[Federal Register Volume 69, Number 70 (Monday, April 12, 2004)]
[Rules and Regulations]
[Pages 19093-19098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-8027]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 103
Imposition of Special Measures Against Burma
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 Burma as a jurisdiction of primary money
laundering concern, and proposed a special measure that certain U.S.
financial institutions would be required to take concerning Burma,
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 regarding Burma.
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 Burma as a
jurisdiction 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 against the money laundering
risk posed by Burma, FinCEN is imposing a special measure authorized by
section 5318A(b)(5). The special measure imposed under this section
will generally prohibit certain U.S. financial institutions from
establishing, maintaining, administering, or managing correspondent or
payable-through accounts in the United States for, or on behalf of,
Burmese banking institutions, unless (as explained below) operation of
those accounts is not prohibited by Executive Order 13310 of July 28,
2003, and the Burma-related activities of such accounts are solely to
effect transactions that are exempt from, or licensed pursuant to,
Executive Order 13310. This prohibition extends to correspondent or
payable-through accounts maintained for other foreign banks when such
accounts are used by the foreign bank to provide financial services to
a Burmese banking institution indirectly.
Additionally, by separate notice, FinCEN is announcing concurrently
the imposition of the fifth special measure against two Burmese banking
institutions, Myanmar Mayflower Bank and Asia Wealth Bank. This special
measure 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, notwithstanding any exemption from, or license
issued pursuant to, Executive Order 13310.
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) to be of ``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 as well as agencies and
departments 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 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
[[Page 19094]]
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 obtain 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 jurisdiction 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 jurisdiction.
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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 jurisdiction;
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 requiring
certain U.S. financial institutions to take the fifth special measure
(31 U.S.C. 5318A(b)(5)) regarding Burma. This special measure may only
be imposed through the issuance of a regulation.
B. Burma
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 or 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, see http://www.fatf-gafi.org.
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Burma lacks a basic set of anti-money laundering
laws and 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. However, in the absence 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 lack of progress, the FATF called upon its member
jurisdictions to impose additional 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. Indeed, 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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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).
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
[[Page 19095]]
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. 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.\5\ 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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\5\ 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 imposition of Section 311 special measures reinforces the
existing restrictions on transactions with Burma that are outlined
above. Although they are similar in their effect, the Section 311
special measures differ in certain respects and serve distinct policy
goals. First, the Section 311 special measures are potentially broader
than the existing sanctions in at least one respect--they apply to all
foreign branches of Burmese banking institutions. Second, the purposes
served by the Section 311 action differ markedly from the purposes of
the economic sanctions described above. This action under Section 311
is premised on the Secretary's determination that Burma poses an
unacceptable risk of money laundering and other financial crimes, due
to its failure to implement an effective anti-money laundering regime.
The goals of this action include protecting the U.S. financial system
and encouraging Burma to make the necessary changes to its anti-money
laundering regime. The existing sanctions pursuant to Executive Order
13310, on the other hand, were imposed for different reasons, in
particular to take additional steps with respect to the government of
Burma's continued repression of the democratic opposition.
These underlying purposes for the designation of Burma fuel another
intended consequence, namely, to encourage other jurisdictions and
financial institutions to take similar steps to cut off Burma from the
international financial system due to the unacceptable risk of money
laundering. In addition to stemming the flow of illicit funds from
Burma into the United States, the act of naming Burma publicly and
formally denying it access to the U.S. financial system is an important
statement to the rest of the world about the need for caution in
financial dealings with Burma and the need for reform.
Next, this action fulfills an important role of the United States
in supporting the multilateral effort to encourage Burma to implement
effective anti-money laundering controls. The FATF has called on all
members to impose additional countermeasures as a result of Burma's
failure to address its money laundering deficiencies. The assessment of
Section 311 special measures, premised squarely on the absence of money
laundering controls, fulfills this obligation in a way that the
existing sanctions cannot.
Finally, the Section 311 special measures incorporate the
exemptions from, and licenses issued pursuant to, Executive Order
13310. Thus, U.S. financial institutions may maintain otherwise
prohibited correspondent account relationships so long as the
maintenance of such accounts is not prohibited by E.O. 13310 and
provided that the only transactions conducted on behalf of Burmese
banking institutions are those that are otherwise permissible under the
existing sanctions regime. The policy of allowing certain transactions
under the Executive Order should not be undermined by Section 311
special measures. However, Burma has been designated under Section 311
of the Act due to inadequate anti-money laundering controls, and the
fact that the overarching purpose for a transaction is permissible
under the Executive Order does not itself reduce the risk of money
laundering. Therefore, while the exemptions and licenses are
incorporated into the Section 311 special measures, U.S. financial
institutions processing such transactions must still conduct enhanced
scrutiny to guard against the flow of illicit proceeds.
II. Imposition of Special Measures
As a result of the designation of Burma as a jurisdiction of
primary money laundering concern, and based upon consultations \6\ and
the consideration of all relevant factors, the Secretary has determined
that grounds exist for the imposition of the special measures
authorized by section 5318A(b)(5). Thus, the final rule 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, a Burmese banking
institution. This prohibition extends to any correspondent or payable-
through account maintained in the United States for any foreign bank if
the account is used by the foreign bank to provide banking services
indirectly to a Burmese banking institution. 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.
Other than with respect to Myanmar Mayflower Bank and Asia Wealth Bank,
the rule does, however, allow U.S. financial institutions to maintain
correspondent accounts otherwise prohibited by this rule if such
accounts are permitted to be maintained pursuant to Executive Order
13310 and the Burma-related activity of those accounts is solely for
the purpose of conducting transactions that are exempt from, or
authorized by regulation, order, directive, or license issued pursuant
to, Executive Order 13310.
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\6\ 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 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.
[[Page 19096]]
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. Imposition of the fifth
special measure on Burma is consistent with this call for additional
countermeasures and forms part of an international effort to protect
the financial system. 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
additional advisories, shifting the burden for reporting obligations,
and/or restrictions on the licensing of Burmese financial institutions.
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, because it
precludes maintaining correspondent accounts for foreign branches of
Burmese banking institutions. 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. In fact, Treasury's action is intended to encourage other
jurisdictions and financial institutions to take similar steps to cut
off Burma from the international financial system, which will further
minimize any potential competitive disadvantage for U.S. financial
institutions.
Moreover, the final 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 the 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
Involving the Jurisdiction
Given the preexisting sanctions on Burma, it is unlikely that these
new measures or the timing of the new measures will have a significant
adverse systemic impact on the international payment, clearance, and
settlement system, or on legitimate business activities of Burma.
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 on Burma is consistent with
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,\7\ that would require certain U.S. financial institutions to take
the fifth special measure regarding Burma. 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, except that the term ``foreign financial
institution'' has been replaced by ``foreign banking institution,''
with a corresponding change in the term's definition, to conform with
the language of Section 5318A(b)(5).
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\7\ 68 FR 66299 (November 25, 2003).
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IV. Section-by-Section Analysis
A. Overview
This final rule is intended to deny Burmese banking institutions
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, a Burmese banking institution. If a U.S.
financial institution covered by this rule learns that a correspondent
account that it maintains for a foreign bank is being used by that
foreign bank to provide services indirectly to a Burmese banking
institution, 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, the
rule does not itself require U.S. financial institutions to perform
additional due diligence on foreign bank customers.
The rule does allow U.S. financial institutions to maintain
otherwise prohibited correspondent accounts to the extent they are
permitted pursuant to Executive Order 13310 and the Burma-related
activities of those accounts are for the purpose of conducting
transactions that are exempt from, or licensed pursuant to, Executive
Order 13310.
B. Definitions
Correspondent account. Section 103.186(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 or other disbursements 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 rule as that
established in the final rule implementing Sections 313 and 319(b) of
the Act \8\ with one notable exception: The term also applies to such
accounts maintained by futures commission merchants and introducing
brokers and mutual funds.
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\8\ 67 FR 60562 (September 26, 2002) (codified at 31 CFR 103.175
(d)(1))
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Covered financial institution. Section 103.186(a)(2) of the 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
[[Page 19097]]
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.
Burmese banking institution. Section 103.186(a)(3) of the final
rule defines a Burmese banking institution to include all foreign banks
chartered or licensed by Burma. The definition of foreign bank is that
contained in 31 CFR 103.11(o). Foreign branches and offices of Burmese
banking institutions are included in this definition. However,
subsidiaries are not at this time. Also, the Central Bank of Burma is
not a Burmese banking institution.
C. Requirements for Covered Financial Institutions
1. Prohibition on Correspondent Accounts
Section 103.186(b)(1) of the final rule prohibits generally 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, a Burmese banking
institution. 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, a Burmese banking
institution. This prohibition is subject to the exception contained in
section 103.186(b)(4), described below.
2. Prohibition on Indirect Correspondent Accounts
Under section 103.186(b)(2) of the final 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 a Burmese
banking institution, 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 banking institution in section 103.186(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 a foreign bank is using
the account to provide services to a Burmese banking institution.
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 a
Burmese banking institution, then the covered financial institutions
must ensure that the account is no longer used for such purposes.
Additionally, when a covered financial institution becomes aware
that a foreign bank customer is using the U.S. correspondent account to
provide services to a Burmese banking institution 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.\9\
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\9\ 67 FR 60562 (September 26, 2002) (codified at 31 CFR
103.177).
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This provision is likewise subject to the exception contained in
section 103.186(b)(3), described below.
3. Exception
Section 103.186(b)(3) provides for an exception to the prohibition
on both direct and indirect correspondent account relationships of the
final rule. U.S. financial institutions covered by the final rule may
maintain a correspondent account relationship otherwise prohibited by
this rule if the maintenance of such an account is permitted pursuant
to Executive Order 13310 and if the transactions involving Burmese
banking institutions that are conducted through the correspondent
account are limited solely to transactions that are exempted in, or
otherwise authorized by regulation, order, directive, or license issue
pursuant to, Executive Order 13310. As described previously in section
I(C), certain transactions with Burma are exempt from the prohibitions
of Executive Order 13310 or have been authorized through the licensing
process. The general licenses (i.e., those of general applicability) or
other authorizations issued will be set forth in 31 CFR part 537, and
are available on the Web site of Treasury's Office of Foreign Assets
Control, http://www.treas.gov/offices/eotffc/ofac/sanctions/sanctguide-burma.html. To ensure that those authorized activities are available as
a practical matter, U.S. correspondent accounts permitted to operate
pursuant to Executive Order 13310 may be used to effect those permitted
transactions.
4. Reporting and Recordkeeping Not Required
Section 103.186(b)(3) of the final 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. 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 final rulemaking are
already prohibited under existing sanctions from maintaining
correspondent accounts for Burmese banking institutions. Given the
comprehensive sanctions regime, FinCEN believes that few foreign
correspondent bank customers of small U.S. financial institutions
covered by the rulemaking will themselves maintain correspondent
accounts for Burmese banking institutions.
VI. 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
0
For the reasons set forth in the preamble, 31 CFR part 103 is amended
as follows:
[[Page 19098]]
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. 103.186 under the
undesignated centerheading ``SPECIAL DUE DILIGENCE FOR CORRESPONDENT
ACCOUNTS AND PRIVATE BANKING ACCOUNTS'' to read as follows:
Sec. 103.186 Special measures against Burma.
(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) Burmese banking institution means any foreign bank, as that
term is defined in Sec. 103.11(o), chartered or licensed by Burma,
including branches and offices located outside Burma.
(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, a Burmese banking institution.
(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 a Burmese banking institution, 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 a Burmese banking institution.
(3) Exception. The provisions of paragraphs (b)(1) and (2) of this
section shall not apply to a correspondent account provided that the
operation of such account is not prohibited by Executive Order 13310
and the transactions involving Burmese banking institutions that are
conducted through the correspondent account are limited solely to
transactions that are exempted from, or otherwise authorized by
regulation, order, directive, or license pursuant to, Executive Order
13310.
(4) Reporting and recordkeeping not required. Nothing in this
section shall require a covered financial institution to maintain any
records, obtain any certification, or report any information not
otherwise required by law or regulation.
Dated: April 2, 2004.
William J. Fox,
Director, Financial Crimes Enforcement Network.
[FR Doc. 04-8027 Filed 4-9-04; 8:45 am]
BILLING CODE 4810-02-P