[Federal Register Volume 68, Number 45 (Friday, March 7, 2003)]
[Rules and Regulations]
[Pages 10965-10966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5432]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103


Notice of Expiration of Conditional Exception to Bank Secrecy Act 
Regulations Relating to Orders for Transmittal of Funds by Financial 
Institutions

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

ACTION: Expiration of conditional exception; request for comments.

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SUMMARY: FinCEN is giving notice of the expiration of a conditional 
exception to a Bank Secrecy Act requirement on May 31, 2003. The 
exception permits financial institutions to substitute coded 
information for the true name and address of a customer in a funds 
transmittal order.

DATES: Effective June 1, 2003. Written comments must be received on or 
before April 21, 2003.

ADDRESSES: Commenters are encouraged to submit comments by electronic 
mail because paper mail in the Washington, DC area may be delayed. 
Comments submitted by electronic mail may be sent to 
[email protected] with the caption in the body of the text, 
``ATTN: Conditional Exception Expiration.'' Comments also may be 
submitted by paper mail to FinCEN, PO Box 39, Vienna, VA 22183-0039, 
``ATTN: Conditional Exception Expiration.'' Comments should be sent by 
one method only. 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: David Vogt, Executive Associate 
Director, Office of Regulatory Programs, FinCEN, (202) 354-6400, or 
Judith R. Starr, Chief Counsel, FinCEN, (703) 905-3590.

SUPPLEMENTARY INFORMATION: 

I. Background

    In 1998, FinCEN granted a conditional exception (``the CIF 
Exception'') to the strict operation of 31 CFR 103.33(g) (the ``Travel 
Rule''). See FinCEN Issuance 98-1, 63 FR 3640 (January 26, 1998). The 
Travel Rule requires a financial institution to include certain 
information in transmittal orders relating to transmittals of funds of 
$3,000 or more. The CIF Exception addressed computer programming 
problems in the banking and securities industries by relaxing the 
Travel Rule's requirement that a customer's true name and address be 
included in a funds transmittal order, so long as alternate steps, 
described in FinCEN Issuance 98-1 and designed to prevent avoidance of 
the Travel Rule, were satisfied. By its terms, the CIF Exception to the 
Travel Rule was to expire on May 31, 1999; however, in light of 
programming burdens associated with year 2000 compliance issues, FinCEN 
extended the CIF Exception so that it would expire on May 31, 2001. See 
FinCEN Issuance 99-1, 64 FR 41041 (July 29,

[[Page 10966]]

1999). On May 30, 2001, after first soliciting input from the law 
enforcement community for its views on any law enforcement burdens 
caused by the CIF Exception, FinCEN again extended the CIF Exception. 
The CIF Exception is now scheduled to expire on May 31, 2003. See 
FinCEN Issuance 2001-1, 66 FR 32746 (June 18, 2001). FinCEN intends to 
permit the CIF Exception to expire, and is soliciting comments before 
it does so.

II. The CIF Exception

    FinCEN promulgated the Travel Rule in 1995. The Travel Rule 
requires financial institutions to include certain information in 
transmittal orders relating to transmittals of funds of $3,000 or more, 
which must ``travel'' with the order throughout the funds transmittal 
sequence. Among these requirements is that each transmittor's financial 
institution and intermediary financial institution include in a 
transmittal order the transmittor's true name and street address. See 
31 CFR 103.33(g)(1)(i)-(ii) and (g)(2)(i)-(ii). Subsequently, financial 
institutions represented to FinCEN that their ability to comply with 
the Travel Rule at all depended on their ability to use their automated 
customer information files, known as CIFs. Although an originating 
institution always knew the originating customer's true name and 
address, the CIFs were often programmed with coded or nominee names and 
addresses (or post office boxes). The reprogramming tasks involved in 
changing the CIFs were represented to be a significant barrier to 
compliance with the Travel Rule. In light of these burdens, and in the 
interest of obtaining prompt compliance, FinCEN promulgated the 
conditional exception.
    The conditional exception provides that a financial institution may 
satisfy the requirements of 31 CFR 103.33(g) that a customer's true 
name and address be included in a transmittal order, only upon 
satisfaction of the following conditions:
    (1) The CIFs are not specifically altered for the particular 
transmittal of funds in question;
    (2) The CIFs are generally programmed and used by the institution 
for customer communications, not simply for transmittal of funds 
transactions, and as so programmed generate other than true name and 
street address information;
    (3) The institution itself knows and can associate the CIF 
information used in the funds transmittal order with the true name and 
street address of the transmittor of the order;
    (4) The transmittal order includes a question mark symbol 
immediately following any designation of the transmittor other than by 
a true name on the order;
    (5) Any currency transaction report or suspicious activity report 
by the institution with respect to the funds transmittal contains the 
true name and address information for the transmittor and plainly 
associates the report with the particular funds transmittal in 
question.

The conditional exception further provides that it has no application 
to any funds transmittals for whose processing an institution does not 
automatically rely on preprogrammed and prespecified CIF name and 
address information. FinCEN's release promulgating the CIF Exception 
further warned financial institutions that any customer request for a 
nominee name in a CIF should be carefully evaluated as a potentially 
suspicious transaction. See 63 FR 3642.

III. Expiration of the CIF Exception

    In the aftermath of the terrorist attacks of September 11 and the 
passage of the Uniting and Strengthening America by Providing 
Appropriate Tools to Intercept and Obstruct Terrorism Act of 2001 
(``USA Patriot Act''), Congress has emphasized the need to increase 
transparency across the financial sector. See Pub. L. 107-56, section 
302(a)(2) (finding that defects in financial transparency are critical 
to the financing of global terrorism). FinCEN has implemented this 
congressional policy in its numerous Patriot Act rulemakings and 
believes that it should be reflected in existing BSA rules such as the 
Travel Rule as well. The financial community has had a number of years 
to address the technological issues posed by the Travel Rule, and the 
major programming issues posed by year 2000 compliance are now well 
behind it. Therefore, FinCEN deems it appropriate, after two 
extensions, to permit the CIF Exception to expire. This conclusion is 
buttressed by information FinCEN has received regarding the potential 
for abuse of the CIF Exception; for example, by private banking 
departments that cater to high net worth individuals' demands for 
increased confidentiality by using CIFs.

IV. Request for Comments

    FinCEN invites comments on (1) the existence of any remaining 
technological barriers to full compliance with the Travel Rule; (2) 
whether financial institutions will be able to comply fully with the 
Travel Rule upon the expiration of the CIF Exception or whether 
additional time will be required to attain compliance; (3) the 
existence of any adverse effect on law enforcement investigations 
arising from the CIF Exception; and (4) the potential for or actual 
abuse of the CIF Exception.

    Dated: March 3, 2003.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 03-5432 Filed 3-6-03; 8:45 am]
BILLING CODE 4810-02-P