[Federal Register Volume 77, Number 104 (Wednesday, May 30, 2012)]
[Proposed Rules]
[Pages 31794-31803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12747]


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DEPARTMENT OF THE TREASURY

31 CFR Chapter X

RIN 1506-AB19


Financial Crimes Enforcement Network; Imposition of Special 
Measure Against JSC CredexBank as a Financial Institution of Primary 
Money Laundering Concern

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: In a finding published elsewhere in this issue of the Federal 
Register, the Secretary of the Treasury, through his delegate, the 
Director of FinCEN, found that reasonable grounds exist for concluding 
that JSC CredexBank is a financial institution of primary money 
laundering concern pursuant to 31 U.S.C. 5318A. FinCEN is issuing this 
notice of proposed rulemaking to propose the imposition of two special 
measures against JSC CredexBank.

DATES: Written comments on the notice of proposed rulemaking must be 
submitted on or before July 30, 2012.

ADDRESSES: You may submit comments, identified by RIN 1506-AB19 by any 
of the following methods:
     Federal E-rulemaking Portal: 
http:[sol][sol]www.regulations.gov. Follow the instructions for 
submitting comments. Include 1506-AB19 in the submission. Refer to 
Docket Number FINCEN-2012-0003.
     Mail: The Financial Crimes Enforcement Network, P.O. Box 
39, Vienna, VA 22183. Include RIN 1506-AB19 in the body of the text. 
Please submit comments by one method only.
     Comments submitted in response to this NPRM will become a 
matter of public record. Therefore, you should submit only information 
that you wish to make publicly available.
    Inspection of comments: Public comments received electronically or 
through the U.S. Postal Service sent in response to a notice and 
request for comment will be made available for public review as soon as 
possible on http:[sol][sol]www.regulations.gov. Comments received may 
be physically inspected in the FinCEN reading room located in Vienna, 
Virginia. Reading room appointments are available weekdays (excluding 
holidays) between 10 a.m. and 3 p.m., by calling the Disclosure Officer 
at (703) 905-5034 (not a toll-free call).

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

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Provisions

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001 (the USA PATRIOT Act), 
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (BSA), codified at 
12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-
5332, to promote the prevention, detection, and prosecution of 
international money laundering and the financing of terrorism. 
Regulations implementing the BSA appear at 31 CFR chapter X. The 
authority of the Secretary of the Treasury (``the Secretary'') to 
administer the BSA and

[[Page 31795]]

its implementing regulations has been delegated to the Director of 
FinCEN.\1\
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    \1\ Therefore, references to the authority of the Secretary of 
the Treasury under section 311 of the USA PATRIOT Act apply equally 
to the Director of FinCEN.
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    Section 311 of the USA PATRIOT Act (``section 311'') added section 
5318A to the BSA, granting the Secretary the authority, upon finding 
that reasonable grounds exist for concluding that a foreign 
jurisdiction, institution, class of transaction, or type of account is 
of ``primary money laundering concern,'' to require domestic financial 
institutions and financial agencies to take certain ``special 
measures'' against the entity of primary money laundering concern. 
Section 311 identifies factors for the Secretary to consider and 
Federal agencies to consult before the Secretary may conclude that a 
jurisdiction, institution, class of transaction, or type of account is 
of primary money laundering concern. The statute also provides similar 
procedures, i.e., factors and consultation requirements, for selecting 
the specific special measures to be imposed against the primary money 
laundering concern.
    Taken as a whole, section 311 provides the Secretary with a range 
of options that can be adapted to target specific money laundering and 
terrorist financing concerns most effectively. These options give the 
Secretary the authority to control and limit access to the U.S. 
financial system to any jurisdictions and institutions that pose money 
laundering threats. Through the imposition of various special measures, 
the Secretary can gain more information about the jurisdictions, 
institutions, transactions, or accounts of concern; can more 
effectively monitor the respective jurisdictions, institutions, 
transactions, or accounts; and can protect U.S. financial institutions 
from involvement with jurisdictions, institutions, transactions, or 
accounts that are of money laundering concern.
    Before making a finding that reasonable grounds exist for 
concluding that a financial institution operating outside the United 
States is of primary money laundering concern, the Secretary is 
required to consult with both the Secretary of State and the Attorney 
General. The Secretary is also required by section 311 to consider 
``such information as the Secretary determines to be relevant, 
including the following potentially relevant factors \2\:
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    \2\ 31 U.S.C. 5318A(c)(2).
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     The extent to which such financial institution is used to 
facilitate or promote money laundering in or through the jurisdiction;
     The extent to which such financial institution is used for 
legitimate business purposes in the jurisdiction; and
     The extent to which the finding that the institution is of 
primary money laundering concern is sufficient to ensure, with respect 
to transactions involving the institution operating in the 
jurisdiction, that the purposes of the BSA continue to be fulfilled, 
and to guard against international money laundering and other financial 
crimes.
    If the Secretary determines that reasonable grounds exist for 
concluding that a financial institution operating outside the United 
States is of primary money laundering concern, the Secretary must 
determine the appropriate special measure(s) to address the specific 
money laundering risks. Section 311 provides a range of special 
measures that can be imposed individually, jointly, in any combination, 
and in any sequence.\3\ The Secretary's imposition of special measures 
requires additional consultations to be made and factors to be 
considered. The statute requires the Secretary to consult with 
appropriate Federal agencies and other interested parties \4\ and to 
consider the following specific factors:
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    \3\ Available special measures include requiring: (1) 
Recordkeeping and reporting of certain financial transactions; (2) 
collection of information relating to beneficial ownership; (3) 
collection of information relating to certain payable-through 
accounts; (4) collection of information relating to certain 
correspondent accounts; and (5) prohibition or conditions on the 
opening or maintaining of correspondent or payable through accounts. 
31 U.S.C. 5318A(b)(l)-(5). For a complete discussion of the range of 
possible countermeasures, see 68 FR 18917 (April 17, 2003) 
(proposing special measures against Nauru).
    \4\ Section 5318A(a)(4)(A) requires the Secretary to consult 
with the Chairman of the Board of Governors of the Federal Reserve 
System, any other appropriate Federal banking agency, the Secretary 
of State, the Securities and Exchange Commission (``SEC''), the 
Commodity Futures Trading Commission (``CFTC''), the National Credit 
Union Administration (``NCUA''), and, in the sole discretion of the 
Secretary, ``such other agencies and interested parties as the 
Secretary may find to be appropriate.'' The consultation process 
must also include the Attorney General, if the Secretary is 
considering prohibiting or imposing conditions on domestic financial 
institutions opening or maintaining correspondent account 
relationships with the designated jurisdiction.
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     Whether similar action has been or is being taken by other 
nations or multilateral groups;
     Whether the imposition of any particular special measures 
would create a significant competitive disadvantage, including any 
undue cost or burden associated with compliance, for financial 
institutions organized or licensed in the United States;
     The extent to which the action or the timing of the action 
would have a significant adverse systemic impact on the international 
payment, clearance, and settlement system, or on legitimate business 
activities involving the particular jurisdiction; and
     The effect of the action on the United States national 
security and foreign policy.\5\
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    \5\ Classified information used in support of a section 311 
finding and measure(s) may be submitted by Treasury to a reviewing 
court ex parte and in camera. See section 376 of the Intelligence 
Authorization Act for fiscal year 2004, Public Law 108-177 (amending 
31 U.S.C. 5318A by adding new paragraph (f)).
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B. JSC CredexBank

    In this rulemaking, FinCEN proposes to impose both the first 
special measure (31 U.S.C. 5318A(b)(1)) and the fifth special measure 
(31 U.S.C. 5318A(b)(5)) against JSC CredexBank (``Credex''). The first 
special measure imposes requirements with respect to recordkeeping and 
reporting of certain financial transactions and may be imposed by order 
prior to finalization of this proposed regulation, as explained in more 
detail below. The fifth special measure prohibits or conditions the 
opening or maintaining of correspondent or payable-through accounts for 
the identified institution by U.S. financial institutions and may be 
imposed only through the finalization of this proposed regulation.
    Credex is a depository institution that is located and licensed in 
the Republic of Belarus and primarily services corporate entities.\6\ 
Originally established on September 27, 2001, as Nordic Investment Bank 
Corporation by Ximex Executive Limited (``Ximex''),7 8 the 
bank changed its name to Northern Investment Bank on April 5, 2006, and 
then to the current name of Credex on February 12, 2007. Credex is 
96.82% owned by Vicpart Holding SA, based in Fribourg City, 
Switzerland.\9\ With 169 employees \10\ and a total capitalization of 
approximately $19 million,\11\ the bank currently ranks as the 22nd 
largest among 31 commercial banks in Belarus in total assets.\12\ 
Credex has six domestic branches and one representative office in the 
Czech Republic.\13\ While the majority of its correspondent banking 
relationships are with domestic banks, Credex maintains correspondent 
relationships with

[[Page 31796]]

Russian, Latvian, German, and Austrian banks.\14\ According to 
available public information, Credex does not appear to have any direct 
U.S. correspondent relationship.\15\
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    \6\ Bankers Almanac (2012).
    \7\ ``Belarus on a Roll,'' Business New Europe, July 22, 2009 
(http://www.businessneweurope.eu/story1701/Belarus_on_a_roll).
    \8\ Bankers Almanac (2012).
    \9\ Id.
    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ Id.
    \14\ Id.
    \15\ Id.
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II. Imposition of Special Measures Against JSC CredexBank as a 
Financial Institution of Primary Money Laundering Concern

    As a result of the finding on [INSERT DATE OF TREASURY FINDING], 
the Secretary, through his delegate, the Director of FinCEN, found that 
reasonable grounds exist for concluding that Credex is a financial 
institution of primary money laundering concern. Based upon that 
finding, the Director of FinCEN is authorized to impose one or more 
special measures. Following the required consultations and the 
consideration of all relevant factors discussed in the finding and in 
this notice of proposed rulemaking, the Secretary, through the Director 
of FinCEN, is proposing to impose the first and fifth special measures 
authorized by section 5318A(b).\16\
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    \16\ In connection with this action, FinCEN consulted with staff 
of the Federal functional regulators, the Department of Justice, and 
the Department of State, among others.
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    The first special measure authorizes the Secretary, through the 
Director of FinCEN, to require any domestic financial institution ``to 
maintain records, file reports, or both, concerning the aggregate 
amount of transactions, or concerning each transaction, with respect 
to'' a financial institution operating outside of the United States 
found to be of primary money laundering concern. The fifth special 
measure authorizes a prohibition against the opening or maintaining of 
correspondent accounts \17\ by any domestic financial institution or 
agency for or on behalf of a financial institution found to be a 
primary money laundering concern.
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    \17\ For purposes of the proposed rule, a correspondent account 
is defined as an account established to receive deposits from, or 
make payments or other disbursements on behalf of, a foreign bank, 
or handle other financial transactions related to the foreign bank.
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    FinCEN is imposing the first special measure in addition to the 
fifth special measure in this case because of the special circumstances 
and concerns raised by the activities of Credex. Specifically, the 
pervasive lack of transparency surrounding Credex--including its 
engagement in a disproportionately large volume of transactions for a 
bank of its size and its ownership and use by shell companies in a 
manner that obscures the purpose and ownership of funds moving through 
the United States--indicates a high degree of money laundering risk and 
vulnerability to other financial crimes. This lack of transparency and 
use of the bank by shell corporations is the reason why FinCEN proposes 
to employ the first special measure in this case. The imposition of the 
first special measure in this case will serve a number of functions. 
Information gathered through reports submitted by financial 
institutions pursuant to the first special measure will provide FinCEN 
and law enforcement with greater insight into transactions or attempted 
transactions related to Credex, including details regarding the 
underlying beneficial owners. This knowledge, in turn, could help 
FinCEN and law enforcement pierce the veil of the shell corporations 
behind which the true owners of the funds involved hide.
    Under Section 311, FinCEN may impose the first special measure by 
order prior to the implementation of any finalized rule,\18\ provided 
that any such order be issued with a NPRM relating to the imposition of 
the special measure and that such order may not remain in effect for 
more than 120 days absent the promulgation of a rule on or before the 
end of the 120-day period beginning on the date the order was 
issued.\19\ The authority to issue such an order immediately upon 
finding that an institution is of primary money laundering concern is 
particularly important in addressing illicit finance risks associated 
with the identified financial institution that could continue posing a 
threat to the U.S. financial system while a proposed rule is under 
consideration.
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    \18\ 31 U.S.C. 5318A(a)(2)(B).
    \19\ 31 U.S.C. 5318A(a)(3).
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    Although the factual circumstances surrounding Credex could merit 
an immediate imposition of the first special measure, FinCEN has 
elected not to issue an order to this effect in this case. Taking into 
account the fact that this NPRM marks the inaugural use of the first 
special measure in a Section 311 action, FinCEN has decided not to 
implement the first special measure prior to the finalization of the 
proposed rule in order to provide financial institutions and other 
interested parties with an opportunity to comment on how the first 
special measure could be implemented in a manner that most effectively 
mitigates the risk posed by the identified institution to the U.S. 
financial system and enables the collection of useful information while 
minimizing the overall burden on U.S. financial institutions.
    As such, FinCEN requests comment on the scope and practicability of 
the potential obligations under the first special measure, and in 
particular, any input on the feasibility of implementing the first 
special measure by order prior to a final rule or in the absence of a 
prohibition on opening or maintaining correspondent accounts with an 
identified institution as proposed under fifth special measure. FinCEN 
will consider such input not only in the context of assessing whether 
to finalize the proposed rule, but also in the event that it determines 
that it is necessary in a future Section 311 action to issue an order 
imposing the first special measure prior to the finalization of a rule.

A. Form of Records and Reports Under the First Special Measure

    As to the form of records and reports required by the first special 
measure, Section 5318A(b)(1)(B) provides:
    Such records and reports shall be made and retained at such time, 
in such manner, and for such period of time, as the Secretary shall 
determine, and shall include such information as the Secretary may 
determine, including--
    (i) The identity and address of the participants in a transaction 
or relationship, including the identity of the originator of any funds 
transfer;
    (ii) The legal capacity in which a participant in any transaction 
is acting;
    (iii) The identity of the beneficial owner of the funds involved in 
any transaction, in accordance with such procedures as the Secretary 
determines to be reasonable and practicable to obtain and retain the 
information; and
    (iv) A description of any transaction.
    The Director of FinCEN determines that records and reports under 
the first special measure, if imposed, shall be made and retained as 
follows. The covered financial institution is required to take 
reasonable steps to collect and report to FinCEN the following 
information with respect to any transaction or attempted transaction 
related to Credex:
    (i) The identity and address of the participants in a transaction 
or attempted transaction, including the identity of the originator and 
beneficiary of any funds transfer;
    (ii) The legal capacity in which Credex is acting with respect to 
the transaction or attempted transaction and, to the extent Credex is 
not acting on its own behalf, then the customer or other person on 
whose behalf Credex is acting;
    (iii) The identity of the beneficial owner of the funds involved in 
any transaction or attempted transaction; and

[[Page 31797]]

    (iv) A description of the transaction or attempted transaction and 
its purpose.
This information shall be reported to FinCEN within ten business days 
following the day when the covered financial institution engaged in the 
transaction or became aware of the attempted transaction.

B. Discussion of Section 311 Factors

    A discussion of the section 311 factors relevant to imposing the 
first and fifth special measures follows.
1. Whether Similar Actions Have Been or Will Be Taken by Other Nations 
or Multilateral Groups Against Credex
    Other countries or multilateral groups have not yet taken action 
similar to those proposed in this rulemaking that would: (1) Require 
domestic financial institutions and agencies to file reports concerning 
any transactions or attempted transactions related to Credex; and (2) 
prohibit domestic financial institutions and agencies from opening or 
maintaining a correspondent account for or on behalf of Credex, and to 
require those domestic financial institutions and agencies to screen 
their correspondents in a manner that is reasonably designed to guard 
against indirect use by Credex, including access through the use of 
nested correspondent accounts held by Credex. FinCEN encourages other 
countries to take similar action based on the findings contained in 
this rulemaking.
2. Whether the Imposition of the First or Fifth Special Measure Would 
Create a Significant Competitive Disadvantage, Including Any Undue Cost 
or Burden Associated With Compliance, for Financial Institutions 
Organized or Licensed in the United States
    The first special measure sought to be imposed by this rulemaking 
would require domestic financial institutions and agencies to file 
reports concerning any transactions or attempted transactions related 
to Credex. Given the general recordkeeping and reporting obligations 
already in place, FinCEN does not expect incremental increase in the 
burden associated with these requirements to be significant. U.S. 
financial institutions generally apply some level of screening and 
(when required) reporting of their transactions and accounts, often 
through the use of commercially available software such as that used 
for compliance with the economic sanctions programs administered by the 
Office of Foreign Assets Control (OFAC) of the Department of the 
Treasury. They are also required to have enhanced due diligence 
policies and procedures, which involve the collection of beneficial 
ownership information for certain types of correspondent accounts with 
certain foreign financial institutions. As explained in more detail in 
the section-by-section analysis below, financial institutions should be 
able to easily adapt these current screening and reporting procedures 
to comply with this special measure. Moreover, the number of 
transactions or attempted transactions for which the recordkeeping and 
reporting obligations apply is expected to be relatively limited 
because, according to available public information, Credex does not 
appear to have any direct U.S. correspondent relationships. Thus, the 
additional reporting and recordkeeping requirements that would be 
required by this rulemaking are not expected to create a significant 
competitive disadvantage for U.S. financial institutions.
    The fifth special measure sought to be imposed by this rulemaking 
would prohibit covered financial institutions from opening and 
maintaining correspondent accounts for, or on behalf of, Credex. As a 
corollary to this measure, covered financial institutions also would be 
required to take reasonable steps to apply special due diligence, as 
set forth below, to all of their correspondent accounts to help ensure 
that no such account is being used indirectly to provide services to 
Credex. FinCEN does not expect the burden associated with these 
requirements to be significant, given its understanding that, according 
to available public information, no U.S. financial institutions 
currently maintain a correspondent account for Credex. There is a 
minimal burden involved in transmitting a one-time notice to all 
correspondent account holders concerning the prohibition on indirectly 
providing services to Credex. As noted above, U.S. financial 
institutions generally apply some level of transaction and account 
screening, often through the use of commercially available software. As 
explained in more detail in the section-by-section analysis below, 
financial institutions should, if necessary, be able to easily adapt 
their current screening procedures to support compliance with this 
special measure. Thus, the special due diligence that would be required 
by this rulemaking is not expected to impose a significant additional 
burden upon U.S. financial institutions.
3. The Extent to Which the Proposed Action or Timing of the Action Will 
Have a Significant Adverse Systemic Impact on the International 
Payment, Clearance, and Settlement System, or on Legitimate Business 
Activities of Credex
    This proposed rulemaking targets Credex specifically; it does not 
target a class of financial transactions (such as wire transfers) or a 
particular jurisdiction. Credex is not a major participant in the 
international payment system and is not relied upon by the 
international banking community for clearance or settlement services. 
Thus, the imposition of the first and fifth special measures against 
Credex will not have a significant adverse systemic impact on the 
international payment, clearance, and settlement system. In light of 
the reasons for imposing these special measures, FinCEN does not 
believe that it will impose an undue burden on legitimate business 
activities, and notes that the presence of many larger banks in Belarus 
will alleviate the burden on legitimate business activities within that 
jurisdiction.
4. The Effect of the Proposed Action on United States National Security 
and Foreign Policy
    The additional recordkeeping and reporting requirements required by 
the first special measure would enhance the U.S. Government's 
understanding of the transactions engaged in by Credex and enhance 
transparency into Credex's activities of money laundering concern, 
which in turn would be utilized in efforts to detect and deter 
significant money laundering activity and other financial crimes. Such 
efforts would enhance national security, making it more difficult for 
terrorists and money launderers to access the substantial resources of 
the U.S. financial system.
    The exclusion from the U.S. financial system of banks that serve as 
conduits for significant money laundering activity and other financial 
crimes required by the fifth special measure would similarly enhance 
national security by making it more difficult for terrorists and money 
launderers to access the substantial resources of the U.S. financial 
system.
    More generally, the imposition of the first and fifth special 
measures would complement the U.S. Government's worldwide efforts to 
expose and disrupt international money laundering.
    Therefore, pursuant to the finding that Credex is an institution of 
primary money laundering concern, and after conducting the required 
consultations and weighing the relevant factors, the Director of FinCEN 
is proposing to

[[Page 31798]]

impose the first and fifth special measures.

II. Section-by-Section Analysis for Imposition of First and Fifth 
Special Measures

A. 1010.658(a)--Definitions

1. JSC CredexBank
    Section 1010.658(a)(1) of the proposed rule defines Credex to 
include all branches, offices, and subsidiaries of Credex operating in 
Belarus or in any jurisdiction. FinCEN will provide updated 
information, as it is available; however, covered financial 
institutions should take commercially reasonable measures to determine 
whether a customer is a branch, office, or subsidiary of Credex. FinCEN 
is not aware of any subsidiaries of Credex.
2. Correspondent Account
    Section 1010.658(a)(2) of the proposed rule defines the term 
``correspondent account'' by reference to the definition contained in 
31 CFR 1010.605(c)(1)(ii). Section 1010.605(c)(1)(ii) defines a 
correspondent account to mean an account established to receive 
deposits from, or make payments or other disbursements on behalf of, a 
foreign bank, or handle other financial transactions related to the 
foreign bank.
    In the case of a U.S. depository institution, this broad definition 
includes most types of banking relationships between a U.S. depository 
institution and a foreign bank that are established to provide regular 
services, dealings, and other financial transactions including a demand 
deposit, savings deposit, or other transaction or asset account, and a 
credit account or other extension of credit. We are using the same 
definition of ``account'' for purposes of this rule as was established 
for depository institutions in the final rule implementing section 312 
of the USA PATRIOT Act.\20\
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    \20\ See 31 CFR 1010.605(c)(2)(i).
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    In the case of securities broker-dealers, futures commission 
merchants, introducing brokers-commodities, and investment companies 
that are open-end companies (mutual funds), we are also using the same 
definition of ``account'' for purposes of this rule as was established 
for these entities in the final rule implementing section 312 of the 
USA PATRIOT Act.\21\
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    \21\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
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3. Covered Financial Institution
    Section 1010.658(a)(3) of the proposed rule defines ``covered 
financial institution'' with the same definition used in the final rule 
implementing section 312 of the USA PATRIOT Act,\22\ which in general 
includes the following:
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    \22\ See 31 CFR 1010.605(e)(1).
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     An insured bank (as defined in section 3(h) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(h));
     A commercial bank;
     An agency or branch of a foreign bank in the United 
States;
     A Federally insured credit union;
     A savings association;
     A corporation acting under section 25A of the Federal 
Reserve Act (12 U.S.C. 611);
     A trust bank or trust company;
     A broker or dealer in securities;
     A futures commission merchant or an introducing broker-
commodities; and a mutual fund.
4. Beneficial Owner
    Section 1010.658(a)(4) of the proposed rule defines ``beneficial 
owner'' as an individual who has a level of control over, or 
entitlement to, the funds involved in the transaction that, as a 
practical matter, enables the individual, directly or indirectly, to 
control, manage or direct the funds. This definition derives from the 
definition used in the final rule implementing section 312 of the USA 
PATRIOT Act.\23\
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    \23\ See 31 CFR 1010.605(a).
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5. Subsidiary
    Section 1010.658(a)(5) of the proposed rule defines ``subsidiary'' 
as a company of which more than 50 percent of the voting stock or 
analogous equity interest is owned by another company. This definition 
means that the subsidiary is under the control of the owner of the 
majority interest.

B. 1010.658(b)--Requirements for Covered Financial Institutions With 
Regard to the First Special Measure

    The proposed rule imposing the first special measure would require 
that covered financial institutions take reasonable steps to collect 
and report to FinCEN specified information regarding any transaction or 
attempted transaction related to Credex that the covered financial 
institution is requested to engage in after the imposition of the first 
special measure in order to increase the transparency regarding 
Credex's attempts to engage in transactions in or through the U.S. 
financial system. Transactions related to Credex would include, but are 
not limited to, those that are conducted or are attempted by Credex 
itself. This proposed rule would not alter or otherwise impact other 
regulatory obligations of the covered financial institution requiring 
the reporting of suspicious activity.
1. Reporting
(a) Identity of the Participants in a Transaction or Attempted 
Transaction
    Section 1010.658(b)(1)(i) of the proposed rule imposing the first 
special measure would require covered financial institutions to report 
the identity and address of the participants in any transaction or 
attempted transaction related to Credex, including the identity of the 
originator and beneficiary of any funds transfer. This information 
would include any identifying information in the possession of the 
financial institution in the ordinary course of business, including the 
information required under 31 CFR Sec.  1010.410(f) (generally known as 
the ``travel rule''), such as name, account number if used, address, 
the identity of the beneficiary's financial institution, or any other 
specific identifier of the recipient received with the transmittal 
order.
(b) Legal Capacity
    Section 1010.658(b)(1)(ii) of the proposed rule imposing the first 
special measure would require covered financial institutions to report 
the legal capacity in which Credex and any customer of Credex is acting 
with respect to the transaction or attempted transaction. This 
information would include any identifying information collected by the 
financial institution in the ordinary course of business and may 
include identification of the roles of Credex or any of its customers 
in the transaction such as transmittor or recipient of a funds transfer 
or intermediary financial institutions involved in the payment chain 
associated with the transaction.
(c) Beneficial Owner of the Funds
    Section 1010.658(b)(1)(ii) of the proposed rule imposing the first 
special measure would require covered financial institutions to report 
the identity of the beneficial owner of the funds involved in any 
transaction or attempted transaction related to Credex. Under existing 
FinCEN regulations, there are two limited situations where financial 
institutions are expressly obligated to obtain beneficial ownership 
information. Specifically, under the rules implementing Section 312 of 
the USA PATRIOT Act, certain ``covered financial institutions,'' \24\ 
which include the same institutions covered by the

[[Page 31799]]

scope of this proposed regulation, must implement enhanced due 
diligence programs, including obtaining beneficial ownership 
information, in two situations: (i) Covered financial institutions that 
offer private banking accounts are required to take reasonable steps to 
identify the nominal and beneficial owners of such accounts; \25\ and 
(ii) covered financial institutions that offer correspondent accounts 
for certain foreign financial institutions \26\ are required to take 
reasonable steps to obtain information from the foreign financial 
institution about the identity of any person with authority to direct 
transactions through any correspondent account that is a payable-
through account, and the sources and beneficial owner of funds or other 
assets in the payable-through account.\27\ The requirement to report 
beneficial ownership of funds information about transactions or 
attempted transactions related to Credex can be satisfied by employing 
the same policies and procedures as are used for the regulatory 
obligations mentioned in (ii) above promulgated under Section 312 of 
the USA PATRIOT Act, and covered financial institutions should follow 
the same procedures for obtaining such beneficial ownership information 
as they would for those obligations. Collecting such information may 
require personal contact with the correspondent. Where the covered 
financial institution is unable to identify the beneficial owner of 
funds associated with a Credex-related transaction, it should consider 
the transaction to be one of primary money laundering concern and 
determine, based on identified risks, whether or not it should process 
the transaction.
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    \24\ 31 CFR 1010.605(e)(1).
    \25\ 31 CFR 1010.620(b)(1).
    \26\ These foreign financial institutions include foreign banks 
that operate under an offshore banking license; operate under a 
banking license issued by a country named as non-cooperative by an 
international body (such as the Financial Action Task Force (FATF)) 
of which the United States is a member; or operate under a banking 
license issued by country designated by the Treasury Secretary as 
warranting special measures. See 31 CFR 1010.610(c).
    \27\ 31 CFR 1010.610(b)(1)(iii)(A).
---------------------------------------------------------------------------

(d) Description of the Transaction or Attempted Transaction and its 
Purpose
    Section 1010.658(b)(1)(iii) of the proposed rule imposing the first 
special measure would require covered financial institutions to report 
a description of the transaction or attempted transaction and its 
purpose. The description would include additional details of the 
transaction, including amounts, and in particular, a general 
description of any underlying reason for the transaction or obligation 
which the financial transaction supports, such as the purchase of 
specific goods or services, initiation or repayment of a loan or other 
debt, settlement of a trade, transaction in foreign exchange, or other 
type of financial obligation, or other relevant information the covered 
financial institution may have available. To the extent a covered 
financial institution finds that it does not have sufficient 
information to enable it to report a description of the transaction and 
its purpose, it would be reasonable for the covered financial 
institution to inquire further (for example, with any applicable 
customer, respondent bank, or correspondent bank) to obtain additional 
information. In so doing, a covered financial institution should 
consider analogizing to procedures it would follow in fulfilling its 
obligation to determine whether a transaction should be reported as 
suspicious. Specifically, it should consider ``examining the available 
facts, including the background and possible purpose of the 
transaction'' in order to determine whether it is consistent with the 
type of transaction in which a particular customer would normally be 
expected to engage.\28\
---------------------------------------------------------------------------

    \28\ See, e.g., 31 CFR 1020.320(a)(2)(iii).
---------------------------------------------------------------------------

2. Filing Requirements
    Section 1010.658(b)(2) of the proposed rule imposing the first 
special measure would require covered financial institutions to make 
the reports required by Section 1010.658(b)(1) within ten business days 
following the day when the covered financial institution engaged in the 
transaction or became aware of the attempted transaction. By ensuring 
that FinCEN receives information shortly after a transaction is 
executed, the contemplated time period will enable FinCEN to more 
effectively monitor the ongoing activities of Credex, thereby enhancing 
transparency. This time period was specifically chosen because it will 
provide FinCEN with reporting more quickly than that required for 
suspicious activity reporting. FinCEN requests comment on whether ten 
days is sufficient time for covered financial institutions to obtain 
the required information or whether some other period of time, still 
less than that allowed for the filing of suspicious activity reports, 
is more appropriate.
    A covered financial institution would additionally be required to 
take reasonable steps to identify any reportable transaction or 
attempted transaction, direct or indirect, related to Credex, to the 
extent that such use can be determined from transactional records 
maintained by the covered financial institution in the normal course of 
business. For example, a covered financial institution would be 
expected to apply an appropriate screening mechanism to be able to 
identify a funds transfer order that on its face listed Credex as the 
originator's or beneficiary's financial institution, or otherwise 
referenced Credex in a manner detectable under the financial 
institution's normal screening processes. An appropriate screening 
mechanism could be the mechanism used by a covered financial 
institution to comply with various legal requirements, such as the 
commercially available software programs used to comply with the 
economic sanctions programs administered by OFAC. Willful failure to 
provide timely, accurate, and complete information in such reporting 
may constitute a violation of these requirements subject to civil and 
criminal penalties under 31 U.S.C. 5321 and 5322.
    FinCEN specifically solicits comments on the requirement under the 
proposed rule that covered financial institutions take reasonable steps 
to screen their transactions in order to identify any transaction or 
attempted transaction related to Credex.

C. 1010.658(c)--Requirements for Covered Financial Institutions With 
Regard to the Fifth Special Measure

    The proposed imposition of the fifth special measure would prohibit 
covered financial institutions from establishing, maintaining, or 
managing in the United States any correspondent account for, or on 
behalf of, Credex. As a corollary to this prohibition, covered 
financial institutions would be required to apply special due diligence 
to their correspondent accounts to guard against their indirect use by 
Credex. At a minimum, that special due diligence must include two 
elements. First, a covered financial institution must notify those 
correspondent account holders that the covered financial institution 
knows or has reason to know provide services to Credex that such 
correspondents may not provide Credex with access to the correspondent 
account maintained at the covered financial institution. Second, a 
covered financial institution must take reasonable steps to identify 
any indirect use of its correspondent accounts by Credex, to the extent 
that such indirect use can be determined from transactional records 
maintained by the covered financial institution in the normal course of 
business. A covered

[[Page 31800]]

financial institution should take a risk-based approach when deciding 
what, if any, additional due diligence measures it should adopt to 
guard against the indirect use of its correspondent accounts by Credex, 
based on risk factors such as the type of services it offers and 
geographic locations of its correspondents.
1. Prohibition on Direct Use of Correspondent Accounts
    Section 1010.658(c)(1) of the proposed rule imposing the fifth 
special measure prohibits all covered financial institutions from 
establishing, maintaining, administering, or managing a correspondent 
account in the United States for, or on behalf of, Credex. The 
prohibition would require all covered financial institutions to review 
their account records to ensure that they maintain no accounts directly 
for, or on behalf of, Credex.
2. Special Due Diligence of Correspondent Accounts to Prohibit Indirect 
Use
    As a corollary to the prohibition on maintaining correspondent 
accounts directly for Credex, section 1010.658(c)(2) of the proposed 
rule imposing the fifth special measure requires a covered financial 
institution to apply special due diligence to its correspondent 
accounts \29\ that is reasonably designed to guard against their 
indirect use by Credex. At a minimum, that special due diligence must 
include notifying those correspondent account holders that the covered 
financial institution knows or has reason to know provide services to 
Credex that such correspondents may not provide Credex with access to 
the correspondent account maintained at the covered financial 
institution. A covered financial institution would, for example, have 
knowledge that the correspondents provide access to Credex through 
transaction screening software. A covered financial institution may 
satisfy this requirement by transmitting the following notice to its 
correspondent account holders that it knows or has reason to know 
provide services to Credex:
---------------------------------------------------------------------------

    \29\ Again, for purposes of the proposed rule, a correspondent 
account is defined as an account established to receive deposits 
from, or make payments or other disbursements on behalf of, a 
foreign bank, or handle other financial transactions related to the 
foreign bank.

    Notice: Pursuant to U.S. regulations issued under section 311 of 
the USA PATRIOT Act, 31 CFR 1010.658, we are prohibited from 
establishing, maintaining, administering or managing a correspondent 
account for, or on behalf of, JSC CredexBank or any of its 
subsidiaries. The regulations also require us to notify you that you 
may not provide JSC CredexBank or any of its subsidiaries with 
access to the correspondent account you hold at our financial 
institution. If we become aware that JSC CredexBank or any of its 
subsidiaries is indirectly using the correspondent account you hold 
at our financial institution for transactions, we will be required 
to take appropriate steps to prevent such access, including 
---------------------------------------------------------------------------
terminating your account.

    The purpose of the notice requirement is to help ensure cooperation 
from correspondent account holders in denying Credex access to the U.S. 
financial system. However, FinCEN does not require or expect a covered 
financial institution to obtain a certification from any of its 
correspondent account holders that indirect access will not be provided 
in order to comply with this notice requirement. Instead, methods of 
compliance with the notice requirement could include, for example, 
transmitting a one-time notice by mail, fax, or email to certain of the 
covered financial institution's correspondent account customers, 
informing them that they may not provide Credex with access to the 
covered financial institution's correspondent account, or including 
such information in the next regularly occurring transmittal from the 
covered financial institution to those correspondent account holders. 
FinCEN specifically solicits comments on the form and scope of the 
notice that would be required under the rule.
    A covered financial institution also would be required to take 
reasonable steps to identify any indirect use of its correspondent 
accounts by Credex, to the extent that such indirect use can be 
determined from transactional records maintained by the covered 
financial institution in the normal course of business. For example, a 
covered financial institution would be expected to apply an appropriate 
screening mechanism to be able to identify a funds transfer order that 
on its face listed Credex as the financial institution of the 
originator or beneficiary, or otherwise referenced Credex in a manner 
detectable under the financial institution's normal screening 
processes. An appropriate screening mechanism could be the mechanism 
used by a covered financial institution to comply with various legal 
requirements, such as the commercially available software programs used 
to comply with the economic sanctions programs administered by OFAC. 
FinCEN specifically solicits comments on the requirement under the 
proposed rule that covered financial institutions take reasonable steps 
to screen their correspondent accounts in order to identify any 
indirect use of such accounts by Credex.
    Notifying certain correspondent account holders and taking 
reasonable steps to identify any indirect use of its correspondent 
accounts by Credex in the manner discussed above are the minimum due 
diligence requirements under the proposed rule imposing the fifth 
special measure. Beyond these minimum steps, a covered financial 
institution should adopt a risk-based approach for determining what, if 
any, additional due diligence measures it should implement to guard 
against the indirect use of its correspondent accounts by Credex, based 
on risk factors such as the type of services it offers and the 
geographic locations of its correspondent account holders.
    Under the proposed rule imposing the fifth special measure, a 
covered financial institution that obtains knowledge that a 
correspondent account is being used by a foreign bank to provide 
indirect access to Credex must take all appropriate steps to prevent 
such indirect access, including the notification of its correspondent 
account holder per section 1010.658(c)(2)(i)(A) and, where necessary, 
terminating the correspondent account. A covered financial institution 
may afford the foreign bank a reasonable opportunity to take corrective 
action prior to terminating the correspondent account. Should the 
foreign bank refuse to comply, or if the covered financial institution 
cannot obtain adequate assurances that the account will no longer be 
available to Credex, the covered financial institution must terminate 
the account within a commercially reasonable time. This means that the 
covered financial institution should not permit the foreign bank to 
establish any new positions or execute any transactions through the 
account, other than those necessary to close the account. A covered 
financial institution may reestablish an account closed under the 
proposed rule if it determines that the account will not be used to 
provide banking services indirectly to Credex. FinCEN specifically 
solicits comments on the requirement under the proposed rule that 
covered financial institutions prevent indirect access to Credex, once 
such indirect access is identified.
3. Reporting Not Required
    Section 1010.658(c)(3) of the proposed rule imposing the fifth 
special measure clarifies that the rule does not impose any reporting 
requirement upon any covered financial institution that is

[[Page 31801]]

not otherwise required by applicable law or regulation. A covered 
financial institution must, however, document its compliance with the 
requirement that it notify those correspondent account holders that the 
covered financial institution knows or has reason to know provide 
services to Credex, such correspondents may not provide Credex with 
access to the correspondent account maintained at the covered financial 
institution.

III. Request for Comments

    FinCEN invites comments on all aspects of the proposals to impose 
the first and fifth special measures against Credex and specifically 
invites comments on the following matters:
    1. The impact of the proposed special measures upon legitimate 
transactions with Credex involving, in particular, U.S. persons and 
entities; foreign persons, entities, and governments; and multilateral 
organizations doing legitimate business with persons or entities 
operating in Belarus.

First Special Measure

    2. The form and scope of the reports to FinCEN required under the 
proposed rule to impose the first special measure;
    3. The appropriate time within which a covered institution would be 
required to report to FinCEN;
    4. The appropriate scope of the proposed requirement for a covered 
financial institution to take reasonable steps to identify any 
reportable transactions by Credex;
    5. The appropriate steps a covered financial institution should 
take once it identifies a transaction related to Credex; and
    6. Whether a definition of ``attempted transaction'' needs to be 
included and what that definition should be.

Fifth Special Measure

    7. The form and scope of the notice to certain correspondent 
account holders that would be required under the rule;
    8. The appropriate scope of the proposed requirement for a covered 
financial institution to take reasonable steps to identify any indirect 
use of its correspondent accounts by Credex; and
    9. The appropriate steps a covered financial institution should 
take once it identifies an indirect use of one of its correspondent 
accounts by Credex.

Possible Future Implementation of First Special Measure by Order

    10. FinCEN has the authority, pursuant to 31 U.S.C. 5318A(b)(1), to 
impose the first special measure by order, without notice and comment, 
for up to 120 days prior to the implementation of a final rule imposing 
that special measure. FinCEN requests comment on the feasibility of so 
implementing the requirements of the first special measure by order 
prior to a final rule imposing the first special measure;
    11. The feasibility of implementing an order imposing the first 
special measure in the absence of a prohibition on opening and 
maintaining correspondent accounts with the identified institution 
under the fifth special measure;
    12. Whether the current definition of covered financial 
institutions would be appropriate if the first special measure were 
implemented by order; and
    13. Whether there are any potential differences among the types of 
covered financial institutions that might make it more difficult for 
some to implement the order.

IV. Regulatory Flexibility Act

    It is hereby certified that the proposed imposition of the first 
and fifth special measures would not have a significant economic impact 
on a substantial number of small entities.
    On the basis of publicly available information, FinCEN understands 
that Credex currently maintains no correspondent accounts in the United 
States. Moreover, to the extent that a transaction related to Credex 
were to be processed through a U.S. financial institution, this would 
most likely involve the small subset of the largest financial 
institutions that actively engage in international transactions. Thus, 
the requirement to report transactions related to Credex under the 
first special measure would not have a significant impact on a 
substantial number of small entities. In addition, all U.S. persons, 
including U.S. financial institutions, currently must exercise some 
degree of due diligence in order to comply with various legal 
requirements. The tools used for such purposes, including commercially 
available software used to comply with the economic sanctions programs 
administered by OFAC and existing suspicious activity reporting 
programs, can easily be modified to monitor for and report transactions 
related to Credex. Thus, any increase in the reporting burden that 
would be required by the imposition of the first special measure--i.e., 
reporting of all transactions related to Credex on a timelier basis--
would not impose a significant additional economic burden upon small 
U.S. financial institutions.
    As noted above, FinCEN understands that Credex currently maintains 
no correspondent accounts in the United States. Thus, the prohibition 
on maintaining such accounts under the fifth special measure would not 
have a significant impact on a substantial number of small entities. In 
addition, all U.S. persons, including U.S. financial institutions, 
currently must exercise some degree of due diligence in order to comply 
with various legal requirements. The tools used for such purposes, 
including commercially available software used to comply with the 
economic sanctions programs administered by OFAC, can easily be 
modified to monitor for the use of correspondent accounts by Credex. 
Thus, the special due diligence that would be required by the 
imposition of the fifth special measure--i.e., the one-time transmittal 
of notice to certain correspondent account holders and the screening of 
transactions to identify any indirect use of correspondent accounts--
would not impose a significant additional economic burden upon small 
U.S. financial institutions.
    FinCEN invites comments from members of the public who believe 
there will be a significant economic impact on small entities from the 
imposition of the first and fifth special measures on Credex.

V. Paperwork Reduction Act

    The collection of information contained in this proposed rule is 
being submitted to the Office of Management and Budget for review in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)). Comments on the collection of information should be sent to 
the Desk Officer for the Department of Treasury, Office of Information 
and Regulatory Affairs, Office of Management and Budget, Paperwork 
Reduction Project (1506), Washington, DC 20503 (or by email to [email protected] with a copy to FinCEN by mail or email at the 
addresses previously specified. Comments should be submitted by one 
method only. Comments on the collection of information should be 
received by July 30, 2012. In accordance with the requirements of the 
Paperwork Reduction Act of 1995, 44 U.S.C. 3506(c)(2)(A), and its 
implementing regulations, 5 CFR 1320, the following information 
concerning the collection of information as required by 31 CFR 1010.658 
is presented to assist those persons wishing to comment on the 
information collection.
    31 CFR 1010.658 is proposed imposing the first and fifth special 
measures under 31 U.S.C. 5318A. The Paperwork reduction act analysis 
for both follows.

[[Page 31802]]

    The provisions in this proposed rule pertaining to the collection 
of information can be found in sections 1010.658(b)(1), 
1010.658(c)(2)(i), and 1010.658(c)(3)(i). The information required to 
be reported by section 1010.658(b)(1) will be used by the U.S. 
Government to monitor the activities of the institution of primary 
money laundering concern. The notification requirement in section 
1010.658(c)(2)(i) is intended to ensure cooperation from correspondent 
account holders in denying Credex access to the U.S. financial system. 
The information required to be maintained by section 1010.658(c)(3)(i) 
will be used by federal agencies and certain self-regulatory 
organizations to verify compliance by covered financial institutions 
with the provisions of 31 CFR 1010.658. The class of financial 
institutions affected by the notification requirement is identical to 
the class of financial institutions affected by the recordkeeping 
requirement. The collection of information is mandatory.
    Description of Affected Financial Institutions: Banks, broker-
dealers in securities, futures commission merchants and introducing 
brokers-commodities, and mutual funds.
    Estimated Number of Affected Financial Institutions: 5,000.
    Estimated Average Annual Burden Hours Per Affected Financial 
Institutions: The estimated average burden associated with the 
collection of information in this proposed rule is one hour per 
affected financial institution.
    Estimated Total Annual Burden: 5,000 hours.
    FinCEN specifically invites comments on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the mission of FinCEN, including whether the information shall have 
practical utility; (b) the accuracy of FinCEN's estimate of the burden 
of the proposed collection of information; (c) ways to enhance the 
quality, utility, and clarity of the information required to be 
maintained; (d) ways to minimize the burden of the required collection 
of information, including through the use of automated collection 
techniques or other forms of information technology; and (e) estimates 
of capital or start-up costs and costs of operation, maintenance, and 
purchase of services to report the information.
    An agency may not conduct or sponsor and a person is not required 
to respond to a collection of information unless it displays a valid 
OMB control number.

VI. Executive Order 12866

    Executive Orders 12866 and 13563 direct agencies to assess 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 not a ``significant 
regulatory action'' for purposes of Executive Order 12866.

List of Subjects in 31 CFR Chapter X

    Administrative practice and procedure, Banks and banking, Brokers, 
Counter-money laundering, Counter-terrorism, Foreign banking.

Authority and Issuance

    For the reasons set forth in the preamble, Chapter X of title 31 of 
the Code of Federal Regulations is proposed to be amended as follows:

CHAPTER X--FINANCIAL CRIMES ENFORCEMENT NETWORK, DEPARTMENT OF THE 
TREASURY

    1. The authority citation for Chapter X continues to read as 
follows:

    Authority:  12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 
5316-5332 Title III, secs. 311, 312, 313, 314, 319, 326, 352, Pub. 
L. 107-56, 115 Stat. 307.

    2. Subpart F of Part Chapter X is proposed to be amended by adding 
new Sec.  1010.658, as follows:
    A. Under the undesignated center heading ``SPECIAL DUE DILIGENCE 
FOR CORRESPONDENT ACCOUNTS AND PRIVATE BANKING ACCOUNTS'' to read as 
follows:


Sec.  1010.658  Special measures against the JSC CredexBank

    (a) Definitions. For purposes of this section:
    (1) JSC CredexBank means all branches, offices, and subsidiaries of 
JSC CredexBank operating in any jurisdiction.
    (2) Correspondent account has the same meaning as provided in Sec.  
1010.605(c)(1)(ii).
    (3) Covered financial institution has the same meaning as provided 
in Sec.  1010.605(e)(1).
    (4) Beneficial Owner means an individual who has a level of control 
over, or entitlement to, the funds involved in the transaction that, as 
a practical matter, enables the individual, directly or indirectly, to 
control, manage, or direct the funds.
    (5) Subsidiary means a company of which more than 50 percent of the 
voting stock or analogous equity interest is owned by another company.
    (b) Reporting requirements for covered financial institutions (1)
    Reporting. A covered financial institution is required to take 
reasonable steps to collect and report to FinCEN the following 
information with respect to any transaction or attempted transaction 
related to JSC CredexBank:
    (i) The identity and address of the participants in a transaction 
or attempted transaction, including the identity of the originator and 
beneficiary of any funds transfer;
    (ii) The legal capacity in which JSC CredexBank is acting with 
respect to the transaction or attempted transaction and, to the extent 
JSC CredexBank is not acting on its own behalf, then the customer or 
other person on whose behalf JSC CredexBank is acting;
    (iii) The identity of the beneficial owner of the funds involved in 
any transaction or attempted transaction; and
    (iv) A description of the transaction or attempted transaction and 
its purpose.
    (2) When to file. A report required by paragraph (a) of this 
section shall be filed by the reporting financial institution within 
ten business days following the day when the covered financial 
institution engaged in the transaction or became aware of the attempted 
transaction.
    (c) Prohibition on accounts and due diligence requirements for 
covered financial institutions.
    (1) Prohibition on direct use of correspondent accounts. A covered 
financial institution shall terminate any correspondent account that is 
established, maintained, administered, or managed in the United States 
for, or on behalf of, JSC CredexBank.
    (2) Special due diligence of correspondent accounts to prohibit 
indirect use. (i) A covered financial institution shall apply special 
due diligence to its correspondent accounts that is reasonably designed 
to guard against their indirect use by JSC CredexBank. At a minimum, 
that special due diligence must include:
    (A) Notifying those correspondent account holders that the covered 
financial institution knows or has reason to know provide services to 
JSC CredexBank, that such correspondents may not provide JSC CredexBank 
with access to the correspondent account maintained at the covered 
financial institution; and
    (B) Taking reasonable steps to identify any indirect use of its 
correspondent accounts by JSC CredexBank, to the

[[Page 31803]]

extent that such indirect use can be determined from transactional 
records maintained in the covered financial institution's normal course 
of business.
    (ii) A covered financial institution shall take a risk-based 
approach when deciding what, if any, other due diligence measures it 
should adopt to guard against the indirect use of its correspondent 
accounts by JSC CredexBank.
    (iii) A covered financial institution that obtains knowledge that a 
correspondent account is being used by the foreign bank to provide 
indirect access to JSC CredexBank, shall take all appropriate steps to 
prevent such indirect access, including the notification of its 
correspondent account holder under paragraph (b)(2)(i)(A) and, where 
necessary, terminating the correspondent account.
    (3) Recordkeeping and reporting. (i) A covered financial 
institution is required to document its compliance with the notice 
requirement set forth in paragraph (b)(2)(i)(A) of this section.
    (ii) Nothing in this subsection (c) shall require a covered 
financial institution to report any information not otherwise required 
to be reported by law or regulation.

    Dated: May 22, 2012.
Peter S. Alvarado,
Deputy Director, Financial Crimes Enforcement Network.
[FR Doc. 2012-12747 Filed 5-29-12; 8:45 am]
BILLING CODE 4810-02-P