[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Proposed Rules]
[Pages 65567-65568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26204]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA75


Financial Crimes Enforcement Network; Withdrawal of the Notice of 
Proposed Rulemaking; Anti-Money Laundering Programs for Commodity 
Trading Advisors

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Withdrawal of notice of proposed rulemaking.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is 
withdrawing the notice of proposed rulemaking, dated May 5, 2003, in 
which FinCEN proposed requiring commodity trading advisors to establish 
and implement anti-money laundering programs.

DATES: The withdrawal is effective November 4, 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 amended the anti-
money laundering provisions of the BSA, which is codified at 12 U.S.C. 
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-5332. The 
amendments were designed to promote the prevention, detection, and 
prosecution of international money laundering and terrorist financing.
    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\ Accordingly, references herein to the Secretary's authority 
apply equally to the Director of FinCEN.
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    Section 352 of the USA PATRIOT Act amended section 5318(h) of the 
BSA. Section 352 requires every financial institution to establish an 
anti-money laundering program that includes, at a minimum, (1) The 
development of internal policies, procedures, and controls; (2) the 
designation of a compliance officer; (3) an ongoing employee training 
program; and (4) an independent audit function to test programs. 
Section 352 authorizes the Secretary, after consulting with the 
appropriate Federal functional regulator,\2\ to prescribe minimum 
standards for anti-money laundering programs, and to exempt from the 
application of those standards any financial institution that is not 
subject to rules implementing the BSA.
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    \2\ In the case of commodity trading advisors, the appropriate 
Federal functional regulator is the Commodity Futures Trading 
Commission (``CFTC'').

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[[Page 65568]]

    Commodity trading advisors are defined as financial institutions 
under the BSA.\3\ In November 2002, FinCEN temporarily exempted certain 
financial institutions, including commodity trading advisors, from the 
requirement to establish and implement an anti-money laundering 
program.\4\
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    \3\ 31 U.S.C. 5312(c).
    \4\ 31 CFR 103.170. See also Anti-Money Laundering Programs for 
Financial Institutions, 67 FR 67547 (Nov. 6, 2002).
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II. The 2003 Notice of Proposed Rulemaking and Subsequent Developments

A. The 2003 Notice of Proposed Rulemaking

    On May 5, 2003, FinCEN issued a notice of proposed rulemaking, in 
which it proposed requiring commodity trading advisors to establish and 
implement anti-money laundering programs.\5\ FinCEN proposed to apply 
the rule to commodity trading advisors that are registered or required 
to be registered with the Commodity Futures Trading Commission and that 
direct client commodity futures or options accounts.
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    \5\ Anti-Money Laundering Programs for Commodity Trading 
Advisors, 68 FR 23640 (May 5, 2003).
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    The comment period closed on July 7, 2003. FinCEN received three 
comment letters in response to the notice of proposed rulemaking. One 
of the comment letters was submitted by a registered futures 
association, another was submitted by a futures industry trade 
association, and the third was submitted by a commodity trading 
advisor. Comments focused on four matters: (1) Relief from AML 
obligations for certain commodity trading advisors; (2) allocation of 
certain money laundering obligations between commodity trading advisors 
and futures commission merchants; (3) liability issues for commodity 
trading advisors when outsourcing the performance of AML functions; and 
(4) access by federal examiners to the BSA records of a commodity 
trading advisor.

B. Subsequent Developments

    In June 2007, FinCEN announced that it would be taking a fresh look 
at BSA regulation to ensure that it is being applied efficiently and 
effectively across the industries that FinCEN regulates and the 
industries FinCEN has proposed to regulate. As part of that initiative, 
FinCEN is considering whether and to what extent it should impose 
requirements under the BSA on commodity trading advisors and similar 
entities.
    As it considers its approach to commodity trading advisors, FinCEN 
has determined that it will withdraw the notice of proposed rulemaking 
that was published in May 2003. Given the passage of time, FinCEN has 
determined that it will not proceed with an anti-money laundering 
program requirement for commodity trading advisors without publishing a 
new proposal. This will give industry and other interested parties an 
opportunity to provide comment on the contents of any such proposal, as 
it may be affected by any developments since 2003 in industry 
operations as well as functional and BSA regulation.
    Finally, since the time that the notice of proposed rulemaking was 
published, FinCEN has concluded the major rulemakings required by the 
USA PATRIOT Act for banks, broker-dealers, and futures commission 
merchants. Each of these institutions is subject to a comprehensive set 
of requirements under the BSA including, among other things, the 
obligation to establish and implement an anti-money laundering 
program,\6\ the obligation to establish and implement a customer 
identification program,\7\ the obligation to establish and implement a 
special due diligence program for foreign correspondent accounts and 
foreign private banking accounts,\8\ the obligation to detect and 
report suspicious activity,\9\ and the obligation to file currency 
transaction reports.\10\
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    \6\ 31 CFR 103.120.
    \7\ 31 CFR 103.121-103.123.
    \8\ 31 CFR 103.176 and 103.178.
    \9\ 31 CFR 103.17-103.19.
    \10\ 31 CFR 103.22.
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    Commodity trading advisors must conduct financial transactions for 
their clients through other financial institutions that are subject to 
BSA regulations. A client's commodity interests in particular must be 
carried with a futures commission merchant. Thus, as FinCEN continues 
to consider the extent to which BSA requirements should be imposed on 
commodity trading advisors, their activity is not entirely outside the 
current BSA regulatory regime.

III. Withdrawal of the Notice of Proposed Rulemaking

    For the foregoing reasons, the notice of proposed rulemaking, in 
which FinCEN proposed requiring certain commodity trading advisors to 
establish and implement anti-money laundering programs, as published in 
the Federal Register on May 5, 2003 (68 FR 23640), is hereby withdrawn.

    Dated: October 29, 2008.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. E8-26204 Filed 11-3-08; 8:45 am]
BILLING CODE 4810-02-P