[Federal Register Volume 73, Number 70 (Thursday, April 10, 2008)]
[Proposed Rules]
[Pages 19452-19453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-7627]
[[Page 19452]]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA89
Financial Crimes Enforcement Network; Withdrawal of the Finding
of Primary Money Laundering Concern and the Notice of Proposed
Rulemaking Against First Merchant Bank
AGENCY: Financial Crimes Enforcement Network, Department of the
Treasury.
ACTION: Withdrawal of the finding of primary money laundering concern
and notice of proposed rulemaking.
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SUMMARY: This document withdraws our August 24, 2004 finding that First
Merchant Bank is a financial institution of primary money laundering
concern and our notice of proposed rulemaking recommending the
imposition of the fifth special measure, pursuant to the authority
contained in 31 U.S.C. 5318A of the Bank Secrecy Act.
DATES: The notice of proposed rulemaking is withdrawn as of April 10,
2008.
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division, Financial Crimes Enforcement Network, (800) 949-2732.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (``USA
PATRIOT Act''). Title III of the USA PATRIOT Act amends the anti-money
laundering provisions of the Bank Secrecy Act, codified at 12 U.S.C.
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314 and 5316-5332, to
promote the prevention, detection, and prosecution of money laundering
and the financing of terrorism. Regulations implementing the Bank
Secrecy Act appear at 31 CFR part 103. The authority of the Secretary
of the Treasury (``the Secretary'') to administer the Bank Secrecy Act
and its implementing regulations has been delegated to the Director of
the Financial Crimes Enforcement Network.\1\
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\1\ Therefore, references to the authority of the Secretary
under section 311 of the USA PATRIOT Act apply equally to the
Director of the Financial Crimes Enforcement Network.
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Section 311 of the USA PATRIOT Act added section 5318A to the Bank
Secrecy Act, granting the Secretary the authority, upon finding that
reasonable grounds exist for concluding that a foreign jurisdiction,
foreign financial institution, class of international transactions, or
type of account is of ``primary money laundering concern,'' to require
domestic financial institutions and domestic financial agencies to take
certain ``special measures'' against the primary money laundering
concern.\2\
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\2\ 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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Taken as a whole, section 5318A provides the Secretary with a range
of options that can be adapted to target specific money laundering and
terrorist financing concerns most effectively. These options provide
the authority to bring additional and useful pressure on those
jurisdictions and institutions that pose money-laundering threats and
the ability to take steps to protect the U.S. financial system. Through
the imposition of various special measures, we can: Gain more
information about the concerned jurisdictions, financial institutions,
transactions, and accounts; monitor more effectively the respective
jurisdictions, financial institutions, transactions, and accounts; and
ultimately protect U.S. financial institutions from involvement with
jurisdictions, financial institutions, transactions, or accounts that
pose a money laundering concern.
B. First Merchant Bank
First Merchant Bank OSH Ltd. (``First Merchant Bank'') was licensed
in the ``Turkish Republic of Northern Cyprus'' \3\ in 1993 as an
offshore bank. It had 21 employees and was a privately owned commercial
bank specializing in the provision of commercial and investment banking
services to individual and corporate offshore customers. First Merchant
Bank was owned by Standard Finance Ltd. (Ireland) and private
shareholders (98% and 2%, respectively).\4\ Standard Finance Ltd., in
turn, was owned by Provincial & Allied Funding Corp. (Bahamas) and
Millvale Holdings Inc. (British Virgin Islands). First Merchant Bank's
website stated that it had four wholly owned subsidiaries: FMB Finance
Ltd. (British Virgin Islands), First Merchant International Inc.
(Bahamas), First Merchant Finance Ltd. (Ireland), and First Merchant
Trust Ltd. (Ireland).\5\ For the purposes of this document, unless the
context dictates otherwise, references to First Merchant Bank include
FMB Finance Ltd., First Merchant International Inc., First Merchant
Finance Ltd., and First Merchant Trust Ltd., and any other branch,
office, or subsidiary of First Merchant Bank operating in the ``Turkish
Republic of Northern Cyprus'' or in any other jurisdiction.
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\3\ The ``Turkish Republic of Northern Cyprus'' was described at
length in the August 24, 2004 notice of proposed rulemaking, 69 FR
51979, Aug. 24, 2004 (RIN 1506-AA65). Today's withdrawal of that
proposed rulemaking does not provide updates on jurisdictional
developments. Further discussion of jurisdictional developments can
be found in FinCEN's advisory Guidance to Financial Institutions on
the Money Laundering Threat Involving the Turkish Cypriot
Administered Area of Cyprus, published on March 20, 2008 at http://www.fincen.gov/fin-2008-a003.html. The advisory, however, has no
bearing on today's withdrawal, nor does this withdrawal have any
bearing on the advisory.
\4\ See The Bankers' Almanac, Reed Business Information Ltd
(2005).
\5\ First Merchant Finance, Ltd. and First Merchant Trust, Ltd.
both listed their address as Kildress House Pembroke Row, LWR Baggot
St., Dublin, BUE 2, Ireland. First Merchant International Inc. and
FMB Finance, Ltd. were listed on First Merchant Bank's Web site at
http://www.firstmerchantbank.com/home_main.htm (no longer
accessible).
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II. The 2004 Finding, Proposed Rulemaking, and Subsequent Developments
A. The 2004 Finding and Proposed Rulemaking
Based upon review and analysis of relevant information,
consultations with relevant Federal agencies and departments, and after
consideration of the factors enumerated in section 311, the Secretary,
through his delegate, the Director of the Financial Crimes Enforcement
Network, found that reasonable grounds existed for concluding that
First Merchant Bank was a financial institution of primary money
laundering concern. This finding was published on August 24, 2004,\6\
in a notice of proposed rulemaking which proposed prohibiting covered
financial institutions from, directly or indirectly, opening or
maintaining correspondent accounts in the United States for First
Merchant Bank or any of its branches, offices, or subsidiaries,
pursuant to the authority under 31 U.S.C. 5318A. The notice of proposed
rulemaking outlined the various factors supporting the finding and
proposed prohibition.
[[Page 19453]]
During an extended comment period,\7\ we received two comment letters
on the notice of proposed rulemaking: one comment letter from First
Merchant Bank through its U.S. legal counsel and one comment letter
from a securities industry trade association.
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\6\ See 69 FR 51979 (Aug. 24, 2004, RIN 1506-AA65).
\7\ See 69 FR 58374 (September 30, 2004) (extension of original
comment period from September 23, 2004, to November 1, 2004.).
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B. First Merchant Bank's Subsequent Developments
The United States government has recent information indicating that
First Merchant Bank is no longer conducting transactions as a financial
institution. The Ministry of Finance of the ``Turkish Republic of
Northern Cyprus'' ceased First Merchant Bank's operations on December
4, 2006.\8\ After this date, no Cypriot banks have reported conducting
any transactions with First Merchant Bank. On February 21, 2007, the
Ministry of Finance cancelled First Merchant Bank's license,
withdrawing First Merchant Bank's authority to operate as a financial
institution in the ``Turkish Republic of Northern Cyprus.'' \9\ On June
26, 2007, the Turkish Cypriot Money Laundering Board ordered First
Merchant Bank's website be taken down and its offices closed.
Furthermore, we confirmed the dissolution of First Merchant Bank's
parent, Standard Finance Ltd. (Ireland), and two of First Merchant
Bank's subsidiaries, First Merchant Finance Ltd. (Ireland) and First
Merchant Trust Ltd. (Ireland). As for First Merchant Bank's two other
subsidiaries, our research indicates FMB Finance Limited (British
Virgin Islands) is no longer registered and First Merchant
International Inc. (Bahamas) is not in existence and is not known to
have operated there.
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\8\ Off-Shore Bank, Operations of which have been ceased by the
Ministry of Finance of TRNC with an announcement published in the
Official Gazette No: 201 on December 04, 2006 at http://www.kktcmb.trnc.net/ENGLISH/banks/offshore-banks-eng.html.
\9\ Off-Shore Banks, Licences of which have been cancelled by
the Ministry of Finance of TRNC with an announcement published in
the Official Gazette No: 32 on February 21, 2007 at http://www.kktcmb.trnc.net/ENGLISH/banks/offshore-banks-eng.html.
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III. Withdrawal of the Finding of First Merchant Bank as a Financial
Institution of Primary Laundering Concern
For the reasons set forth above, we hereby withdraw our finding
that First Merchant Bank is a financial institution of primary money
laundering concern as of April 10, 2008. Our withdrawal of the finding
of First Merchant Bank as a financial institution of primary money
laundering concern does not acknowledge any remedial measure taken by
First Merchant Bank, but is the result of First Merchant Bank no longer
operating as a financial institution because it no longer exists.
IV. Withdrawal of Notice of Proposed Rulemaking
For the reasons set forth above, we hereby withdraw the notice of
proposed rulemaking imposing the fifth special measure authorized by 31
U.S.C. 5318A(B)(5) against First Merchant Bank as published in the
Federal Register on August 24, 2004 (69 FR 51979).
Dated: April 4, 2008.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. E8-7627 Filed 4-9-08; 8:45 am]
BILLING CODE 4810-02-P