within a commercially reasonable time, if the covered 
financial institution did not receive the certification from the 
foreign bank, or otherwise obtain documentation of the required 
information, on or before December 26, 2002.
    A significant number of covered financial institutions, principally 
in the securities industry, have noted that the December 26, 2002, 
deadline to obtain the required information is proving to be 
inadequate. Many securities firms indicated that providing an effective 
explanation of their duties under the Act to a wide variety of foreign 
banks, which may speak different languages and operate in different 
ways than their U.S. counterparts, has, in some cases, lengthened the 
process. Moreover, the broad definition of a correspondent account 
found in the final rule has increased the number of accounts subject to 
these requirements and, consequently, has increased the burden on U.S. 
banks and broker-dealers to secure the required information. Finally, 
because the Act has generally increased the overall level of regulatory 
requirements for securities firms and depository institutions, they 
have been managing an increased overall workload as a result of 
additional regulations, within a finite set of resources. For these 
reasons, the process of gathering the necessary information to comply 
with section 313(a) and 319(b) of the Act is taking longer than the 
time provided in the September 28 final rule.

II. The Current Rulemaking

    This rule extends the time by which a covered financial institution 
must obtain the information required to satisfy the requirements of 
sections 313(a) and 319(b) from December 26, 2002, to March 31, 2003. 
Treasury and FinCEN do not anticipate granting a further extension 
beyond March 31 and expect that covered financial institutions will 
comply with the September 26, 2002, final rule with respect to 
correspondent accounts established for foreign banks that have not 
provided the required information by that date.

III. Procedural Requirements

    Because this rule extends the time by which a covered financial 
institution must obtain the information necessary to satisfy the 
requirements of section 313(a) and 319(b) of the Act before taking 
actions to terminate a correspondent account, it has been determined 
that notice and public procedure are unnecessary pursuant to 5 U.S.C. 
553 (b)(B) and that a delayed effective date is not required pursuant 
to 5 U.S.C. 553(d)(1).
    It has been determined that this rule is not a significant 
regulatory action for

[[Page 78384]]

purposes of Executive Order 12866. Because no notice of proposed 
rulemaking is required, the provisions of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.) do not apply.

List of Subjects in 31 CFR Part 103

    Banks and 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. 5311-5314 
and 5316-5332; title III, secs. 312, 313, 314, 319, 352, Pub. L. 
107-56, 115 Stat. 307.

    2. Section 103.177 is amended by revising paragraph (d)(1) to read 
as follows:


Sec.  103.177  Prohibition on correspondent accounts for foreign shell 
banks; records concerning owners of foreign banks and agents for 
service of legal process.

* * * * *
    (d) Closure of correspondent accounts. (1) Accounts existing on 
October 28, 2002. In the case of any correspondent account that was in 
existence on October 28, 2002, if the covered financial institution has 
not obtained a certification (or recertification) from the foreign 
bank, or has not otherwise obtained documentation of the information 
required by such certification (or recertification), on or before March 
31, 2003, and at least once every three years thereafter, the covered 
financial institution shall close all correspondent accounts with such 
foreign bank within a commercially reasonable time, and shall not 
permit the foreign bank to establish any new positions or execute any 
transaction through any such account, other than transactions necessary 
to close the account.
* * * * *

    Dated: December 18, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 02-32333 Filed 12-23-02; 8:45 am]
BILLING CODE 4810-02-P