[Federal Register Volume 68, Number 74 (Thursday, April 17, 2003)]
[Notices]
[Page 19071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9411]



[[Page 19071]]

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DEPARTMENT OF THE TREASURY


Revocation of Designation of Ukraine as Primary Money Laundering 
Concern

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

ACTION: Revocation of designation.

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SUMMARY: This notice revokes the Department of the Treasury's December 
20, 2002, designation of Ukraine as a primary money laundering concern 
pursuant to section 5318A of title 31, United States Code, as added by 
section 311 of the Uniting and Strengthening America by Providing 
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA 
PATRIOT ACT) Act of 2001 (Pub. L. 107-56).

DATES: The revocation of the designation is effective April 17, 2003.

FOR FURTHER INFORMATION CONTACT: Office of Chief Counsel (FinCEN), 
(703) 905-3590; Executive Office for Terrorist Financing and Financial 
Crimes, (202) 622-0400; Office of the General Counsel (Treasury), (202) 
622-1927 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: On December 20, 2002, Treasury designated 
Ukraine as a primary money laundering concern under 31 U.S.C. 5318A, as 
added by section 311(a) of the USA PATRIOT Act. In a notice published 
in the Federal Register on December 26, 2002,\1\ the various factors 
supporting the designation were outlined. Of particular importance to 
the decision to designate was the fact that while Ukraine had recently 
enacted anti-money laundering legislation, it was deficient in several 
material respects.\2\ As noted in the designation, among other things, 
Ukraine's system for reporting suspicious transactions remained so 
constrained as to be virtually ineffective, and the ability of its 
financial intelligence unit to share information with law enforcement 
and function appropriately was in doubt. Having analyzed the 
legislation, the Financial Action Task Force (FATF) likewise concluded 
that the new legislation was inadequate and called on FATF members to 
take appropriate counter-measures against Ukraine. In the designation, 
Treasury specifically warned Ukraine that unless it took steps to 
address the concerns giving rise to its designation, Treasury 
anticipated imposing one or more special measures that would require 
U.S. financial institutions to obtain nominal and beneficial ownership 
information on certain accounts and transactions involving Ukraine.
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    \1\ 67 FR 78859 (December 26, 2002). In that same Notice, 
Treasury also designated Nauru as a primary money laundering 
concern. Published elsewhere in this issue of the Federal Register 
is FinCEN's notice of proposed rulemaking seeking to impose counter-
measures against Nauru.
    \2\ On November 28, 2002, Ukraine's Supreme Council (Parliament) 
passed a Law on Prevention and Counteraction of the Legalization 
(Laundering) of the Proceeds from Crime, and the President of 
Ukraine signed the Law on December 7.
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    Since Treasury's designation of Ukraine under section 5318A, 
Ukraine has taken steps to address the deficiencies. First, Ukraine 
amended its anti-money laundering law clearly to allow the Ukrainian 
financial intelligence unit to share information with law enforcement 
and to lower the suspicious transaction reporting thresholds. Second, 
the Ukrainian criminal code was amended to criminalize money 
laundering, the failure to file suspicious transaction reports, and 
tipping off the subjects of such reports. Finally, the Ukrainian 
banking and financial services laws were amended to require the full 
disclosure of beneficial ownership at account opening for all legal 
entities and natural persons. These new provisions are scheduled to 
come into force as of June 7, 2003.
    As a result of these further legislative enhancements, along with 
the pledge of aggressive implementation, on February 14, 2003, the FATF 
rescinded its call for counter-measures against Ukraine.
    In light of the further legislative enhancements, the commitment of 
Ukraine to further efforts to implement its anti-money laundering 
legislation, and the FATF's decision to rescind the call for counter-
measures, Treasury has decided to revoke the designation of Ukraine as 
a primary money laundering concern under section 5318A.
    Significantly, Treasury's revocation of the primary money 
laundering concern designation should not be construed as an indication 
that financial transactions involving Ukraine do not continue to 
present a heightened risk of money laundering. To the contrary, 
Ukraine's recent legislative enactments are not yet in force and much 
work remains. Ukraine is still on the FATF's Non-Cooperative Countries 
and Territories (NCCT) list due to its inadequate anti-money laundering 
regime. The FATF will require additional progress and effective 
implementation of the anti-money laundering legislation before 
considering removing Ukraine from the NCCT list.
    Moreover, U.S. financial institutions are reminded that the 
revocation of the designation does not affect existing guidance issued 
by FinCEN or obligations arising under the Bank Secrecy Act with 
respect to accounts and transactions involving Ukraine. For example, 
the April 2002 FinCEN advisory on transactions involving Ukraine 
remains in effect, and, due to Ukraine's status as an NCCT 
jurisdiction, U.S. financial institutions are or will be required by 31 
U.S.C. 5318(i), as added by section 312 of the USA PATRIOT Act, to 
conduct enhanced scrutiny on any correspondent accounts maintained for 
a foreign bank operating under a license issued by Ukraine.\3\
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    \3\ Section 5318(i) requires U.S. financial institutions to 
conduct enhanced scrutiny when opening or maintaining a 
correspondent account for a foreign bank operating, among other 
things, under a banking license issued by a foreign country 
designated as non-cooperative with international anti-money 
laundering principles or procedures by an intergovernmental group or 
organization of which the United States is a member and with which 
designation the U.S. representative concurs. Jurisdictions placed on 
the FATF NCCT list fall into this category.
    By its own terms, section 5318(i) became effective on July 23, 
2002. On May 30, 2002, FinCEN issued a proposed rule implementing 
the various provisions of section 5318(i). 67 FR 37736 (May 30, 
2002). On July 23, 2002, FinCEN issued an interim rule that 
temporarily deferred application of section 5318(i) to certain 
financial institutions, and provided guidance to those subject to 
the provision pending FinCEN's issuance of a final rule. 67 FR 48348 
(July 23, 2002). FinCEN expects that the final rule implementing 
section 5318(i) will be issued shortly. In the meantime, only U.S. 
depository institutions must comply with the enhanced scrutiny 
provisions in the manner set forth in the interim guidance.
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Revocation of the Designation of Ukraine as a Primary Money Laundering 
Concern

    For the foregoing reasons, the designation of the country of 
Ukraine as a primary money laundering concern for purposes of section 
5318A of title 31, United States Code, is hereby revoked.

    Dated: April 10, 2003.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 03-9411 Filed 4-16-03; 8:45 am]
BILLING CODE 4810-02-P