[Federal Register Volume 73, Number 76 (Friday, April 18, 2008)]
[Proposed Rules]
[Pages 21179-21180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-8392]



  Federal Register / Vol. 73, No. 76 / Friday, April 18, 2008 / 
Proposed Rules  

[[Page 21179]]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA91


Financial Crimes Enforcement Network; Withdrawal of the Notice of 
Proposed Rulemaking Against the Republic of Nauru

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Withdrawal of the notice of proposed rulemaking.

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SUMMARY: This document withdraws the April 17, 2003 Notice of Proposed 
Rulemaking proposing to impose a special measure pursuant to 31 U.S.C. 
5318A.

DATES: The notice of proposed rulemaking is withdrawn as of April 18, 
2008.

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, Financial Crimes Enforcement Network, (800) 949-2732.

SUPPLEMENTARY INFORMATION: 

I. Background

    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 (the USA PATRIOT Act), 
Public Law 107-56. 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, 5316-5332, 
to promote the prevention, detection, and prosecution of international 
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 of 
the Treasury 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\ If the Secretary of the Treasury determines that a foreign 
jurisdiction, financial institution, class of transactions, or type 
of account is of primary money laundering concern, the Secretary or 
his delegate, the Director of the Financial Crimes Enforcement 
Network, must determine the appropriate special measure(s) to 
address the specific money laundering risks. Section 311 of the USA 
PATRIOT Act provides a range of special measures that can be 
imposed, individually, jointly, in any combination, and in any 
sequence. 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).
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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.

II. The 2002 Notice of Proposed Rulemaking and Subsequent Developments

A. The 2002 Notice of Proposed Rulemaking

    On December 20, 2002, the Department of the Treasury issued a 
finding that Nauru was a jurisdiction of primary money laundering 
concern under 31 U.S.C. 5318A.\3\ After the December 20, 2002 finding, 
based upon review and analysis of relevant information, consultations 
with relevant federal agencies and departments, and after consideration 
of the factors enumerated in section 5318A, on April 17, 2003, the 
Secretary, through his delegate, the Director of the Financial Crimes 
Enforcement Network issued a Notice of Proposed Rulemaking that would 
impose the fifth special measure under section 5318A.\4\ The fifth 
special measure would prohibit all covered U.S. financial institutions 
from establishing, maintaining, administering or managing correspondent 
accounts \5\ for or on behalf of any financial institution from or in 
Nauru.\6\
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    \3\ 67 FR 78859 (Dec. 26, 2002).
    \4\ 68 FR 18917 (Apr. 17, 2003, RIN 1506-AA43).
    \5\ A correspondent account is defined as an account established 
by a bank for a foreign bank 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. See 
31 CFR Sec.  103.175(d).
    \6\ After the expiration of the comment period, we received one 
comment letter on the notice of proposed rulemaking from the 
Republic of Nauru.
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B. Subsequent Jurisdictional Developments

    Since the Department of the Treasury's December 20, 2002 finding of 
Nauru as a jurisdiction of primary money laundering concern and our 
April 17, 2003 issuance of the Notice of Proposed Rulemaking, Nauru has 
taken steps to address the deficiencies in its anti-money laundering 
regime that led to those actions. First, Nauru amended its anti-money 
laundering law to abolish the offshore banking sector and as a result, 
there are currently no offshore banks licensed to operate in Nauru. In 
particular, Nauru's Corporation Amendment Act of 2004 caused offshore 
banking licenses to expire without the possibility of renewal. Second, 
the legal framework was amended to criminalize money laundering. Third, 
Nauru law now mandates suspicious transaction reporting.
    In October 2004, the Financial Action Task Force withdrew counter-
measures against Nauru due to its efforts to reform its banking system, 
progress made in that regard, and its resolve to continue addressing 
any remaining anti-money laundering deficiencies.\7\ On October 13, 
2005, the Financial Action Task Force removed Nauru from the Non-
Cooperative Countries and Territories list due to the closure of its 
offshore financial center, which was the primary reason for Nauru being 
placed on the list.\8\ In consideration of Nauru's remedial measures 
that addressed deficiencies in its anti-money laundering regime, and in 
light of

[[Page 21180]]

actions taken by the Financial Action Task Force, we have decided to 
withdraw the notice of proposed rulemaking imposing the fifth special 
measure and the related finding of Nauru as a jurisdiction of primary 
money laundering concern under 31 U.S.C. 5318A.\9\
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    \7\ Financial Action Task Force, ``FATF Targets Cross-Border 
Cash Movements By Terrorists and Criminals'' (Financial Action Task 
Force members have withdrawn the counter-measures against Myanmar 
and Nauru.) (Oct. 2004).
    \8\ October 2005 Financial Action Task Force Plenary Meeting, 
``FATF will explore the symbiotic relationship among corruption, 
money laundering and terrorist financing'' (The Financial Action 
Task Force removed Nauru from its list of non-cooperative countries 
and territories after Nauru abolished its 400 shell banks, thus 
removing this major money laundering risk.) (Oct. 13, 2005).
    \9\ See Financial Crimes Enforcement Network; Withdrawal of 
Notice of the Finding of the Republic of Nauru as a Primary Money 
Laundering Concern, published elsewhere in this issue of the Federal 
Register.
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III. Withdrawal of the Notice of Proposed Rulemaking

    For the foregoing reasons, the notice of proposed rulemaking 
imposing the fifth special measure for purposes of 31 U.S.C. 5318A, as 
published in the Federal Register on April 17, 2003 (68 FR 18917), is 
hereby withdrawn.

    Dated: April 14, 2008.
James H. Freis, Jr.
Director, Financial Crimes Enforcement Network.
[FR Doc. E8-8392 Filed 4-17-08; 8:45 am]
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