[Federal Register Volume 81, Number 202 (Wednesday, October 19, 2016)]
[Rules and Regulations]
[Pages 71986-71988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25249]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010


Conditional Exception to Bank Secrecy Act Regulations Relating to 
the Burma Section 311 Final Rule

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

ACTION: Grant of conditional exception.

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SUMMARY: This document contains a conditional exception, pursuant to 
authority under the Bank Secrecy Act, which would permit certain U.S. 
financial institutions to maintain correspondent accounts for Burmese 
banks under certain conditions.

DATES: Applicability Date: This conditional exception is applicable 
beginning October 7, 2016.

FOR FURTHER INFORMATION CONTACT: All questions about the exceptive 
relief must be addressed to the FinCEN Resource Center at (800) 767-
2825 (Monday through Friday, 8:00 a.m.-6:00 p.m. ET).

SUPPLEMENTARY INFORMATION: 

I. Statutory and Regulatory Background

    The Bank Secrecy Act (``BSA''), Titles I and II of Public Law 91-
508, as amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 
31 U.S.C. 5311-5314 and 5316-5332, authorizes the Secretary of the 
Treasury (``Secretary''), among other things, to issue regulations 
requiring persons to keep records and file reports that are determined 
to have a high degree of usefulness in criminal, tax, regulatory, and 
counter-terrorism matters. The regulations implementing the BSA appear 
at 31 CFR Chapter X. The Secretary's authority to administer the BSA 
has been delegated to the Director of FinCEN.\1\
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    \1\ Treasury Order 180-01 (Sept. 26, 2002).
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    FinCEN has the authority, under 31 U.S.C. 5318(a)(7) and 31 CFR 
1010.970, to make exceptions to the requirements of 31 CFR Chapter X. 
Such exceptions may be conditional or unconditional, may apply to 
particular persons or to classes of persons, and may apply to 
particular transactions or classes of transactions. Moreover, an 
exception is issuable or revocable in the sole discretion of FinCEN, 
based on the circumstances to which the exception applies.

II. FinCEN Issuance 2016-1

    This document, FinCEN Issuance 2016-1, provides exceptive relief 
under

[[Page 71987]]

31 U.S.C. 5318(a)(7) and 31 CFR 1010.970 to U.S. financial institutions 
covered by 31 CFR 1010.651 (FinCEN's rule imposing special measures 
against Burma under Section 311 of the USA PATRIOT Act). The exceptive 
relief permits such financial institutions to maintain correspondent 
accounts for Burmese banks under certain conditions. Specifically, 
FinCEN is providing the following exceptive relief:
    The provisions of paragraphs (b)(1) and (2) of 31 CFR 1010.651 
shall not apply to a correspondent account that is established, 
maintained, administered, or managed in the United States by a covered 
financial institution (as defined in 31 CFR 1010.651(a)(3)) for, or on 
behalf of, a Burmese banking institution, provided that such covered 
financial institution subjects the account to the due diligence 
obligations set forth under Section 312 of the USA PATRIOT Act and its 
implementing regulation 31 CFR 1010.610.
    FinCEN is providing this exceptive relief given (i) FinCEN's 
assessment of Burma's progress to date in addressing issues identified 
in FinCEN's 2003 finding that Burma was a jurisdiction of primary money 
laundering concern; (ii) a high-level commitment by Burma to continue 
making progress in addressing those issues; and (iii) FinCEN's 
consideration of the ongoing effect on U.S. national security and 
foreign policy of U.S. financial institutions' compliance with 31 CFR 
1010.651.

Section 311 Action Against Burma

    On November 18, 2003, FinCEN found Burma to be a jurisdiction of 
primary money laundering concern pursuant to 31 U.S.C. 5318A, as added 
by Section 311 of the USA PATRIOT Act of 2001 (Section 311).\2\ FinCEN 
based its finding on a number of factors, including (i) Burma's lack of 
an effective anti-money laundering/countering the financing of 
terrorism (AML/CFT) regime; (ii) high levels of public corruption in 
Burma; (iii) a recognition that Burma is a haven for international drug 
trafficking; and (iv) a lack of cooperation by Burma with U.S. law 
enforcement agencies in criminal matters. In connection with this 
finding, on April 12, 2004, FinCEN issued a final rule at 31 CFR 
1010.651 prohibiting U.S. financial institutions from maintaining U.S. 
correspondent accounts for Burmese banking institutions.\3\
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    \2\ 68 FR 66299 (Nov. 25, 2003).
    \3\ 69 FR 19093 (Apr. 12, 2004) (codified at 31 CFR 1010.651).
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Burma's Progress in Addressing the Concerns Described in the Section 
311 Finding

    Since FinCEN promulgated the final rule in 2004, Burma has taken 
steps to improve its AML/CFT regime and to address the issues of 
corruption, drug trafficking, and law enforcement cooperation.
Improvements to Burma's AML/CFT Regime
    FinCEN's finding noted that ``the Burmese anti-money laundering law 
is ineffective and unenforceable'' and could not be regarded as 
effectively remedying a number of AML/CFT deficiencies, including that: 
(i) The Burmese Central Bank had no anti-money laundering regulations 
for financial institutions; (ii) banks licensed by Burma were not 
legally required to obtain or maintain identification information about 
their customers; (iii) such banks were also not required to maintain 
transaction records of customer accounts; and (iv) Burmese financial 
institutions were not required to report suspicious transactions.\4\
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    \4\ 68 FR at 66300.
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    Since 2012, Burma has made significant progress in addressing the 
strategic AML/CFT deficiencies identified by the Financial Action Task 
Force (FATF),\5\ which resulted in its removal in June 2016 from the 
FATF's public list of countries with strategic AML/CFT deficiencies. In 
2013, the Burmese Central Bank, which previously had been part of the 
Ministry of Finance, became independent. Through its 2014 Money 
Laundering Law and the Burmese Central Bank's 2015 customer due 
diligence directive, Burma now requires financial institutions to 
conduct due diligence and know the true identity of their customers 
including beneficial owners. Burma has criminalized money laundering 
and terrorist financing, and it has established a legal framework to 
implement targeted financial sanctions under United Nations Security 
Council Resolutions (UNSCR) 1267, 1373, and related resolutions. 
Further, Burma has established a financial intelligence unit and made 
progress in ensuring that it has operational and budgetary 
independence.
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    \5\ The FATF is an inter-governmental body that sets standards 
and promotes effective implementation of legal, regulatory, and 
operational measures for combating money laundering, terrorist 
financing, and other related threats to the integrity of the 
international financial system.
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Actions Addressing Public Corruption in Burma
    FinCEN's finding noted that, as of 2003, Transparency 
International--the leading international non-governmental organization 
devoted to curbing corruption--ranked Burma as ``the fourth most 
corrupt jurisdiction out of 133 jurisdictions assessed worldwide.'' \6\ 
Burma has taken some significant steps to address public corruption. In 
2012, Burma ratified the UN Convention against Corruption.\7\ Burma 
passed an Anti-Corruption Law in 2013 (and amended it in 2016), 
improving its ability to receive and investigate allegations of 
official corruption.
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    \6\ 68 FR at 66302.
    \7\ United Nations Office of Drugs and Crime, Myanmar becomes 
the 165th State Party to UN Convention on Corruption, January 10, 
2013.
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Attention to International Drug Trafficking
    FinCEN's 2003 finding identified Burma as ``a haven for 
international drug trafficking'' and noted that Burma had failed to 
take any regulatory or enforcement action against financial 
institutions with well-known criminal links.\8\ Burma is in the process 
of restructuring and expanding its counternarcotic task forces and 
Burma has worked regionally on counternarcotics initiatives, including 
those coordinated through the United Nations Office on Drugs and Crime.
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    \8\ 68 FR at 66300-301.
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Cooperation With U.S. Law Enforcement Agencies in Criminal Matters
    FinCEN noted in its 2003 finding that U.S. law enforcement 
indicated that they rarely gained access to bank-related information 
pursuant to investigations, and that they received no cooperation 
regarding counterfeiting investigations involving Burma.\9\
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    \9\ Id. at 66301.
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    U.S. law enforcement indicates that cooperation with Burmese 
authorities has since improved. For example, in September 2014, the 
U.S. and Burmese governments signed a Letter of Agreement to enhance 
cooperation in the fight against illicit drugs and transnational crime, 
and to support the development of Burma's law enforcement capacity and 
promote the rule of law.

FinCEN's Remaining Concerns

    FinCEN is encouraged by Burma's progress thus far, but believes 
that Burma has not yet fully addressed the concerns articulated in the 
2003 finding.
    Although Burma has made a number of technical improvements to its 
AML/

[[Page 71988]]

CFT regime, FinCEN remains concerned that Burma has not yet implemented 
its new reforms and has not displayed adequate effectiveness in 
mitigating the risks and threats of money laundering and terrorist 
financing. FinCEN also notes that a significant portion of financial 
activity in Burma relies upon informal money transfer systems, which 
remain largely unregulated and unsupervised.
    FinCEN is also concerned that Burma has not sufficiently addressed 
the corruption issues identified in the 2003 finding. Burma's ranking 
on Transparency International's International Corruption Perceptions 
Index remains high. The U.S. State Department's 2016 International 
Narcotics Control Strategy Report on Burma notes that ``corruption is 
endemic in both business and government. . . The rule of law remains 
weak, and Burma continues to face a significant risk of narcotics 
proceeds being laundered through commercial ventures.'' \10\
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    \10\ U.S. State Department, 2016 International Narcotics Control 
Strategy Report, available at http://www.state.gov/j/inl/rls/nrcrpt/2016/vol2/253387.htm.
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    The United States also continues to recognize Burma as a haven for 
international drug trafficking. In September 2016, under the Foreign 
Relations Authorization Act, the President determined Burma to be a 
major illicit drug producing country or major drug-transit country.\11\ 
Further, Burma's cooperation with U.S. law enforcement, while improved 
since 2003, nonetheless remains nascent and largely untested.
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    \11\ See Section 706(1) of the Foreign Relations Authorization 
Act, Fiscal Year 2003 (Pub. L. 107-228); 2016 Presidential 
Determination for Major Drug Producing and Transit Countries, 
available at https://www.whitehouse.gov/the-press-office/2016/09/12/presidential-determination-major-drug-transit-or-major-illicit-drug.
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Considerations for Exceptive Relief

    As noted in the final rule, the Section 311 action was designed to 
encourage Burma to make necessary changes to its AML/CFT regime in 
order to address FinCEN's concerns. Burma has begun to address those 
concerns, but significant work remains. FinCEN welcomes Burma's recent 
commitment to work with FinCEN and other components of the U.S. 
Department of the Treasury, as well as with the U.S. government more 
broadly, in advancing its AML/CFT efforts. FinCEN has considered 
Burma's progress, its remaining deficiencies, and its commitment to 
address those deficiencies in deciding to issue this exceptive relief.
    This exceptive relief also takes into account the effect of 
FinCEN's action on U.S. national security and foreign policy, as did 
the final rule.\12\ FinCEN's final rule contained an exemption at 31 
CFR 1010.651(b)(3) that allowed U.S. financial institutions to maintain 
correspondent accounts for Burmese banks if such activity was licensed 
under authorities administered by the U.S. Department of the Treasury's 
Office of Foreign Assets Control (OFAC). Since 2012, OFAC has, via 
general licenses, authorized a broad range of financial activity with 
respect to Burma that would otherwise have been prohibited under the 
Section 311 rule. On October 7, 2016, the President terminated the 
national emergency with respect to Burma and revoked all Burma 
sanctions Executive orders, lifting the economic and financial 
sanctions on Burma administered by OFAC. As a result of the termination 
of the Burma sanctions program, the OFAC general licenses referenced 
above are no longer in effect. Therefore, the exemption incorporated 
into FinCEN's final rule at 31 CFR 1010.651(b)(3), which effectively 
permitted U.S. correspondent account activity with Burmese banks, no 
longer has any operational effect. FinCEN has taken this into 
consideration in deciding to issue this exceptive relief.
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    \12\ 69 FR at 19094.

    Dated: October 13, 2016.
Jamal El Hindi,
Acting Director, Financial Crimes Enforcement Network.
[FR Doc. 2016-25249 Filed 10-18-16; 8:45 am]
 BILLING CODE 4810-02-P