[Federal Register Volume 69, Number 70 (Monday, April 12, 2004)]
[Rules and Regulations]
[Pages 19098-19103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-8026]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 103

RIN 1506-AA63


Imposition of Special Measures Against Myanmar Mayflower Bank and 
Asia Wealth Bank

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

ACTION: Final rule.

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SUMMARY: On November 18, 2003, the Secretary of the Treasury 
(Secretary) designated Myanmar Mayflower Bank (Mayflower Bank) and Asia 
Wealth Bank, both Burmese banks, as financial institutions of primary 
money laundering concern, and proposed a special measure certain U.S. 
financial institutions would be required to take concerning these two 
banks, 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. 
FinCEN is issuing this final rule to require certain U.S. financial 
institutions to take the proposed special measure with respect to these 
two institutions.

DATES: Effective date: May 12, 2004.

FOR FURTHER INFORMATION CONTACT: Office of Regulatory Programs 
(FinCEN), (202) 354-6400 or; the Office of Chief Counsel (FinCEN), 
(703) 905-3590 (not toll free numbers).

SUPPLEMENTARY INFORMATION: The Secretary has designated Mayflower Bank 
and Asia Wealth Bank as 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) (the Act). To protect the U.S. 
financial system from the money laundering threat posed by these 
financial institutions, FinCEN is imposing one of the special measures 
authorized by section 5318A(b), specifically, the fifth special 
measure. The fifth special measure prohibits 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, by separate notice and final rule, the Department is 
imposing the fifth special measure to prohibit certain U.S. financial 
institutions from maintaining correspondent or payable-through accounts 
for, or on behalf of, any Burmese banking institution. Notwithstanding 
any exemption in that notice and final rule applicable to other Burmese 
financial institutions under Executive Order 13310 of July 28, 2003, 
the special measure in this notice prohibits 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.

[[Page 19099]]

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 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 FinCEN 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. 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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     Whether similar action has been or is being 
taken by other nations or multilateral groups;
     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;
     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
     The effect of the action on United States 
national security and foreign policy.
2. Procedures for Imposing Special Measures
    In this final rule, the Secretary, through FinCEN, is imposing 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 www.fatf-gafi.org.
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     Burma lacks a basic set of anti-money laundering 
laws or regulations.
     Money laundering is not a criminal offense for 
crimes other than drug trafficking in Burma.
     The Burmese Central Bank has no anti-money 
laundering regulations for financial institutions.
     Banks licensed by Burma are not legally required 
to obtain or maintain identification information about their customers.
     Banks licensed by Burma are not required to 
maintain transaction records of customer accounts.
     Burma does not require financial institutions to 
report suspicious transactions.
     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. Because of the lack of implementing regulations, 
the Burmese anti-money laundering law could not 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. On December 5, 2003, Burma issued regulations to implement this 
law. However, the regulations do not set threshold amounts or time 
limits. The regulations also do not address the need for a mutual 
assistance law. The 2003 International Narcotics Control Strategy 
Report, issued in March 2004, states that Burma must still implement 
and enforce the December 2003 regulations and address their 
deficiencies. In addition, Burma must provide adequate resources for 
supervision of the financial sector and end policies that make it easy 
for drug money to enter the legitimate economy.\4\
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    \4\ The 2003 International Narcotics Control Strategy Report, 
released by the Bureau for International Narcotics and Law 
Enforcement Affairs, U.S. Department of State, was issued March 1, 
2004. Part II of the report covers money laundering and financial 
crimes. The portion of the report dealing with Burma can be found at 
http://www.state.gov/g/inl/rls/nrcrpt/2003/vol2/html/29920.htm.

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[[Page 19100]]

    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.\5\ 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.\6\
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    \5\ See Official Myanmar Finance Ministry Web site, 
www.Myanmar.com.
    \6\ See Xinhua News Agency, March 8, 2002.
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    The Secretary designated Mayflower Bank and Asia Wealth Bank, both 
located in Burma, as primary money laundering concerns 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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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.\8\ 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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    \8\ For example, the prohibition does not extend to transactions 
relating to certain contracts entered into prior to May 21, 1997. 
See Executive Order 13310, section 13.
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D. The Section 311 Special Measures

    The requirements 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 FinCEN is imposing on the 
jurisdiction of Burma. Although they are similar in their effect on 
these two banks, the 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 measure imposed by this notice does 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 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.

[[Page 19101]]

    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 special measures applicable to all Burmese 
banking institutions would certainly apply to Mayflower Bank and Asia 
Wealth Bank, a separate designation is necessary. The special measure 
FinCEN is applying to all Burmese banking 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, 
FinCEN 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 FinCEN: to name publicly institutions posing 
risks to the international financial system and encourage all 
jurisdictions to exclude them.

II. 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,\9\ the Secretary has 
determined that grounds exist for the imposition of the special measure 
authorized by section 5318A(b)(5). Thus, this rulemaking prohibits 
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 extends 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 rule that obtain knowledge that this is 
occurring are 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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    \9\ 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

    United States 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 precludes 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, FinCEN'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 will further minimize any 
potential competitive disadvantage for U.S. financial institutions.
    Moreover, the rule does 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 will 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.

III. Notice of Proposed Rulemaking and Comments

    FinCEN published a notice of proposed rulemaking on November 25, 
2003,\10\ that would impose special measures against Mayflower Bank and 
Asia Wealth Bank. The comment period for that notice closed on December 
26, 2003. FinCEN received no comment letters on the proposed rule. The 
final rule is identical to that found in the November 2003 notice.
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    \10\ 68 FR 66305 (November 25, 2003).

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[[Page 19102]]

IV. Section-by-Section Analysis

A. Overview

    This final rule is 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 rule prohibits 
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 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 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 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 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 and 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.
    FinCEN is using the same definition for purposes of the final rule 
as that established in the final rule implementing Sections 313 and 
319(b) of the Act \11\ with the notable exception that the term also 
applies to such accounts maintained by futures commission merchants and 
introducing brokers, and mutual funds.
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    \11\ 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 final 
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 final 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 final 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 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 
requires 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 Sec.  103.187(b)(2) of the 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 Sec.  103.187(b)(1), this section does 
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.\12\
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    \12\ See 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. FinCEN 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.\13\
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    \13\ 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 rule states that it does not impose 
any reporting or recordkeeping requirement upon any

[[Page 19103]]

covered financial institution that is not otherwise required by 
applicable law or regulation.

V. Regulatory Flexibility Act

    It is hereby certified that this rule will not have a significant 
economic impact on a substantial number of small entities. As explained 
above, financial institutions covered by this rulemaking are already 
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, FinCEN believes that few foreign correspondent bank 
customers of small U.S. financial institutions covered by the 
rulemaking will themselves maintain correspondent accounts for 
Mayflower Bank or Asia Wealth Bank.

VI. Executive Order 12866

    This rule is not a significant regulatory action for purposes of 
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

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

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

0
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).


0
2. Subpart I of part 103 is 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: April 2, 2004.
William J. Fox,
Director, Financial Crimes Enforcement Network.
[FR Doc. 04-8026 Filed 4-9-04; 8:45 am]
BILLING CODE 4810-02-P