[Federal Register Volume 73, Number 8 (Friday, January 11, 2008)]
[Rules and Regulations]
[Pages 1975-1976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-315]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA88


Financial Crimes Enforcement Network; Amendment Regarding 
Financial Institutions Exempt from Establishing Anti-Money Laundering 
Programs

AGENCY: Financial Crimes Enforcement Network, Department of the 
Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is 
amending the provision in its regulations that defers, for certain 
categories of financial institutions, the application of the anti-money 
laundering program requirements in section 352 of the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism (``USA PATRIOT'') Act of 2001. Two of 
the categories of financial institutions specifically exempted from 
having to establish an anti-money laundering program subsequently have 
been required by regulation to establish such programs, and this 
rulemaking will amend the regulations to reflect those changes.

DATES: Effective Date: January 11, 2008.

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division (FinCEN), (800) 949-2732 (toll-free).

SUPPLEMENTARY INFORMATION: 

I. Background

A. USA PATRIOT Act Section 352

    On October 26, 2001, the President signed into law the USA PATRIOT 
Act (Pub. L. 107-56). Title III of the USA PATRIOT Act makes a number 
of amendments to the anti-money laundering provisions of the Bank 
Secrecy Act (``BSA''), which is codified in subchapter II of chapter 53 
of title 31, United States Code. These amendments are intended to make 
it easier to prevent, detect, and prosecute money laundering and the 
financing of terrorism. Section 352(a) of the USA PATRIOT Act, amended 
section 5318(h) of the BSA, effective April 24, 2002, to require every 
financial institution to establish an anti-money laundering program 
that includes, at a minimum: (i) The development of internal policies, 
procedures, and controls; (ii) the designation of a compliance officer; 
(iii) an ongoing employee training program; and (iv) an independent 
audit function to test programs.
    The definition of ``financial institution'' in sections 5312(a)(2) 
and (c)(1) of the BSA is broad. It includes categories of institutions 
that were already subject to some federal anti-money laundering 
regulations at the time the USA PATRIOT Act was passed, such as banks, 
savings associations, credit unions, and money services businesses 
(such as money transmitters and currency dealers or exchangers). The 
definition also includes: Registered securities broker-dealers; futures 
commission merchants; dealers in precious metals, stones, or jewels; 
pawnbrokers; loan or finance companies; trust companies; private 
bankers; insurance companies; travel agencies; telegraph companies; 
sellers of vehicles, including automobiles, airplanes, and boats; 
persons engaged in real estate closings and settlements; investment 
bankers; investment companies; and commodity pool operators and 
commodity trading advisors that are registered or require to register 
under the Commodity Exchange Act (7 U.S.C. 1 et seq.). Section 352 of 
the USA PATRIOT Act requires all of these businesses to establish anti-
money laundering programs.
    Section 5318(h)(2) of the BSA, however, also grants the Secretary 
of the Treasury, and by extension his delegate FinCEN, the authority to 
exempt certain financial institutions from the requirement to institute 
anti-money laundering programs. In April 2002, FinCEN issued a series 
of interim final rules implementing section 352 of the USA PATRIOT 
Act.\1\ At the same time, FinCEN also exempted certain financial 
institutions, including dealers in precious metals, stones, or jewels, 
and insurance companies, from having to comply with section 352 of the 
USA PATRIOT Act for a six month period.\2\ In November 2002, FinCEN 
replaced this six month exemption from the application of the anti-
money laundering program requirements in section 352 with an open-ended 
exemption (``Temporary Exemption Rule'').\3\
---------------------------------------------------------------------------

    \1\ These rules prescribed requirements for anti-money 
laundering programs for banks, savings associations, credit union, 
registered securities broker-dealers, futures commission merchants, 
and introducing brokers that are regulated by a federal functional 
regulator or a self-regulatory organization, and casinos. 67 FR 
21110 (Apr. 29, 2002) (interim final rules). At the same time, 
FinCEN also issued interim final rules that required money services 
businesses (67 FR 21114 (Apr. 29, 2002)), mutual funds (67 FR 21117 
(Apr. 29, 2002)), and operators of credit card systems (67 FR 21121 
(Apr. 29, 2002)) to establish anti-money laundering programs.
    \2\ Id.
    \3\ 31 CFR 103.170, 67 FR 67547 (Nov. 6, 2002), corrected at 67 
FR 68953 (Nov. 14, 2002).
---------------------------------------------------------------------------

B. Updating 31 CFR Section 103.170

    In the years since the Temporary Exemption Rule was published, 
FinCEN has promulgated a number of rules that require two previously 
exempted categories of financial institutions (dealers in precious 
metals, stones, or jewels,\4\ and insurance companies \5\) to establish 
anti-money laundering programs.\6\ Although FinCEN has, through the 
publication of the above-mentioned rules, ipso jure revoked the 
exemptions previously issued to those categories of financial 
institutions,\7\ the Temporary Exemption Rule is being amended to 
reflect these revocations and eliminate possible confusion.
---------------------------------------------------------------------------

    \4\ 31 CFR 103.170(b)(i)
    \5\ 31 CFR 103.170(b)(ix). Only those insurance companies 
falling within the definition contained in 31 CFR 103.137(a)(9) are 
required to have an anti-money laundering program. The removal of 
the entire category of ``insurance companies'' from the exempted 
list should not be read to limit the breadth of the definition for 
purposes of the availability of the safe harbor under 31 U.S.C. 
5318(g)(3) for voluntary reports of suspicious activities. See 70 FR 
66755 (Nov. 3, 2005), fn 4.
    \6\ FinCEN issued rules in 2005 requiring dealers in precious 
stones, metals, and jewels ((See 70 FR 33702 (June 9, 2005) (interim 
final rule)), and certain insurance companies (See 70 FR 66754 (Nov. 
3, 2005) (final rule)) to establish anti-money laundering programs.
    \7\ The removal of the temporary exemption occurs automatically 
pursuant to 31 CFR section 103.170(c), which states that ``[t]he 
exemptions described in paragraphs (a)(2) and (b) of [this rule] 
shall not apply to any financial institution that is otherwise 
required to establish an anti-money laundering program by this 
subpart I.''

---------------------------------------------------------------------------

[[Page 1976]]

II. Administrative Procedure Act

    Under the Administrative Procedure Act (``APA''), notice of a 
proposed rulemaking is not required when the agency, for good cause, 
finds ``that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \8\ FinCEN is making 
technical amendments to the Temporary Exemption Rule to ensure that the 
list of temporarily exempted financial institutions is accurate and not 
confusing. FinCEN, therefore, finds that publishing the amendments for 
comment is unnecessary.
---------------------------------------------------------------------------

    \8\ 5 U.S.C. 553(b).
---------------------------------------------------------------------------

    In addition, publication of a substantive rule not less than 30 
days before its effective date is required by the APA except as 
otherwise provided by the agency for good cause.\9\ For the same 
reasons described above with respect to notice and opportunity for 
comment, FinCEN finds that there is good cause for making these 
technical amendments effective on January 11, 2008.
---------------------------------------------------------------------------

    \9\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

III. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required for this final 
rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.) do not apply.\10\
---------------------------------------------------------------------------

    \10\ See 5 U.S.C. 601(2) (for purposes of Regulatory Flexibility 
Act analyses, the term ``rule'' means any rule for which the agency 
publishes a general notice of proposed rulemaking).
---------------------------------------------------------------------------

IV. Executive Order 12866

    This final rule is not a ``significant regulatory action'' as 
defined in Executive Order 12866. Accordingly, a regulatory assessment 
is not required.

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 above, FinCEN is amending 31 CFR part 103 as 
follows:

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

0
1. The authority citation for part 103 continues to read as follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 
and 5316-5332; title III, secs. 311, 312, 313, 314, 319, 326, 352, 
Pub. L. 107-56, 115 Stat. 307.

Subpart I--Anti-Money Laundering Programs


Sec.  103.170  [Amended]

0
2. Section 103.170 is amended by:
0
a. Removing paragraphs (b)(1)(i) and (b)(1)(ix); and
0
b. Redesignating paragraphs (b)(1)(ii) as (b)(1)(i); (b)(1)(iii) as 
(b)(1)(ii); (b)(1)(iv) as (b)(1)(iii); (b)(1)(v) as (b)(1)(iv); 
(b)(1)(vi) as (b)(1)(v); (b)(1)(vii) as (b)(1)(vi); (b)(1)(viii) as 
(b)(1)(vii); (b)(1)(x) as (b)(1)(viii); (b)(1)(xi) as (b)(1)(ix); and 
(b)(1)(xii) as (b)(1)(x).

    Dated: December 20, 2007.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
 [FR Doc. E8-315 Filed 1-10-08; 8:45 am]
BILLING CODE 4810-02-P