[Federal Register Volume 76, Number 147 (Monday, August 1, 2011)]
[Rules and Regulations]
[Pages 45689-45690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19118]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506-AA82


Financial Crimes Enforcement Network; Repeal of the Final Rule 
and Withdrawal of the Finding of Primary Money Laundering Concern 
Against VEF Banka

AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.

ACTION: Final rule.

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SUMMARY: This document repeals FinCEN's final rule, ``Imposition of 
Special Measure Against VEF Banka'' of July 13, 2006, and withdraws the 
finding of VEF Banka as a Financial Institution of Primary Money 
Laundering Concern of April 26, 2005, issued pursuant to 31 U.S.C. 
5318A of the Bank Secrecy Act (the ``BSA'').

DATES: Effective Date: August 1, 2011.

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, Financial Crimes Enforcement Network, (800) 949-2732 and 
select Option 1.

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 BSA, 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 BSA appear at 31 
CFR Chapter X.\1\ The authority of the Secretary of the Treasury (the 
``Secretary'') to administer the BSA and its implementing regulations 
has been delegated to the Director of the Financial Crimes Enforcement 
Network.\2\
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    \1\ On October 26, 2010, FinCEN issued a final rule creating a 
new Chapter X in Title 31 of the Code of Federal Regulations for the 
BSA regulations. See 75 FR 65806 (October 26, 2010) (Transfer and 
Reorganization of Bank Secrecy Act Regulations Final Rule) (referred 
to herein as the ``Chapter X Final Rule''). The Chapter X Final Rule 
became effective on March 1, 2011.
    \2\ 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 (``section 311'') added Section 
5318A to the BSA, 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.\3\
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    \3\ 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, FinCEN 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. VEF Banka

    At the time of issuance of the final rule on July 13, 2006, VEF 
Banka was headquartered in Riga, Latvia. VEF Banka was one of the 
smallest of Latvia's 23 banks, and, in 2004, was reported to have 
approximately $80 million in assets and 87 employees. Total assets for 
the bank, as of June 30, 2005, were 27.3 million LATS, equivalent to 
approximately $47.4 million. VEF Banka had one subsidiary, Veiksmes 
l[imacr]zings, which offered financial leasing and factoring services. 
In addition to its headquarters in Riga, VEF Banka had one branch in 
Riga and one representative office in the Czech Republic. VEF Banka 
offered corporate and private banking services, issued credit cards for 
non-Latvians, and provided currency exchange through Internet banking 
services (i.e., virtual currencies). In addition, according to its 
financial statements, VEF Banka maintained correspondent accounts in 
countries worldwide, but reported none in the United States at the time 
of the final rule.

II. The Finding, Final Rule, and Subsequent Developments

A. The Finding and Final Rule

    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 FinCEN, found that reasonable 
grounds existed for concluding that VEF Banka was a financial 
institution of primary money laundering concern. This finding was 
published on April 26, 2005,\4\ 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 VEF Banka 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.
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    \4\ See 70 FR 21369 (April 26, 2005, RIN 1506-AA82).
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    After consulting with required Federal agencies and parties, 
reviewing public comments received from the April 26, 2005 notice of 
proposed rulemaking, and considering additional relevant factors, 
FinCEN issued a final rule on July 13, 2006 that imposed the special 
measure authorized under 31 U.S.C. 5318A(b)(5) against VEF Banka.\5\ 
This final rule requires covered financial institutions to terminate 
any correspondent or payable-through

[[Page 45690]]

accounts for, or on behalf of, VEF Banka, and to apply due diligence 
reasonably designed to guard against indirect use of their 
correspondent or payable-through accounts by VEF Banka.
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    \5\ See 71 FR 39554 (July 13, 2006, RIN 1506-AA82).
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B. VEF Banka's Subsequent Developments

    On May 26, 2010, VEF Banka's Latvian banking regulator, the 
Financial and Capital Market Commission (the ``FCMC''), revoked VEF 
Banka's operating license on the grounds that the shareholders of the 
bank had not received authorization from the FCMC for the acquisition 
of qualifying holdings and the bank failed to ensure compliance with 
provisions of the Credit Institution Law.\6\ As a result, the 
shareholders had no decision-making rights and were unable to ``ensure 
prudent bank operations.'' The FCMC's decision to revoke VEF Banka's 
license was confirmed by the Senate of Latvia's Supreme Court on July 
22, 2010 and terminated VEF Banka's ability to operate as a financial 
institution under Latvian law.\7\ On November 15, 2010, the Riga 
District Court issued a non-appealable order to begin liquidating the 
bank.\8\ The liquidation process is expected to be complete in one to 
two years and will result in the disposition of all of VEF Banka's 
assets, including its subsidiary, Veiksmes l[imacr]zings.
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    \6\ ``On Withdrawal of the JSC `VEF Banka's' Operating 
Licence,'' Financial Capital Market Commission press release, May 
26, 2010 (http://www.fktk.lv/en/publications/press_releases/2010-05-29_on_withdrawal_of_the_jsc/)
    \7\ ``VEF Bank Loses License,'' The Baltic Times, July 28, 2010 
(http://www.baltictimes.com/news/articles/26661/).
    \8\ ``Court Rule for Liquidation of VEF Banka,'' The Baltic 
Course, November 16, 2010 (http://www.baltic-course.com/eng/finances/?doc=33962&underline=vef+banka).
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III. Withdrawal of the Finding of Primary Money Laundering Concern 
Against VEF Banka and Repeal of the Final Rule

    For the reasons set forth above, FinCEN hereby withdraws the 
finding of primary money laundering concern against VEF Banka, as 
published in the Federal Register on April 26, 2005 (70 FR 21369) and 
finalized on July 13, 2006 (71 FR 39554), as of August 1, 2011. As a 
result, FinCEN is also repealing the final rule, as published in the 
Federal Register on July 13, 2006 (71 FR 39554) as 31 CFR 103.192 (now 
31 CFR 1010.654), that was based upon the finding. FinCEN's withdrawal 
of the finding of primary money laundering concern against VEF Banka 
and the repeal of the related final rule do not acknowledge any 
remedial measure taken by VEF Banka, but are the result of the 
revocation of VEF Banka's Latvian banking license and the non-
appealable decision by the Riga District Court to liquidate the 
bank.\9\
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    \9\ The ``Republic of Latvia'' was described at length in the 
April 26, 2005 notice of proposed rulemaking, 70 FR 21369, and July 
13, 2006 final rule, 71 FR 39554. Today's repeal of the final rule 
and withdrawal of the finding of primary money laundering concern 
against VEF Banka do not provide updates on jurisdictional 
developments. Further discussion of jurisdictional developments can 
be found at the U.S. Department of State's ``2011 International 
Narcotics Control Strategy Report'' (http://www.state.gov/p/inl/rls/nrcrpt/2011/vol2/156375.htm#latvia).
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IV. Regulatory Matters

A. Executive Order 12866

    It has been determined that this rulemaking is not a significant 
regulatory action for purposes of Executive Order 12866. Accordingly, a 
regulatory impact analysis is not required.

B. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that may result in expenditure by state, local, and tribal governments, 
in the aggregate, or by the private sector, of $100 million or more in 
any one year. If a budgetary impact statement is required, section 202 
of the Unfunded Mandates Act also requires an agency to identify and 
consider a reasonable number of regulatory alternatives before 
promulgating a rule. FinCEN has determined that it is not required to 
prepare a written statement under Section 202 and has concluded that on 
balance the rule provides the most cost-effective and least burdensome 
alternative to achieve the objectives of the rule.

C. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et 
seq.), FinCEN certifies that this final regulation likely will not have 
a significant economic impact on a substantial number of small 
entities. The regulatory changes in this final rule merely remove the 
current obligations for financial institutions under 31 CFR 103.192 
(now 31 CFR 1010.654).

D. Paperwork Reduction Act

    This regulation discontinues the Office of Management and Budget 
Control Number 1506-0041 assigned to the final rule and, as a result, 
reduces the estimated average burden of one hour per affected financial 
institution, totaling 5,000 hours. This regulation contains no new 
information collection requirements subject to review and approval by 
the Office of Management and Budget under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3507(d) et seq.).

List of Subjects in 31 CFR Part 1010

    Administrative practice and procedure, Banks, banking, Brokers, 
Currency, Foreign banking, Foreign currencies, Gambling, 
Investigations, Penalties, Reporting and recordkeeping requirements, 
Securities, Terrorism.

Authority and Issuance

    For the reasons set forth above, 31 CFR part 1010 is amended as 
follows:

PART 1010--GENERAL PROVISIONS

0
1. The authority citation for 31 CFR part 1010 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, sec. 314, Pub. L. 107-56, 115 Stat. 307.


Sec.  1010.654  [Removed]

0
2. Part 1010 is amended by removing Sec.  1010.654.

    Dated: July 22, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2011-19118 Filed 7-29-11; 8:45 am]
BILLING CODE 4810-02-P