[Federal Register Volume 68, Number 227 (Tuesday, November 25, 2003)]
[Proposed Rules]
[Pages 66305-66311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29288]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103


Imposition of Special Measures Against Myanmar Mayflower Bank and 
Asia Wealth Bank as Financial Institutions of Primary Money Laundering 
Concern

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: On November 18, 2003, the Secretary of the Treasury designated 
Myanmar Mayflower Bank (Mayflower Bank) and Asia Wealth Bank, both 
Burma banks, as financial institutions of primary money laundering 
concern pursuant to 31 U.S.C. 5318A, as added by section 311 of the 
Uniting and Strengthening America by Providing Appropriate Tools 
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. 
The Department of the Treasury, acting through FinCEN, is issuing this 
proposed rule to impose special measures against these two 
institutions.

DATES: Written comments on the notice of proposed rulemaking must be 
submitted on or before December 26, 2003.

ADDRESSES: It is preferable for comments to be submitted 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: Section 311--Designation of Burmese Banks.'' Comments also may 
be submitted by paper mail to FinCEN, P.O. Box 39, Vienna, VA 22183, 
Attn: Section 311 Special Measures Regulations (Burmese Banks). Please 
submit comments 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: Office of the General Counsel, 
Department of the Treasury, (202) 622-1927; the Executive Office for 
Terrorist Financing and Financial Crimes (Treasury) (202) 622-0470; or 
the Office of Chief Counsel (FinCEN), (703) 905-3590 (not toll free 
numbers).

SUPPLEMENTARY INFORMATION: The Secretary of the Treasury has designated 
Myanmar Mayflower Bank (Mayflower Bank) and Asia Wealth Bank to be 
financial institutions of primary money laundering concern under 31 
U.S.C. 5318A, as added by section 311(a) of the USA PATRIOT Act (Pub. 
L. 107-56).
    Treasury, acting through FinCEN, is also proposing the imposition 
of special measures authorized by section 5318A(b)(5). The special 
measures imposed under this section would prohibit certain U.S. 
financial institutions from maintaining correspondent or payable-
through accounts in the United States for, or on behalf of, Mayflower 
Bank and Asia Wealth Bank. This prohibition extends to correspondent or 
payable-through accounts maintained for other foreign banks when such 
accounts are used to provide banking services to the two named Burmese 
banks indirectly.
    Additionally, the Secretary designated the jurisdiction of Burma as 
a jurisdiction of primary money laundering concern. By a separate 
proposed rule, Treasury and FinCEN are proposing a special measure to 
prohibit certain U.S. financial institutions from maintaining 
correspondent or payable-through accounts for, or on behalf of, any 
Burmese financial institution. The special measure in this notice would 
prohibit certain U.S. financial institutions from establishing, 
maintaining, administering, or managing correspondent or payable-
through accounts for, or on behalf of, Myanmar Mayflower Bank or Asia 
Wealth Bank, notwithstanding any

[[Page 66306]]

exemption from or license issued pursuant to Executive Order 13310 of 
July 28, 2003.

I. Background

A. Section 311 of the USA PATRIOT Act

    On October 26, 2001, the President signed the Act into law. Title 
III of the Act amends the anti-money laundering provisions of the Bank 
Secrecy Act (BSA) (codified in subchapter II of chapter 53 of title 31, 
United States Code) to promote the prevention, detection, and 
prosecution of international money laundering and the financing of 
terrorism.
    Section 311 of the Act (Section 311) added section 5318A to the 
BSA, granting the Secretary of the Treasury (Secretary) authority to 
designate a foreign jurisdiction, institution(s), class(es) of 
transactions, or type(s) of account(s) as a ``primary money laundering 
concern'' and to require U.S. financial institutions to take certain 
``special measures'' against the primary money laundering concern.
    Section 311 identifies factors to consider and agencies to consult 
before the Secretary may designate a primary money laundering concern. 
The statute also provides similar procedures, i.e., factors and 
consultation requirements, for selecting the imposition of specific 
special measures against the designee.
    Taken as a whole, Section 311 provides Treasury with a range of 
options that can be adapted to target most effectively specific money 
laundering and terrorist financing concerns. These options give the 
Secretary the authority to bring additional and useful pressure on 
those jurisdictions and institutions that pose money laundering 
threats. Through the imposition of various special measures, the 
Secretary can gain more information about the concerned jurisdictions, 
institutions, transactions, and accounts; more effectively monitor the 
respective institutions, transactions, and accounts; and/or protect 
U.S. financial institutions from involvement with jurisdictions, 
institutions, transactions, or accounts that pose a money laundering 
concern.
1. Required Consultations and Statutory Considerations To Be Made Prior 
to Designating a Foreign Financial Institution To Be of Primary Money 
Laundering Concern
    Before making a finding that reasonable grounds exist for 
concluding that a foreign financial institution is of primary money 
laundering concern, the Secretary is required to consult with both the 
Secretary of State and the Attorney General.
    In addition to these consultations, the Secretary is required by 
statute to consider ``such information as the Secretary determines to 
be relevant, including the following potentially relevant factors,'' 
when designating a foreign financial institution:
    [sbull] The extent to which such financial institution is used to 
facilitate or promote money laundering in or through the jurisdiction;
    [sbull] The extent to which such financial institution is used for 
legitimate business purposes in the jurisdiction; and
    [sbull] The extent to which such action is sufficient to ensure, 
with respect to transactions involving the institution operating in the 
jurisdiction, that the purposes of this subchapter continue to be 
fulfilled, and to guard against international money laundering and 
other financial crimes.
    Thus, a designation is based on consideration of the relevant facts 
and factors in conjunction with a consultation process, which leads to 
a decision by the Secretary that there are reasonable grounds to 
conclude that the institution is of primary money laundering concern.
2. Imposition of Special Measures
    If the Secretary determines that a foreign financial institution is 
of primary money laundering concern, the Secretary must determine the 
appropriate special measure(s) to address the specific money laundering 
risks. Section 311 provides a range of special measures that can be 
imposed, individually, jointly, in any combination, and in any 
sequence.\1\
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    \1\ Available special measures include requiring: (1) 
Recordkeeping and reporting of certain financial transactions; (2) 
collection of information relating to beneficial ownership; (3) 
collection of information relating to certain payable-through 
accounts; (4) collection of information relating to certain 
correspondent accounts; and (5) prohibition or conditions on the 
opening or maintaining of correspondent or payable-through accounts. 
31 U.S.C. 5318A(b)(1)-(5). For a complete discussion of the range of 
possible countermeasures, see 68 FR 18917 (April 17, 2003) 
(proposing to impose special measures against Nauru).
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    The Secretary's imposition of special measures follows procedures 
similar to those for designations, but carries with it additional 
consultations to be made and factors to consider. The statute requires 
the Secretary to consult with appropriate agencies and other interested 
parties \2\ and to consider the following specific factors:
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    \2\ Section 5318A(a)(4)(A) requires the Secretary to consult 
with the Chairman of the Board of Governors of the Federal Reserve, 
any other appropriate Federal banking agency, the Secretary of 
State, the Securities and Exchange Commission (SEC), the Commodity 
Futures Trading Commission (CFTC), the National Credit Union 
Administration (NCUA), and, in the sole discretion of the Secretary, 
``such other agencies and interested parties as the Secretary may 
find to be appropriate.'' The consultation process must also include 
the Attorney General and the Secretary of State, if the Secretary is 
considering prohibiting or imposing conditions on domestic financial 
institutions maintaining correspondent account relationships with 
the designated entity.
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    [sbull] Whether similar action has been or is being taken by other 
nations or multilateral groups;
    [sbull] Whether the imposition of any particular special measure 
would create a significant competitive disadvantage, including any 
undue cost or burden associated with compliance, for financial 
institutions organized or licensed in the United States;
    [sbull] The extent to which the action or the timing of the action 
would have a significant adverse systemic impact on the international 
payment, clearance, and settlement system, or on legitimate business 
activities involving the particular institution; and
    [sbull] The effect of the action on United States national security 
and foreign policy.
3. Procedures for Imposing Special Measures
    In this proposed rulemaking, the Secretary seeks to impose the 
fifth special measure (31 U.S.C. 5318A(b)(5)) against Mayflower Bank 
and Asia Wealth Bank. This special measure may only be imposed through 
the issuance of a regulation.

B. Burma, Myanmar Mayflower Bank, and Asia Wealth Bank

1. The Burmese Anti-Money Laundering Regime
    Burma (also known as Myanmar) has no effective anti-money 
laundering controls in place. As a result, in June 2001 Burma was 
designated as a Non-Cooperative Country and Territory (NCCT) by the 
Financial Action Task Force (FATF) \3\ for its lack of basic anti-money 
laundering provisions and weak oversight of the banking sector. 
Following the designation by the FATF, in April 2002, FinCEN issued an 
advisory to U.S. financial institutions to give enhanced scrutiny to 
all transactions originating in or routed to or through Burma, or 
involving entities organized or domiciled, or persons maintaining 
accounts, in Burma. Deficiencies identified by FATF and the FinCEN 
advisory included:
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    \3\ For further information on the FATF go to http://www.fatf-gafi.org.
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    [sbull] Burma lacks a basic set of anti-money laundering laws or 
regulations.

[[Page 66307]]

    [sbull] Money laundering is not a criminal offense for crimes other 
than drug trafficking in Burma.
    [sbull] The Burmese Central Bank has no anti-money laundering 
regulations for financial institutions.
    [sbull] Banks licensed by Burma are not legally required to obtain 
or maintain identification information about their customers.
    [sbull] Banks licensed by Burma are not required to maintain 
transaction records of customer accounts.
    [sbull] Burma does not require financial institutions to report 
suspicious transactions.
    [sbull] Burma has significant obstacles to international co-
cooperation by judicial authorities.
    In June 2002, Burma responded to this international pressure by 
enacting an anti-money laundering law that purportedly addresses some 
of these deficiencies. The necessary regulations required for its 
effective implementation, however, are not in place. As a result, the 
Burmese anti-money laundering law is ineffective and unenforceable, and 
cannot be regarded as effectively remedying any of the identified 
deficiencies. Due to Burma's continuing lack of progress, the FATF 
called upon its member jurisdictions to impose countermeasures on Burma 
as of November 3, 2003.
    The United States continues to recognize that Burma is a haven for 
international drug trafficking. On January 31, 2003, the President also 
signed Presidential Determination No. 2003-14, identifying Burma as a 
major illicit drug producing and/or drug transiting country pursuant to 
section 706(1) of the Foreign Relations Authorization Act, Fiscal Year 
2003 (Pub. L. 107-228), and as a country that has failed demonstrably 
during the previous twelve months to adhere to its obligations under 
international counter-narcotics agreements and take the measures set 
forth in section 489(a)(1) of the Foreign Assistance Act of 1961, as 
amended (FAA). In addition, this past year Burma continued to be named 
as a major money laundering country. A major money laundering country 
is defined by statute as one ``whose financial institutions engage in 
currency transactions including significant amounts of proceeds from 
international narcotics trafficking.'' FAA section 481(e)(7).
2. Mayflower Bank and Asia Wealth Bank
    Mayflower Bank was incorporated in 1996 as a full-service 
commercial bank in Rangoon, Burma. The bank maintains 25 branches and 
has 1,153 employees. The Banker's Almanac and Dun and Bradstreet 
reports indicate that Mayflower Bank was incorporated in 1994. 
According to the 2003 Europa World Yearbook, the chairman of Mayflower 
Bank is Kyaw Win. The 1996-1997 Worldwide Correspondents Guide 
indicates that Mayflower Bank claims to have correspondent accounts in 
major cities, but advises readers to contact the bank for more 
information. The current issue of Thomson Bank Directory states that 
current financial figures for the bank are not available.
    Asia Wealth Bank started its banking operation in 1995 and is one 
of the largest private banks in Burma, offering a wide variety of 
banking services. In August 2000, Asia Wealth Bank held 52 percent of 
the market share in fixed deposits of Burmese banks (over U.S. $23 
billion). At the end of March 2001, it had 39 branches with a total of 
3,200 employees (in December 2002, Dun and Bradstreet indicated only 
2,200 employees). According to the 2003 Europa World Yearbook, Win 
Maung is the Chairman and Aik Htun is the Vice-Chair.
    Presently Burma is reported to have only ten local private banks, 
and Mayflower Bank and Asia Wealth Bank are two of the five largest. 
There are also five state run (i.e., public) banks in Burma.\4\ Other 
reports indicate that there may be as many as 20 private banks, but 
confirm that Mayflower Bank and Asia Wealth Bank are two of the leading 
banks.\5\
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    \4\ See Official Myanmar Finance Ministry Web site, http://www.Myanmar.com.
    \5\ See Xinhua News Agency, March 8, 2002.
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C. Economic Sanctions

    On July 28, 2003, the President signed both the Burmese Freedom and 
Democracy Act of 2003 and Executive Order 13310, imposing economic 
sanctions on Burma. These sanctions generally include: (1) A ban on the 
exportation or reexportation, directly or indirectly, of financial 
services to Burma; (2) the blocking of property and interests in 
property of the State Peace and Development Council of Burma and three 
state-owned foreign trade banks that are in the United States or in the 
possession or control of U.S. persons; and (3) a ban on the importation 
of Burmese goods into the United States. These sanctions build on an 
investment ban imposed under Executive Order 13047 issued pursuant to 
the International Emergency Economic Powers Act (IEEPA) on May 20, 
1997, and a recently expanded visa ban in place since October 1996. The 
new sanctions have frozen hundreds of thousands of dollars of assets 
and have disrupted an already weak economy, especially in the important 
garment sector where many firms have closed or moved outside of Burma.
    Executive Order 13310 prohibits broadly the provision of financial 
services to Burma from the United States or by a U.S. person, subject 
to limited exceptions.\6\ Since the President signed the Order, 
however, Treasury has issued several licenses to permit transactions 
with Burma for certain specified purposes. For example, Treasury issued 
licenses authorizing transactions for the conduct of the official 
business of the United States Government, the United Nations, the World 
Bank, and the International Monetary Fund, and non-commercial personal 
remittances of up to $300 per household per quarter. The exemptions and 
licenses reflect the judgment of the United States that certain 
transactions are necessary and appropriate, even within the framework 
of this sanctions regime.
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    \6\ For example, the prohibition does not extend to transactions 
relating to certain contracts entered into prior to May 21, 1997. 
See Executive Order 13310, Sec.  13.
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D. The Proposed Section 311 Special Measures

    The requirements sought to be imposed against Mayflower Bank and 
Asia Wealth Bank pursuant to Section 311 reinforce the existing 
restrictions on transactions with Burma that are outlined above, and 
are a necessary addition to the Section 311 special measures Treasury 
seeks to impose on the jurisdiction of Burma. Although they are similar 
in their effect on these two banks, the proposed Section 311 special 
measures differ in certain respects and serve distinct policy goals 
from the economic sanctions imposed pursuant to Executive Order 13310. 
Most notably, the Section 311 special measures will not permit U.S. 
financial institutions to maintain indirect correspondent accounts even 
to conduct transactions that are exempt from, or licensed pursuant to, 
Executive Order 13310. The justification for this absolute prohibition 
lies in the Secretary's determination that Mayflower Bank and Asia 
Wealth Bank pose an unacceptable risk of money laundering and other 
financial crimes, and are linked to narcotics traffickers. The specific 
information concerning these two banks justifies their exclusion 
entirely from the U.S. financial system. This underscores the important 
policy justification for the Section 311 action--stemming the flow of 
illicit funds into

[[Page 66308]]

the U.S. financial system. In contrast, the existing sanctions pursuant 
to Executive Order 13310 were imposed for different reasons, including, 
for example, the government of Burma's continued suppression of the 
democratic opposition.
    Moreover, as with the designation of Burma generally, the United 
States is sending a strong message to other jurisdictions and financial 
institutions to take similar steps to cut off these two banks from the 
international financial system due to the unacceptable risk of money 
laundering.
    Finally, while the proposed special measures applicable to all 
Burmese financial institutions would certainly apply to Mayflower Bank 
and Asia Wealth Bank, a separate designation is necessary. The special 
measure Treasury proposes to apply to all Burmese financial 
institutions incorporates the licenses and exemptions applicable to the 
economic sanctions under Executive Order 13310. These exceptions are 
not appropriate when dealing with Mayflower Bank and Asia Wealth Bank, 
given their affiliation with narcotics traffickers. Also, by separately 
designating these two banks, to the extent Burma responds to the 
international call and begins to implement effective anti-money 
laundering controls, Treasury has the flexibility to alter the special 
measures applicable to all Burmese financial institutions while 
maintaining the absolute prohibition against these two institutions. 
The separate designation of Mayflower Bank and Asia Wealth Bank under 
Section 311 also fulfills another important goal of Treasury: To name 
publicly institutions posing risks to the international financial 
system and encourage all jurisdictions to exclude them.

II. Designation of Mayflower Bank and Asia Wealth Bank as Financial 
Institutions of Primary Money Laundering Concern

    Based upon a review and analysis of relevant information, 
consultations with relevant agencies and departments, and a 
consideration of the factors outlined above, the Secretary has 
determined that Mayflower Bank and Asia Wealth Bank are financial 
institutions of primary money laundering concern. See the notice 
published elsewhere in this separate part.
    The Secretary has found Mayflower Bank and Asia Wealth Bank, both 
located in Burma, to be of primary money laundering concern due to a 
number of factors, including: (1) They are licensed in Burma, a 
jurisdiction with inadequate anti-money laundering controls; (2) 
individuals owning and controlling both banks are linked to drug 
trafficking and money laundering, including using the banks for such 
purposes; and (3) the individuals who own and control the banks are 
linked to the United Wa State Army (UWSA), an organization involved in 
narcotics trafficking, and designated as significant narcotics 
traffickers under the Foreign Narcotics Kingpin Designation Act,\7\ 
and, in the case of the Asia Wealth Bank, the owners are linked to 
organized crime.
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    \7\ 21 U.S.C. 1901-1908, 8 U.S.C 1182.
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    As provided by section 311, the Secretary also considered the 
following three factors, all of which counsel in favor of designating 
both banks:

1. The Extent to Which Such Financial Institutions, Transactions, or 
Types of Accounts Are Used To Facilitate or Promote Money Laundering in 
or Through the Jurisdiction

    The Secretary has information that Mayflower Bank is owned and 
controlled by convicted narcotics traffickers, is essentially 
controlled by the UWSA, and has been used to facilitate money 
laundering. For example, public sources indicate that Mayflower Bank is 
owned by Kyaw Win. His name has been linked to a former drug lord and 
to others who have been identified in connection with the narcotics 
trade.\8\ Various sources establish the connection between officials of 
the UWSA and Mayflower Bank, both in terms of their control over the 
institution as well as the use of the institution to launder funds.\9\ 
The UWSA operates an extensive drug trafficking operation.
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    \8\ See The Age Company Limited (Melbourne), ``Burma's Banking 
Meltdown Goes Unnoticed Beyond its Borders,'' March 20, 2003; Asian 
Company Profiles Ltd., Mayflower Bank profile, July 3, 2003.
    \9\ The Financial Times reports that the UWSA, one of the 
world's largest organizations of armed drug traffickers, has taken 
over the Mayflower Bank in Rangoon. See Heritage Foundation Reports, 
January 2002. A Thailand article from 2002 indicates that the UWSA 
bought shares in the Mayflower Bank and has been providing 
assistance to it, describing the Bank as part of the UWSA Business 
Empire. See Bangkok Phuchatkan, January 2, 2002.
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    Asia Wealth Bank, one of Burma's largest private banks, is 
affiliated with prominent organizations and figures in the drug trade, 
including members of the Kokang ethnic group headed by notorious 
druglord Peng Chia-Sheng. Eike Htun, the vice chairman of the bank, has 
been specifically identified as having connections with Burma's 
narcotics trade.\10\ The bank has also been a repository for funds with 
illicit origins, and counterfeit notes.\11\
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    \10\ See Backman, The Age (Melbourne), March 20, 2003; Global 
News Wire, BBC Monitoring, February 14, 2003.
    \11\ As recently as October 2002, significant funds from Yang 
Kya Haw, arrested for drug trafficking, were discovered in the Asia 
Wealth Bank. See Shanland (internet website), February 19, 2003. On 
April 30, 2002, counterfeit 1,000 Kyat notes were found at the Asia 
Wealth Bank branch in Pa-an, Burma. See Oslo Democratic Voice of 
Burma, May 2, 2002.
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2. The Extent to Which Such Institutions, Transactions, or Types of 
Accounts Are Used for Legitimate Business Purposes in the Jurisdiction

    In response to economic turmoil, Burma recently suspended the 
banking operations of all private banks, including Mayflower Bank and 
Asia Wealth Bank. Although it appears that some private banks may be 
conducting operations despite the suspension, it is difficult to 
conduct legitimate business at this time. Additionally, Burmese law 
does not allow private banks to engage in foreign currency 
transactions. All foreign currency transfers into Burma are required to 
be executed by one of three of Burma's state banks (Myanmar Economic 
Bank, Myanmar Investment and Commercial Bank, and Myanmar Foreign Trade 
Bank).
    Generally, Burma's poorly regulated banking system and ineffective 
money laundering legislation have created a business and investment 
environment conducive to the use of drug-related proceeds in legitimate 
commerce. Burma's economy continues to be vulnerable to drug money 
laundering because of its under-regulated financial system, weak anti-
money laundering regime, and policies that facilitate the funneling of 
drug money into commercial enterprises and infrastructure 
investment.\12\ According to a March 1998 report of Jane's Intelligence 
Review, about 60 percent of Burma's private investment is in one way or 
another related to narcotics.
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    \12\ See U.S. Department of State, International Narcotics 
Control Strategy Report, March 2003.
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3. The Extent to Which Such Action Is Sufficient To Ensure, With 
Respect To Transactions Involving the Jurisdiction and Institutions 
Operating in the Jurisdiction, That the Purposes of the BSA Continue To 
Be Fulfilled, and To Guard Against International Money Laundering and 
Other Financial Crimes

    A determination that Mayflower Bank and Asia Wealth Bank--
institutions operating in a jurisdiction with inadequate anti-money 
laundering laws and regulations, believed to be

[[Page 66309]]

controlled by drug traffickers, and believed to be used by the UWSA and 
possibly other organized crime groups to conduct illegal transactions--
are of primary money laundering concern plainly furthers the purposes 
of the BSA to guard against international money laundering and other 
financial crimes.

III. Imposition of Special Measures

    As a result of the designation of Mayflower Bank and Asia Wealth 
Bank as primary money laundering concerns, and based upon consultations 
and the consideration of all relevant factors,\13\ the Secretary has 
determined that grounds exist for the imposition of the special measure 
authorized by section 5318A(b)(5). Thus, the proposed rulemaking would 
prohibit covered financial institutions from establishing, maintaining, 
administering, or managing in the United States any correspondent or 
payable-through account for, or on behalf of, Mayflower Bank or Asia 
Wealth Bank. This prohibition would extend to any correspondent account 
maintained for any foreign bank if the account is used to provide 
banking services indirectly to either of these two banks. Financial 
institutions covered by this proposed rule that obtain knowledge that 
this is occurring would be required to ensure that any such account no 
longer is used to provide such services, including, where necessary, 
terminating the correspondent relationship in the manner set forth in 
this rulemaking.
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    \13\ For purposes of this action, the required consultation with 
the Federal functional regulators was performed at the staff level.
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    In imposing this special measure, the Secretary has considered the 
following pursuant to section 5318A(a)(4)(b):

1. Similar Actions Have Been or Will Be Taken by Other Nations or 
Multilateral Groups Against Burma Generally

    In June of 2001, the FATF designated Burma as an NCCT, resulting in 
FATF members issuing advisories to their financial sectors recommending 
enhanced scrutiny of transactions involving Burma. In April 2002 FinCEN 
issued an advisory notifying U.S. financial institutions that they 
should accord enhanced scrutiny with respect to transactions and 
accounts involving Burma. In October 2003, FATF called upon its 33 
members to take additional countermeasures with respect to Burma as of 
November 3, 2003. Based on informal discussions and the past practices 
of the FATF membership, the majority of FATF members are expected to 
take countermeasures, including all of the Group of Seven countries. 
The countermeasures imposed by such FATF members will likely include 
imposition of additional reporting requirements, issuance of 
advisories, shifting the burden for reporting obligations, and/or 
restrictions on the licensing of Burmese financial institutions. 
Imposition of the fifth special measure against Mayflower Bank and Asia 
Wealth Bank (as well as the jurisdiction of Burma) is consistent with 
this call for additional countermeasures and forms part of an 
international effort to protect the financial system.

2. Imposition of the Fifth Special Measure Would Not Create a 
Significant Competitive Disadvantage, Including Any Undue Cost or 
Burden Associated With Compliance, for Financial Institutions Organized 
or Licensed in the United States

    U.S. financial institutions are already prohibited from providing 
financial services to Burma, unless such services are exempted or 
licensed. The imposition of the fifth special measure potentially 
imposes a broader prohibition than currently exists for two reasons--it 
would preclude maintaining correspondent accounts for foreign branches 
of these two banks and the exemptions and licenses do not apply. 
However, on balance, it is unlikely that the imposition of the fifth 
special measure will create any significant additional costs or place 
U.S. financial institutions at a competitive disadvantage with respect 
to these two institutions. In fact, Treasury's action is intended to 
encourage other jurisdictions and financial institutions to take 
similar steps to cut off Mayflower Bank and Asia Wealth Bank from the 
international financial system, which would further minimize any 
potential competitive disadvantage for U.S. financial institutions.
    Moreover, the proposed rule would not itself require U.S. financial 
institutions to perform additional due diligence on their existing 
foreign bank correspondent account customers beyond what is already 
required under existing regulations.

3. The Proposed Action or Timing of the Action Will Not Have a 
Significant Adverse Systemic Impact on the International Payment, 
Clearance, and Settlement System, or on Legitimate Business Activities 
of the Two Banks

    Private banks, such as Mayflower Bank and Asia Wealth Bank, are not 
permitted to deal in foreign exchange. All foreign currency transfers 
into Burma are required to be executed by one of three of Burma's state 
banks. And, as noted previously, it is unlikely that Mayflower Bank or 
Asia Wealth Bank can conduct any legitimate banking operations at this 
time. Therefore, this action or timing of the action would affect 
neither the international payment, clearance, and settlement system nor 
the potential legitimate banking operations of the two banks.

4. The Proposed Action Would Enhance the National Security of the 
United States and Is Consistent With, and in Furtherance of, United 
States Foreign Policy

    The imposition of this countermeasure against Mayflower Bank, Asia 
Wealth Bank, and Burma is part of an overall foreign policy strategy to 
enhance our national security through comprehensive economic and 
political sanctions against Burma.

IV. Section-by-Section Analysis

A. Overview

    The designation published elsewhere in this separate part and this 
proposed rule are intended to deny Mayflower Bank and Asia Wealth Bank 
access to the U.S. financial system through correspondent accounts, 
which includes payable-through accounts. The proposed rule would 
prohibit certain U.S. financial institutions from establishing, 
maintaining, administering, or managing correspondent accounts in the 
United States for, or on behalf of, Mayflower Bank and Asia Wealth 
Bank. If a U.S. financial institution covered by this proposed 
rulemaking learns that a correspondent account that it maintains for a 
foreign bank is being used by that foreign bank to provide services 
indirectly to Mayflower Bank or Asia Wealth Bank, the U.S. institution 
must ensure that the account no longer is used to provide such 
services, including, where necessary, terminating the correspondent 
relationship. As explained below, however, the proposed rule does not 
itself require U.S. financial institutions to perform additional due 
diligence on foreign bank customers.

B. Definitions

    Correspondent account. Section 103.187(a)(1) of the proposed rule's 
definition of correspondent account is the definition contained in 31 
CFR 103.175(d), which defines the term to mean an account established 
to receive deposits from, or make payments on behalf of, a foreign 
bank, or handle other financial transactions related to the foreign 
bank.
    In the case of a U.S. depository institution, this broad definition 
would

[[Page 66310]]

include most types of banking relationships between a U.S. depository 
institution and a foreign bank, including payable-through accounts.
    In the case of securities broker-dealers, futures commission 
merchants, introducing brokers, and mutual funds, a correspondent 
account would include any account that permits the foreign bank to 
engage in (1) trading in securities and commodity futures or options, 
(2) funds transfers, or (3) other types of financial transactions.
    Treasury is using the same definition for purposes of the proposed 
rule as that established in the final rule implementing Sections 313 
and 319(b) of the Act \14\ with the notable exception that the term 
also applies to such accounts maintained by futures commission 
merchants, introducing brokers, and mutual funds.
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    \14\ 67 FR 60562 (September 26, 2002), codified at 31 CFR 
103.175(d)(1).
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    Covered financial institution. Section 103.187(a)(2) of the 
proposed rule defines covered financial institution to mean all of the 
following: any insured bank (as defined in section 3(h) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(h)); a commercial bank or trust 
company; a private banker; an agency or branch of a foreign bank in the 
United States; a 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 
SEC under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); 
a futures commission merchant or an introducing broker registered, or 
required to register, with the CFTC under the Commodity Exchange Act (7 
U.S.C. 1 et seq.); and an investment company (as defined in section 3 
of the Investment Company Act of 1940 (15 U.S.C. 80a-3)) that is an 
open-end company (as defined in section 5 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-5)) that is registered, or required to register, 
with the SEC pursuant to that Act.
    Myanmar Mayflower Bank. Section 103.187(a)(3) of the proposed rule 
defines Myanmar Mayflower Bank to include all headquarters, branches, 
and offices operating in Burma or in any jurisdiction. This definition 
does not include subsidiaries.
    Asia Wealth Bank. Section 103.187(a)(4) of the proposed rule 
defines Asia Wealth Bank to include all headquarters, branches, and 
offices operating in Burma or in any jurisdiction. Similarly, this 
definition does not include subsidiaries.

C. Requirements for Covered Financial Institutions

1. Prohibition on Correspondent Accounts
    Section 103.187(b)(1) of the proposed rule prohibits all covered 
financial institutions from establishing, maintaining, administering, 
or managing a correspondent or payable-through account in the United 
States for, or on behalf of, Mayflower Bank or Asia Wealth Bank. The 
prohibition would require all covered financial institutions to review 
their account records to determine that they maintain no accounts 
directly for, or on behalf of, either bank.
2. Prohibition on Indirect Correspondent Accounts
    Under section 103.187 (b)(2) of the proposed rule, if a covered 
financial institution obtains knowledge that a correspondent or 
payable-through account that it maintains for a foreign bank is being 
used by that foreign bank to provide services indirectly to Mayflower 
Bank or Asia Wealth Bank, the U.S. institution must ensure that the 
account no longer is used to provide such services, including, where 
necessary, terminating the correspondent relationship. In contrast to 
the obligation placed on covered financial institutions to identify 
correspondent accounts maintained directly for, or on behalf of, a 
Burmese financial institution in section 103.187(b)(1), this section 
would not itself impose an independent obligation on covered financial 
institutions to review or investigate correspondent accounts they 
maintain for foreign banks to ascertain whether such foreign banks are 
using the account to provide services to Mayflower Bank or Asia Wealth 
Bank. Instead, if covered financial institutions become aware, through 
due diligence that is otherwise appropriate or required under existing 
anti-money laundering obligations, that a foreign bank is using its 
correspondent account to provide banking services indirectly to 
Mayflower Bank or Asia Wealth Bank, then the covered financial 
institutions must ensure that the account is no longer used for such 
purposes. This reflects the approach taken in the proposed rulemaking 
imposing special measures against Nauru.\15\
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    \15\ 68 FR 18917 (April 17, 2003).
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    Additionally, when a covered financial institution becomes aware 
that a foreign bank customer is using a correspondent account to 
provide services to either of the two designated banks indirectly, the 
covered financial institution may afford that foreign bank customer a 
reasonable opportunity to take corrective action prior to terminating 
the U.S. correspondent account. Should the foreign bank customer refuse 
to comply, or if the covered financial institution cannot obtain 
adequate assurances that the account will no longer be used for 
impermissible purposes, the covered financial institution must 
terminate the account in accordance with this regulation. Treasury has 
also incorporated the requirement of termination within a reasonable 
period of time and the reinstatement of a terminated correspondent 
account found in the final regulation implementing sections 313 and 
319(b) of the Act.\16\
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    \16\ 67 FR 60562 (September 26, 2002) (codified at 31 CFR 
103.177).
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3. Reporting and Recordkeeping Not Required
    Section 103.187(b)(3) of the proposed rule states that it does not 
impose any reporting or recordkeeping requirement upon any covered 
financial institution that is not otherwise required by applicable law 
or regulation.

V. Designation of Mayflower Bank and Asia Wealth Bank as Financial 
Institutions of Primary Money Laundering Concern

    Effective November 18, 2003, Mayflower Bank and Asia Wealth Bank, 
were designated by the Secretary of the Treasury as financial 
institutions of primary money laundering concern under 31 U.S.C. 5318A, 
as added by Section 311(a) of the Act. See the notice published 
elsewhere in this separate part.

VI. Public Comments Requested

    Comments are invited from all interested persons concerning this 
proposed rulemaking, and are specifically sought from the financial 
sector, including domestic financial institutions and agencies, 
concerning the appropriateness and effectiveness of this particular 
special measure, the ability to comply with the special measure, and 
any competitive disadvantage, cost, or burden associated with 
compliance.

VII. Regulatory Flexibility Act

    It is hereby certified that this proposed rule will not have a 
significant economic impact on a substantial number of small entities. 
As explained above, financial institutions covered by this proposed 
rulemaking are already

[[Page 66311]]

prohibited under existing sanctions from maintaining correspondent 
accounts for Mayflower Bank and Asia Wealth Bank. Given the limitations 
placed by the Burmese government on the international activities of 
these banks, Treasury and FinCEN believe that few foreign correspondent 
bank customers of small U.S. financial institutions covered by the 
proposed rulemaking will themselves maintain correspondent accounts for 
Mayflower Bank or Asia Wealth Bank. Treasury and FinCEN specifically 
request comment on the extent to which the prohibition contained in the 
proposed rule would affect small U.S. financial institutions beyond 
obligations already imposed by existing economic sanctions.

VIII. Executive Order 12866

    Because this rule involves a foreign affairs function of the United 
States, it is not subject to Executive Order 12866, ``Regulatory 
Planning and Review.''

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 
proposed to be 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, 
5316-5332; title III, sec. 311, 312, 313, 314, 319, 326, 352, Pub.L. 
107-56, 115 Stat. 307; 12 U.S.C. 1818; 12 U.S.C. 1786(q).

    2. Subpart I of part 103 is proposed to be amended by adding Sec.  
103.187 under the undesignated centerheading ``SPECIAL DUE DILIGENCE 
FOR CORRESPONDENT ACCOUNTS AND PRIVATE BANKING ACCOUNTS'' to read as 
follows:


Sec.  103.187  Special measures against Myanmar Mayflower Bank and Asia 
Wealth Bank.

    (a) Definitions. For purposes of this section:
    (1) Correspondent account has the same meaning as provided in Sec.  
103.175(d).
    (2) Covered financial institution has the same meaning as provided 
in Sec.  103.175(f)(2) and also includes the following:
    (i) A futures commission merchant or an 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.); and
    (ii) An investment company (as defined in section 3 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-5)) that is an open-end 
company (as defined in section 5 of the Investment Company Act (15 
U.S.C. 80a-5)) and that is registered, or required to register, with 
the Securities and Exchange Commission pursuant to that Act.
    (3) Myanmar Mayflower Bank means all headquarters, branches, and 
offices of Myanmar Mayflower Bank operating in Burma or in any 
jurisdiction.
    (4) Asia Wealth Bank means all headquarters, branches, and offices 
of Asia Wealth Bank operating in Burma or in any jurisdiction.
    (b) Requirements for covered financial institutions--(1) 
Prohibition on correspondent accounts. A covered financial institution 
shall terminate any correspondent account that is established, 
maintained, administered, or managed in the United States for, or on 
behalf of, Myanmar Mayflower Bank or Asia Wealth Bank.
    (2) Prohibition on indirect correspondent accounts. (i) If a 
covered financial institution has or obtains knowledge that a 
correspondent account established, maintained, administered, or managed 
by that covered financial institution in the United States for a 
foreign bank is being used by the foreign bank to provide banking 
services indirectly to Myanmar Mayflower Bank or Asia Wealth Bank, the 
covered financial institution shall ensure that the correspondent 
account is no longer used to provide such services, including, where 
necessary, terminating the correspondent account; and
    (ii) A covered financial institution required to terminate an 
account pursuant to paragraph (b)(2)(i) of this section:
    (A) Shall do so within a commercially reasonable time, and shall 
not permit the foreign bank to establish any new positions or execute 
any transactions through such account, other than those necessary to 
close the account; and
    (B) May reestablish an account closed pursuant to this paragraph if 
it determines that the account will not be used to provide banking 
services indirectly to Myanmar Mayflower Bank or Asia Wealth Bank.
    (3) Reporting and recordkeeping not required. Nothing in this 
section shall require a covered financial institution to maintain any 
records, obtain any certification, or to report any information not 
otherwise required by law or regulation.

    Dated: November 19, 2003.
William F. Baity,
Acting Director, Financial Crimes Enforcement Network.
[FR Doc. 03-29288 Filed 11-24-03; 8:45 am]
BILLING CODE 4810-02-P