[Federal Register Volume 68, Number 224 (Thursday, November 20, 2003)]
[Rules and Regulations]
[Pages 65392-65399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28991]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA44


Financial Crimes Enforcement Network; Amendments to the Bank 
Secrecy Act Regulations; Definition of Futures Commission Merchants and 
Introducing Brokers in Commodities as Financial Institutions; 
Requirement That Futures Commission Merchants and Introducing Brokers 
in Commodities Report Suspicious Transactions

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

ACTION: Final rules.

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SUMMARY: This document contains amendments to the regulations 
implementing the statute generally referred to as the Bank Secrecy Act. 
The amendments add futures commission merchants and introducing brokers 
in commodities to the regulatory definition of ``financial 
institution'' and require that they report suspicious transactions to 
FinCEN. Bringing these major participants in the futures industry into 
the Bank Secrecy Act regulatory structure is intended to further the 
counter-money laundering program of the Department of the Treasury.

DATES: Effective Date: December 22, 2003.
    Applicability Date: May 18, 2004.

FOR FURTHER INFORMATION CONTACT: Alma M. Angotti, Senior Enforcement 
Counsel, and Judith R. Starr, Chief Counsel, FinCEN, at (703) 905-3590; 
David Vogt, Associate Director, and Donald Carbaugh, Chief, Depository 
Institutions, Office of Regulatory Programs, FinCEN, (202) 354-6400.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Provisions

    The Bank Secrecy Act, Pub. L. 91-508, codified as amended at 12 
U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314; 5316-5332 
(``BSA''), authorizes the Secretary of the Treasury, inter alia, to 
issue regulations requiring financial institutions to keep records and 
file reports that are determined to have a high degree of usefulness in 
criminal, tax, and regulatory matters, or in the conduct of 
intelligence or counter-intelligence activities to protect against 
international terrorism, and to implement counter-money laundering 
programs and compliance procedures.\1\ Regulations implementing Title 
II of the BSA (codified at 31 U.S.C. 5311 et seq.) appear at 31 CFR 
part 103. The authority of the Secretary to administer the BSA has been 
delegated to the Director of FinCEN.
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    \1\ Language expanding the scope of the BSA to intelligence or 
counter-intelligence activities to protect against international 
terrorism was added by Section 358 of the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (``USA Patriot 
Act''), Pub. L. 107-56.
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    The BSA defines the term ``financial institution'' to include, 
among other broad categories of institutions, any ``broker or dealer in 
securities or commodities.'' \2\ Section 321(b) of the USA Patriot Act 
amended the BSA to expressly include in the definition of ``financial 
institution'' futures commission merchants (``FCMs'') that are 
registered, or required to register, with the Commodity Futures Trading 
Commission (``CFTC'') under the Commodity Exchange Act (``CEA'').\3\
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    \2\ 31 U.S.C. 5312(a)(2)(H). The Secretary has clarified that 
the term ``broker or dealer in commodities'' in the BSA includes 
introducing brokers in commodities (``IB-Cs''). See 67 FR 21110, 
21111 n.5 (April 29, 2002) (anti-money laundering programs for 
certain financial institutions); 68 FR 25148 (May 9, 2003) (joint 
final rule requiring customer identification programs for FCMs and 
IB-Cs).
    \3\ 7 U.S.C. 1 et seq. Section 321(b) also provided that the 
term ``financial institution'' includes any commodity pool operator 
(``CPO'') and any commodity trading advisor (``CTA'') registered, or 
required to register, under the CEA. See 31 U.S.C. 5312(c). FinCEN 
has proposed rules that require unregistered investment companies, 
including commodity pools, to have anti-money laundering (``AML'') 
programs (``AMLPs''). FinCEN also has proposed rules requiring CTAs 
to have AMLPs. 68 FR 23640 (May 5, 2003). A requisite element of 
these AMLPs is the requirement to have policies, procedures, and 
controls that are reasonably designed to ensure compliance with the 
BSA and its implementing regulations.
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    The Secretary of the Treasury was granted authority in 1992, with 
the enactment of 31 U.S.C. 5318(g),\4\ to require financial 
institutions to report suspicious transactions. Subsection (g)(1) 
provides:
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    \4\ 31 U.S.C. 5318(g) was added to the BSA by section 1517 of 
the Annunzio-Wylie Anti-Money Laundering Act, Title XV of the 
Housing and Community Development Act of 1992, Pub. L. 102-550; it 
was expanded by section 403 of the Money Laundering Suppression Act 
of 1994, Title IV of the Riegle Community Development and Regulatory 
Improvement Act of 1994, Pub. L. 103-325, to require designation of 
a single government recipient for reports of suspicious 
transactions.

The Secretary may require any financial institution, and any 
director, officer, employee, or agent of any financial institution, 
to report any suspicious transaction relevant to a possible 
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violation of law or regulation.

    Subsection (g)(2) provides further:

If a financial institution or any director, officer, employee, or 
agent of any financial institution, voluntarily or pursuant to this

[[Page 65393]]

section or any other authority, reports a suspicious transaction to 
a government agency * * * the financial institution, director, 
officer, employee, or agent may not notify any person involved in 
the transaction that the transaction has been reported.

    Subsection (g)(3) provides that any financial institution, 
director, officer, employee, or agent of any financial institution

that makes a voluntary disclosure of any possible violation of law 
or regulation * * * or makes a disclosure pursuant to this 
subsection or any other authority * * * shall not be liable to any 
person under any law or regulation of the United States, any 
constitution, law, or regulation of any State or political 
subdivision [thereof] * * * for such disclosure or for any failure 
to provide notice of such disclosure to the person who is the 
subject of such disclosure or any other person identified in the 
disclosure.

    Finally, subsection (g)(4)(A) requires the Secretary of the 
Treasury, ``to the extent practicable and appropriate,'' to designate 
``a single officer or agency of the United States to whom such reports 
shall be made.'' \5\ The designated agency is in turn responsible for 
referring any report of a suspicious transaction to ``any appropriate 
law enforcement or supervisory agency.'' \6\
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    \5\ This designation does not preclude the authority of 
supervisory agencies to require financial institutions to submit 
other reports to the same agency or another agency ``pursuant to any 
other applicable provision of law.'' 31 U.S.C. 5318(g)(4)(C).
    \6\ 31 U.S.C. 5318(g)(4)(B).
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B. FCMs and IB-Cs: Regulation and Money Laundering

    The final suspicious activity reporting rule contained in this 
document applies to FCMs and IB-Cs. An FCM is defined in the CEA as an 
individual, association, partnership, corporation, or trust that is 
engaged in soliciting or accepting orders and funds for the purchase or 
sale of a commodity for future delivery on or subject to the rules of a 
contract market or derivatives transaction execution facility 
(``DTEF'').\7\ An IB-C is similarly defined,\8\ except that an IB-C may 
not accept money, securities, or property (or extend credit in lieu 
thereof) to margin, guarantee, or secure any trades or contracts. The 
CEA requires FCMs and IB-Cs to register pursuant to the procedures of 
Section 4f(a)(1) of the CEA.\9\ As of May 31, 2003, there were 185 FCMs 
and 1,591 IB-Cs (domestic and foreign) that had registered with the 
CFTC pursuant to this provision.
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    \7\ 7 U.S.C. 1a(20).
    \8\ 7 U.S.C. 1a(23) (defining the term ``introducing broker'').
    \9\ 7 U.S.C. 6f(a)(1).
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    This final rule is just one of several steps taken by the Secretary 
of the Treasury to address comprehensively the risk of money laundering 
in the futures industry. In April 2002, FinCEN issued an interim final 
rule requiring FCMs and IB-Cs to develop and implement AMLPs to prevent 
them from being used to launder money or finance terrorist activities, 
which includes achieving and monitoring compliance with the applicable 
requirements of the Bank Secrecy Act and the Secretary of the 
Treasury's implementing regulations.\10\
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    \10\ See 67 FR 21111. Compliance with this rule is deemed 
satisfied if FCMs and IB-Cs comply with the AML rule (Compliance 
Rule 2-9(c)) that was approved by the CFTC and issued by the 
National Futures Association (``NFA''), the only registered futures 
association. Id.
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    This final rule follows other recent actions that expand the 
application of the BSA to additional financial institutions and require 
those financial institutions to report suspicious transactions. For 
example, since April 1996, rules issued by FinCEN under the authority 
contained in 31 U.S.C. 5318(g) have required banks, thrifts, and other 
banking organizations to report suspicious transactions.\11\ In 
collaboration with FinCEN, the federal bank supervisors concurrently 
issued suspicious transaction reporting rules under their own 
authority.\12\ The bank supervisory agency rules apply to banks, bank 
holding companies, and non-depository institution affiliates and 
subsidiaries of banks and bank holding companies. Money services 
businesses have been required to report suspicious transactions to the 
Department of the Treasury since the beginning of 2002.\13\ In July 
2002, FinCEN took a further step in the creation of a comprehensive 
system for the reporting of suspicious transactions by the major 
categories of financial institutions operating in the United States by 
requiring brokers and dealers in securities (``BDs'') to report 
suspicious transactions.\14\ In October 2002, FinCEN issued a final 
rule requiring casinos to report suspicious transactions, and a 
proposed rule that would require certain insurance companies to report 
suspicious transactions. The final rule contained in this document will 
extend this and other BSA requirements to FCMs and IB-Cs. The reporting 
and recordkeeping provisions of the BSA, including suspicious 
transaction reporting by FCMs and IB-Cs can provide highly useful 
information in law enforcement and regulatory investigations and 
proceedings, and in the conduct of intelligence activities to protect 
against international terrorism.\15\
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    \11\ See 31 CFR 103.18 (requiring banks, thrifts, and other 
banking organizations to report suspicious transactions).
    \12\ See 12 CFR 21.11 (issued by the Office of the Comptroller 
of the Currency); 12 CFR 208.62 (issued by the Board of Governors of 
the Federal Reserve System); 12 CFR 353.3 (issued by the Federal 
Deposit Insurance Corporation); 12 CFR 563.180 (issued by the Office 
of Thrift Supervision); and 12 CFR 748.1 (issued by the National 
Credit Union Administration).
    \13\ See 65 FR 13683 (March 14, 2000).
    \14\ See 67 FR 44048 (July 1, 2002).
    \15\ See 31 U.S.C. 5311 (stating purpose of the reporting 
authority under the BSA).
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II. Notice of Proposed Rulemaking and Comments

    On May 5, 2003, FinCEN published a notice of proposed rulemaking 
(the ``Notice'') \16\ that would extend the reporting and recordkeeping 
obligations of the BSA, including suspicious transaction reporting, to 
FCMs and IB-Cs. FinCEN received two comment letters on the Notice: one 
comment from NFA and one comment from the Futures Industry Association, 
an industry trade association. Both commenters support the proposed 
rule, but each suggested certain changes and clarifications they 
believe would be appropriate. Changes and clarifications resulting from 
these comments are discussed below in the section-by-section analysis.
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    \16\ 68 FR 23653 (May 5, 2003).
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III. Section-by-Section Analysis

A. 103.11(ii)--Meaning of Terms

    1. Definitions of Futures Commission Merchant and Introducing 
Broker-Commodities. Under this final rule, the definition of 
``financial institution'' in 31 CFR 103.11(n) includes FCMs and IB-Cs 
as these terms are defined in paragraphs (zz) and (aaa), respectively. 
There were no comments concerning these definitions, and FinCEN is 
adopting them as proposed.
    These terms encompass any person registered or required to be 
registered as an FCM or IB-C with the CFTC,\17\ but exclude securities 
BDs that have notice registered with the CFTC as FCMs or IB-Cs for the 
sole purpose of effecting transactions in security futures products 
(``SFPs'').\18\ For these persons, FinCEN

[[Page 65394]]

believes that the BSA rules of their primary federal supervisory agency 
should apply, and that authority to examine for compliance with those 
rules should remain with the agency with which the entities are 
primarily registered. Thus, a BD that is notice registered with the 
CFTC must comply with the BSA rules applicable to BDs, and will be 
examined for BSA compliance by the Securities and Exchange Commission 
(``SEC''). A parallel change also is being made to the definition of 
``broker or dealer in securities'' in the BSA regulations. Thus, an FCM 
or IB-C that is notice registered with the SEC must comply with the BSA 
rules applicable to FCMs and IB-Cs, and will be examined for BSA 
compliance by the CFTC and the relevant designated self-regulatory 
organizations (``DSROs'').
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    \17\ There are two types of IB-Cs, guaranteed and non-
guaranteed. A guaranteed IB-C is one that elects to operate pursuant 
to a written guarantee agreement with an FCM instead of 
independently meeting its own capital requirements. See, e.g., 17 
CFR 1.17(a)(2)(ii). An independent IB-C, by contrast, is one that 
elects to meet its own capital requirements. Both types of IB-Cs 
engage in the offer and sale of futures contracts and commodity 
options on behalf of customers and facilitate transfers or 
transmittals of funds for their customers. Thus, they present the 
same or similar money laundering risks, and Treasury sees no reason 
to draw a distinction between IB-Cs that are guaranteed and those 
that are not. Therefore, all IB-Cs will be covered by the final 
rule.
    \18\ A ``security future'' is defined in the CEA and the 
Securities Exchange Act of 1934 (``Exchange Act'') as a contract of 
sale for future delivery of a single security or narrow-based 
security index (7 U.S.C. 1a(31) and 15 U.S.C. 78c(a)(55)), and an 
SFP is defined as a security future or any put, call, straddle, 
option, or privilege on any security future (7 U.S.C. 1a(32) and 15 
U.S.C. 78c(a)(56)). The Commodity Futures Modernization Act of 2000 
(``CFMA''), Pub. L. 103-556, 114 Stat. 2763 (December 21, 2000), 
amended the Exchange Act definitions of ``security'' and ``equity 
security'' to include security futures (15 U.S.C. 78c(a)(1) and 15 
U.S.C. 78c(a)(11), respectively). As a result of these amendments, 
an SFP is both a security and a futures contract (or option thereon) 
and is thus subject to the jurisdiction of both the CFTC and the 
SEC.
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    With respect to those entities that are dual registrants with both 
the CFTC and the SEC for purposes of futures and securities 
transactions other than SFPs, FinCEN intends for this rule to have the 
same effect as 31 CFR 103.19, which is the rule that requires 
suspicious transaction reporting for BDs. That is, dual registrants in 
compliance with the suspicious transaction reporting requirements under 
31 CFR 103.19 also shall be deemed to be in compliance with this rule, 
and dual registrants who are in compliance with this rule shall be 
deemed to be in compliance with 31 CFR 103.19. This will prevent dual 
registrants from being subjected to different or conflicting suspicious 
transaction reporting requirements for the various aspects of their 
businesses.
    2. Definitions of Transaction, Commodity, Contract of Sale, and 
Option. The definition of ``transaction'' in the regulations under the 
BSA, which is set forth in paragraph (ii), conforms generally to the 
definition Congress added to title 18 when it criminalized money 
laundering in 1986.\19\ The term is broad and is intended to reach all 
of the various types of transactions that may occur at a financial 
institution. Amended paragraph (ii) specifically adds futures 
transactions, i.e., transactions involving any contract of sale of a 
commodity for future delivery, any option on any contract of sale for 
future delivery, and any option on a commodity, to the list of 
transactions subject to BSA requirements. The definition is not 
restricted to transactions conducted on a designated contract market or 
a DTEF.\20\
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    \19\ See Pub. L. 99-570, Title XIII, 1352(a), 100 Stat. 3207-18 
(October 27, 1986), codified at 18 U.S.C. 1956.
    \20\ Thus, for example, the term ``transaction'' includes any 
transaction by an FCM or IB-C in a foreign currency futures 
contract, any option on any foreign currency futures contract, or 
any option on a foreign currency that occurs on an off-exchange 
basis. See Section 2(c)(1) and (2) of the CEA, 7 U.S.C. 2(c)(1)-(2).
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    Paragraphs (xx), (yy), and (bbb) set forth definitions of 
``commodity,'' ``contract of sale,'' and ``option on a commodity.'' 
These are definitions based on Sections 1a(4), 1a(7), and 1a(26), 
respectively, in the CEA.\21\ There were no comments concerning these 
definitions, and FinCEN is adopting them as proposed.
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    \21\ 7 U.S.C. 1a(4), 1a(7), and 1a(26), respectively.
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B. 103.17--Reports by FCMs and IB-Cs of Suspicious Transactions

    1. Reporting standard. Section 103.17 requires FCMs and IB-Cs to 
report suspicious transactions that are conducted or attempted by, at, 
or through an FCM or IB-C and involve or aggregate at least $5,000 in 
funds or other assets. It is important to recognize that transactions 
are reportable whether or not they involve currency.\22\ Paragraph 
(a)(1) also permits, but does not require, the reporting of 
transactions that appear relevant to possible violations of law or 
regulation even in cases in which the rule does not explicitly so 
require, for example in the case of a transaction falling below the 
$5,000 threshold.
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    \22\ Many currency transactions are not indicative of money 
laundering or other violations of law, a fact recognized both by 
Congress, in authorizing reform of the currency transaction 
reporting system, and by FinCEN in issuing rules to implement that 
system (see 31 U.S.C. 5313(d) and 31 CFR 103.22(d), 63 FR 50147 
(September 21, 1998)). But many non-currency transactions (for 
example, funds transfers) can indicate illicit activity, especially 
in light of the breadth of the statutes that make money laundering a 
crime. See 18 U.S.C. 1956 and 1957.
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    Paragraph (a)(2) requires reporting if the FCM or IB-C knows, 
suspects, or has reason to suspect that the transaction (or pattern of 
transactions of which the transaction is a part) is one of four classes 
of transactions (described more fully below) requiring reporting. The 
``knows, suspects, or has reason to suspect'' standard incorporates a 
concept of due diligence in the reporting requirement.
    The first class of transactions requiring reporting, described in 
paragraph (a)(2)(i), includes transactions involving funds derived from 
illegal activity or intended or conducted in order to hide or disguise 
funds or assets derived from illegal activity. The second class of 
transactions, described in paragraph (a)(2)(ii), involves transactions 
designed, whether through structuring or other means, to evade the 
requirements of the BSA. The third class of transactions, described in 
paragraph (a)(2)(iii), involves transactions that appear to serve no 
business or apparent lawful purpose, and for which the FCM or IB-C 
knows of no reasonable explanation after examining the available facts 
relating to the transaction and the parties. The fourth class of 
transactions, described in paragraph (a)(2)(iv), involves the use of 
the FCM or IB-C to facilitate a criminal transaction.
    A determination as to whether a report is required must be based on 
all the facts and circumstances relating to the transaction and 
customer in question. Different fact patterns may lead to different 
determinations. In some cases, the facts of the transaction may 
indicate the need to report. For example, frequent and large-scale 
usage of wire transfers, including wire transfers to or from locations 
outside of the United States, from an account with only nominal futures 
activity may be indicative of suspicious activity. In other instances, 
the transaction or activity itself may be sufficiently suspicious to 
warrant reporting. Thus, if a customer engages in wash transactions or 
other fictitious or non-bona fide transactions that violate the CEA, a 
suspicious activity report must be filed.\23\ Similarly, the fact that 
a customer unreasonably refuses to provide information necessary for 
the FCM or IB-C to make required reports, retain records as required, 
identify or verify the identity of a customer, or otherwise comply with 
the BSA; provides information that the FCM or IB-C determines to be 
false; or seeks to change or cancel a transaction after such person is 
informed of currency transaction reporting or information

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verification or recordkeeping requirements relevant to the transaction, 
would all indicate that a suspicious activity report should be filed. 
The FCM or IB-C may not notify the customer that it intends to file or 
has filed a suspicious transaction report with respect to the 
customer's activity.
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    \23\ As discussed below, however, paragraph (c)(1)(ii) provides 
an exception from the suspicious transaction reporting requirements 
for violations of the CEA by the FCM, IB-C, or any of its officers, 
directors, employees, or associated persons that are reported to the 
CFTC, a registered futures association, or any ``registered 
entity,'' as that term is defined in Section 1a(29) of the CEA, 7 
U.S.C. 1a(29). As discussed in more detail below, dual registrants 
can report these violations either to these entities, or to the SEC 
or a securities self-regulatory organization (``SRO''), as defined 
in section 3(a)(26) of the Securities Exchange Act of 1934, 15 
U.S.C. 78c(a)(26), whichever is appropriate.
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    In other situations, a more involved analysis and judgment may be 
needed to determine whether a transaction is suspicious within the 
meaning of the rule. Transactions that raise the need for such 
judgments may include, for example: (i) Transmission or receipt of 
funds transfers without normal identifying information or in a manner 
that indicates an attempt to disguise or hide the country of origin or 
destination or the identity of the customer sending the funds or of the 
beneficiary to whom the funds are sent; (ii) a repeated pattern of 
unusual activity by the customer, such as where the customer repeatedly 
makes unexplainable, frequent deposits or withdrawals ; or (iii) 
repeated use of an account as a temporary resting place for funds from 
multiple sources without a clear business purpose. The judgments 
involved also will extend to whether the facts and circumstances and 
the institution's knowledge of its customer provide a reasonable 
explanation for the transaction or activity that removes it from the 
suspicious category.
    An FCM may carry, and an IB-C may introduce, intermediated accounts 
including omnibus accounts and accounts for collective investment 
vehicles such as commodity pools. In such circumstances, the FCM and 
IB-C may have little or no contact with or information about the 
ultimate beneficial owners of such accounts. FinCEN has proposed AMLP 
rules for CTAs and commodity pools, and monitoring for suspicious 
transactions is an integral part of such programs. Any AMLP obligations 
of intermediaries such as CTAs, however, would not reduce the 
obligation on an FCM or IB-C imposed by this rule to monitor 
transactions based on the facts and circumstances with which it is 
presented, in order to determine if a transaction is suspicious. In 
addition, omnibus accounts maintained for certain foreign financial 
institutions ultimately may fall within the definition of 
``correspondent account'' under section 312 of the USA Patriot Act.\24\
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    \24\ FCMs and IB-Cs have been temporarily exempted from the 
correspondent account due diligence requirements of Section 312, 
although they are subject to its private banking due diligence 
requirements. See 67 FR 48348 (July 23, 2002) (interim final rule).
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    2. Reporting Threshold. There were no comments concerning the 
$5,000 reporting threshold and FinCEN is adopting it as proposed. 
FinCEN reminds FCMs and IB-Cs, however, that the suspicious transaction 
reporting rules are not intended to operate (and indeed cannot properly 
operate) in a mechanical fashion. Rather, the suspicious transaction 
reporting requirements are intended to function in such a way as to 
have financial institutions evaluate customer activity and 
relationships for money laundering risks.\25\
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    \25\ Thus, for example, sizable futures transactions conducted 
for a well established commodity pool operated in accordance with 
Part 4 of the CFTC's regulations may require less scrutiny than a 
futures transaction conducted for an individual customer through a 
financial institution located in a jurisdiction that has been 
identified as a non-cooperative country or territory by the 
Financial Action Task Force.
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    3. Transactions Involving Both an FCM and an IB-C. Proposed 
paragraph (a)(3) provided that the obligation to identify and report 
properly a suspicious transaction rests with each FCM and IB-C involved 
in the transaction. It also provided, though, that when a transaction 
involves both an FCM and an IB-C, only one report needs to be filed 
with FinCEN as long as that report contains all the relevant facts 
concerning the transaction. This provision was intended to avoid 
duplicative and redundant reporting.
    Both commenters observed that FCMs and IB-Cs frequently handle 
complex transactions that involve one or more FCMs, and not just an FCM 
and an IB-C. They noted that the language in the proposed rule only 
addressed the situation in which both an FCM and an IB-C are involved 
in a transaction and did not clearly apply to a situation where two 
FCMs are involved in the same transaction on behalf of the same 
customer. Accordingly, FinCEN has clarified the language to extend to 
the latter situation as well, as long as the suspicious activity report 
(``SAR'') that is filed (FCMs and IB-Cs will use the Form SAR-SF) \26\ 
contains all of the necessary information. Thus, for example, in a 
``give-up'' arrangement involving a clearing and an executing FCM, one 
FCM's SAR-SF could satisfy the obligation of both FCMs to report 
suspicious transactions. As a corollary, FinCEN also wishes to clarify 
that, as in the case of an FCM and IB-C involved in a transaction, two 
FCMs involved in a transaction (such as a clearing and an executing 
FCM) may consult with each other and share information, including the 
SAR-SF itself, to enable them to file a single report.\27\
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    \26\ A draft of the SAR-SF was published for comment in the 
Federal Register on August 5, 2002; 67 FR 50751 (August 5, 2002); 
the form became final on December 26, 2002 and is available on 
FinCEN's Web site at www.fincen.gov. FinCEN intends to conform the 
instructions to the SAR-SF to specifically address FCM 
responsibilities under this rule.
    \27\ Information sharing procedures among BSA-defined financial 
institutions generally are set forth in 31 CFR 103.110. FinCEN will 
be issuing guidance on how financial institutions can file joint 
SARs in the appropriate circumstances.
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    4. Filing Procedures. Paragraph (b) sets forth the filing 
procedures to be followed by an FCM or IB-C making reports of 
suspicious transactions. Within 30 days after an FCM or IB-C becomes 
aware of a suspicious transaction, it must report the transaction by 
completing a SAR-SF and filing it in a central location determined by 
FinCEN. The rule also makes special provision for situations that 
require immediate attention, such as ongoing terrorist financing or 
money laundering schemes. In that event, the FCM or IB-C must notify 
immediately, by telephone, an appropriate law enforcement authority in 
addition to filing a SAR-SF. The rule also permits, but does not 
require, FCMs and IB-Cs to notify the CFTC in addition to contacting 
law enforcement and filing a SAR-SF.\28\ There were no comments that 
addressed these procedures.
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    \28\ In addition, the rule reminds FCMs and IB-Cs of FinCEN's 
Financial Institutions Hotline (1-866-556-3974) for use by financial 
institutions wishing voluntarily to report to law enforcement 
suspicious transactions that may relate to terrorist activity. FCMs 
and IB-Cs reporting suspicious activity by calling the Financial 
Institutions Hotline must still file a timely SAR-SF to the extent 
required by the proposed rule.
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    5. Exceptions. Paragraph (c) sets forth two exceptions to the 
reporting requirement. A report does not have to be filed to report a 
robbery or burglary that is reported to law enforcement. A report also 
does not have to be filed concerning possible violations of the CEA, 
the rules promulgated by the CFTC, or the rules of any registered 
futures association or registered entity by an employee or other 
associated person of an FCM or IB-C, provided that such violations are 
reported to the CFTC, a registered futures association, or a registered 
entity. This exception does not encompass reports of BSA violations 
made to the CFTC or a registered futures association.\29\
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    \29\ Specifically, this exception does not apply to a BSA 
violation that is reported to the CFTC pursuant to CFTC Rule 42.2, 
17 CFR 42.2, which was adopted after the issuance of the proposed 
rule.
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    One commenter suggested that the rule make clear that an entity 
dually registered with the CFTC and the SEC is permitted to rely on the 
reporting exception if it appropriately reports violations to the CFTC, 
a registered futures association or a registered entity, or to the SEC 
or applicable securities

[[Page 65396]]

SRO, whichever is most appropriate under the circumstances. In the 
proposing release, FinCEN made clear its intent that the rule will have 
the same effect as 31 CFR 103.19, which is the rule that requires 
suspicious transaction reporting for BDs. FinCEN stated that dual 
registrants who are in compliance with the suspicious transaction 
reporting requirements for BDs under 31 CFR 103.19 will also be deemed 
to be in compliance with this rule, and further, that dual registrants 
that are in compliance with this rule will also be deemed to be in 
compliance with 31 CFR 103.19.\30\
    FinCEN is guided by the legislative history of Title II of the USA 
Patriot Act,\31\ which specifically urged Treasury to take steps to 
provide for a reporting process for entities registered as both a BD 
and an FCM that requires only a single report, and to act to prevent 
inconsistent regulations for dual registrants. Accordingly, FinCEN 
agrees with this comment and clarifies that an FCM dually registered as 
a BD can rely on the exception from SAR filing by reporting the 
violation to either an appropriate securities or futures regulator or 
SRO. Similarly, a BD that is dually registered as an FCM can rely on 
the exception by reporting the violation to the CFTC or a registered 
futures association or registered entity in the same way that an FCM is 
permitted to do so.
---------------------------------------------------------------------------

    \30\ 68 FR at 23656.
    \31\ HR Rep. 107-250 at 65.
---------------------------------------------------------------------------

    Both commenters also noted that the proposed rule did not 
specifically address what documentation is sufficient to demonstrate 
reliance upon an exception. In contrast, the SAR rule for BDs provides 
that a Form RE-3, U-4, or U-5 is sufficient documentation to 
demonstrate reliance. One commenter suggested that FinCEN specifically 
state that a Form 8-T, U-5, RE-3, or any other form properly filed with 
a futures or securities regulator is sufficient documentation. FinCEN 
agrees with this comment, and the final rule reflects this change.\32\
---------------------------------------------------------------------------

    \32\ The final rule also clarifies that any report filed with a 
securities or futures regulator in reliance upon an exception to 
suspicious activity reporting and other related documentation shall 
be made available, upon request, to the CFTC, SEC, and any 
registered futures association, registered entity, or securities 
self-regulatory organization that is examining an FCM, IB-C, or BD 
for compliance with SAR requirements.
---------------------------------------------------------------------------

    Finally, in response to one comment, FinCEN clarifies that FCMs and 
IB-Cs have the same ability as BDs to rely on the reporting exception 
whether their reporting procedures are ``formal or informal.''\33\
---------------------------------------------------------------------------

    \33\ 67 FR at 44,051 (noting that BDs may rely on the reporting 
exception whether their reporting follows existing formal or 
informal industry procedures).
---------------------------------------------------------------------------

    6. Retention of Records. Paragraph (d) requires FCMs and IB-Cs to 
maintain a copy of any SAR-SF that is filed with FinCEN and all 
original related supporting documentation for a period of five years 
from the date of filing. Nothing in the rule modifies, limits, or 
supersedes section 101 of the Electronic Records in Global and National 
Commerce Act,\34\ and thus an FCM or IB-C may make and maintain records 
either as originals or in electronic format as permitted under existing 
CFTC rules.\35\ Accordingly, the FCM or IB-C must make the supporting 
documentation available to FinCEN, the CFTC, or any other appropriate 
law enforcement or regulatory agency, and, consistent with paragraph 
(g), to any registered futures association, registered entity, or SRO. 
There were no comments addressing this record retention provision, and 
FinCEN is adopting it as proposed.
---------------------------------------------------------------------------

    \34\ Pub. L. 106-229, 114 Stat. 464 (15 U.S.C. 7001) (E-Sign 
Act).
    \35\ See, e.g., 17 CFR 1.4 and 1.31.
---------------------------------------------------------------------------

    7. Non-Disclosure. Paragraph (e) reflects the statutory bar against 
the disclosure of information filed in, or the fact of filing, a 
suspicious activity report (whether the report is required by the rule 
or is filed voluntarily).\36\ Thus, the paragraph specifically 
prohibits persons filing a SAR-SF from making any disclosure either 
about the report or the supporting documentation unless the disclosure 
is made to FinCEN, the CFTC, another appropriate law enforcement or 
regulatory agency, or, consistent with paragraph (g), a registered 
futures association, registered entity, or SRO. There were no comments 
concerning this provision, and FinCEN is adopting it as proposed.
---------------------------------------------------------------------------

    \36\ See 31 U.S.C. 5318(g)(2).
---------------------------------------------------------------------------

    8. Safe Harbor from Civil Liability. Paragraph (f) incorporates the 
BSA's statutory protection from civil liability for making or filing a 
report of a suspicious transaction or for failing to disclose the fact 
that a report has been made or filed. The specific reference to 
arbitration reflects the clarification provided in the USA Patriot Act 
that the safe harbor for suspicious transaction reporting would apply 
in arbitration proceedings. Because some disputes in the futures 
industry are resolved under a reparations procedure provided for by the 
CEA,\37\ paragraph (f) clarifies that the safe harbor also applies in 
reparations proceedings. FinCEN intends to work with the CFTC, the 
DSROs, and industry representatives to ensure that appropriate 
educational materials are delivered to compliance and litigation 
personnel.
---------------------------------------------------------------------------

    \37\ See Section 14 of the CEA, 7 U.S.C. 18 and 7 CFR Part 12.
---------------------------------------------------------------------------

    It must be noted that, while the rule reiterates and clarifies the 
broad statutory protection from liability for making reports of 
suspicious transactions and for failing to disclose the fact of such 
reporting, the regulatory provisions do not extend the scope of either 
the statutory prohibition or the statutory protection. The prohibition 
on disclosure (other than as required under the rule) applies 
regardless of any protection from liability. This means, for instance, 
that during an arbitration or reparations proceeding, an FCM or IB-C 
would not be permitted to provide a copy of a SAR-SF, or disclose the 
fact that one had been filed, to any participant in the proceeding, 
including as applicable, the arbitrator, judgment officer, or 
administrative law judge.
    Both commenters requested that the safe harbor protection from 
civil liability under this rule, and under FinCEN's rule implementing 
Section 314(b) of the USA Patriot Act,\38\ be extended to protect 
disclosures to foreign financial institutions to the extent that an FCM 
or IB-C needs to obtain information from that foreign entity.\39\ 
However, foreign entities are not ``financial institutions'' and thus 
are not eligible for these protections that the BSA extends to 
financial institutions. Moreover, FinCEN and the relevant examining 
authority in the United States have the ability to require U.S.-
regulated financial institutions to protect adequately sensitive 
information involved in reporting a suspicious transaction. That said, 
it may be appropriate in certain circumstances for an FCM or IB-C to 
question carefully the foreign financial institution about the customer 
or the transaction to understand more fully whether the FCM should 
report the transaction as

[[Page 65397]]

suspicious. The FCM could not however, disclose the fact that it is 
contemplating the filing of a SAR. FinCEN recognizes that, particularly 
with respect to international transactions, the balance between 
obtaining sufficient information and protecting the confidentiality of 
suspicious activity reporting is a difficult one for FCMs and IB-Cs to 
achieve, but it is one that is faced by all financial institutions 
subject to a SAR requirement, and one which they are generally 
successful in achieving.
---------------------------------------------------------------------------

    \38\ 31 CFR 103.110(b)(5).
    \39\ These provisions are different and serve different 
purposes. The safe harbor in the SAR rule provides total immunity 
for filing the SAR. Those financial institutions permitted to file a 
joint SAR must be able to share information, including the SAR 
itself, in order to prepare and file the SAR. Under Section 314(b) 
of the USA Patriot Act, however, information sharing relates to the 
underlying transactional and customer information; nothing in the 
rule implementing Section 314(b) authorizes the sharing of actual 
SARs. 31 CFR 103.10. If other financial institutions, e.g., CTAs, 
become subject to final rules requiring them to have an AMLP, FCMs 
and IB-Cs can qualify for the safe harbor under Section 314(b) when 
they share underlying transactional and customer information with 
those financial institutions.
---------------------------------------------------------------------------

    9. Examination. Paragraph (g) notes that compliance with the 
obligation to report suspicious transactions will be examined for by 
Treasury through FinCEN or its delegee, and provides that failure to 
comply with the rule may constitute a violation of the BSA and the BSA 
regulations. This paragraph also clarifies that an FCM or IB-C must 
provide access to any SAR-SF that it has filed, along with any 
supporting documentation, to the CFTC and any registered futures 
association, any registered entity that has authority to examine the 
institution, or to the SEC or an SRO in the case of dual registrants.
    10. Effective Date. Paragraph (h) provides that the new suspicious 
transaction reporting requirements will be effective 180 days after the 
date on which the final regulations to which this notice of rulemaking 
relates are published in the Federal Register.

C. 103.33--Records To Be Made and Retained by Financial Institutions

    The addition of FCMs and IB-Cs to the ``financial institution'' 
definition make such persons subject to the recordkeeping and reporting 
requirements set forth in section 103.33. This paragraph requires 
specific records concerning transfers and transmittals of funds in the 
amount of $3,000 or more. The amendments to paragraphs (e)(6)(i) and 
(f)(6)(i) of Section 103.33 set forth exceptions for any transfers or 
transmittals of funds involving either an FCM or an IB-C. The inclusion 
of FCMs and IB-Cs within the exceptions is intended to provide parallel 
treatment for records required to be made and kept by banks, BDs, FCMs, 
and IB-Cs. There were no comments concerning this provision, and FinCEN 
is adopting it as proposed.

D. 103.56--Examination

    Under the current BSA delegation framework, the Internal Revenue 
Service is responsible for examining all financial institutions (except 
for BDs) that are not examined by the federal bank supervisory 
agencies. This rule will expand the scope of the BSA rules applicable 
to FCMs and IB-Cs by including them in the regulatory definition of 
``financial institution,'' and shift the responsibility for examining 
FCMs and IB-Cs under the BSA from the Internal Revenue Service to the 
CFTC. Thus, 31 CFR 103.56, which sets forth delegations of BSA 
authority, is amended to provide the CFTC with examination authority 
with respect to FCMs and IB-Cs for compliance with the BSA regulations.

IV. Regulatory Flexbility Act

    FinCEN certifies that this final regulation will not have a 
significant economic impact on a substantial number of small entities. 
As noted above, the inclusion of FCMs and IB-Cs within the ``financial 
institution'' definition in the BSA regulations will make these 
entities subject to all of the same requirements that apply to 
similarly situated financial institutions, such as banks and broker-
dealers in securities. Nevertheless, FinCEN does not believe that these 
requirements modify the existing obligations of FCMs and IB-Cs, since 
the transactional information required to be made and retained under 
the rules will be information that already is required to be made and 
retained in the ordinary course of an FCM's or IB-C's business.
    Concerning the filing of SARs by FCMs and IB-Cs, FinCEN does not 
believe that the economic impact of the rule will be significant. Due 
to mandatory provisions of the USA Patriot Act \40\ and obligations 
imposed by the NFA,\41\ FCMs and IB-Cs already are obligated to 
establish AMLPs that include policies, procedures, and internal 
controls that are reasonably designed to assure compliance with the BSA 
and the implementing regulations. A set of systems and procedures 
designed to detect and require reporting of suspicious activity 
complements these existing program requirements. As the NFA's 
interpretive notice to Compliance Rule 2-9(c) makes clear, an FCM or 
IB-C may tailor its program based on the type of its business, the size 
and complexity of its operations, the breadth and scope of its customer 
base, the number of its employees, and its resources.
---------------------------------------------------------------------------

    \40\ 31 U.S.C. 5318(h).
    \41\ NFA Compliance Rule 2-9(c).
---------------------------------------------------------------------------

V. Executive Order 12866

    The Department of the Treasury has determined that this final 
regulation is not a ``significant regulatory action'' for purposes of 
Executive Order 12866.

VI. Unfunded Mandates Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (``Unfunded Mandates Act''), March 22, 1995, requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that includes a federal mandate that may result in expenditure by 
state, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 202 of the Unfunded Mandates Act 
also requires an agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. FinCEN has 
determined that it is not required to prepare a written statement under 
section 202 and has concluded that on balance these rules provide the 
most cost-effective and least burdensome alternative to achieve the 
objectives of the rules.

VII. Paperwork Reduction Act

    The collection of information contained in this final regulation 
has been approved by the Office of Management and Budget (``OMB'') in 
accordance with the requirements of the Paperwork Reduction Act (44 
U.S.C. 3507) under control number 1506-0019. The estimated average 
burden associated with the collection of information in this final rule 
is 4 hours per respondent.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to Desk Officer 
for the Department of the Treasury, Office of Information and 
Regulatory Affairs, Office of Management and Budget, Paperwork 
Reduction Project (1506), Washington, DC 20503 (or by the Internet to 
[email protected]).
    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. FinCEN received no comments on its 
recordkeeping burden estimate.

List of Subjects in 31 CFR Part 103

    Authority delegations (Government agencies), Banks and banking, 
Brokers, Commodity futures, Currency, Investigations, Law enforcement, 
Penalties, Reporting and recordkeeping requirements, Securities.

Amendments to the Regulations

0
For the reasons set forth above in the preamble, 31 CFR Part 103 is 
amended as follows:

[[Page 65398]]

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

0
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. 5311-5314, 
5316-5332; title III, sec. 312, 313, 314, 319, 326, 352, Pub. L. 
107-56, 115 Stat. 307; 12 U.S.C. 1818; 12 U.S.C. 1786(q).


0
2. Section 103.11 is amended by revising paragraph (f), adding 
paragraphs (n)(8) and (n)(9), revising paragraph (ii)(1), and adding 
paragraphs (xx), (yy), (zz), (aaa), and (bbb) to read as follows:


Sec.  103.11  Meaning of terms.

* * * * *
    (f) Broker or dealer in securities. A broker or dealer in 
securities, registered or required to be registered with the Securities 
and Exchange Commission under the Securities Exchange Act of 1934, 
except persons who register pursuant to section 15(b)(11) of the 
Securities Exchange Act of 1934.
* * * * *
    (n) * * *
    (8) A futures commission merchant;
    (9) An introducing broker in commodities.
* * * * *
    (ii) Transaction. (1) Except as provided in paragraph (ii)(2) of 
this section, transaction means a purchase, sale, loan, pledge, gift, 
transfer, delivery, or other disposition, and with respect to a 
financial institution includes a deposit, withdrawal, transfer between 
accounts, exchange of currency, loan, extension of credit, purchase or 
sale of any stock, bond, certificate of deposit, or other monetary 
instrument, security, contract of sale of a commodity for future 
delivery, option on any contract of sale of a commodity for future 
delivery, option on a commodity, purchase or redemption of any money 
order, payment or order for any money remittance or transfer, or any 
other payment, transfer, or delivery by, through, or to a financial 
institution, by whatever means effected.
* * * * *
    (xx) Commodity. Any good, article, service, right, or interest 
described in section 1a(4) of the Commodity Exchange Act (``CEA''), 7 
U.S.C. 1a(4).
    (yy) Contract of sale. Any sale, agreement of sale, or agreement to 
sell as described in section 1a(7) of the CEA, 7 U.S.C. 1a(7).
    (zz) Futures commission merchant. Any person registered or required 
to be registered as a futures commission merchant with the Commodity 
Futures Trading Commission (``CFTC'') under the CEA, except persons who 
register pursuant to section 4f(a)(2) of the CEA, 7 U.S.C. 6f(a)(2).
    (aaa) Introducing broker-commodities. Any person registered or 
required to be registered as an introducing broker with the CFTC under 
the CEA, except persons who register pursuant to section 4f(a)(2) of 
the CEA, 7 U.S.C. 6f(a)(2).
    (bbb) Option on a commodity. Any agreement, contract, or 
transaction described in section 1a(26) of the CEA, 7 U.S.C. 1a(26).

0
3. Section 103.17 is added to read as follows:


Sec.  103.17  Reports by futures commission merchants and introducing 
brokers in commodities of suspicious transactions.

    (a) General--(1) Every futures commission merchant (``FCM'') and 
introducing broker in commodities (``IB-C'') within the United States 
shall file with FinCEN, to the extent and in the manner required by 
this section, a report of any suspicious transaction relevant to a 
possible violation of law or regulation. An FCM or IB-C may also file 
with FinCEN a report of any suspicious transaction that it believes is 
relevant to the possible violation of any law or regulation but whose 
reporting is not required by this section. Filing a report of a 
suspicious transaction does not relieve an FCM or IB-C from the 
responsibility of complying with any other reporting requirements 
imposed by the Commodity Futures Trading Commission (``CFTC'') or any 
registered futures association or registered entity as those terms are 
defined in the Commodity Exchange Act (``CEA''), 7 U.S.C. 21 and 7 
U.S.C. 1a(29).
    (2) A transaction requires reporting under the terms of this 
section if it is conducted or attempted by, at, or through an FCM or 
IB-C, it involves or aggregates funds or other assets of at least 
$5,000, and the FCM or IB-C knows, suspects, or has reason to suspect 
that the transaction (or a pattern of transactions of which the 
transaction is a part):
    (i) Involves funds derived from illegal activity or is intended or 
conducted in order to hide or disguise funds or assets derived from 
illegal activity (including, without limitation, the ownership, nature, 
source, location, or control of such funds or assets) as part of a plan 
to violate or evade any federal law or regulation or to avoid any 
transaction reporting requirement under federal law or regulation;
    (ii) Is designed, whether through structuring or other means, to 
evade any requirements of this part or of any other regulations 
promulgated under the Bank Secrecy Act (``BSA''), Public Law 91-508, as 
amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 
U.S.C. 5311-5314, 5316-5332;
    (iii) Has no business or apparent lawful purpose or is not the sort 
in which the particular customer would normally be expected to engage, 
and the FCM or IB-C knows of no reasonable explanation for the 
transaction after examining the available facts, including the 
background and possible purpose of the transaction; or
    (iv) Involves use of the FCM or IB-C to facilitate criminal 
activity.
    (3) The obligation to identify and properly and timely to report a 
suspicious transaction rests with each FCM and IB-C involved in the 
transaction, provided that no more than one report is required to be 
filed by any of the FCMs or IB-Cs involved in a particular transaction, 
so long as the report filed contains all relevant facts.
    (b) Filing procedures--(1) What to file. A suspicious transaction 
shall be reported by completing a Suspicious Activity Report-Securities 
and Futures Industry (``SAR-SF''), and collecting and maintaining 
supporting documentation as required by paragraph (d) of this section.
    (2) Where to file. The SAR-SF shall be filed with FinCEN in a 
central location, to be determined by FinCEN, as indicated in the 
instructions to the SAR-SF.
    (3) When to file. A SAR-SF shall be filed no later than 30 calendar 
days after the date of the initial detection by the reporting FCM or 
IB-C of facts that may constitute a basis for filing a SAR-SF under 
this section. If no suspect is identified on the date of such initial 
detection, an FCM or IB-C may delay filing a SAR-SF for an additional 
30 calendar days to identify a suspect, but in no case shall reporting 
be delayed more than 60 calendar days after the date of such initial 
detection. In situations involving violations that require immediate 
attention, such as terrorist financing or ongoing money laundering 
schemes, the FCM or IB-C shall immediately notify by telephone an 
appropriate law enforcement authority in addition to filing timely a 
SAR-SF. FCMs and IB-Cs wishing voluntarily to report suspicious 
transactions that may relate to terrorist activity may call FinCEN's 
Financial Institutions Hotline at 1-866-556-3974 in addition to filing 
timely a SAR-SF if required by this section. The FCM or IB-C may also, 
but is not required to, contact the CFTC to report in such situations.

[[Page 65399]]

    (c) Exceptions--(1) An FCM or IB-C is not required to file a SAR-SF 
to report--
    (i) A robbery or burglary committed or attempted of the FCM or IB-C 
that is reported to appropriate law enforcement authorities;
    (ii) A violation otherwise required to be reported under the CEA (7 
U.S.C. 1 et seq.), the regulations of the CFTC (17 CFR chapter I), or 
the rules of any registered futures association or registered entity as 
those terms are defined in the CEA, 7 U.S.C. 21 and 7 U.S.C. 1a(29), by 
the FCM or IB-C or any of its officers, directors, employees, or 
associated persons, other than a violation of 17 CFR 42.2, as long as 
such violation is appropriately reported to the CFTC or a registered 
futures association or registered entity.
    (2) An FCM or IB-C may be required to demonstrate that it has 
relied on an exception in paragraph (c)(1) of this section, and must 
maintain records of its determinations to do so for the period 
specified in paragraph (d) of this section. To the extent that a Form 
8-R, 8-T, U-5, or any other similar form concerning the transaction is 
filed consistent with CFTC, registered futures association, or 
registered entity rules, a copy of that form will be a sufficient 
record for the purposes of this paragraph (c)(2).
    (d) Retention of records. An FCM or IB-C shall maintain a copy of 
any SAR-SF filed and the original or business record equivalent of any 
supporting documentation for a period of five years from the date of 
filing the SAR-SF. Supporting documentation shall be identified as such 
and maintained by the FCM or IB-C, and shall be deemed to have been 
filed with the SAR-SF. An FCM or IB-C shall make all supporting 
documentation available to FinCEN, the CFTC, or any other appropriate 
law enforcement agency or regulatory agency, and, for purposes of 
paragraph (g) of this section, to any registered futures association, 
registered entity, or self-regulatory organization (``SRO'') (as 
defined in section 3(a)(26) of the Securities Exchange Act of 1934, 15 
U.S.C. 78c(a)(26)), upon request.
    (e) Confidentiality of reports. No financial institution, and no 
director, officer, employee, or agent of any financial institution, who 
reports a suspicious transaction under this part, may notify any person 
involved in the transaction that the transaction has been reported, 
except to the extent permitted by paragraph (a)(3) of this section. 
Thus, any person subpoenaed or otherwise requested to disclose a SAR-SF 
or the information contained in a SAR-SF, except where such disclosure 
is requested by FinCEN, the CFTC, another appropriate law enforcement 
or regulatory agency, or for purposes of paragraph (g) of this section, 
a registered futures association, registered entity, or SRO shall 
decline to produce the SAR-SF or to provide any information that would 
disclose that a SAR-SF has been prepared or filed, citing this 
paragraph and 31 U.S.C. 5318(g)(2), and shall notify FinCEN of any such 
request and its response thereto.
    (f) Limitation of liability. An FCM or IB-C, and any director, 
officer, employee, or agent of such FCM or IB-C, that makes a report of 
any possible violation of law or regulation pursuant to this section or 
any other authority (or voluntarily) shall not be liable to any person 
under any law or regulation of the United States (or otherwise to the 
extent also provided in 31 U.S.C. 5318(g)(3), including in any 
arbitration or reparations proceeding) for any disclosure contained in, 
or for failure to disclose the fact of, such report.
    (g) Examination and enforcement. Compliance with this section shall 
be examined by the Department of the Treasury, through FinCEN or its 
delegates, under the terms of the BSA. Reports filed under this section 
or Sec.  103.19 (including any supporting documentation), and 
documentation demonstrating reliance on an exception under paragraph 
(c) of this section or Sec.  103.19, shall be made available, upon 
request, to the CFTC, Securities and Exchange Commission, and any 
registered futures association, registered entity, or SRO, examining an 
FCM, IB-C, or broker or dealer in securities for compliance with the 
requirements of this section or Sec.  103.19. Failure to satisfy the 
requirements of this section may constitute a violation of the 
reporting rules of the BSA or of this part.
    (h) Effective date. This section applies to transactions occurring 
after May 18, 2004.

0
4. Section 103.33 is amended by redesignating paragraphs (e)(6)(i)(E), 
(F), and (G) as paragraphs (e)(6)(i)(G), (H), and (I), respectively; 
adding new paragraphs (e)(6)(i)(E) and (F); redesignating paragraphs 
(f)(6)(i)(E), (F), and (G) as paragraphs (f)(6)(i)(G), (H), and (I), 
respectively, and adding new paragraphs (f)(6)(i)(E) and (F) to read as 
follows:


Sec.  103.33  Records to be made and retained by financial 
institutions.

* * * * *
    (e) * * *
    (6) * * *
    (i) * * *
    (E) A futures commission merchant or an introducing broker in 
commodities;
    (F) A wholly-owned domestic subsidiary of a futures commission 
merchant or an introducing broker in commodities;
* * * * *
    (f) * * *
    (6) * * *
    (i) * * *
    (E) A futures commission merchant or an introducing broker in 
commodities;
    (F) A wholly-owned domestic subsidiary of a futures commission 
merchant or an introducing broker in commodities;
* * * * *

0
5. Section 103.56 is amended by revising paragraph (b)(8) and adding a 
new paragraph (b)(9) to read as follows:


Sec.  103.56  Enforcement.

* * * * *
    (b) * * *
    (8) To the Commissioner of Internal Revenue with respect to all 
financial institutions, except brokers or dealers in securities, 
futures commission merchants, introducing brokers in commodities, and 
commodity trading advisors, not currently examined by Federal bank 
supervisory agencies for soundness and safety; and
    (9) To the Commodity Futures Trading Commission with respect to 
futures commission merchants, introducing brokers in commodities, and 
commodity trading advisors.
* * * * *

    Dated: November 13, 2003.
William F. Baity,
Deputy Director, Financial Crimes Enforcement Network.
[FR Doc. 03-28991 Filed 11-19-03; 8:45 am]
BILLING CODE 4810-02-P