[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Rules and Regulations]
[Pages 62607-62630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26204]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1060

RIN 1506-AB12


Comprehensive Iran Sanctions, Accountability, and Divestment 
Reporting Requirements

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

ACTION: Final rule.

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SUMMARY: FinCEN, to comply with the congressional mandate to prescribe 
regulations under section 104(e) of the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act of 2010 (``CISADA'') and consistent 
with its statutory mission under 31 U.S.C. 310, is issuing this final 
rule. The rule requires a U.S. bank that maintains a correspondent 
account for a foreign bank to inquire of the foreign bank, and report 
to FinCEN certain information with respect to transactions or other 
financial services provided by that foreign bank. Under the rule, U.S. 
banks will only be required to report this

[[Page 62608]]

information to FinCEN upon receiving a specific written request from 
FinCEN. This final rule follows publication of a May 2, 2011 proposed 
rule, takes into account the public comments received, and adopts the 
provisions of the proposed rule with minor modifications described in 
the preamble.

DATES: Effective Date: October 11, 2011.

FOR FURTHER INFORMATION CONTACT: The FinCEN regulatory helpline at 
(800) 949-2732 and select Option 6.

SUPPLEMENTARY INFORMATION:

I. Statutory Provisions

    On July 1, 2010, the President signed CISADA \1\ into law. Section 
104(c) of CISADA requires the Secretary of the Treasury (``the 
Secretary'') to prescribe regulations to prohibit, or impose strict 
conditions on, the opening or maintaining in the United States of 
correspondent accounts and payable-through accounts for foreign 
financial institutions that the Secretary finds knowingly engage in 
sanctionable activities described in section 104(c)(2) of CISADA. The 
relevant statutory language reads as follows:
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    \1\ Public Law No. 111-195, 124 Stat. 1312 (2010).

    ``(c) PROHIBITIONS AND CONDITIONS WITH RESPECT TO CERTAIN 
ACCOUNTS HELD BY FOREIGN FINANCIAL INSTITUTIONS.--
    (1) IN GENERAL.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary of the Treasury shall prescribe 
regulations to prohibit, or impose strict conditions on, the opening 
or maintaining in the United States of a correspondent account or a 
payable-through account by a foreign financial institution that the 
Secretary finds knowingly engages in an activity described in 
paragraph (2).
    (2) ACTIVITIES DESCRIBED.--A foreign financial institution 
engages in an activity described in this paragraph if the foreign 
financial institution--
    (A) facilitates the efforts of the Government of Iran (including 
efforts of Iran's Revolutionary Guard Corps or any of its agents or 
affiliates)--
    (i) to acquire or develop weapons of mass destruction or 
delivery systems for weapons of mass destruction; or
    (ii) to provide support for organizations designated as foreign 
terrorist organizations under section 219(a) of the Immigration and 
Nationality Act (8 U.S.C. 1189(a)) or support for acts of 
international terrorism (as defined in section 14 of the Iran 
Sanctions Act of 1996 (Public Law 104-172; 50 U.S.C. 1701 note));
    (B) facilitates the activities of a person subject to financial 
sanctions pursuant to United Nations Security Council Resolution 
1737 (2006), 1747 (2007), 1803 (2008), or 1929 (2010), or any other 
resolution that is agreed to by the Security Council and imposes 
sanctions with respect to Iran;
    (C) engages in money laundering to carry out an activity 
described in subparagraph (A) or (B);
    (D) facilitates efforts by the Central Bank of Iran or any other 
Iranian financial institution to carry out an activity described in 
subparagraph (A) or (B); or
    (E) facilitates a significant transaction or transactions or 
provides significant financial services for--
    (i) Iran's Revolutionary Guard Corps or any of its agents or 
affiliates whose property or interests in property are blocked 
pursuant to the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.); or
    (ii) a financial institution whose property or interests in 
property are blocked pursuant to that Act in connection with--
    (I) Iran's proliferation of weapons of mass destruction or 
delivery systems for weapons of mass destruction; or
    (II) Iran's support for international terrorism.
    (3) PENALTIES.--The penalties provided for in subsections (b) 
and (c) of section 206 of the International Emergency Economic 
Powers Act (50 U.S.C. 1705) shall apply to a person that violates, 
attempts to violate, conspires to violate, or causes a violation of 
regulations prescribed under paragraph (1) of this subsection to the 
same extent that such penalties apply to a person that commits an 
unlawful act described in section 206(a) of that Act.''

    On August 16, 2010, the Office of Foreign Assets Control (``OFAC') 
published the Iranian Financial Sanctions Regulations, 31 CFR Part 561 
(the ``IFSR''). Section 561.201 of the IFSR implements section 104(c) 
of CISADA. It states that the Secretary will, consistent with 
authorities under CISADA, prohibit or impose strict conditions on the 
opening or maintaining in the United States of correspondent accounts 
or payable-through accounts for a foreign financial institution that 
the Secretary finds knowingly engages in one or more of the 
sanctionable activities described in section 561.201(a) of the IFSR.
    Section 104(e) of CISADA requires the Secretary to prescribe 
regulations to establish one or more specific requirements for U.S. 
financial institutions maintaining correspondent accounts for foreign 
financial institutions, in connection with the sanctionable activities 
described in section 104(c)(2) of CISADA. The relevant statutory 
language reads as follows:

    ``(e) REQUIREMENTS FOR FINANCIAL INSTITUTIONS MAINTAINING 
ACCOUNTS FOR FOREIGN FINANCIAL INSTITUTIONS.--
    (1) IN GENERAL.--The Secretary of the Treasury shall prescribe 
regulations to require a domestic financial institution maintaining 
a correspondent account or payable-through account in the United 
States for a foreign financial institution to do one or more of the 
following:
    (A) Perform an audit of activities described in subsection 
(c)(2) that may be carried out by the foreign financial institution.
    (B) Report to the Department of the Treasury with respect to 
transactions or other financial services provided with respect to 
any such activity.
    (C) Certify, to the best of the knowledge of the domestic 
financial institution, that the foreign financial institution is not 
knowingly engaging in any such activity.
    (D) Establish due diligence policies, procedures, and controls, 
such as the due diligence policies, procedures, and controls 
described in section 5318(i) of title 31, United States Code, 
reasonably designed to detect whether the Secretary of the Treasury 
has found the foreign financial institution to knowingly engage in 
any such activity.
    (2) PENALTIES.--The penalties provided for in sections 5321(a) 
and 5322 of title 31, United States Code, shall apply to a person 
that violates a regulation prescribed under paragraph (1) of this 
subsection, in the same manner and to the same extent as such 
penalties would apply to any person that is otherwise subject to 
such section 5321(a) or 5322.''

    In order to comply with the congressional mandate to prescribe 
regulations under section 104(e) of CISADA, and consistent with its 
statutory mission under 31 U.S.C. 310, FinCEN is implementing section 
104(e)(1)(B) of CISADA. FinCEN considered implementing any one or more 
of the options under section 104(e)(1) of CISADA, and determined that 
implementing section 104(e)(1)(B) is the most useful vehicle for 
effecting the intent of section 104(e) at this time. Section 
104(e)(1)(B) of CISADA authorizes the Secretary to prescribe 
regulations that require a domestic financial institution maintaining a 
correspondent account in the United States for a foreign financial 
institution to report to the Department of the Treasury with respect to 
transactions or other financial services provided with respect to 
sanctionable activities described in section 104(c)(2) of CISADA that 
may be carried out by the foreign financial institution.
    FinCEN believes that among the services included within the concept 
of ``transactions or other financial services provided'' by a foreign 
financial institution are correspondent accounts the foreign financial 
institution maintains for other foreign financial institutions and 
transfers of funds the foreign financial institution processes for or 
on behalf of other foreign financial institutions, individuals, or 
entities. A foreign financial institution's provision of correspondent 
account services and transfer of funds services to a financial 
institution designated by the U.S. Government in connection with Iran's 
proliferation of weapons of mass

[[Page 62609]]

destruction or delivery systems for weapons of mass destruction, or in 
connection with Iran's support for international terrorism, may be 
relevant to the sanctionable activities described under section 
104(c)(2) of CISADA. As a result, FinCEN is focusing this reporting 
requirement on the provision of information relating to such 
correspondent accounts and transfers of funds.\2\ In addition, because 
a foreign financial institution's provision of transfer of funds 
services to Iran's Islamic Revolutionary Guard Corps (``IRGC'') or any 
of its agents or affiliates designated by the U.S. Government may also 
be relevant to the sanctionable activities described under section 
104(c)(2) of CISADA, FinCEN is also focusing this reporting requirement 
on the provision of information relating to such transfers of funds.\3\
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    \2\ See, e.g., CISADA subsection 104(c)(2)(E)(ii), which 
includes focus on the provision by foreign financial institutions of 
significant financial services to financial institutions that are of 
concern under CISADA.
    \3\ See, e.g., CISADA subsection 104(c)(2)(E)(i), which includes 
focus on the provision by foreign financial institutions of 
significant financial services to individuals or entities that are 
of concern under CISADA.
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    FinCEN is implementing section 104(e)(1)(B) of CISADA by issuing 
regulations that require a bank, upon receiving a written request from 
FinCEN, to inquire of a specified foreign bank for which it maintains a 
correspondent account, and report to FinCEN, with respect to the 
following: (1) Whether the foreign bank maintains a correspondent 
account for an Iranian-linked financial institution designated under 
the International Emergency Economic Powers Act (``IEEPA''); \4\ (2) 
whether the foreign bank has processed one or more transfers of funds 
within the preceding 90 calendar days for or on behalf of, directly or 
indirectly,\5\ an Iranian-linked financial institution designated under 
IEEPA, other than through a correspondent account; and (3) whether the 
foreign bank has processed one or more transfers of funds within the 
preceding 90 calendar days for or on behalf of, directly or indirectly, 
an IRGC-linked person designated under IEEPA.\6\
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    \4\ See below Section V. A. for the definition of Iranian-linked 
financial institution designated under IEEPA.
    \5\ See below Section IV. D. for the rationale for replacing the 
terminology ``related to'' with ``for or on behalf of, directly or 
indirectly.''
    \6\ See below Section V. A. for the definition of IRGC-linked 
person designated under IEEPA.
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    In addition, the rule requires a bank to request, when making its 
inquiry of a specified foreign bank, that the foreign bank agree to 
notify the bank if the foreign bank subsequently establishes a new 
correspondent account for an Iranian-linked financial institution 
designated under IEEPA at any time within 365 calendar days from the 
date of the foreign bank's initial response, and report such 
information to FinCEN.
    The rule also requires a bank to report to FinCEN instances in 
which the bank does not maintain a correspondent account for a foreign 
bank specified in a written request from FinCEN. This requirement will 
only apply when FinCEN specifically requests in writing that the bank 
report such information. To the extent possible and based on all 
available information, FinCEN intends to send requests directly to 
banks that FinCEN believes may maintain correspondent accounts for the 
specified foreign bank(s). The number of banks that receive a request 
may vary in each specific case, based on the availability of 
information to FinCEN and other circumstances.

II. Background Information

A. 31 CFR Part 561 Iranian Financial Sanctions Regulations--Office of 
Foreign Assets Control

    On August 16, 2010, OFAC published the IFSR, 31 CFR part 561. As 
noted above, section 561.201 of the IFSR implements section 104(c) of 
CISADA. It states that the Secretary will, consistent with authorities 
under CISADA, prohibit or impose strict conditions on the opening or 
maintaining in the United States of correspondent accounts or payable-
through accounts for a foreign financial institution that the Secretary 
finds knowingly engages in one or more of the sanctionable activities 
described in section 561.201(a) of the IFSR. The names of foreign 
financial institutions that are found by the Secretary to knowingly 
engage in such sanctionable activities, and for which U.S. financial 
institutions may not open or maintain correspondent accounts or 
payable-through accounts in the United States, will be published in the 
Federal Register and listed in appendix A to the IFSR. If the Secretary 
decides to impose strict conditions on the opening or maintaining of a 
correspondent account or a payable-through account for a foreign 
financial institution, the actual condition(s) to be imposed will be 
specified upon the identification of the foreign financial institution 
in an order or regulation published in the Federal Register.

B. Use of CISADA Reports

    The CISADA reports received as a result of this rulemaking will be 
used primarily to provide FinCEN with potentially useful information 
from U.S. banks regarding the nature of foreign bank activities that 
may be relevant to CISADA. Based on the reports, immediate action may 
be taken under section 104(c) of CISADA, or, among other things, there 
may be consultation with those foreign banks that maintain 
correspondent accounts for Iranian-linked financial institutions 
designated under IEEPA, that have processed one or more transfers of 
funds for or on behalf of, directly or indirectly, an Iranian-linked 
financial institution or an IRGC-linked person designated under IEEPA, 
or that have been unwilling to respond to inquiries from the banks at 
which the foreign banks maintain correspondent accounts. An 
investigation by OFAC into the activities of such foreign banks could 
result in a finding by the Secretary under section 104(c) of CISADA and 
section 561.201 of the IFSR. For example, when a bank reports that a 
foreign bank maintains a correspondent account for an Iranian-linked 
financial institution designated under IEEPA, or has processed one or 
more transfers of funds for or on behalf of, directly or indirectly, an 
Iranian-linked financial institution or an IRGC-linked person 
designated under IEEPA, OFAC could use the information to corroborate 
or supplement data derived from other sources and may request further 
information from the foreign bank to clarify whether the foreign bank 
is facilitating significant transactions or providing significant 
financial services for an Iranian-linked financial institution or an 
IRGC-linked person designated under IEEPA. Such transactions or 
services can be the basis for prohibiting or imposing strict conditions 
on the foreign bank's correspondent or payable-through accounts in the 
United States under section 104(c) of CISADA and section 561.201 of the 
IFSR.

III. Notice of Proposed Rulemaking

    The final rule contained in this document is based on the Notice of 
Proposed Rulemaking published in the Federal Register on May 2, 2011 
(``Notice'').\7\ With the intent of implementing section 104(e) of 
CISADA, the Notice proposed to require a U.S. bank that maintains a 
correspondent account for a foreign bank to inquire of the foreign bank 
and report to FinCEN certain information with respect to transactions 
or other financial services provided by that foreign bank. The Notice 
also proposed that banks would only be required to

[[Page 62610]]

report this information to FinCEN upon receiving a specific written 
request from FinCEN.
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    \7\ See 76 FR 24410 (May 2, 2011).
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IV. Comments on the Notice--Overview and General Issues

    The comment period for the Notice ended on June 1, 2011. We 
received a total of seven comment letters from 14 entities and 
individuals.\8\ Of the seven comment letters, five were submitted by 
trade groups or associations,\9\ one was submitted by a group of seven 
U.S. Senators, and one was submitted by an advocacy group. The comments 
were generally supportive of the Notice but sought additional 
clarification on certain aspects of the Notice. Comments received 
covered a broad and varied range of topics. Although most of these 
comments are addressed directly below, a few others are covered in the 
section-by-section analysis.
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    \8\ All comments to the Notice are available for public viewing 
at http://www.regulations.gov.
    \9\ One comment letter was submitted on behalf of two trade 
groups or associations.
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    Comments on the Notice focused on the following general matters: 
(A) The approach to implementing section 104(e) of CISADA; (B) the 
ability of a foreign bank to respond to a CISADA request; (C) the 
impact of the rule on foreign correspondent account relationships; (D) 
the scope of information to be reported by a foreign bank; (E) the 
timeframe for a foreign bank and a U.S. bank to respond to a CISADA 
request; (F) clarification regarding the proposed model certification; 
(G) clarification regarding certain definitions and terms; (H) record 
retention and supporting documentation; (I) sharing information 
regarding a CISADA request; and (J) estimate of burden.

A. The Approach to Implementing Section 104(e) of CISADA

    One of the comments asserted that the Notice was not published in 
the Federal Register until 10 months after the President signed CISADA, 
which led the commenter to call into question the seriousness of 
enforcing comprehensive sanctions against Iran. Two commenters urged 
that the final rule should be implemented as soon as possible. 
Conversely, another commenter asserted that allowing only a 30-day 
comment period for the Notice was inadequate. In drafting the Notice, 
we considered a number of different approaches before settling on the 
one that we believe will produce the most useful information in the 
most workable manner. The time it took to publish the Notice reflected 
the need to craft a rule that would best achieve our policy aims, in a 
complex and novel context. Because we were mindful of the need to 
obtain this information expeditiously, we issued the Notice with a 30-
day comment period. The quality and scope of the comments convinces us 
that 30 days was sufficient. We have drafted the final rule as promptly 
as possible, while taking into consideration all of the comments 
received and ensuring that we have established a rule that most 
effectively implements section 104(e) of CISADA.
    Section 104(e) of CISADA offers FinCEN four options for rulemaking. 
One commenter requested clarification regarding how FinCEN determined 
that implementing section 104(e)(1)(B) would be the most useful way to 
implement section 104(e) of CISADA. As noted above, FinCEN considered a 
number of different approaches to implementing section 104(e) of 
CISADA. We believe that implementing section 104(e)(1)(B) will produce 
the most useful information in the most workable manner and will best 
achieve our policy aims. In fact, this belief is echoed in a number of 
comments FinCEN received. One commenter asserted that section 104(e) of 
CISADA allows FinCEN to implement any one or more of four requirements, 
some of which the commenter believes are potentially very burdensome to 
industry. The commenter believes the proposed requirements 
appropriately balance the need of the U.S. government to isolate Iran 
from the global financial system with the need to maintain an 
effectively functioning correspondent banking system. Another commenter 
asserted that FinCEN has taken elements of the four options Congress 
outlined in the statute and incorporated them with existing 
requirements to develop a rule that considers the costs to industry, 
the ability of the industry to comply, appropriate use of limited 
enforcement resources, and the need for information. Yet another 
commenter asserted that banks providing correspondent relationships in 
the U.S. are not in a position to speak to the overall activities of 
their foreign counterparts. The commenter further asserted that as 
such, if those activities are at issue under section 104(e) of CISADA, 
it is more appropriate to ask the U.S.-based banks to transmit 
inquiries to their foreign correspondents than to ask them to conduct 
independent investigations for which they are ill-suited.
    One commenter believes that the proposed rule treats section 104(e) 
of CISADA as a discretionary provision in which banks will only have to 
certify they are not doing business with relevant Iranian-linked 
designated entities and individuals upon a written inquiry from FinCEN. 
Another commenter suggested that the proposed rule would not meet the 
requirements of the statute, as domestic financial institutions should 
be required to provide information to FinCEN, not only when asked, but 
as soon as they are aware that the foreign financial institution is 
engaged in a ``prohibited activity.'' FinCEN does not interpret 104(e) 
to be discretionary. To the contrary, we understand 104(e) to require 
the Secretary to prescribe regulations mandating that domestic 
financial institutions take one or more actions, one of which is to 
provide requested reports to FinCEN, and we believe the final rule 
reflects this understanding. We also note that the activities described 
in section 104(c)(2) of CISADA are not ``prohibited activities.'' 
Instead they are activities that can be grounds for imposing the 
sanctions described in section 104(c)(1) of CISADA.
    FinCEN proposed to target this reporting requirement on those 
foreign banks that there is some basis to suspect may be engaged in 
activities that may be sanctionable under section 104(c) of CISADA. We 
considered requiring every U.S. bank to provide periodic reports from 
every foreign bank for which they maintain correspondent accounts, but 
concluded that we would be better served by a rule that focused on 
those foreign banks that are of interest for purposes of CISADA. By 
requiring reports from those U.S. banks that maintain correspondent 
accounts for the specific foreign banks that are of interest for 
purposes of CISADA implementation, we believe that we will receive the 
information needed without generating a multitude of unnecessary and 
uninformative reports.
    The reporting requirement in the final rule is scalable. Based on 
the circumstances, it permits FinCEN to expand the number of U.S. banks 
that would be required to file reports, as well as the number of 
foreign banks from whom information would be sought. This means that 
FinCEN may ask any number of U.S. banks about any number of foreign 
banks as is necessary, based on the number of foreign banks there is 
some basis to suspect may be engaged in activities that may be 
sanctionable under section 104(c) of CISADA.
    The targeted approach that FinCEN has proposed is supported by a 
number of commenters. One commenter strongly recommended incorporating 
the concept of targeted requests in the final rule. That same commenter 
noted that it appreciated FinCEN's effort to craft a

[[Page 62611]]

regulation that focuses on developing meaningful and properly targeted 
information. Another commenter expressed support for a request-driven 
model as an appropriate means of focusing industry and governmental 
resources on information of value. Yet another commenter asserted that 
in proposing a reporting requirement that would be imposed only when 
specifically requested, FinCEN has struck an appropriate balance 
between the need of the U.S. government to isolate Iran from the global 
financial system with the need to maintain an effectively functioning 
correspondent banking system.
    One commenter correctly noted that banks are only required to 
request information from a foreign bank for which they maintain a 
correspondent account upon receiving a written request from FinCEN 
regarding that specific foreign bank. This rule does not require a bank 
to proactively inquire of any one or more of the foreign banks for 
which it maintains correspondent accounts.
    One commenter suggested that under CISADA, a foreign financial 
institution should be required to report if it has facilitated the 
activities of a person subject to financial sanctions pursuant to 
United Nations (``U.N.'') Security Council Resolutions with respect to 
Iran. The commenter suggested that the proposed rule should be amended 
to require this additional disclosure. We recognize that foreign banks' 
transactions involving persons subject to financial sanctions pursuant 
to U.N. Security Council Resolutions with respect to Iran are among the 
sanctionable activities described in section 104(c)(2) of CISADA; 
however, there are other avenues for obtaining information on such 
transactions and FinCEN has determined that this specific reporting 
mechanism is not the most efficacious means to obtain such information 
at this time. However, as FinCEN collects and assesses the information 
required under this rule, we will continue to consider whether 
expanding the scope of this rule to include information pertaining to 
whether a foreign bank has facilitated the activities of a person 
subject to financial sanctions pursuant to U.N. Security Council 
Resolutions with respect to Iran would provide additional useful 
information as it relates to CISADA. If that is determined to be the 
case, FinCEN will consider proposing an expansion of this reporting 
requirement to include such information. At this time, FinCEN believes 
that a focus on foreign banks' transactions involving Iranian-linked 
financial institutions designated under IEEPA and IRGC-linked persons 
designated under IEEPA will provide the most beneficial information for 
purposes of implementing section 104(c) of CISADA.
    One commenter suggested that alternative resources might better 
serve the same purpose as the proposed rule. The commenter encouraged 
FinCEN to place greater reliance on government-to-government requests 
given the commenter's belief that such requests are likely to be far 
more reliable when collecting information to identify sanctions 
targets. The same commenter asserted that the benefit of an inter-
governmental approach is the opportunity to urge other countries to 
adopt and implement similar sanctions. FinCEN clarifies that this rule 
is one tool that is being utilized to collect information as it relates 
to identifying potential sanctions targets under CISADA. As the 
commenter correctly suggested, additional methods of information 
collection are being utilized to identify sanctions targets. The 
commenter also suggested that FinCEN utilize existing Bank Secrecy Act 
(``BSA'') reporting tools as necessary to implement this reporting 
requirement. FinCEN agrees, and will leverage existing BSA reporting 
tools as appropriate.

B. The Ability of a Foreign Bank To Respond to a CISADA Request

    Four commenters asserted that privacy legislation in certain 
jurisdictions may prohibit foreign banks from providing the requested 
information with respect to individual customer accounts and 
transactions. Three of these same commenters asserted that under CISADA 
banks have no legal authority to compel foreign banks to provide the 
requested information. FinCEN acknowledges that some foreign banks may 
choose not to respond or may not be able to respond due to their own 
jurisdictions' privacy legislation. For this reason the rule 
incorporates an option for U.S. banks to report to FinCEN instances in 
which they have not received a response from a foreign bank.
    Although foreign banks are not necessarily required to respond 
under CISADA authority, those foreign banks may feel compelled to 
respond in order to maintain good relationships with the U.S. banks 
with which they maintain correspondent accounts. Even in instances in 
which a foreign bank does not respond to a bank's inquiry, that 
information is still valuable. As noted elsewhere in this rulemaking, 
based on the reports received, immediate action may be taken under 
section 104(c) of CISADA, or, among other things, there may be 
consultation with foreign banks, including those that have been 
unwilling to respond to inquiries. An investigation by OFAC into the 
activities of such foreign banks could result in a finding by the 
Secretary under section 104(c) of CISADA and section 561.201 of the 
IFSR.
    One commenter suggested that the proposed rule should clearly 
outline the ramifications for foreign banks that fail to provide the 
required information or provide incorrect information. The commenter 
suggested that those ramifications should mirror the sanctions outlined 
in section 104(c)(1) of CISADA. If a foreign bank fails to respond or 
provides incorrect information an investigation may be conducted into 
the activities of such foreign bank which could, in turn, result in a 
finding under section 104(c) of CISADA.
    One commenter contended that the proposed rule does not take into 
account the fact that a foreign bank may conduct legitimate business 
with an Iranian-linked financial institution designated under IEEPA, 
through licensed transactions and clearing. The commenter further 
asserted that for this reason, it would be possible for a U.S. 
authority to impose a penalty under CISADA on a foreign bank for 
undertaking transactions which had been licensed by its own competent 
authority. If a foreign bank wishes to explain that a correspondent 
account or transfer of funds identified in a certification was licensed 
by a competent authority in the foreign bank's home jurisdiction, the 
foreign bank may provide this explanatory information in the 
certification form. Such explanatory information may be taken into 
account when the foreign bank's certification is reviewed and it is 
determined what further action, if any, is appropriate under section 
104(c) of CISADA. The model certification has been revised to include 
language that identifies this type of circumstance as an example of 
information a foreign bank can include in its certification.

C. The Impact of the Rule on Foreign Correspondent Account 
Relationships

    One commenter requested that FinCEN clarify that a request for 
information regarding a foreign bank or even a positive report from a 
foreign bank is not a mandate to close or restrict an account. The 
commenter asserted that one option under the rule is for a bank to 
report that it cannot determine to its satisfaction that the foreign 
bank does not maintain a relevant account or

[[Page 62612]]

has not processed relevant transfers of funds. The commenter requested 
that FinCEN acknowledge in the final rule that this option meets 
compliance expectations for the bank, and the bank is not expected to 
take further action. Another commenter similarly suggested that the 
rule should clarify that a bank that does not receive a response from a 
foreign bank is merely required to report that and does not have to 
take any other action, including closing the account.
    As explained elsewhere in the rulemaking, this rule does not 
require a bank to take any steps with respect to the foreign bank other 
than those relating to the collection of information outlined in the 
rule, regardless of the response received from the foreign bank. While 
the rule does not preclude a bank from taking any other action based on 
the bank's assessment of the facts and bank policy, including 
restricting or terminating a correspondent account relationship with a 
foreign bank or filing a suspicious activity report, a bank is not 
required to take any additional action based solely upon the fact that 
the bank: (i) Has received a request for information under this 
regulation; (ii) has received a response from the foreign bank; or 
(iii) has not received a response from the foreign bank.
    If a foreign bank does not respond to an inquiry made by a bank 
under this rule, the bank will be in compliance with these reporting 
requirements so long as the bank timely reports to FinCEN that the 
foreign bank did not respond to the bank's inquiry. In addition, if a 
bank cannot determine that the foreign bank does not maintain a 
relevant account or has not processed relevant transfers of funds, the 
bank will be in compliance with these reporting requirements so long as 
the bank timely reports such information to FinCEN, together with the 
reason(s) for this, such as the failure of the foreign bank to respond 
to the inquiry by or a request from the bank, the failure of the 
foreign bank to certify its response, or if the bank has information 
that is inconsistent with the certification.
    FinCEN requested comment regarding the impact of this information 
collection on banks' correspondent account relationships with foreign 
banks. One commenter suggested that a barrage of requests from the 
United States could create, over time, an unintended consequence of 
alienating foreign correspondents. The commenter also asserted that 
foreign banks might be driven to find alternate ways to direct 
transactions to avoid dealing with the United States. The commenter 
sees this as having a two-part negative impact: the immediate detriment 
to the economy and the decreasing ability of the United States to 
receive valuable information on international transactions. As stated 
elsewhere in the rulemaking, FinCEN proposed to target this reporting 
requirement on those foreign banks that there is some basis to suspect 
may be engaged in activities that may be sanctionable under section 
104(c) of CISADA. We considered requiring every U.S. bank to provide 
periodic reports from every foreign bank for which they maintain 
correspondent accounts, but concluded that we would be better served by 
a rule that focused on those foreign banks that are of interest for 
purposes of CISADA. We believe that by taking a targeted approach we 
will avoid alienating foreign banks for which we have no concern 
regarding sanctionable Iranian-related activities. For these reasons, 
we believe the commenter's concerns are unfounded.

D. The Scope of Information To Be Reported by a Foreign Bank

    FinCEN requested comment as to whether the terminology ``processed 
one or more transfers of funds'' should be further clarified, and if 
so, how and what terms should be used in the alternative. A few 
commenters requested further clarification; however FinCEN did not 
receive any suggestions regarding alternative terminology.
    One commenter asserted that the broad definition of the term 
``processed one or more transfers of funds'' appears problematic. The 
commenter suggested that according to the definition, this term would 
include each and every transaction, in particular those that do not 
require using a correspondent account. Another commenter suggested that 
it would need further clarity regarding the term ``processed one or 
more transfers of funds'' to identify which transactions FinCEN intends 
to reach. Another commenter questioned what is meant by the term 
``other than through a correspondent account,'' in the context of a 
request that a foreign bank certify whether it has processed one or 
more transfers of funds within the preceding 90 calendar days related 
to an Iranian-linked financial institution designated under IEEPA, 
``other than through a correspondent account.''
    As explained in the Notice, the terminology ``processed one or more 
transfers of funds'' is meant to address circumstances through which 
transfers of funds are made without requiring a correspondent account, 
specifically including circumstances in which financial institutions 
are part of a common payments or clearing mechanism that provides for 
transfers of funds among participants without requiring bilateral 
correspondent account relationships. If a foreign bank is reporting 
that it maintains a correspondent account for a specific Iranian-linked 
financial institution designated under IEEPA, the foreign bank does not 
also have to report that it has processed transfers of funds for that 
specific Iranian-linked financial institution, as that is assumed 
within the context of the reported correspondent account. 
Alternatively, for example, in instances in which a foreign bank is 
part of a common payments or clearing mechanism that provides for 
transfers of funds among participants without requiring bilateral 
correspondent account relationships, those foreign banks should report 
whether they have processed transfers of funds for an Iranian-linked 
financial institution designated under IEEPA through such common 
payments or clearing mechanisms. This type of example is the reason we 
used the terminology processed one or more transfers of funds within 
the preceding 90 calendar days related to an Iranian-linked financial 
institution designated under IEEPA, ``other than through a 
correspondent account.'' \10\
---------------------------------------------------------------------------

    \10\ As it relates to the model certification, a foreign bank 
should fill out each section of the model certification by selecting 
one box in each section of the model certification. For example, if 
a foreign bank has a correspondent account for an Iranian-linked 
financial institution designated under IEEPA, the foreign bank will 
select the second box under section B of the model certification: 
``Foreign Bank hereby certifies that it does maintain a 
correspondent account(s) for an Iranian-Linked Financial Institution 
Designated Under IEEPA.'' The foreign bank will also fill out the 
corresponding chart in section B of the model certification for each 
applicable correspondent account. The language in the first box 
under section C of the model certification states ``Foreign Bank 
hereby certifies that to its knowledge it has not processed one or 
more transfers of funds within the preceding 90 calendar days for or 
on behalf of, directly or indirectly, an Iranian-Linked Financial 
Institution Designated Under IEEPA, other than through a 
correspondent account detailed above.'' The language ``other than 
through a correspondent account detailed above'' is intended to 
direct the foreign bank not to reenter the information that was 
already entered in section B of the model certification in section C 
of the model certification. However, regardless of which box the 
foreign bank selects in section B of the model certification, the 
foreign bank should also select one box from section C of the model 
certification. If a foreign bank has not processed any transfers of 
funds outside of a correspondent account relationship with an 
Iranian-linked financial institution designated under IEEPA, the 
foreign bank will select the first box under section C of the model 
certification. If the foreign bank has processed transfers of funds 
for or on behalf of, directly or indirectly, an Iranian-linked 
financial institution designated under IEEPA outside of a 
correspondent account relationship, the foreign bank will select the 
second box under section C of the model certification: ``Foreign 
Bank hereby certifies that it has processed one or more transfers of 
funds within the preceding 90 calendar days for or on behalf of, 
directly or indirectly, an Iranian-Linked Financial Institution 
Designated Under IEEPA, other than through a correspondent account 
detailed above.'' In this case the foreign bank also will fill out 
the corresponding chart in section C of the model certification for 
each applicable Iranian-linked financial institution designated 
under IEEPA. Similarly, the foreign bank will also select one box 
from section D of the model certification.

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

[[Page 62613]]

    FinCEN also clarifies that in the context of a request that a 
foreign bank certify whether it has processed one or more transfers of 
funds within the preceding 90 calendar days related to an IRGC-linked 
person designated under IEEPA, the foreign bank should report whether 
it has processed any transfers of funds related to an IRGC-linked 
person designated under IEEPA, regardless of whether the transfers of 
funds were processed through a correspondent account or through some 
other common payments or clearing mechanism.
    One commenter noted that under section 1060.300(b), the foreign 
bank is requested to certify that it has not ``processed one or more 
transfers of funds within the preceding 90 calendar days related to an 
Iranian-linked financial institution'' or ``related to an IRGC-linked 
person.'' The commenter contended that this concept is broader than can 
reasonably be expected. The commenter explained that while the foreign 
bank could reasonably determine whether such relevant designated 
entities and individuals were parties to a transaction, it has no 
reliable way of ascertaining whether a transaction with a third party 
has a relationship to such relevant designated entities and 
individuals. The commenter provided the following example: if the head 
office of a foreign bank processes a non-USD-denominated payment from 
its customer in another country outside the United States to a Middle 
Eastern trading company, it would have no way of knowing whether the 
trading company may in turn be acting on behalf of a relevant 
designated entity or individual. The commenter suggested that the 
requested certification relate to payments ``to or from'' the relevant 
designated entities or individuals as opposed to ``related to.''
    Another commenter noted that it is conceivable that transactions 
can be conducted that are settled through correspondent accounts held 
for other credit institutions where the foreign bank does not or cannot 
recognize that a relevant transaction is conducted on behalf of or in 
the interest of an Iranian-linked financial institution designated 
under IEEPA. The commenter suggested that the certification from the 
foreign bank, therefore, must at least contain the qualification that 
it is not aware of, or should not necessarily have been aware of, such 
circumstance.
    In the context of the request that a foreign bank certify whether 
it has processed one or more transfers of funds within the preceding 90 
calendar days ``related to'' an Iranian-linked financial institution 
designated under IEEPA, other than through a correspondent account, and 
whether it has processed one or more transfers of funds within the 
preceding 90 calendar days ``related to'' an IRGC-linked person 
designated under IEEPA, FinCEN has agreed to replace ``related to'' 
with ``for or on behalf of, directly or indirectly.'' The terminology 
``for or on behalf of, directly or indirectly,'' is meant to include 
situations where a foreign bank has knowledge that a transfer of funds 
it is processing is for or on behalf of an Iranian-linked financial 
institution designated under IEEPA, or an IRGC-linked person designated 
under IEEPA, but where the designated entity or individual does not 
appear on the face of the transaction. In other words, the phrase is 
meant to include those situations in which the processing is being done 
with knowledge based on a relationship that exists through a third 
party such as a money exchange or trading house.
    Consistent with the above mentioned revision and based on comments 
received, FinCEN has also incorporated the phrase ``to its knowledge'' 
into the reporting requirement that upon receiving a written request 
from FinCEN, a bank shall report to FinCEN, in such format and manner 
as may be prescribed by FinCEN, the following information for any 
specified foreign bank the name of any specified foreign bank, for 
which the bank maintains a correspondent account, that certifies that 
it does not maintain a correspondent account for an Iranian-linked 
financial institution designated under IEEPA, that certifies that to 
its knowledge it has not processed one or more transfers of funds 
within the preceding 90 calendar days for or on behalf of, directly or 
indirectly, an Iranian-linked financial institution designated under 
IEEPA, other than through a correspondent account, and/or that 
certifies that to its knowledge it has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an IRGC-linked person designated 
under IEEPA.'' \11\ [Emphasis added.]
---------------------------------------------------------------------------

    \11\ See section 1060.300(c)(1)(iv).
---------------------------------------------------------------------------

    In order to be consistent with the revisions to the regulation 
text, FinCEN has also incorporated the phrase ``to its knowledge'' into 
the model certification in the following places: ``Foreign Bank hereby 
certifies that to its knowledge it has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an Iranian-Linked Financial 
Institution Designated Under IEEPA, other than through a correspondent 
account detailed above;'' [emphasis added] and ``Foreign Bank hereby 
certifies that to its knowledge it has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an IRGC-Linked Person Designated 
Under IEEPA.'' [Emphasis added.]
    One commenter noted that when inquiring of a foreign bank, the U.S. 
bank would also be required to ask the foreign bank to agree to report 
if it establishes a new correspondent account for an Iranian-linked 
financial institution designated under IEEPA within 365 calendar days 
after its initial response and that would in turn be reported to FinCEN 
by the U.S. bank. The commenter believes this is the most difficult 
element of the proposal. The commenter asserted that a request is based 
on whether the United States has designated an entity under IEEPA. The 
commenter further suggested that since IEEPA is a U.S. law, and the 
IEEPA lists are constantly changing, any affected foreign bank would be 
required to develop systems to monitor and track whether or not a 
transaction might be covered. The commenter also suggested that foreign 
banks would have to sort through the entire OFAC list as a first step 
to identify which entities are covered and then apply it to its own 
records. The commenter recommended that FinCEN or OFAC create a special 
section/list for IEEPA designations that is easily accessed by foreign 
banks around the world.
    FinCEN clarifies that the rule does not call on a foreign bank to 
report on new transfers of funds processed for a relevant designated 
entity or individual following its initial response. The rule only 
calls on a foreign bank to report any new correspondent accounts opened 
for an Iranian-linked financial institution designated under IEEPA 
within 365 calendar days after the foreign bank's initial response. 
Also, as noted elsewhere in the rulemaking and in the model 
certification, a list of financial institutions that meet the criteria 
of Iranian-linked financial institutions designated under IEEPA ([IFSR] 
tags) are included at the following link on OFAC's Web site: http://
www.treasury.gov/resource-

[[Page 62614]]

center/sanctions/Programs/Documents/irgc--ifsr.pdf. As of June 27, 
2011, there were 22 financial institutions with IFSR tags, meaning 22 
Iranian-linked financial institutions designated under IEEPA.\12\ The 
foreign bank can go to the link to look for updates to the site when 
they open a new correspondent account. In addition, as part of standard 
practices, banks globally should perform some type of customer 
identification or verification, customer due diligence, and/or ``know 
your customer'' policy in opening new accounts. In light of the global 
awareness of risks in conjunction with certain transactions related to 
Iran, it does not appear to be unreasonable to expect that a foreign 
bank that has received a request under this rulemaking could report on 
new correspondent accounts within the succeeding 365 calendar days.
---------------------------------------------------------------------------

    \12\ It is important to note that the list is dynamic and should 
be referenced regularly to ensure the most up-to-date information.
---------------------------------------------------------------------------

    The commenter also suggested that FinCEN call on a foreign bank to 
respond to these requests within 30 calendar days after the foreign 
bank identifies a new correspondent account with an Iranian-linked 
financial institution designated under IEEPA. This comment is addressed 
by text in the model certification, which provides as follows: 
``Foreign Bank hereby agrees to notify in writing the Bank if Foreign 
Bank establishes a new Correspondent Account for an Iranian-Linked 
Financial Institution Designated Under IEEPA at any time within 365 
calendar days from the date of this response. Foreign Bank agrees to 
provide such notification within 30 calendar days of the establishment 
of the new correspondent account.''
    FinCEN requested comment regarding whether setting a minimum dollar 
threshold for a foreign bank to report on transfers of funds processed 
within the preceding 90 calendar days related to an Iranian-linked 
financial institution designated under IEEPA or related to an IRGC-
linked person designated under IEEPA would lessen the reporting 
obligations, while still providing useful information. FinCEN also 
requested comment regarding what that minimum dollar threshold should 
be.
    Three commenters suggested that a threshold should be set. Two of 
these commenters asserted that section 104 of CISADA applies to a 
``significant transaction or transactions.'' For this reason, the 
commenters suggested that a threshold should be set to require foreign 
banks to only report on significant transactions. As it relates to 
section 104(c) of CISADA, a determination of significance will be 
decided on a case-by-case basis. Neither section 104 of CISADA nor the 
IFSR defines a minimum dollar threshold for ``significant 
transactions.'' \13\ Neither of these commenters suggested what the 
minimum dollar threshold should be.
---------------------------------------------------------------------------

    \13\ See 31 CFR 561.404 for interpretations of ``significant 
transaction or transactions.''
---------------------------------------------------------------------------

    Only one commenter proposed what that minimum dollar threshold 
should be. The commenter suggested that FinCEN should apply the $3,000 
threshold that exists in some other anti-money laundering rules because 
monitoring transactions of lesser value can be overly burdensome with 
little benefit. The commenter also suggested that a threshold for 
minimum aggregate through-put in a correspondent account can also serve 
to better focus resources on identifying the riskiest correspondent 
accounts. However, the commenter further asserted that it is mindful 
that parsing activity at the margins of the threshold can incur its own 
compliance costs and therefore thresholds should always be applied 
permissively and not as technical standards that generate compliance 
complexities.
    Considering the fact that a threshold of $3,000 is unlikely to 
eliminate a substantial number of responses from foreign banks, and 
considering the commenter's proposal that utilizing the minimum 
threshold should be at the foreign bank's discretion due to the 
potential burden of added compliance costs, FinCEN has determined that 
it will not set a minimum threshold for reporting on transfers of 
funds. In addition, for these same reasons, FinCEN will not set a 
minimum threshold for reporting on correspondent accounts. This rule 
calls for reports on all correspondent accounts with Iranian-linked 
financial institutions designated under IEEPA regardless of the volume 
of transactions conducted through the correspondent accounts.

E. The Timeframe for a Foreign Bank and a U.S. Bank To Respond to a 
CISADA Request

    In the Notice, FinCEN proposed that a bank would be required to 
report the information required by this rule to FinCEN within 30 
calendar days of the date of the written request from FinCEN. In 
addition, FinCEN proposed that if a bank receives notification from a 
foreign bank that the foreign bank has established a new correspondent 
account for an Iranian-linked financial institution designated under 
IEEPA, the bank is required to report the information required by this 
rule within 10 calendar days of receiving that notification. FinCEN 
requested comment as to whether these proposed timeframes were 
appropriate.
    Four commenters contended that 30 calendar days to report the 
information required by this rule to FinCEN is not sufficient. Three of 
these commenters proposed that the timeframe be extended to 90 calendar 
days. Two of these commenters asserted that it will take a foreign bank 
time to research whether it maintains a correspondent account or has 
processed transfers of funds in the previous 90 calendar days for the 
relevant designated entities and individuals. Two of these commenters 
asserted that foreign banks' responses may be subject to legal review 
by local regulators prior to submission to the bank. One of these 
commenters suggested that a bank will have to do some level of due 
diligence to ``certify'' that it does not know that the foreign bank's 
certification is incorrect. Another one of these commenters asserted 
that it would be unfortunate if a U.S. bank had to report to FinCEN 
that a foreign bank has not replied in time, specifically in instances 
in which the foreign bank is making efforts to do so, as this could 
cast a bad and perhaps false light on the foreign bank. Another 
commenter suggested that a 30-day timeframe to respond will likely 
produce a significant number of ``no response'' reports to FinCEN.
    FinCEN has taken these comments into consideration. For this 
reason, FinCEN is revising the timeframe to respond to 45 calendar days 
from the date of the written request from FinCEN. FinCEN acknowledges 
the concerns raised by the commenters; however, these requests are 
time-sensitive by nature and extending the timeframe for a response to 
90 days is not feasible. In addition, as noted elsewhere in this 
rulemaking, a U.S. bank is not expected to independently verify the 
information provided by a foreign bank. This should lessen the amount 
of time necessary for a U.S. bank to review a foreign bank's response 
prior to submission to FinCEN.
    FinCEN does recognize the possibility that there may be certain 
situations in which additional time for a foreign bank to respond is 
needed. For this reason, we are amending the final rule to require that 
if a U.S. bank receives a certification from a foreign bank after the 
45 calendar day deadline, the U.S. bank is required to report that 
information to FinCEN within 10 calendar days of receiving that 
certification. This additional obligation does not relieve the U.S. 
bank of its obligation to report to FinCEN within 45

[[Page 62615]]

calendar days the results of the U.S. bank's inquiry, regardless of 
whether the foreign bank has responded.
    One commenter suggested that a bank should be given 30 days to 
respond to FinCEN upon receiving a notification from a foreign bank 
that it has opened a new account with an Iranian-linked financial 
institution designated under IEEPA. As has been clarified elsewhere in 
this rulemaking, a U.S. bank is not expected to independently verify 
the information provided by a foreign bank. For this reason, FinCEN 
believes that if a bank receives notification from a foreign bank that 
the foreign bank has established a new correspondent account for an 
Iranian-linked financial institution designated under IEEPA, the bank 
will have sufficient time to report the information required by this 
rule within 10 calendar days of receiving that notification.

F. Clarification Regarding the Proposed Model Certification

    FinCEN requested comment as to the effectiveness of the proposed 
model certification. One commenter noted that under the proposed rule, 
the person signing on behalf of the U.S. bank would be required to 
state that he has read and understood the foreign bank's certification, 
that the statements made are complete and correct, and that the U.S. 
bank does not know or suspect, or have reason to suspect that the 
foreign bank's certification is incorrect. The commenter suggested that 
a statement that the foreign bank's response is complete and correct 
would require the certifying U.S. officer to have intimate knowledge of 
the foreign bank's customers and activities, something that the U.S. 
bank will never have. The commenter also suggested that the terminology 
``know, suspect, and reason to suspect'' raises questions about the 
level of due diligence a U.S. bank is expected to perform under the 
proposed rule.
    Another commenter noted that section 1060.300(c)(1)(v) requires 
that the reporting U.S. bank identify any specified foreign bank for 
which the inquiring U.S. bank ``has not been able to establish to its 
satisfaction'' does not engage in the listed activities and, further, 
certify to FinCEN that it does not ``know[], suspect[], or ha[ve] 
reason to suspect'' that any certification provided by the foreign bank 
is incorrect. With these few words, the commenter suggested, the 
proposed rule would appear to shift the burden on the inquiring bank 
from simply acting as a conduit for FinCEN's inquiries to independently 
investigating and evaluating the truthfulness of the foreign bank's 
response.
    Another commenter noted that a U.S. bank has no ability to verify 
the information reported by a foreign bank. The commenter recommended 
that the final rule acknowledge that the only obligation of the U.S. 
bank is to request the data and pass along the information it receives 
as received. An additional commenter expressed similar concerns.
    FinCEN clarifies that our expectation with regard to knowledge is 
only knowledge a U.S. bank would have based on the monitoring it 
already conducts to comply with OFAC requirements and BSA requirements 
regarding due diligence over foreign correspondent accounts. We also 
clarify that we do not expect a U.S. bank to independently verify the 
information provided by a foreign bank. However, we do expect a bank to 
report if it has information that is inconsistent with the foreign 
bank's certification. An example of a situation in which information is 
inconsistent with the certification might involve a scenario where a 
U.S. bank's transaction monitoring software recently blocked a 
transaction on behalf of a certain foreign bank, but that foreign bank 
does not include such transaction in the report provided to the U.S. 
bank.
    To reflect these clarifications in the final rule more clearly, 
FinCEN has decided to make revisions to section 1060.300(c)(1)(v) and 
to the portion of the model certification to be completed by the bank. 
These revisions directly address the recommendations offered by these 
commenters.
    FinCEN is revising the language in section 1060.300(c)(1)(v) of the 
final rule to clarify our expectations with regard to the U.S. bank's 
responsibilities as they relate to the information reported by a 
foreign bank. Section 1060.300(c)(1)(v) proposed that a bank report to 
FinCEN the following information regarding a specified foreign bank: 
The name of any specified foreign bank, for which the bank maintains a 
correspondent account, about which the bank has not been able to 
establish to its satisfaction that the foreign bank does not maintain a 
correspondent account for an Iranian-linked financial institution 
designated under IEEPA, has not processed one or more transfers of 
funds within the preceding 90 calendar days related to an Iranian-
linked financial institution designated under IEEPA, other than through 
a correspondent account, and/or has not processed one or more transfers 
of funds within the preceding 90 calendar days related to an IRGC-
linked person designated under IEEPA, together with the reason(s) for 
this, such as the failure of the foreign bank to respond to the inquiry 
by or a request from the bank, the failure of the foreign bank to 
certify its response, or if the bank knows, suspects, or has reason to 
suspect that the certification is incorrect.'' [Emphasis added.]
    FinCEN is amending section 1060.300(c)(1)(v) by revising the phrase 
``about which the bank has not been able to establish to its 
satisfaction that the foreign bank'' to read as follows: ``that the 
bank cannot determine;'' and revising the phrase ``or if the bank 
knows, suspects, or has reason to suspect that the certification is 
incorrect'' to read as follows: ``or if the bank has information that 
is inconsistent with the certification.''
    In addition, FinCEN is also revising the corresponding portion of 
the model certification to be completed by the bank. The proposed 
language in the model certification stated as follows: ``I, ----------
---------------------------------------- (name of signatory), have read 
and understand this Certification; the statements made in this 
Certification are complete and correct, to the best of the knowledge of 
the Bank; and the Bank does not know, suspect, or have reason to 
suspect that the Certification made by Foreign Bank is incorrect. I am 
authorized to submit this document on behalf of the Bank.''
    In the final rule, FinCEN is revising the portion of the model 
certification to be completed by the bank to read as follows: ``I, ----
---------------------------------------------- (name of signatory), 
have received and reviewed this Certification. To the best of its 
knowledge, the Bank has no information that is inconsistent with the 
Certification made by Foreign Bank. I am authorized to submit this 
document on behalf of the Bank.''
    This revision is consistent with the revisions made to section 
1060.300(c)(1)(v). FinCEN believes that this revision to the model 
certification, together with the amendments to section 
1060.300(c)(1)(v) discussed above, will alleviate the concerns raised 
by commenters and more accurately describe FinCEN's expectations with 
regard to the U.S. bank's obligations as they relate to information 
received from a foreign bank.
    Furthermore, as requested by three commenters, FinCEN clarifies 
that the individual signing the model certification is only signing on 
behalf of the relevant bank in his capacity as a duly authorized 
officer of the bank and not in his personal capacity. As noted in the 
language in the model certification, the individual signing on behalf 
of the bank is submitting the ``document on behalf of the Bank.''

[[Page 62616]]

    Similarly, as requested by one commenter, FinCEN clarifies that the 
individual signing the model certification is only signing on behalf of 
the relevant foreign bank in his capacity as a duly authorized officer 
of the foreign bank and not in his personal capacity. As noted in the 
language in the model certification, the individual signing on behalf 
of the foreign bank is ``authorized to execute this certification on 
behalf of Foreign Bank.''
    One commenter requested that FinCEN clarify how foreign banks 
should convert foreign currency as it relates to the foreign banks' 
reporting on the approximate value of transactions processed through a 
correspondent account or transfer(s) of funds processed within the 
preceding 90 calendar days. FinCEN will not prescribe any specific 
method or reference rate for the conversion of foreign exchange, but 
rather leaves it to the foreign bank to convert the sums using a 
reasonable rate informed by good banking practices. The purpose of this 
conversion is to help in assessing the significance of the 
transaction(s) at issue. Examples of reasonable rates may include the 
rate that the foreign bank would have applied to convert the respective 
payment into U.S. dollars on the date of the transaction, or, in the 
case of aggregation of multiple transactions over a time period, the 
average exchange rate over the applicable time period.
    One commenter asserted that while the proposed model certification 
includes links to websites with information about relevant designated 
entities and individuals, the commenter believes that the process of 
responding would be simpler and produce better information if requests 
to foreign banks also included a list of relevant designated entities 
and individuals covered by that particular request. The model 
certification includes a link to the list of relevant designated 
entities and individuals exclusively applicable to this reporting 
requirement. FinCEN believes that providing access to this link is 
sufficient to assist foreign banks in clearly identifying the 
designated entities and individuals relevant to a request.
    As requested by one commenter, FinCEN will consider evaluating the 
adequacy of the model certification in 12 to 18 months in order to 
determine if revisions are necessary.

G. Clarification Regarding Certain Definitions and Terms

    Refer to Section V.A., below, for clarification regarding the terms 
bank, correspondent account, and foreign bank.

H. Record Retention and Supporting Documentation

    One commenter requested clarification regarding a number of aspects 
of the record retention requirement, including the record retention 
period and supporting documentation to be maintained as part of the 
record retention. The commenter requested that the record retention 
period be reduced from five years. FinCEN clarifies that the record 
retention period for this rulemaking will remain five years consistent 
with FinCEN's other record retention requirements. FinCEN also 
clarifies that this specific recordkeeping requirement does not serve 
to change any other applicable recordkeeping requirements. The record 
retention period will begin on the date the request from FinCEN is 
issued. If the bank receives notification from a foreign bank that the 
foreign bank has established a new correspondent account with an 
Iranian-linked financial institution designated under IEEPA at any time 
within 365 calendar days from the date of the foreign bank's initial 
response, this will not affect the beginning of the record retention 
period. The record retention period with regard to that specific 
foreign bank will still begin on the date the request from FinCEN was 
issued.
    FinCEN clarifies that supporting documentation related to this 
rulemaking includes any and all correspondence between the bank and 
FinCEN, or between the bank and the foreign bank, regarding a request 
for information under this rulemaking. For example, this would include 
the initial request from FinCEN to the bank, the request from the bank 
to the foreign bank, the response from the foreign bank to the bank, 
the report to FinCEN from the bank, and any correspondence associated 
with any one of these requests/reports. FinCEN also clarifies that 
although we will maintain a copy of the report the bank submits to 
FinCEN, the bank must also maintain a copy of that report in order to 
confirm compliance with this regulation.

I. Sharing Information Regarding a CISADA Request

    One of the commenters questioned in what instances it would be 
appropriate for a bank to inform others internally or externally that 
it has received a request from FinCEN regarding a specific foreign 
bank. To the extent that FinCEN would require a request regarding a 
specific foreign bank remain confidential, we will explicitly state the 
requirement for confidentiality in the request sent to the bank.

J. Estimate of Burden

    Refer to Section IX., below, for a summary of comments regarding 
the burden estimates.

V. Section-by-Section Analysis

A. General (Sec.  1060.300(a))

    As proposed, section 31 CFR 1060.300(a) requires that, upon 
receiving a written request from FinCEN, a bank that maintains a 
correspondent account for a specified foreign bank shall inquire of the 
foreign bank, and report to FinCEN with respect to any correspondent 
account maintained by such foreign bank for an Iranian-linked financial 
institution designated under IEEPA, any transfer of funds for or on 
behalf of, directly or indirectly, an Iranian-linked financial 
institution designated under IEEPA processed by such foreign bank 
within the preceding 90 calendar days, other than through a 
correspondent account, and any transfer of funds for or on behalf of, 
directly or indirectly, an IRGC-linked person designated under IEEPA 
processed by such foreign bank within the preceding 90 calendar days.
    The language in this section of the final rule is substantially the 
same as proposed. However, for purposes of providing additional clarity 
as requested by commenters, FinCEN modified the final rule language in 
the following ways: the phrase ``to the best of the knowledge of the 
bank'' was removed, consistent with revisions to section 
1060.300(c)(1)(v); \14\ and ``for or on behalf of, directly or 
indirectly,'' replaced ``related to.'' \15\
---------------------------------------------------------------------------

    \14\ See above Section IV. F. for the rationale for the 
revisions to section 1060.300(c)(1)(v).
    \15\ See above Section IV. D. for the rationale for replacing 
the terminology ``related to'' with ``for or on behalf of, directly, 
or indirectly.''
---------------------------------------------------------------------------

Definitions
Bank
    For the purpose of this rule the term ``bank'' is defined in 31 CFR 
1010.100(d). A bank includes each agent, agency, branch, or office 
within the United States of persons doing business in one or more of 
the following capacities: commercial banks or trust companies, private 
banks, savings and loan associations, national banks, thrift 
institutions, credit unions, other organizations chartered under 
banking laws and supervised by banking supervisors of any State, and 
banks organized under foreign law.
    FinCEN proposed to limit the reporting requirement in this 
rulemaking to banks, as opposed to all U.S. financial institutions that 
could fall

[[Page 62617]]

within the scope of this rule. FinCEN requested comment as to whether 
this rulemaking should be expanded to include other types of financial 
institutions, such as those financial institutions included in FinCEN's 
definition of ``covered financial institution.'' \16\
---------------------------------------------------------------------------

    \16\ See 31 CFR 1010.605(e) (defining a ``covered financial 
institution'' as any one of a number of specific U.S. financial 
institutions, including banks, broker-dealers, futures commission 
merchants, and mutual funds).
---------------------------------------------------------------------------

    Two commenters requested clarification as to why FinCEN proposed to 
limit this reporting requirement to banks instead of the broader 
category of U.S. financial institutions as would be permissible under 
CISADA. One of these commenters also requested clarification as to how 
FinCEN would determine whether to expand the reporting requirement to 
other domestic financial institutions.
    As explained in the Notice, FinCEN determined that limiting the 
reporting requirement in this rule to banks will provide useful 
information as it relates to CISADA, while limiting the obligations of 
the financial industry. Although there are other financial institutions 
that could fall within the scope of this rule in light of the breadth 
of the definition of financial institution in CISADA and the breadth of 
the definition of correspondent account, this rule focuses on those 
financial institutions deemed to provide the services most 
traditionally associated with correspondent banking.
    Two trade associations commented on this aspect of the rulemaking. 
These commenters were in favor of limiting the rulemaking to banks, in 
order to avoid redundancy and overlapping information. FinCEN did not 
receive any comments that provided justification for expanding this 
reporting requirement to include other domestic financial institutions. 
Based on the comments received, and FinCEN's prior statements regarding 
the scope of affected U.S. financial institutions, the reporting 
requirements in the final rule will be limited to banks as proposed.
    As FinCEN collects and assesses the information required under this 
rule, we will continue to consider whether expanding the scope of this 
rule to include other domestic financial institutions would provide 
additional useful information as it relates to CISADA. If that is 
determined to be the case, FinCEN will consider proposing an expansion 
of this reporting requirement to include other domestic financial 
institutions.
    One commenter requested clarification that the rule will only apply 
to depository institutions and not to non-depository institutions, even 
if the two may be within the same bank holding company structure. 
Another commenter requested clarification regarding whether this rule 
would apply to U.S. branches of foreign banks. FinCEN clarifies that 
this rule will only apply to banks as defined in 31 CFR 1010.100(d), 
and will not apply to any other type of non-bank financial institution 
that may fall within the same bank holding company structure. In 
addition, U.S. branches of foreign banks are included within the 
definition of ``bank'' in 31 CFR 1010.100(d).
 Correspondent Account
    For the purpose of this rule, the term ``correspondent account'' is 
defined in 31 CFR 1010.605(c)(1)(ii) and means an account established 
for a foreign bank to receive deposits from, or to make payments or 
other disbursements on behalf of, the foreign bank, or to handle other 
financial transactions related to such foreign bank.\17\ Although there 
is a reference in section 104(e) of CISADA to payable-through accounts, 
as FinCEN is incorporating this requirement into its regulations, such 
payable-through accounts are subsumed within the definition of a 
correspondent account at 31 CFR 1010.610(b)(1)(iii)(B).\18\ The 
definition of correspondent account is being adopted in the final rule 
as proposed.
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    \17\ This definition of correspondent account is consistent with 
the rule's focus on U.S. banks' correspondent account relationships 
with foreign banks.
    \18\ 31 CFR 1010.610(b)(1)(iii)(B) states ``* * * a payable-
through account means a correspondent account maintained by a 
covered financial institution for a foreign bank by means of which 
the foreign bank permits its customers to engage, either directly or 
through a subaccount, in banking activities usual in connection with 
the business of banking in the United States.''
---------------------------------------------------------------------------

    Three commenters requested clarification regarding the scope of 
accounts that are included within the breadth of the definition of the 
term correspondent account. The definition of correspondent account 
that is included within this rule is the same definition of 
correspondent account as in 31 CFR 1010.610--Due diligence programs for 
correspondent accounts for foreign financial institutions. The same 
scope of accounts included within the requirements of 31 CFR 1010.610 
are included within the requirements of this rulemaking, except that 
the term only applies to such accounts maintained by any bank for any 
foreign bank.
Foreign Bank
    For the purpose of this rulemaking the term ``foreign bank'' is 
defined in 31 CFR 1010.100(u) and means a bank organized under foreign 
law, or an agency, branch, or office located outside the United States 
of a bank. The term does not include an agent, agency, branch, or 
office within the United States of a bank organized under foreign law.
    FinCEN proposed to limit the reporting requirement in this 
rulemaking to information pertaining to the activities of foreign 
banks, as opposed to the activities of all foreign financial 
institutions that could fall within the scope of this rule. FinCEN 
requested comment as to whether this rulemaking should be expanded to 
include information pertaining to the activities of other types of 
foreign financial institutions, such as those included in FinCEN's 
definition of ``foreign financial institution,'' \19\ or OFAC's 
definition of ``foreign financial institution'' \20\ in the IFSR.
---------------------------------------------------------------------------

    \19\ See 31 CFR 1010.605(f).
    \20\ See 31 CFR 561.308.
---------------------------------------------------------------------------

    As explained in the Notice, FinCEN has determined that limiting the 
reporting requirement in this rule to information pertaining to the 
activities of foreign banks will provide useful information as it 
relates to CISADA, while limiting the obligations of the financial 
industry. Although there are other foreign financial institutions that 
maintain correspondent accounts with U.S. financial institutions that 
could provide useful information with respect to CISADA-relevant 
activities, this rule focuses on those foreign financial institutions 
deemed to receive the services most traditionally associated with 
correspondent banking.
    Two trade associations commented on this aspect of the rule. The 
commenters asserted that limiting the scope of the rule to inquiries 
regarding foreign banks was appropriate. FinCEN did not receive any 
comments that provided justification for expanding this reporting 
requirement to include information pertaining to the activities of 
other foreign financial institutions. Based on the comments received, 
and FinCEN's prior statements regarding the scope of affected foreign 
financial institutions, the reporting requirements in the final rule 
will be limited to foreign banks as proposed.
    As FinCEN collects and assesses the information required under this 
rule, we will continue to consider whether expanding the scope of this 
rule to include information pertaining to the activities of other 
foreign financial institutions would provide additional useful 
information as it relates to CISADA. If that is determined to be the

[[Page 62618]]

case, FinCEN will consider proposing an expansion of this reporting 
requirement to include information pertaining to the activities of 
other foreign financial institutions.
    One commenter asked that FinCEN clarify that the definition of 
foreign bank excludes U.S. representative offices of foreign banks. The 
commenter also asked for clarification regarding whether subsidiaries 
or branches of a single bank operating in different countries are one 
foreign bank or separate foreign banks for the purpose of a CISADA 
request. For purposes of this rulemaking, U.S. representative offices 
are not included within our definition of foreign bank at 31 CFR 
1010.100(u), which excludes offices within the United States of a bank 
organized under foreign law. Although representative offices cannot 
offer banking services in the United States, they nevertheless are 
offices of banks organized under foreign law, and therefore are not 
foreign banks for purposes of the BSA rules. FinCEN will only be 
sending requests to banks that it knows or believes maintain a 
correspondent account for the specific foreign bank, specific foreign 
bank branch, or specific foreign bank subsidiary at issue. This means 
that the extent of the inquiry will be specific to the correspondent 
account about which a request is made. In the case of a foreign bank 
subsidiary, FinCEN would only be requesting information regarding a 
foreign bank subsidiary if that subsidiary is itself a foreign bank.
Iranian-Linked Financial Institution Designated Under IEEPA
    For the purpose of this rule the term ``Iranian-linked financial 
institution designated under IEEPA'' means a financial institution 
designated by the United States Government pursuant to IEEPA (or listed 
in an annex to an Executive order issued pursuant to such Act) in 
connection with Iran's proliferation of weapons of mass destruction or 
delivery systems for weapons of mass destruction, or in connection with 
Iran's support for international terrorism.\21\ The definition of 
``Iranian-linked financial institution designated under IEEPA'' is 
being adopted in the final rule as proposed.
---------------------------------------------------------------------------

    \21\ See CISADA subsection 104(c)(2)(E)(ii).
---------------------------------------------------------------------------

IRGC-Linked Person Designated Under IEEPA
    For the purpose of this rule the term ``IRGC-linked person 
designated under IEEPA'' means Iran's Islamic Revolutionary Guard Corps 
or any of its agents or affiliates designated by the United States 
Government pursuant to IEEPA (or listed in an annex to an Executive 
order issued pursuant to such Act).\22\ The definition of ``IRGC-linked 
person designated under IEEPA'' is being adopted in the final rule as 
proposed.
---------------------------------------------------------------------------

    \22\ See CISADA subsection 104(c)(2)(E)(i).
---------------------------------------------------------------------------

    The names of persons whose property and interests in property are 
blocked pursuant to IEEPA are published on OFAC's Specially Designated 
Nationals and Blocked Persons List (``SDN List''). Iranian-linked 
financial institutions designated under IEEPA are those whose property 
and interests in property are blocked pursuant to 31 CFR part 544 or 31 
CFR part 594 in connection with Iran's proliferation of weapons of mass 
destruction or delivery systems for weapons of mass destruction or 
Iran's support for international terrorism and are identified by 
``[IFSR]'' tags located at the end of their entries on the SDN List 
(e.g., [NPWMD][IFSR] or [SDGT][IFSR]). IRGC-linked persons designated 
under IEEPA are those whose property and interests in property are 
blocked pursuant to one or more parts of 31 CFR Chapter V and are 
identified by ``[IRGC]'' tags located at the end of their entries on 
the SDN List (e.g., [NPWD][IRGC] or [SDGT][IRGC]). OFAC's electronic 
SDN List can be found at the following URL: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx. The following 
financial institutions meet the criteria of Iranian-linked financial 
institutions designated under IEEPA ([IFSR] tags), and the following 
persons meet the criteria of IRGC-linked persons designated under IEEPA 
([IRGC] tags): http://www.treasury.gov/resource-center/sanctions/Programs/Documents/irgc_ifsr.pdf. These listings are part of the SDN 
List, administered by OFAC. Please note that OFAC's SDN List is dynamic 
and should be reviewed regularly for the most current information 
regarding Iranian-linked financial institutions designated under IEEPA 
and IRGC-linked persons designated under IEEPA.

B. Duty To Inquire (Sec.  1060.300(b))

    This section describes a bank's duty to inquire of a specified 
foreign bank for which the bank maintains a correspondent account, as 
to whether such foreign bank maintains a correspondent account for an 
Iranian-linked financial institution designated under IEEPA, and/or has 
processed one or more transfers of funds within the preceding 90 
calendar days for or on behalf of, directly or indirectly, an Iranian-
linked financial institution or an IRGC-linked person designated under 
IEEPA. Upon receiving a written request from FinCEN, a bank that 
maintains a correspondent account for a specified foreign bank shall 
inquire of such foreign bank for the purpose of having such foreign 
bank certify: (1) Whether it maintains a correspondent account for an 
Iranian-linked financial institution designated under IEEPA; (2) 
whether it has processed one or more transfers of funds within the 
preceding 90 calendar days for or on behalf of, directly or indirectly, 
an Iranian-linked financial institution designated under IEEPA, other 
than through a correspondent account; and (3) whether it has processed 
one or more transfers of funds within the preceding 90 calendar days 
for or on behalf of, directly or indirectly, an IRGC-linked person 
designated under IEEPA. In addition, when the bank makes its inquiry, 
the bank shall request that the foreign bank agree to notify the bank 
if the foreign bank subsequently establishes a new correspondent 
account for an Iranian-linked financial institution designated under 
IEEPA at any time within 365 calendar days from the date of the foreign 
bank's initial response.
    The language in this section of the final rule is substantially the 
same as proposed. However, for purposes of providing additional clarity 
as requested by commenters, FinCEN modified the final rule language in 
the following way: ``for or on behalf of, directly or indirectly,'' 
replaced ``related to.'' \23\
---------------------------------------------------------------------------

    \23\ See above Section IV. D. for the rationale for replacing 
the terminology ``related to'' with ``for or on behalf of, directly 
or indirectly.''
---------------------------------------------------------------------------

    To assist a bank in obtaining the required information from a 
specified foreign bank, FinCEN proposed a model certification format 
for a bank to provide to a specified foreign bank when the bank makes 
its inquiry regarding whether the specified foreign bank maintains a 
correspondent account for an Iranian-linked financial institution 
designated under IEEPA, and/or has processed one or more transfers of 
funds within the preceding 90 calendar days for or on behalf of, 
directly or indirectly, an Iranian-linked financial institution or an 
IRGC-linked person designated under IEEPA. The model certification will 
not appear in the Code of Federal Regulations (``CFR''); however, it is 
included at Appendix A to this Federal Register notice. While the model 
certification will not be included in the CFR, it is still subject to 
the Paperwork Reduction Act (``PRA''), and therefore any material 
changes made to the model certification will go through public notice 
and comment as required under

[[Page 62619]]

the PRA. In addition, FinCEN will use its website to make the model 
certification available to the public. FinCEN requested comment as to 
the effectiveness of the proposed model certification.\24\
---------------------------------------------------------------------------

    \24\ See above Section IV. F. for a summary of comments 
associated with the model certification, along with an explanation 
of slight revisions to the language in the final model 
certification.
---------------------------------------------------------------------------

    As part of the model certification, the foreign bank is asked to 
agree to notify, in writing, the bank at which it maintains a 
correspondent account if the foreign bank establishes a new 
correspondent account for an Iranian-linked financial institution 
designated under IEEPA at any time within 365 calendar days from the 
date of the foreign bank's response. The model certification sets forth 
the expectation that the notification shall be due to the bank within 
30 calendar days of the establishment of the new correspondent account. 
If a bank does not utilize the model certification, the bank will need 
to request separately that the foreign bank provide such information 
with respect to the establishment of a new correspondent account for an 
Iranian-linked financial institution designated under IEEPA.

C. Filing Procedures (Sec.  1060.300(c))

What To File (Sec.  1060.300(c)(1))
    This section describes the filing procedures a bank shall follow to 
report to FinCEN information required by this rule. Upon receiving a 
written request from FinCEN, a bank is required to report to FinCEN, in 
such format and manner as may be prescribed by FinCEN, the following 
information for any specified foreign bank:
     The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it maintains a 
correspondent account for an Iranian-linked financial institution 
designated under IEEPA, together with the name of the Iranian-linked 
financial institution designated under IEEPA, the full name(s) on the 
correspondent account and the correspondent account number(s), 
applicable information regarding whether the correspondent account has 
been blocked or otherwise restricted, other applicable identifying 
information for the correspondent account, and the approximate value in 
U.S. dollars (``USD'') of transactions processed through the 
correspondent account within the preceding 90 calendar days;
     The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it has processed 
one or more transfers of funds within the preceding 90 calendar days 
for or on behalf of, directly or indirectly, an Iranian-linked 
financial institution designated under IEEPA, other than through a 
correspondent account, together with the name of the Iranian-linked 
financial institution designated under IEEPA, the identity of the 
system or means by which such transfer(s) of funds was processed, the 
full name on the account(s) and the account number(s), if applicable, 
other applicable identifying information for such transfer(s) of funds, 
and the approximate value in USD of such transfer(s) of funds processed 
within the preceding 90 calendar days;
     The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it has processed 
one or more transfers of funds within the preceding 90 calendar days 
for or on behalf of, directly or indirectly, an IRGC-linked person 
designated under IEEPA, together with the name of the IRGC-linked 
person designated under IEEPA, the identity of the system or means by 
which such transfer(s) of funds was processed, the full name on the 
account(s) and the account number(s), if applicable, other applicable 
identifying information for such transfer(s) of funds, and the 
approximate value in USD of such transfer(s) of funds processed within 
the preceding 90 calendar days;
     The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it does not 
maintain a correspondent account for an Iranian-linked financial 
institution designated under IEEPA, that certifies that to its 
knowledge it has not processed one or more transfers of funds within 
the preceding 90 calendar days for or on behalf of, directly or 
indirectly, an Iranian-linked financial institution designated under 
IEEPA, other than through a correspondent account, and/or that 
certifies that to its knowledge it has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an IRGC-linked person designated 
under IEEPA;
     The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that the bank cannot determine does 
not maintain a correspondent account for an Iranian-linked financial 
institution designated under IEEPA, has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an Iranian-linked financial 
institution designated under IEEPA, other than through a correspondent 
account, and/or has not processed one or more transfers of funds within 
the preceding 90 calendar days for or on behalf of, directly or 
indirectly, an IRGC-linked person designated under IEEPA, together with 
the reason(s) for this, such as the failure of the foreign bank to 
respond to the inquiry by or a request from the bank, the failure of 
the foreign bank to certify its response, or if the bank has 
information that is inconsistent with the certification;
     The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that notifies the bank that it has 
established a new correspondent account for an Iranian-linked financial 
institution designated under IEEPA at any time within 365 calendar days 
from the date of the foreign bank's initial response, together with the 
name of the Iranian-linked financial institution designated under 
IEEPA, the full name(s) on the correspondent account and the 
correspondent account number(s), applicable information regarding 
whether the correspondent account has been blocked or otherwise 
restricted, and other applicable identifying information for the 
correspondent account;
     If applicable, confirmation that the bank does not 
maintain a correspondent account for the specified foreign bank(s), but 
only in instances in which FinCEN specifically requests that the bank 
report such information; and
     If applicable, the name of any specified foreign bank, for 
which the bank maintains a correspondent account, that provides a 
certification to the bank after the 45 calendar day deadline, along 
with all applicable related information associated with that 
certification.
    The language in this section of the final rule is substantially the 
same as proposed. However, for purposes of providing additional clarity 
as requested by commenters, FinCEN modified the final rule language in 
the following ways: ``for or on behalf of, directly or indirectly,'' 
replaced ``related to;'' \25\ ``that the bank cannot determine'' 
replaced ``about which the bank has not been able to establish to its 
satisfaction that the foreign bank;'' and '' if the bank has 
information that is inconsistent with the certification'' replaced ``if 
the bank knows, suspects, or has reason to suspect that the 
certification is incorrect.'' \26\
---------------------------------------------------------------------------

    \25\ See above Section IV. D. for the rationale for replacing 
the terminology ``related to'' with ``for or on behalf of, directly 
or indirectly.''
    \26\ See above Section IV. F. for the rationale for replacing 
the terminology ``about which the bank has not been able to 
establish to its satisfaction that the foreign bank'' with ``that 
the bank cannot determine;'' and for the rationale for replacing the 
terminology ``if the bank knows, suspects, or has reason to suspect 
that the certification is incorrect'' with ``if the bank has 
information that is inconsistent with the certification.''

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

[[Page 62620]]

    FinCEN also incorporated the phrase ``to its knowledge'' into the 
reporting requirement that upon receiving a written request from 
FinCEN, a bank shall report to FinCEN, in such format and manner as may 
be prescribed by FinCEN, the following information for any specified 
foreign bank the name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it does not 
maintain a correspondent account for an Iranian-linked financial 
institution designated under IEEPA, that certifies that to its 
knowledge it has not processed one or more transfers of funds within 
the preceding 90 calendar days for or on behalf of, directly or 
indirectly, an Iranian-linked financial institution designated under 
IEEPA, other than through a correspondent account, and/or that 
certifies that to its knowledge it has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an IRGC-linked person designated 
under IEEPA.'' \27\ [Emphasis added.]
---------------------------------------------------------------------------

    \27\ See section 1060.300(c)(1)(iv). Also see above Section IV. 
D. for the rationale for incorporating the phrase ``to its 
knowledge'' into this reporting requirement.
---------------------------------------------------------------------------

    In addition, FinCEN added the following reporting requirement in 
the final rule in order to provide additional clarity as requested by 
commenters: Upon receiving a written request from FinCEN, a bank shall 
report to FinCEN, in such format and manner as may be prescribed by 
FinCEN, the following information for any specified foreign bank, if 
applicable, the name of any specified foreign bank, for which the bank 
maintains a correspondent account, that provides a certification to the 
bank after the 45-calendar-day deadline, along with all applicable 
related information associated with that certification.'' \28\
---------------------------------------------------------------------------

    \28\ See section 1060.300(c)(1)(viii). Also see above Section 
IV. E. for the rationale for implementing this additional reporting 
requirement.
---------------------------------------------------------------------------

    If a bank utilizes the model certification to inquire of a 
specified foreign bank, the bank can submit the certification from the 
specified foreign bank to FinCEN in order to comply with this reporting 
requirement. If a bank does not utilize the model certification to 
inquire of a specified foreign bank, the bank shall report to FinCEN, 
in such format and manner as may be prescribed by FinCEN, the 
information required by this rule.
    If a specified foreign bank, for which the bank maintains a 
correspondent account, does not adequately respond to the bank's 
inquiry, the bank shall report to FinCEN, in such format and manner as 
may be prescribed by FinCEN, the information required by this rule. If 
a bank receives a notification from a specified foreign bank regarding 
the establishment of a new correspondent account for an Iranian-linked 
financial institution designated under IEEPA, the bank shall report to 
FinCEN, in such format and manner as may be prescribed by FinCEN, the 
information required by this rule. If a bank receives a certification 
from a specified foreign bank after the 45-calendar-day deadline, the 
bank shall report to FinCEN, in such format and manner as may be 
prescribed by FinCEN, the information required by this rule.
    If a bank receives a written request from FinCEN regarding a 
specified foreign bank, for which the bank does not maintain a 
correspondent account, and FinCEN has specifically requested that the 
bank report instances in which the bank does not maintain a 
correspondent account for such specified foreign bank, the bank shall 
report this information to FinCEN, in such format and manner as may be 
prescribed by FinCEN.
When To File (Sec.  1060.300(c)(2))
    A bank is required to report the information required by this rule 
to FinCEN within 45 calendar days of the date of the written request 
from FinCEN. If a bank receives notification from a foreign bank that 
the foreign bank has established a new correspondent account for an 
Iranian-linked financial institution designated under IEEPA, the bank 
is required to report the information required by this rule within 10 
calendar days of receiving that notification. If a bank receives a 
certification from a foreign bank after the 45-calendar-day deadline, 
the bank is required to report the information required by this rule 
within 10 calendar days of receiving that certification.
    The language in this section of the final rule is substantially the 
same as proposed. However, for purposes of providing relief as 
requested by commenters, FinCEN modified the final rule language in the 
following way: 45 calendar days replaced 30 calendar days.\29\
---------------------------------------------------------------------------

    \29\ See above Section IV. E. for the rationale for the 
extension of time to comply with this reporting requirement.
---------------------------------------------------------------------------

    In addition, FinCEN added a 10-calendar-day deadline for a bank to 
report if it receives a certification from a foreign bank after the 45-
calendar-day deadline. This corresponds with the following reporting 
requirement added to the final rule: Upon receiving a written request 
from FinCEN, a bank shall report to FinCEN, in such format and manner 
as may be prescribed by FinCEN, the following information for any 
specified foreign bank, if applicable, the name of any specified 
foreign bank, for which the bank maintains a correspondent account, 
that provides a certification to the bank after the 45-calendar-day 
deadline, along with all applicable related information associated with 
that certification.'' \30\
---------------------------------------------------------------------------

    \30\ See section 1060.300(c)(1)(viii). Also see above Section 
IV. E. for the rationale for implementing this additional reporting 
requirement, along with the rationale for the corresponding 
timeframe for reporting.
---------------------------------------------------------------------------

D. Record Retention (Sec.  1060.300(d))

    This section describes the recordkeeping requirements applicable to 
this rule. A bank shall maintain for a period of five years a copy of 
any report filed and the original or any business record equivalent of 
any supporting documentation for a report, including a foreign bank 
certification or other responses to an inquiry under this rule. This 
section of the final rule is being adopted as proposed.

E. No Other Action Required (Sec.  1060.300(e))

    Paragraph (e) states that ``[n]othing in this section shall be 
construed to require a bank to take any action, or to decline to take 
any action, other than the requirements identified in this section, 
with respect to an account established for, or a transaction engaged in 
with, a foreign bank. However, nothing in this section relieves a bank 
of any other applicable regulatory obligation.'' While this paragraph 
clarifies that the section does not require a bank to take any steps 
with respect to the foreign bank other than those relating to the 
collection of information outlined in this section, it also clarifies 
that this section does not preclude a bank from taking any other 
action, including restricting or terminating a correspondent account 
relationship with a foreign bank, or filing a suspicious activity 
report, based on the bank's assessment of the facts and bank policy. 
However, a bank is not required to restrict or terminate a 
correspondent account relationship with a foreign bank, or to file a 
suspicious activity report, based solely upon the fact that the bank: 
(i) Has received a request for information under

[[Page 62621]]

this regulation; (ii) has received a response from the foreign bank; or 
(iii) has not received a response from the foreign bank. This section 
of the final rule is being adopted as proposed.

VI. Executive Order 12866

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. It has been determined that the final rule is designated a 
``significant regulatory action'' although not economically 
significant, under section 3(f) of Executive Order 12866. Accordingly, 
the rule has been reviewed by the Office of Management and Budget.

VII. Unfunded Mandates Reform Act of 1995 Statement

    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 205 
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.

VIII. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (``RFA'') (5 U.S.C. 601 
et seq.), FinCEN certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
The final rule will apply to banks that maintain correspondent accounts 
for foreign banks. As previously stated in our final rules implementing 
sections 312,\31\ 313,\32\ and 319(b) \33\ of the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, most 
banks that maintain correspondent accounts for foreign banks tend to be 
large banks. We expect that small banks will be less likely to maintain 
correspondent accounts for foreign banks. In most cases, small banks 
utilize their domestic correspondent accounts with large banks to 
conduct transactions with foreign banks.
---------------------------------------------------------------------------

    \31\ Anti-Money Laundering Programs; Special Due Diligence 
Programs for Certain Foreign Accounts, 71 FR 496 (Jan. 4, 2006).
    \32\ Anti-Money Laundering Requirements--Correspondent Accounts 
for Foreign Shell Banks; Recordkeeping and Termination of 
Correspondent Accounts for Foreign Banks, 67 FR 60562 (Sept. 26, 
2002).
    \33\ Id.
---------------------------------------------------------------------------

    FinCEN invited comment on the impact of this proposal on small 
entities. One commenter suggested that FinCEN provided no data to 
support the conclusion that the regulation would not have a significant 
economic impact on a substantial number of small entities. However, no 
other commenters expressed concern that this rule would have a 
significant economic impact on a substantial number of small entities. 
The rule applies to banks that maintain correspondent accounts for 
foreign banks. As stated above, and in our previous rules regarding 
foreign correspondent accounts, we believe most banks that maintain 
correspondent accounts for foreign banks are large banks. In addition, 
as noted elsewhere in this rulemaking, FinCEN estimates that 
approximately 350 banks maintain correspondent accounts for foreign 
banks. FinCEN further estimates that on average approximately five 
percent of banks that maintain correspondent accounts for foreign banks 
will have an account with any one specific foreign bank about which 
FinCEN is requesting information. Furthermore, as noted elsewhere in 
this rulemaking, a bank will only be required to comply with this 
reporting requirement upon receiving a specific written request from 
FinCEN. Therefore, a substantial number of small entities would not be 
affected. Accordingly, a regulatory flexibility analysis is not 
required.

IX. Paperwork Reduction Act

    The collection of information contained in this rule has been 
approved by the Office of Management and Budget in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control 
number 1506-0066. Under the Paperwork Reduction Act, an agency may not 
conduct or sponsor, and an individual is not required to respond to, a 
collection of information unless it displays a valid OMB control 
number.
Reporting Requirements Under Section 104(e) of CISADA
    The collection of information in this rule is in 31 CFR 1060.300. 
The information may be transmitted to one or more departments or 
agencies of the United States of America for the purpose of fulfilling 
such departments' and agencies' governmental functions. The collection 
of information is mandatory. FinCEN is issuing this final rule that 
will require a bank to report to FinCEN, upon request, certain 
information regarding certain foreign banks specified by FinCEN.
    Description of Affected Financial Institutions: Banks as defined in 
31 CFR 1010.100(d).
    Estimated Number of Affected Financial Institutions: 350 banks.
    FinCEN estimates that approximately 350 banks maintain 
correspondent accounts for foreign banks.\34\ However, FinCEN estimates 
that on average around five percent of banks that maintain 
correspondent accounts for foreign banks will have an account with any 
one specific foreign bank about which FinCEN is requesting information. 
This smaller proportion of actual affected financial institutions in 
each case of a request is based on the fact that foreign banks 
generally only hold a limited number of correspondent

[[Page 62622]]

account relationships with separate U.S. banks. For this reason, the 
estimated number of financial institutions that may maintain a 
correspondent account for any one specific foreign bank identified in 
any one request from FinCEN will be in the range of 18 banks. In order 
to further reduce the number of affected financial institutions, when 
possible, FinCEN will rely on information available to help limit the 
number of banks requested to provide information with respect to the 
foreign banks that are the subject of specific requests. In turn, 
FinCEN intends to send requests directly to banks that FinCEN, based on 
all available information, believes maintain correspondent accounts for 
the specified foreign bank(s). The number of banks that receive a 
request may vary in each specific case, based on the availability of 
information to FinCEN and other circumstances.
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    \34\ 177 banks reported a balance due as of September 30, 2010 
in either line item 3.a. or 3.b. of Schedule RC-A--Cash and Balances 
Due From Depository Institutions on the Consolidated Reports of 
Condition and Income for a Bank with Domestic and Foreign Offices--
FFIEC 031, or on the Consolidated Reports of Condition and Income 
for a Bank with Domestic Offices Only--FFIEC 041. Line item 3.a. 
represents balances due from foreign branches of other U.S. banks 
and line item 3.b. represents balances due from other banks in 
foreign countries and foreign central banks. As of September 30, 
2010, 7,020 banks, regulated by either the Board of Governors of the 
Federal Reserve System, the Federal Deposit Insurance Corporation, 
or the Office of the Comptroller of the Currency, filed either FFIEC 
031 or FFIEC 041. 177 of those 7,020 banks reported a balance due 
for a correspondent account for a foreign bank. These numbers do not 
include agents, agencies, branches, or offices within the U.S. of a 
bank organized under foreign law, which are also included within the 
definition of bank for purposes of this rulemaking. According to the 
Federal Reserve Board Structure Data for U.S. Banking Offices of 
Foreign Entities, there are approximately 214 U.S. Offices of 
Foreign Banking Organizations, as of September 30, 2010. See http://www.federalreserve.gov/releases/iba/201009/bycntry.htm. Of those 214 
U.S. Offices of Foreign Banking Organizations, approximately 43 only 
operate in the U.S. as representative offices. See http://www.federalreserve.gov/releases/iba/201009/bytype.htm. 
Representative offices do not maintain correspondent accounts. For 
this reason, FinCEN is conservatively estimating that it is likely 
the remaining 171 U.S. Offices of Foreign Banking Organizations do 
maintain some form of correspondent account for a foreign bank. This 
results in a total estimate of 348 U.S. banks and foreign banks 
operating in the U.S. that maintain a correspondent account for a 
foreign bank.
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    Estimated Average Annual Burden Hours per Affected Financial 
Institution: 31 hours per bank.
    The scope of any request may be with respect to one foreign bank or 
a number of foreign banks (for example, a number of foreign banks 
operating in the same jurisdiction). FinCEN believes that regardless of 
the number of requests transmitted, such requests will pertain to 
approximately 50 foreign banks in any given year.
Financial Institutions That Maintain a Correspondent Account for a 
Specified Foreign Bank
    A bank will only be required to comply with the requirements of 
this rule if the bank receives a written request from FinCEN. As noted 
above, FinCEN estimates that on average approximately five percent of 
the banks that maintain correspondent accounts for foreign banks, i.e., 
approximately 18 banks, will maintain correspondent accounts for any 
one specific foreign bank about which FinCEN is requesting information. 
If FinCEN makes requests with respect to approximately 50 foreign banks 
per year and on average 18 banks are required to respond, per request, 
with regard to a correspondent account they maintain for any one 
specified foreign bank, there will be approximately 900 CISADA-related 
reports per year.
    Each time a bank receives a request from FinCEN regarding a 
specific foreign bank for which it maintains a correspondent account, 
it will incur a reporting burden associated with section 1060.300(b) 
(inquiry); a reporting burden associated with section 1060.300(c) 
(reporting); and a recordkeeping burden associated with section 
1060.300(d) (record retention).
    The estimated average reporting burden associated with section 
1060.300(b) for one request from FinCEN is one hour per responding U.S. 
bank with respect to each specific foreign bank about which FinCEN is 
requesting information. The estimated average reporting burden 
associated with section 1060.300(c) for one request from FinCEN is one 
hour per bank. The estimated average recordkeeping burden associated 
with section 1060.300(d) for one request from FinCEN is one hour per 
bank. This results in a total estimated average burden of three hours 
per bank with respect to each foreign bank about which FinCEN is 
requesting information. In the unlikely scenario in which the same bank 
were required to respond to FinCEN with respect to each foreign bank 
about which FinCEN is seeking information in any given year, the 
estimated annual burden hours would be 150. FinCEN believes that even 
with respect to the banks that are most active in the provision of 
correspondent accounts to foreign banks, they are likely to be required 
to respond to FinCEN with respect to one fifth of the foreign banks 
about which FinCEN is seeking information, which corresponds to roughly 
30 burden hours per year based on the above calculations.
Financial Institutions That Do Not Maintain a Correspondent Account for 
a Specified Foreign Bank
    In certain instances FinCEN may request that if a bank receives a 
written request from FinCEN regarding a specified foreign bank, and the 
bank does not maintain a correspondent account for such specified 
foreign bank, the bank report this information to FinCEN. As noted 
above, FinCEN intends to send requests to banks that FinCEN is aware 
have a correspondent account for a specified foreign bank as often as 
possible. In instances in which FinCEN is not aware of which banks 
maintain a correspondent account for a specified foreign bank, FinCEN 
may send requests to those banks FinCEN believes might have a 
correspondent account for a specified foreign bank.
    In instances in which FinCEN is sending a request to a small number 
of banks that FinCEN believes might maintain a correspondent account 
for a specified foreign bank, FinCEN may request, in the written 
request sent to those banks, that the banks that do not maintain a 
correspondent account for the specified foreign bank report such 
information to FinCEN. FinCEN believes that we will rarely be sending a 
request to a large number of banks that we are not certain maintain a 
correspondent account for the specified foreign bank for which we are 
requesting information. In those rare cases, FinCEN would most likely 
not ask those banks to report if they do not maintain a correspondent 
account for such foreign bank. One commenter noted support for this 
element of the proposal. The commenter asserted that barring 
significant need, asking for a written negative confirmation should be 
unnecessary because banks are subject to extensive supervision and the 
banking agencies should be able to assess appropriate compliance.
    FinCEN believes that the estimated average reporting burden for a 
bank to report to FinCEN that it does not maintain a correspondent 
account for the foreign bank specified in a request from FinCEN will be 
approximately 30 minutes per request. FinCEN also estimates that across 
the 50 requests FinCEN anticipates making annually, on average two to 
five banks will receive a request from FinCEN regarding a foreign bank 
for which they do not maintain a correspondent account, and for which 
FinCEN requests that they report such information. This means that 
approximately 250 banks will be required to report that they do not 
maintain a correspondent account for a foreign bank specified in a 
request from FinCEN in any given year. This also means that 
approximately 125 estimated annual burden hours will be expended each 
year. FinCEN also estimates that no single bank will receive a request 
from FinCEN more than two times per year regarding a specified foreign 
bank for which it does not maintain a correspondent account, and for 
which FinCEN requests that it report such information. This corresponds 
to roughly one estimated average annual burden hour per bank.
    Estimated Total Annual Burden: 2825 total annual burden hours.
    Approximately 900 CISADA-related reports anticipated each year 
(provided by a varying number of banks) multiplied by three burden 
hours per report. (2700 total annual burden hours). Approximately 250 
reports from banks that do not maintain a correspondent account with a 
specified foreign bank (provided by a varying number of banks) 
multiplied by 30 minutes of burden per report. (125 total annual burden 
hours).
    In the Notice, FinCEN specifically requested comment concerning the 
following:
    (a) Whether the proposed collection of information is necessary for 
the proper performance of the functions of FinCEN,

[[Page 62623]]

including whether the information will have practical utility.
    FinCEN received no specific comments regarding this request.
    (b) The accuracy of the estimated burden associated with the 
proposed collection of information.
    One commenter questioned the estimate that of the approximately 350 
banks that maintain correspondent accounts for foreign banks, only five 
percent are likely to have an account affected by any single written 
request from FinCEN. The commenter contended that there is nothing 
provided to support the five percent estimate. As noted above, in order 
to reduce the number of affected financial institutions, when possible, 
FinCEN will rely on information available to help limit the number of 
banks requested to provide information with respect to the foreign 
banks that are the subject of specific requests. The number of banks 
that receive a request may vary in each specific case, based on the 
availability of information to FinCEN and other circumstances. This 
means that although FinCEN has the discretion to send a request to 
every U.S. bank that maintains a correspondent account for a specific 
foreign bank, in circumstances in which we feel it is appropriate, we 
may choose to only send a request to some of the U.S. banks that 
maintain a correspondent account for a specific foreign bank. For this 
reason, we can reasonably estimate that on average approximately five 
percent of banks that maintain correspondent accounts for foreign banks 
will have an account with the any one specific foreign bank about which 
FinCEN is requesting information.
    The commenter also noted that FinCEN estimates the impact of a 
request about a specific foreign bank will require no more than three 
hours for a U.S. bank to comply. The commenter noted that although 
there is no way to verify these estimates, it believes that this rule 
has the potential to be burdensome and complex. In order to manage the 
burden of this reporting requirement, FinCEN has proposed a model 
certification for a bank to utilize in order to inquire of a foreign 
bank. The model certification includes language identifying the purpose 
for which the bank is requesting information from the foreign bank. In 
addition, the model certification defines the key terms applicable to 
this reporting request. The model certification clearly outlines the 
information a foreign bank is requested to report and provides links to 
the list of relevant designated entities and individuals on which a 
foreign bank is requested to report. As suggested by the commenter, 
FinCEN will track and consider reporting on the effectiveness of the 
reporting mechanism.
    The commenter also suggested that the regulatory burden estimates 
are inadequate and do not seem to be a good faith effort to fulfill 
requirements to assess adequately the regulatory burden. However the 
commenter did not provide any alternative burden estimates. In 
addition, FinCEN did not receive any other comments which raised 
concerns regarding the adequacy of the burden estimates.
    Based on two comments received, FinCEN clarifies that in evaluating 
the effect of this rule on banks, we estimated that approximately 18 
U.S. banks would be required to file reports with FinCEN for each 
request regarding a single foreign bank. We reached this estimate based 
on the following calculation: FinCEN estimates that 350 U.S. banks 
maintain correspondent accounts for foreign banks, and approximately 
five percent of the U.S. banks that maintain correspondent accounts for 
foreign banks will have a correspondent account with any given foreign 
bank about which FinCEN is requesting information. Five percent of 350 
is 18 (rounded up). In any given request, the actual number of U.S. 
banks that would be required to report will, of course, vary.
    (c) How the quality, utility, and clarity of the information to be 
collected may be enhanced.
    FinCEN received various comments regarding clarification associated 
with the collection of information. Those comments are addressed 
throughout the preamble of this rulemaking.
    (d) How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology.
    One commenter requested that FinCEN utilize e-filing to collect the 
required information from banks. At this time, FinCEN cannot utilize e-
filing for this collection of information. This is something we may 
consider in the future. FinCEN will prescribe the format and manner in 
which information will be collected from banks in the requests FinCEN 
sends to those banks.

X. Effective Date

    Publication of a substantive rule not less than 30 days before its 
effective date is required by the Administrative Procedure Act except 
as otherwise provided by the agency for good cause.\35\ In order to 
comply with the congressional mandate to prescribe regulations under 
section 104(e) of CISADA, which will work in tandem with the 
regulations implementing section 104(c) of CISADA, FinCEN finds that 
there is good cause for making this amendment effective on October 11, 
2011. Regulations implementing section 104(c) of CISADA were required 
to be prescribed within 90 days of the enactment of the Act on July 1, 
2010. As noted above, on August 16, 2010, OFAC published the IFSR. 
Section 561.201 of the IFSR implements section 104(c) of CISADA. The 
reports received as a result of this regulation will assist in the 
implementation of the IFSR.
---------------------------------------------------------------------------

    \35\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

    In finding good cause, FinCEN considered the possible effect of 
providing less than 30 days notice to affected persons. FinCEN 
determined that immediate implementation would not unfairly burden 
these persons because, as explained above, U.S. banks will only be 
required to report to FinCEN upon receiving a specific written request 
from FinCEN. As also noted above, FinCEN will only request reports from 
those U.S. banks that maintain correspondent accounts for the specific 
foreign banks that are of interest for purposes of CISADA 
implementation, and as a result we believe that we will receive the 
information needed without generating a multitude of unnecessary and 
uninformative reports.

List of Subjects in 31 CFR Part 1060

    Banks, Banking, Counter-terrorism, Foreign banking, Reporting and 
recordkeeping requirements, Terrorism.

Authority and Issuance

    For the reasons set forth above, 31 CFR part 1060 is added to read 
as follows:

PART 1060--PROVISIONS RELATING TO THE COMPREHENSIVE IRAN SANCTIONS, 
ACCOUNTABILITY, AND DIVESTMENT ACT OF 2010

Sec.
1060.100 [Reserved]
1060.200 [Reserved]
1060.300 Reporting obligations on foreign bank relationships with 
Iranian-linked financial institutions designated under IEEPA and 
IRGC-linked persons designated under IEEPA.
1060.400 [Reserved]
1060.500 [Reserved]
1060.600 [Reserved]
1060.700 [Reserved]
1060.800 Penalties

    Authority:  Pub. L. 111-195, 124 Stat. 1312.

[[Page 62624]]

Sec.  1060.100  [Reserved]


Sec.  1060.200  [Reserved]


Sec.  1060.300  Reporting obligations on foreign bank relationships 
with Iranian-linked financial institutions designated under IEEPA and 
IRGC-linked persons designated under IEEPA.

    (a) General.
    (1) Upon receiving a written request from FinCEN, a bank (as 
defined in 31 CFR 1010.100(d)) that maintains a correspondent account 
(as defined in 31 CFR 1010.605(c)(1)(ii)) for a specified foreign bank 
(as defined in 31 CFR 1010.100(u)) shall inquire of the foreign bank, 
and report to FinCEN, with respect to any correspondent account 
maintained by such foreign bank for an Iranian-linked financial 
institution designated under IEEPA; any transfer of funds for or on 
behalf of, directly or indirectly, an Iranian-linked financial 
institution designated under IEEPA processed by such foreign bank 
within the preceding 90 calendar days, other than through a 
correspondent account; and any transfer of funds for or on behalf of, 
directly or indirectly, an IRGC-linked person designated under IEEPA 
processed by such foreign bank within the preceding 90 calendar days.
    (2) For the purposes of this section, an ``Iranian-linked financial 
institution designated under IEEPA'' means a financial institution 
designated by the United States Government pursuant to the 
International Emergency Economic Powers Act (or listed in an annex to 
an Executive order issued pursuant to such Act) in connection with 
Iran's proliferation of weapons of mass destruction or delivery systems 
for weapons of mass destruction, or in connection with Iran's support 
for international terrorism. For the purposes of this section, an 
``IRGC-linked person designated under IEEPA'' means Iran's Islamic 
Revolutionary Guard Corps or any of its agents or affiliates designated 
by the United States Government pursuant to the International Emergency 
Economic Powers Act (or listed in an annex to an Executive order issued 
pursuant to such Act).

    Note to paragraph (a)(2):  Section 104(c) of the Comprehensive 
Iran Sanctions, Accountability, and Divestment Act of 2010 
(``CISADA''), Public Law 111-195, 124 Stat. 1312, provides the 
Secretary of the Treasury with authority to prohibit, or impose 
strict conditions on, the opening or maintaining in the United 
States of a correspondent account or a payable-through account by a 
foreign financial institution that the Secretary finds knowingly 
engages in certain specified activities. Those specified activities 
include facilitating a significant transaction or transactions or 
providing significant financial services for a financial institution 
whose property or interests in property are blocked pursuant to the 
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) 
in connection with Iran's proliferation of weapons of mass 
destruction or delivery systems for weapons of mass destruction, or 
in connection with Iran's support for international terrorism, or 
for Iran's Islamic Revolutionary Guard Corps or any of its agents or 
affiliates whose property or interests in property are blocked 
pursuant to that Act.

    (b) Duty to inquire. Upon receiving a written request from FinCEN, 
a bank that maintains a correspondent account for a specified foreign 
bank shall inquire of such foreign bank for the purpose of having such 
foreign bank certify: whether it maintains a correspondent account for 
an Iranian-linked financial institution designated under IEEPA; whether 
it has processed one or more transfers of funds within the preceding 90 
calendar days for or on behalf of, directly or indirectly, an Iranian-
linked financial institution designated under IEEPA, other than through 
a correspondent account; and whether it has processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an IRGC-linked person designated 
under IEEPA. Upon such inquiry, a bank shall request that the foreign 
bank agree to notify the bank if the foreign bank subsequently 
establishes a new correspondent account for an Iranian-linked financial 
institution designated under IEEPA at any time within 365 calendar days 
from the date of the foreign bank's initial response.
    (c) Filing Procedures.
    (1) What to file. Upon receiving a written request from FinCEN, a 
bank shall report to FinCEN, in such format and manner as may be 
prescribed by FinCEN, the following information for any specified 
foreign bank:
    (i) The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it maintains a 
correspondent account for an Iranian-linked financial institution 
designated under IEEPA, and the following related information:
    (A) The name of the Iranian-linked financial institution designated 
under IEEPA;
    (B) The full name(s) on the correspondent account and the 
correspondent account number(s);
    (C) Applicable information regarding whether the correspondent 
account has been blocked or otherwise restricted;
    (D) Other applicable identifying information for the correspondent 
account; and
    (E) The approximate value in U.S. dollars of transactions processed 
through the correspondent account within the preceding 90 calendar 
days;
    (ii) The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it has processed 
one or more transfers of funds within the preceding 90 calendar days 
for or on behalf of, directly or indirectly, an Iranian-linked 
financial institution designated under IEEPA, other than through a 
correspondent account, and the following related information:
    (A) The name of the Iranian-linked financial institution designated 
under IEEPA;
    (B) The identity of the system or means by which such transfer(s) 
of funds was processed;
    (C) The full name on the account(s) and the account number(s), if 
applicable;
    (D) Other applicable identifying information for such transfer(s) 
of funds; and
    (E) The approximate value in U.S. dollars of such transfer(s) of 
funds processed within the preceding 90 calendar days;
    (iii) The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it has processed 
one or more transfers of funds within the preceding 90 calendar days 
for or on behalf of, directly or indirectly, an IRGC-linked person 
designated under IEEPA, and the following related information:
    (A) The name of the IRGC-linked person designated under IEEPA;
    (B) The identity of the system or means by which such transfer(s) 
of funds was processed;
    (C) The full name on the account(s) and the account number(s), if 
applicable;
    (D) Other applicable identifying information for such transfer(s) 
of funds; and
    (E) The approximate value in U.S. dollars of such transfer(s) of 
funds processed within the preceding 90 calendar days;
    (iv) The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that certifies that it does not 
maintain a correspondent account for an Iranian-linked financial 
institution designated under IEEPA, that certifies that to its 
knowledge it has not processed one or more transfers of funds within 
the preceding 90 calendar days for or on behalf of, directly or 
indirectly, an Iranian-linked financial institution designated under 
IEEPA, other than through a correspondent account, and/

[[Page 62625]]

or that certifies that to its knowledge it has not processed one or 
more transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an IRGC-linked person designated 
under IEEPA;
    (v) The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that the bank cannot determine does 
not maintain a correspondent account for an Iranian-linked financial 
institution designated under IEEPA, has not processed one or more 
transfers of funds within the preceding 90 calendar days for or on 
behalf of, directly or indirectly, an Iranian-linked financial 
institution designated under IEEPA, other than through a correspondent 
account, and/or has not processed one or more transfers of funds within 
the preceding 90 calendar days for or on behalf of, directly or 
indirectly, an IRGC-linked person designated under IEEPA, together with 
the reason(s) for this, such as the failure of the foreign bank to 
respond to the inquiry by or a request from the bank, the failure of 
the foreign bank to certify its response, or if the bank has 
information that is inconsistent with the certification;
    (vi) The name of any specified foreign bank, for which the bank 
maintains a correspondent account, that notifies the bank that it has 
established a new correspondent account for an Iranian-linked financial 
institution designated under IEEPA at any time within 365 calendar days 
from the date of the foreign bank's initial response, and the following 
related information:
    (A) The name of the Iranian-linked financial institution designated 
under IEEPA;
    (B) The full name(s) on the correspondent account and the 
correspondent account number(s);
    (C) Applicable information regarding whether the correspondent 
account has been blocked or otherwise restricted; and
    (D) Other applicable identifying information for the correspondent 
account;
    (vii) If applicable, confirmation that the bank does not maintain a 
correspondent account for the specified foreign bank(s), but only in 
instances in which FinCEN specifically requests that the bank report 
such information; and
    (viii) If applicable, the name of any specified foreign bank, for 
which the bank maintains a correspondent account, that provides a 
certification to the bank after the 45-calendar-day deadline, along 
with all applicable related information associated with that 
certification.
    (2) When to file. (i) A bank shall report to FinCEN within 45-
calendar-days of the date of the request from FinCEN.
    (ii) Reports based on subsequent notifications received from a 
foreign bank regarding the establishment of a new correspondent account 
for an Iranian-linked financial institution designated under IEEPA 
shall be due within 10 calendar days of receipt of the notification.
    (iii) Reports based on certifications received from a foreign bank 
after the 45 calendar day deadline shall be due within 10 calendar days 
of receipt of the certification.
    (d) Retention of records. A bank shall maintain for a period of 
five years a copy of any report filed and the original or any business 
record equivalent of any supporting documentation for a report, 
including a foreign bank certification or other responses to an inquiry 
under this section.
    (e) No other action required. Nothing in this section shall be 
construed to require a bank to take any action, or to decline to take 
any action, other than the requirements identified in this section, 
with respect to an account established for, or a transaction engaged in 
with, a foreign bank. However, nothing in this section relieves a bank 
of any other applicable regulatory obligation.


Sec.  1060.400  [Reserved]


Sec.  1060.500  [Reserved]


Sec.  1060.600  [Reserved]


Sec.  1060.700  [Reserved]


Sec.  1060.800  Penalties.

    A person violating any requirement under this part is subject to 
the penalties provided for in sections 5321(a) and 5322 of title 31, 
United States Code, in the same manner and to the same extent as such 
penalties would apply to any person that is otherwise subject to such 
section 5321(a) or 5322.

    Dated: October 3, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.

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[[Page 62627]]


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[[Page 62628]]


[GRAPHIC] [TIFF OMITTED] TR11OC11.010


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[GRAPHIC] [TIFF OMITTED] TR11OC11.011


[[Page 62630]]


[GRAPHIC] [TIFF OMITTED] TR11OC11.012

[FR Doc. 2011-26204 Filed 10-7-11; 8:45 am]
BILLING CODE 4810-02-P