[Federal Register Volume 89, Number 21 (Wednesday, January 31, 2024)]
[Proposed Rules]
[Pages 6074-6082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02004]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506-AB65


Proposal of Special Measure Regarding Al-Huda Bank, as a Foreign 
Financial Institution of Primary Money Laundering Concern

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: FinCEN is issuing a notice of proposed rulemaking (NPRM), 
pursuant to section 311 of the USA PATRIOT Act, that proposes 
prohibiting the opening or maintaining of a correspondent account in 
the United States for, or on behalf of, Al-Huda Bank, a foreign 
financial institution based in Iraq found to be of primary money 
laundering concern.

DATES: Written comments on the notice of proposed rulemaking must be 
submitted on or before March 1, 2024.

ADDRESSES: Comments must be submitted by one of the following methods:
     Federal E-rulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. Refer to Docket Number 
FINCEN-2024-0001 in the submission.
     Mail: Financial Crimes Enforcement Network, P.O. Box 39, 
Vienna, VA 22183. Refer to Docket Number FINCEN-2024-0001 in the 
submission.
    Please submit comments by one method only and note that comments 
submitted in response to this NPRM will become a matter of public 
record.

FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section 
at 1-800-767-2825 or electronically at [email protected].

SUPPLEMENTARY INFORMATION:

I. Statutory Provisions

    Section 311 of the USA PATRIOT Act (section 311), codified at 31 
U.S.C. 5318A, grants the Secretary of the Treasury (Secretary) 
authority, upon finding that reasonable grounds exist for concluding 
that one or more financial institutions operating outside of the United 
States is of primary money laundering concern, to require domestic 
financial institutions and domestic financial agencies to take certain 
``special measures.'' \1\ The authority of the Secretary to administer 
the Bank Secrecy Act (BSA) and its implementing regulations has been 
delegated to FinCEN.\2\
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    \1\ On October 26, 2001, the President signed into law the 
Uniting and Strengthening America by Providing Appropriate Tools 
Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 
107-56 (USA PATRIOT Act). Title III of the USA PATRIOT Act amended 
the anti-money laundering (AML) provisions of the Bank Secrecy Act 
(BSA) to promote the prevention, detection, and prosecution of 
international money laundering and the financing of terrorism. The 
BSA, as amended, is the popular name for a collection of statutory 
authorities that FinCEN administers that is codified at 12 U.S.C. 
1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, and includes 
other authorities reflected in notes thereto. Regulations 
implementing the BSA appear at 31 CFR Chapter X.
    \2\ Pursuant to Treasury Order 180-01 (Jan. 14, 2020), the 
authority of the Secretary to administer the BSA, including, but not 
limited to, 31 U.S.C. 5318A, has been delegated to the Director of 
FinCEN.
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    The five special measures set out in section 311 are safeguards 
that may be employed to defend the U.S. financial system from money 
laundering and terrorist financing risks. The Secretary may impose one 
or more of these special measures in order to protect the U.S. 
financial system from such threats. Through special measures one 
through four, the Secretary may impose additional recordkeeping, 
information collection, and reporting requirements on covered domestic 
financial institutions and domestic financial agencies--collectively, 
``covered financial institutions.'' \3\ Through special measure five, 
the Secretary may prohibit, or impose conditions on, the opening or 
maintaining in the United States of correspondent or payable-

[[Page 6075]]

through accounts for or on behalf of a foreign banking institution, if 
such correspondent account or payable-through account involves the 
foreign financial institution found to be of primary money laundering 
concern.\4\
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    \3\ 31 U.S.C. 5318A(b)(1)-(b)(4). For definition of ``covered 
financial institutions,'' see 31 CFR 1010.100(t) and section V.A.3 
of this notice.
    \4\ 31 U.S.C. 5318A(b)(5).
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    Before making a finding that reasonable grounds exist for 
concluding that a foreign financial institution is of primary money 
laundering concern, the Secretary is required to consult with both the 
Secretary of State and the Attorney General.\5\ The Secretary is also 
required to consider such information as the Secretary determines to be 
relevant, including the following potentially relevant factors:
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    \5\ 31 U.S.C. 5318A(c)(1).
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     The extent to which such a financial institution is used 
to facilitate or promote money laundering in or through a jurisdiction 
outside the United States, including any money laundering activity by 
organized criminal groups, international terrorists, or entities 
involved in the proliferation of weapons of mass destruction (WMD) or 
missiles;
     The extent to which such a foreign financial institution 
is used for legitimate business purposes in the jurisdiction; and
     The extent to which such action is sufficient to ensure 
that the purposes of section 311 are fulfilled and to guard against 
international money laundering and other financial crimes.\6\
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    \6\ 31 U.S.C. 5318A(c)(2)(B).
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    Upon finding that a foreign financial institution is of primary 
money laundering concern, the Secretary may require covered financial 
institutions to take one or more special measures. In selecting one or 
more special measures, the Secretary ``shall consult with the Chairman 
of the Board of Governors of the Federal Reserve System, any other 
appropriate Federal banking agency (as defined in section 3 of the 
Federal Deposit Insurance Act), the Secretary of State, the Securities 
and Exchange Commission, the Commodity Futures Trading Commission, the 
National Credit Union Administration Board, and in the sole discretion 
of the Secretary, such other agencies and interested parties as the 
Secretary may find appropriate.'' \7\ When imposing special measure 
five, the Secretary must do so ``in consultation with the Secretary of 
State, the Attorney General, and the Chairman of the Board of Governors 
of the Federal Reserve System.'' \8\
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    \7\ 31 U.S.C. 5318A(a)(4)(A).
    \8\ 31 U.S.C. 5318A(b)(5).
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    In addition, the Secretary is required to consider the following 
factors when selecting special measures:
     Whether similar action has been or is being taken by other 
nations or multilateral groups;
     Whether the imposition of any particular 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 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, institution, class of 
transactions, or type of account; and
     The effect of the action on United States national 
security and foreign policy.\9\
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    \9\ 31 U.S.C. 5318A(a)(4)(B).
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II. Summary of NPRM

    For years, Al-Huda Bank has exploited its access to U.S. dollars 
(USD) to support designated foreign terrorist organizations (FTOs), 
including Iran's Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds 
Force (IRGC-QF) as well as Iran-aligned Iraqi militias Kata'ib 
Hizballah (KH) and Asa'ib Ahl al-Haq (AAH).\10\ Since its 
establishment, Al-Huda Bank has been controlled and operated by the 
IRGC and IRGC-QF. Moreover, the chairman of Al-Huda Bank is complicit 
in Al-Huda Bank's illicit financial activities, including money 
laundering through front companies that conceal the true nature of and 
parties involved in illicit transactions, ultimately enabling the 
financing of terrorism.
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    \10\ The Department of State has authority to designate 
organizations as FTOs. The U.S. Department of the Treasury's Office 
of Foreign Assets Control (OFAC) has also designated the IRGC, IRGC-
QF, KH, and AAH pursuant to multiple sanctions authorities.
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    Given the nature of Iraq's economy and trade relationships, Iraqi 
businesses that import goods into Iraq rely on wire transfers of USD 
from the account of the Central Bank of Iraq (CBI) at the Federal 
Reserve Bank of New York (FRBNY), a process known as the wire auction, 
or more generally the ``CBI dollar auction.'' \11\ Many Iraqi 
businesses and financial institutions use the CBI dollar auction for 
legitimate purposes. However, FinCEN assesses that Al-Huda Bank has 
deliberately embarked on a strategy that relies on exploiting the CBI 
dollar auction to support designated FTOs, including the IRGC, IRGC-QF, 
KH, and AAH, with the support of the Iranian government. Al-Huda Bank 
has actively supported terrorist groups and abused the CBI dollar 
auction through numerous money laundering typologies, including use of 
fraudulent documentation to obscure the ultimate beneficiaries of the 
transactions. Given these facts, FinCEN assesses that there is a high 
risk of Al-Huda Bank exploiting USD correspondent relationships to 
support its money laundering and terrorist financing activity.
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    \11\ The CBI dollar auction comprises both (1) the wire auction 
and (2) bulk USD banknote shipments to Iraq which the CBI sells to 
exchange houses and banks in return for IQD. The latter is known as 
the ``cash auction'' and is a separate process from the wire 
auction. Al-Huda Bank's illicit finance activities described herein 
are related to the wire auction. See Section III.A.2.
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    This NPRM (1) sets forth FinCEN's finding that Al-Huda Bank is a 
foreign financial institution of primary money laundering concern; and 
(2) proposes that, under special measure five, covered financial 
institutions be prohibited from opening or maintaining a correspondent 
account for, or on behalf of, Al-Huda Bank.

III. Finding That Al-Huda Bank Is a Foreign Financial Institution of 
Primary Money Laundering Concern

    Pursuant to 31 U.S.C. 5318A(a)(1), FinCEN finds that reasonable 
grounds exist for concluding that Al-Huda Bank is a foreign financial 
institution of primary money laundering concern. Below is a discussion 
of the relevant statutory factors FinCEN considered in making this 
finding related to this Iraq-based financial institution.

A. The Extent to Which Al-Huda Bank Is Used To Facilitate or Promote 
Money Laundering Outside the United States, Including Any Money 
Laundering Activity by Organized Criminal Groups, International 
Terrorists, or Entities Involved in the Proliferation of WMD or 
Missiles

    FinCEN assesses that Al-Huda Bank is used to facilitate or promote 
money laundering outside the United States, particularly money 
laundering activity to support designated FTOs. FinCEN based this 
assessment on information available through both public and non-public 
reporting, and after thorough consideration of each of the following 
factors: (1) that Al-Huda Bank is a foreign financial institution; and 
(2) that Al-Huda Bank exploits its access to USD through the dollar 
auction; and (3) that through the exploitation of the dollar auction, 
Al-Huda Bank provides support to designated FTOs, in particular the 
IRGC and IRGC-QF, as well as Iran-aligned Iraqi militias KH and AAH.

[[Page 6076]]

1. Al-Huda Bank Is a Foreign Financial Institution
    Al-Huda Bank is a private commercial bank registered and 
headquartered in Baghdad, Iraq, with five domestic branch locations. 
These domestic branches are in Baghdad, Karbala, and Nasiriyah. Al-Huda 
Bank has no subsidiaries or branches outside of Iraq, and is regulated 
by the CBI.
    Al-Huda Bank has no direct U.S. correspondent banking relationships 
but interacts with the U.S. financial system indirectly through USD 
correspondent accounts at six foreign financial institutions. In other 
words, Al-Huda Bank interacts with foreign banks that themselves have 
correspondent accounts with U.S. banks. Al-Huda Bank also accesses USD 
through the CBI dollar auction.
2. Al-Huda Bank Exploits Its Access to USD Through the CBI Dollar 
Auction
    Individual Iraqi businesses that import goods into Iraq rely on 
wire transfers of USD from CBI's account at the FRBNY. The CBI wire 
auction is the mechanism by which the CBI provides USD to facilitate 
the purchase of imports. When Iraq sells oil in the international 
petroleum markets, the revenues are credited in USD to the CBI's 
account at the FRBNY. Iraqi companies with accounts at Iraqi banks can 
then access the CBI dollar auction to purchase USD with Iraqi dinar 
(IQD) to pay for imports. USD are transferred from the CBI's FRBNY 
account to an Iraqi bank, and onward to a third-country bank on behalf 
of a third-country exporter.
    Many Iraqi businesses and their banks use the CBI dollar auction 
for its intended, legitimate purpose of facilitating imports of goods. 
However, as discussed in section III.A.3, FinCEN assesses that Al-Huda 
Bank has deliberately embarked on a strategy that relies on 
illegitimate exploitation of the dollar auction to support designated 
FTOs, including the IRGC, IRGC-QF, KH, and AAH, with the support of the 
Iranian government.
    With the knowledge of Al-Huda Bank's chairman, Al-Huda Bank's abuse 
of the dollar auction is obfuscated through the application of numerous 
money laundering typologies, including the use of fraudulent 
documentation, fake deposits, identity documents of the deceased, fake 
companies, and counterfeit IQD, which are used to purchase USD and 
support terrorist groups and militias. For years, Al-Huda Bank has been 
involved in these deceptive money laundering activities. Examples of 
three of these money laundering typologies are discussed below: (1) 
fraudulent documentation; (2) stolen identities; and (3) counterfeit 
IQD. Al-Huda Bank's use of these money laundering typologies also risks 
exposing covered financial institutions to Al-Huda Bank's exploitation 
of USD correspondent banking relationships to support its terrorist 
financing activities, discussed in section III.A.3.
    Since at least 2012, Al-Huda Bank has used fraudulent documentation 
to purchase foreign currency--including USD--from the CBI at dollar 
auctions. Based on media reporting, during 2012 to 2014, Al-Huda Bank 
filed false documentation to justify international transfers of over $6 
billion to banks and companies.\12\ On at least one occasion, 
government authorities detected Al-Huda Bank's filing of fraudulent 
documentation, which resulted in freezing of a transfer of a 
significant amount of money. In another scheme, Al-Huda Bank would 
deposit fake checks to make the balance seem higher on the account Al-
Huda Bank used in dollar auctions. The fake check deposits would allow 
Al-Huda Bank to purchase USD using that false higher balance before the 
fake check bounced, which Al-Huda Bank would then write off.
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    \12\ Al-Arabiya, ``Billions of Dollars'' Smuggled Out of Iraq 
During Maliki's Rule, November 9, 2015, available at https://english.alarabiya.net/News/middle-east/2015/11/09/Iraq-smuggled-billions-of-dollars-during-Maliki-s-rule.
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    Al-Huda Bank, with its chairman's knowledge, has also abused the 
dollar auction by utilizing stolen identities. In one scheme, the Al-
Huda Bank chairman and other Al-Huda Bank officials would use the 
identification documents of deceased individuals to purchase USD in 
dollar auctions. Al-Huda Bank officials would also pay living people 
for use of their identification documents. The illicit use of 
identification documents allowed Al-Huda Bank to circumvent limits on 
currency purchases.
    With the knowledge of Al-Huda Bank's chairman, Al-Huda Bank has 
also been involved in funneling of counterfeit IQD through fake 
businesses in Iraq. The counterfeit IQD would be printed in Iran, 
funneled through Iraqi businesses, and then exchanged for USD. The use 
of counterfeit IQD greatly increases the amount of illicit profit 
gained from exchanging IQD for USD at the CBI dollar auction, and the 
funneling of counterfeit IQD through Iraqi businesses disguises the 
counterfeit IQD's source in Iran.
3. Through the Exploitation of the CBI Dollar Auction, Al-Huda Bank 
Provides Support to Designated FTOs
    Iran has exploited its relationship with Iraq-based, Iran-backed 
militias to influence Iraqi businesses and officials to generate 
illicit revenue for the militias' operations. As part of this effort, 
Iran has developed a network of commercial platforms, including 
financial institutions, to move funds and misrepresent trade-based 
financial transactions that obscure the ultimate beneficiary, namely 
Iran-backed terrorist groups and militias.
    Since its establishment, Al-Huda Bank has been controlled and 
operated by the IRGC and IRGC-QF. In 2008, the chairman of Al-Huda Bank 
established the bank specifically for the benefit of KH and has met 
with and taken orders from IRGC-QF leadership in Tehran, Iran. After 
establishing the bank, the Al-Huda Bank chairman began money laundering 
operations on behalf of the IRGC-QF and KH.
    Al-Huda Bank has funded Iran-aligned militias through a scheme in 
which Al-Huda Bank and other Iraqi banks have falsely claimed imports 
that did not exist into Iraq worth billions of dollars to justify the 
purchase of USD in the CBI dollar auction. Al-Huda Bank would purchase 
the USD with counterfeit IQD printed in Iran. Al-Huda Bank was not 
allowed to conduct financial transactions without the Iran-aligned 
militias' involvement and Al-Huda Bank would provide part of Al-Huda 
Bank's revenue from this scheme to those Iran-aligned militias.
    This fraudulent scheme has been a substantial source of funding for 
Iran-aligned militias' operations. The Iran-aligned Iraqi militia AAH 
has used companies based across Iraq to generate revenue, launder 
illicit profits, and convert IQD to USD. AAH has used Al-Huda Bank to 
maintain accounts for some of these companies, as well as to access the 
currency auction. The use of false imports, counterfeit currency, and 
front companies are essential components of exploitation of the CBI 
dollar auction by obscuring the source of funds and the purpose and 
ultimate beneficiaries of the transactions that support Iran-aligned 
Iraqi militias. Overall, IRGC and IRGC-QF use of Al-Huda Bank and 
several other Iraqi banks to access the dollar auction resulted in 
approximately $70 billion USD in profit from 2019 through 2020.

[[Page 6077]]

B. The Extent to Which Al-Huda Bank Is Used for Legitimate Business 
Purposes

    Al-Huda Bank is the 30th largest bank in Iraq and approximately the 
11,000th largest in the world, with 416 billion IQD ($285 million USD) 
in total assets in 2020, which is approximately 0.2 percent of total 
Iraqi banking system assets.\13\ Records collected by FinCEN show Al-
Huda Bank engaged in approximately $4.7 billion USD in USD-cleared 
international transactions through U.S. correspondent bank accounts 
between July 2017 and December 2022, the vast majority being CBI dollar 
auction-related transactions.
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    \13\ Al-Huda Bank, Consolidated Financial Statements, December 
31, 2020, available at www.alhudabank.iq.
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    In 2020, Al-Huda Bank's self-reported total revenues were 
8,937,678,000 IQD ($6,115,456 USD) with a gross profit of 2,753,653,000 
IQD ($1,884,140 USD). As of December 31, 2020, Al-Huda Bank held 
55,057,239,000 IQD ($37,671,991 USD) in customer account deposits, 
approximately 1,110,270,000 IQD ($760,000 USD) of which were current 
accounts belonging to private individuals.\14\
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    \14\ Id.
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    The assets noted above, based on Al-Huda Bank financial statements, 
are indicative of at least a portion of legitimate business transiting 
the financial institution. However, FinCEN assesses that Al-Huda Bank's 
legitimate business activities do not outweigh the money laundering 
risks posed by the bank, as the variety and type of the illicit finance 
risks presented by Al-Huda Bank are such that even a higher volume of 
legitimate activity would not allay FinCEN's significant money 
laundering concern.\15\ As demonstrated above, Al-Huda Bank facilitates 
the financing of a wide variety of terrorists and terrorist groups, 
many of whom have attacked citizens and partners of the United States. 
Further, there is significant information indicating that the owner and 
chairman of Al-Huda Bank is a witting and active participant in the 
illicit finance involving and perpetrated by Al-Huda Bank.
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    \15\ Relatedly, there is limited publicly available information 
about Al-Huda Bank's existing AML policies and procedures to enable 
a current, fulsome assessment. Al-Huda Bank's 2020 End-of-Year 
report stated that its internal compliance monitor reviewed Al-Huda 
Bank's procedures when opening checking accounts for customers and 
found that Al-Huda Bank met the instructions and directives of Iraqi 
AML, terrorist financing, and risk management law, and it confirmed 
that current account holders were not included in banned lists, 
domestically or internationally. Id. at 11-12. Given the totality of 
the circumstances, however, this self-assessment lacks credibility 
and does not alter FinCEN's overall assessment of concern.
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C. The Extent to Which Action Proposed by FinCEN Would Guard Against 
International Money Laundering and Other Financial Crimes

    As noted by the U.S. Department of State in 2023, corruption is a 
significant impediment to conducting business in Iraq, and Iran-aligned 
militias threaten U.S. citizens and companies throughout Iraq.\16\ Al-
Huda Bank has engaged in transactions that facilitate the financing of 
FTOs, including the IRGC, IRGC-QF, and Iran-aligned militias KH and 
AAH, with the support of the Iranian government. A finding that Al-Huda 
Bank is of primary money laundering concern would make clear to foreign 
correspondents Al-Huda Bank's illicit finance risk, and this awareness 
may cause those financial institutions or their regulators to take 
their own action to address the risk. Moreover, such a finding and 
subsequent imposition of one or more special measures would guard 
against money laundering and other financial crimes by severing Al-Huda 
Bank's access to the U.S. financial system.
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    \16\ U.S. Department of State, 2021 Investment Climate 
Statements: Iraq, 2021, available at https://www.state.gov/reports/2021-investment-climate-statements/iraq/.
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IV. Proposed Special Measure

    Having found that Al-Huda Bank is a financial institution of 
primary money laundering concern, particularly with regard to its 
misuse of the dollar auction to finance designated terrorist 
organizations, FinCEN proposes imposing a prohibition on covered 
financial institutions under special measure five. Special measure five 
authorizes the Secretary to impose conditions upon the opening or 
maintaining in the United States of a correspondent account or payable-
through account, if such account ``involves'' a financial institution 
of primary money laundering concern. Although Al-Huda Bank does not 
have correspondent accounts with U.S. financial institutions, it has 
accounts with foreign financial institutions that maintain U.S. 
correspondent accounts. Those U.S. correspondent accounts involve Al-
Huda Bank when transactions involving the bank are processed through 
those accounts. Thus, FinCEN has determined that special measure five 
will most effectively mitigate the risks posed by Al-Huda Bank.
    FinCEN considered the other special measures available under 
section 311. As discussed further in Section IV.E. below, it determined 
that none of them would appropriately address the risks posed by Al-
Huda Bank.
    In proposing this special measure, FinCEN consulted with the Board 
of Governors of the Federal Reserve System, the Office of the 
Comptroller of the Currency, the Secretary of State, the staff of the 
Securities and Exchange Commission, the Commodity Futures Trading 
Commission, staff of the National Credit Union Administration, the 
Federal Deposit Insurance Corporation, and the Attorney General. These 
consultations involved obtaining interagency views on the imposition of 
special measure five and the effects that such a prohibition would have 
on the U.S. domestic and international financial systems.
    Below is a discussion of the relevant statutory factors FinCEN 
considered in proposing the prohibition under special measure five.

A. Whether Similar Action Has Been or Is Being Taken by Other Nations 
or Multilateral Groups Regarding Al-Huda Bank

    FinCEN is not aware of any other nation or multilateral group that 
has imposed, or is currently imposing, similar action against Al-Huda 
Bank.

B. Whether the Imposition of Any Particular 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

    While FinCEN assesses that the prohibition proposed in this NPRM 
would place some cost and burden on covered financial institutions, 
these burdens are neither undue nor inappropriate in view of the threat 
posed by the illicit activity facilitated by Al-Huda Bank. As described 
above, Al-Huda Bank has had access to USD through the CBI dollar 
auction, which does not require Iraqi banks to have direct USD 
correspondent relationships. Also as described above, Al-Huda Bank has 
no direct USD correspondent relationships with U.S. financial 
institutions. Rather, it accesses USD through its nested correspondent 
relationships, including but not limited to six USD accounts outside 
the United States. These accounts may be used for commercial payments, 
as well as foreign exchange and money markets. Covered financial 
institutions and transaction partners have ample opportunity to arrange 
for alternative payment mechanisms in the absence of

[[Page 6078]]

correspondent banking relationships with Al-Huda Bank.
    As such, a prohibition on correspondent banking with Al-Huda Bank 
would impose minimal additional compliance costs for covered financial 
institutions, which would most commonly involve merely involve adding 
Al-Huda Bank to existing sanctions and money laundering screening 
tools. FinCEN assesses that given the risks posed by Al-Huda Bank's 
facilitation of money laundering, the additional burden on covered 
financial institutions in preventing the opening of correspondent 
accounts with Al-Huda Bank, as well as conducting due diligence on 
foreign correspondent account holders and notifying them of the 
prohibition, will be minimal and not undue.

C. 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 of Al-Huda Bank

    FinCEN assesses that imposing the proposed special measure would 
have minimal impact upon the international payment, clearance, and 
settlement system. As a comparatively small bank, responsible for a 
nominal amount of transaction volume in the region, Al-Huda Bank is not 
a systemically important financial institution in Iraq, regionally, or 
globally. FinCEN views that prohibiting Al-Huda Bank's access to U.S.-
Iraq correspondent banking channels would not affect overall cross-
border transaction volumes.
    Further, a prohibition under special measure five would not prevent 
Al-Huda Bank from conducting legitimate business activities in other 
foreign currencies. In addition to the six correspondent accounts used 
to access USD noted above, Al-Huda Bank currently holds two Euro 
accounts and two United Arab Emirates (UAE) dirham (AED) accounts as 
well.\17\ Provided that its legitimate activities do not involve a 
correspondent account maintained in the United States, the bank could 
continue to engage in them.
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    \17\ BankCheck, Al-Huda Bank--Iraq, accessed December 13, 2023, 
available at https://bankcheck.app.
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D. The Effect of the Proposed Action on United States National Security 
and Foreign Policy

    As described above, evidence available to FinCEN has demonstrated 
that Al-Huda Bank served as a significant conduit for the financing of 
FTOs in violation of U.S. and international sanctions. Imposing special 
measure five will: (1) close Al-Huda Bank's access to USD; (2) remove 
Al-Huda Bank as an illicit finance facilitator within an international 
network of front companies and sanctions evasion infrastructure 
supporting these FTOs; and (3) raise awareness of the way illicit 
actors exploit weaknesses in vulnerable jurisdictions to circumvent 
sanctions and finance terrorism.

E. Consideration of Alternative Special Measures

    In assessing the appropriate special measure to impose, FinCEN 
considered alternatives to a prohibition on the opening or maintaining 
in the United States of correspondent accounts or payable-through 
accounts, including the imposition of one or more of the first four 
special measures, or imposing conditions on the opening or maintaining 
of correspondent accounts under special measure five. Having considered 
these alternatives and for the reasons set out below, FinCEN assesses 
that none of the other special measures available under section 311 
would appropriately address the risks posed by Al-Huda Bank and the 
urgent need to prevent it from accessing USD through correspondent 
banking entirely.
    With the knowledge of Al-Huda Bank's chairman, Al-Huda Bank's abuse 
of the dollar auction is obfuscated through the application of numerous 
money laundering typologies, including the use of fraudulent 
documentation, fake deposits, identity documents of the deceased, fake 
companies, and counterfeit IQD, which are used to purchase USD and 
support terrorist groups and militias. Taken as a whole, Al-Huda Bank's 
illicit activities present a heightened risk of obscured transaction 
counterparty identification that would be undetectable by covered 
financial institutions. Indeed, a key feature of the facilitation of 
funding for Iranian and Iran-aligned FTOs through Al-Huda Bank is the 
use of fake companies to obscure the true beneficial owners and 
ultimate destinations of funds involved in the transactions. Moreover, 
this behavior provides opportunities for obscuring the identities of 
transaction counterparties to correspondent banking relationship 
providers.
    Because of the nature, extent, and purpose of the obfuscation 
engaged in by Al-Huda Bank, any special measure intended to mandate 
additional information collection would likely be ineffective and 
insufficient to determine the true identity of illicit finance actors. 
For example, the provision under special measure one, that ``the 
identity and address of the participants in a transaction or 
relationship, including the identity of the originator of any funds 
transfer'' be collected in records and reports, could be circumvented 
by the operations of shell companies, wherein the reported identity of 
the originator serves to obscure the true beneficial owner or 
originator. This would accordingly be ineffective in preventing illicit 
transactions. Al-Huda Bank's record of such circumvention suggests 
special measure one would not adequately protect the U.S. financial 
system from the threats posed by the bank.
    Further, the requirements under special measures three and four, 
that domestic financial institutions obtain ``with respect to each 
customer (and each such representative), information that is 
substantially comparable to that which the depository institution 
obtains in the ordinary course of business with respect to its 
customers residing in the United States'', are also likely to be 
ineffective. First, Al-Huda Bank's use of nested correspondent account 
access through layers of payment systems would render these alternative 
measures ineffective. Only significant effort and expense by U.S. 
institutions could fill this gap, which would impose a disproportionate 
compliance burden and with no guarantee that the money laundering 
threat would be addressed through customer due diligence research.
    FinCEN also considered special measure two, which may require 
domestic financial institutions to ``obtain and retain information 
concerning the beneficial ownership of any account opened or maintained 
in the United States by a foreign person.'' The agency determined this 
special measure to be largely irrelevant since the concerns involving 
Al-Huda Bank do not involve the opening or maintaining of accounts in 
the U.S. by foreign persons.
    FinCEN similarly assesses that merely imposing conditions under 
special measure five would be inadequate to address the risks posed by 
Al-Huda Bank's activities. Special measure five also enables FinCEN to 
impose conditions as an alternative to a prohibition on the opening or 
maintaining of correspondent accounts. Given Al-Huda Bank's consistent 
and longstanding ties to terrorist financing organizations since its 
inception, and its track record of obfuscating transactions and account 
holders, FinCEN determined that imposing any condition would not be an 
effective measure to safeguard the U.S. financial system.

[[Page 6079]]

FinCEN assesses that the billions of dollars supplied to terrorist 
groups through Al-Huda Bank's exploitation of its access to USD, and 
the exposure of U.S. financial institutions to Al-Huda Bank's illicit 
activity outweigh the value in providing conditioned access to the U.S. 
financial system for any purportedly legitimate business activity. 
Conditions on the opening or maintaining of correspondent accounts 
would likely be insufficient to prevent illicit financial flows through 
the U.S. financial system, given Al-Huda Bank's use of fraudulent 
documentation and front companies to obscure its financing of terrorist 
groups in order to access USD. Given Al-Huda Bank's deliberate use of 
money laundering typologies, FinCEN cannot craft sufficient conditions 
to enable covered financial institutions to open or maintain 
correspondent accounts for Al-Huda Bank without introducing severe risk 
to those financial institutions in processing transactions that 
ultimately finance terrorism.
    FinCEN, thus, assesses that any condition or additional 
recordkeeping or reporting requirement would be an ineffective measure 
to safeguard the U.S. financial system. Such measures would not prevent 
Al-Huda Bank from accessing the correspondent accounts of U.S. 
financial institutions, thus leaving the U.S. financial system 
vulnerable to processing illicit transfers that are likely to finance 
terrorist groups, posing a significant national security and money 
laundering risk. In addition, no recordkeeping or reporting 
requirements or conditions would be sufficient to guard against the 
risks posed by a bank that processes transactions that are designed to 
obscure the transactions' true nature and are ultimately for the 
benefit of terrorist groups. Therefore, FinCEN has determined that a 
prohibition on opening or maintaining correspondent banking 
relationships is the only special measure out of the special measures 
available under section 311 that can adequately protect the U.S. 
financial system from the illicit finance risk posed by Al-Huda Bank. 
For these reasons, and after thorough consideration of alternate 
measures, FinCEN assesses that no measures short of full prohibition on 
correspondent or payable-through banking access would be sufficient to 
address the money laundering risks posed by Al-Huda Bank.

V. Section-by-Section Analysis

    The goal of this proposed rule is to combat and deter money 
laundering in facilitation of terrorist financing associated with Al-
Huda Bank and prevent Al-Huda Bank from using the U.S. financial system 
to enable its illicit finance behavior.

A. 1010.663(a)--Definitions

1. Definition of Al-Huda Bank
    The term ``Al-Huda Bank'' means all subsidiaries, branches, and 
offices of Al-Huda Bank operating as a bank in any jurisdiction. FinCEN 
is not currently aware of any subsidiary banks or branches outside of 
Iraq.
2. Definition of Correspondent Account
    The term ``correspondent account'' has the same meaning as the 
definition contained in 31 CFR 1010.605(c)(1)(ii). 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. FinCEN is using the same 
definition of ``account'' for purposes of this proposed rule as is 
established for depository institutions in the final rule implementing 
the provisions of section 312 of the USA PATRIOT Act, requiring 
enhanced due diligence for correspondent accounts maintained for 
certain foreign banks.\18\ Under this definition, ``payable-through 
accounts'' are a type of correspondent account.
---------------------------------------------------------------------------

    \18\ See 31 CFR 1010.605(c)(2)(i).
---------------------------------------------------------------------------

    In the case of securities broker-dealers, futures commission 
merchants, introducing brokers in commodities, and investment companies 
that are open-end companies (mutual funds), FinCEN is also using the 
same definition of ``account'' for purposes of this proposed rule as 
was established for these entities in the final rule implementing the 
provisions of section 312 of the USA PATRIOT Act, requiring due 
diligence for correspondent accounts maintained for certain foreign 
banks.\19\
---------------------------------------------------------------------------

    \19\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
---------------------------------------------------------------------------

3. Definition of Covered Financial Institution
    The term ``covered financial institution'' is defined 31 CFR 
1010.100(t), which in general includes the following:
     A bank (except bank credit card systems);
     A broker or dealer in securities;
     A money services business, as defined in 31 CFR 
1010.100(ff);
     A telegraph company;
     A casino;
     A card club;
     A person subject to supervision by any state or Federal 
bank supervisory authority;
     A futures commission merchant or an introducing broker-
commodities; and
     A mutual fund.
4. Definition of Foreign Banking Institution
    The term ``foreign banking institution'' 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. This is consistent with the definition of ``foreign bank'' 
under 31 CFR 1010.100. This proposed rule interprets Al-Huda Bank to be 
a foreign banking institution.
5. Definition of Subsidiary
    The term ``subsidiary'' means a company of which more than 50 
percent of the voting stock or analogous equity interest is owned by 
another company.

B. 1010.663(b)--Prohibition on Accounts and Due Diligence Requirements 
for Covered Financial Institutions

1. Prohibition on Opening or Maintaining Correspondent Accounts
    Section 1010.663(b)(1) of the proposed rule would prohibit covered 
financial institutions from opening or maintaining in the United States 
a correspondent account for, or on behalf of, Al-Huda Bank.
2. Prohibition on Use of Correspondent Accounts Involving Al-Huda Bank
    Section 1010.663(b)(2) of the proposed rule would require covered 
financial institutions to take reasonable steps to not process a 
transaction for the correspondent account of a foreign banking 
institution in the United States if such a transaction involves Al-Huda 
Bank. Such reasonable steps are described in 1010.663(b)(3), which sets 
forth the special due diligence requirements a covered financial 
institution would be required to take when it knows or has reason to 
believe that a transaction involves Al-Huda Bank.
3. Special Due Diligence for Correspondent Accounts
    As a corollary to the prohibition set forth in section 
1010.663(b)(1) and (2), section 1010.663(b)(3) of the proposed rule 
would require covered financial institutions to apply special due 
diligence to all of their foreign

[[Page 6080]]

correspondent accounts that is reasonably designed to guard against 
such accounts being used to process transactions involving Al-Huda 
Bank. As part of that special due diligence, covered financial 
institutions would be required to notify those foreign correspondent 
account holders that the covered financial institutions know or have 
reason to believe provide services to Al-Huda Bank, that such 
correspondents may not provide Al-Huda Bank with access to the 
correspondent account maintained at the covered financial institution. 
A covered financial institution may satisfy this notification 
requirement using the following notice:

    Notice: Pursuant to U.S. regulations issued under Section 311 of 
the USA PATRIOT Act, see 31 CFR 1010.663, we are prohibited from 
opening or maintaining in the United States a correspondent account 
for, or on behalf of, Al-Huda Bank. The regulations also require us 
to notify you that you may not provide Al-Huda Bank, including any 
of its subsidiaries, branches, and offices access to the 
correspondent account you hold at our financial institution. If we 
become aware that the correspondent account you hold at our 
financial institution has processed any transactions involving Al-
Huda Bank, including any of its subsidiaries, branches, and offices, 
we will be required to take appropriate steps to prevent such 
access, including terminating your account.

    The purpose of the notice requirement is to aid cooperation with 
correspondent account holders in preventing transactions involving Al-
Huda Bank from accessing the U.S. financial system. FinCEN does not 
require or expect a covered financial institution to obtain a 
certification from any of its correspondent account holders that access 
will not be provided to comply with this notice requirement.
    Methods of compliance with the notice requirement could include, 
for example, transmitting a notice by mail, fax, or email. The notice 
should be transmitted whenever a covered financial institution knows or 
has reason to believe that a foreign correspondent account holder 
provides services to Al-Huda Bank.
    Special due diligence also includes implementing risk-based 
procedures designed to identify any use of correspondent accounts to 
process transactions involving Al-Huda Bank. A covered financial 
institution would be expected to apply an appropriate screening 
mechanism to identify a funds transfer order that on its face listed 
Al-Huda Bank as the financial institution of the originator or 
beneficiary, or otherwise referenced Al-Huda Bank in a manner 
detectable under the financial institution's normal screening 
mechanisms. An appropriate screening mechanism could be the mechanisms 
used by a covered financial institution to comply with various legal 
requirements, such as commercially available software programs used to 
comply with the economic sanctions programs administered by the U.S. 
Department of the Treasury's Office of Foreign Assets Control (OFAC).
4. Recordkeeping and Reporting
    Section 1010.663(b)(4) of the proposed rule would clarify that the 
proposed rule does not impose any reporting requirement upon any 
covered financial institution that is not otherwise required by 
applicable law or regulation. A covered financial institution must, 
however, document its compliance with the notification requirement 
described above in section 1010.663(b)(3).

VI. Request for Comments

    FinCEN is requesting comments for 30 days after the publication of 
this NPRM. Given Al-Huda Bank's consistent and longstanding ties to 
terrorist financing and its track record of obfuscating transactions, 
FinCEN assesses that a 30-day comment period for this NPRM strikes an 
appropriate balance between ensuring sufficient time for notice to the 
public and opportunity for comment on the proposed rule, while 
minimizing undue risk posed to the U.S. financial system in processing 
illicit transfers that are likely to finance terrorist groups. FinCEN 
invites comments on all aspects of the proposed rule, including the 
following specific matters:
    1. FinCEN's proposal of a prohibition under the fifth special 
measure under 31 U.S.C. 5318A(b), as opposed to imposing special 
measures one through four or imposing conditions under the fifth 
special measure;
    2. The form and scope of the notice to certain correspondent 
account holders that would be required under the rule; and
    3. The appropriate scope of the due diligence requirements in this 
proposed rule.

VII. Regulatory Impact Analysis

    FinCEN has analyzed this proposed rule under Executive Orders 
12866, 13563, and 14094, the Regulatory Flexibility Act,\20\ the 
Unfunded Mandates Reform Act,\21\ and the Paperwork Reduction Act.\22\
---------------------------------------------------------------------------

    \20\ 5 U.S.C. 603.
    \21\ 12 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
    \22\ 44 U.S.C. 3507(a)(1)(D).
---------------------------------------------------------------------------

    As discussed above, the intended effects of the imposition of 
special measure five to Al-Huda Bank are twofold. The rule is expected 
to (1) combat and deter money laundering in facilitation of terrorist 
financing associated with Al-Huda Bank, and (2) prevent Al-Huda Bank 
from using the U.S. financial system to enable its illicit finance 
behavior. In the analysis below, FinCEN discusses the economic effects 
that are expected to accompany adoption of the rule as proposed and 
assess such expectations in more granular detail. This discussion 
includes detailed explanation of certain ways FinCEN's conclusions may 
be sensitive to methodological choices and underlying assumptions made 
in drawing inferences from available data. Throughout, these have been 
outlined so that the public may review and provide comment.\23\
---------------------------------------------------------------------------

    \23\ See Section VII.
---------------------------------------------------------------------------

A. Executive Orders

    Executive Orders 12866, 13563, and 14094 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 this proposed rule is not a significant 
regulatory action under section 3(f) of Executive Order 12866, as 
amended by Executive Order 14094. Accordingly, a regulatory impact 
analysis is not required.

B. Regulatory Flexibility Act

    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (RFA) requires the agency to ``prepare and make 
available for public comment an initial regulatory flexibility 
analysis'' (IRFA) that will ``describe the impact of the proposed rule 
on small entities.'' \24\ However, Section 605 of the RFA allows an 
agency to certify a rule, in lieu of preparing an analysis, if the 
proposed rulemaking is not expected to have a significant economic 
impact on a substantial number of small entities. This proposed rule 
would apply to all covered financial institutions and would affect a 
substantial number of small entities. However, for the reasons 
described below, FinCEN assesses that these changes would be unlikely 
to have

[[Page 6081]]

a significant economic impact on such entities.
---------------------------------------------------------------------------

    \24\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    Covered financial institutions would also be required to take 
reasonable measures to detect use of their correspondent accounts to 
process transactions involving Al-Huda Bank. All U.S. persons, 
including U.S. financial institutions, currently must comply with OFAC 
sanctions, and U.S. financial institutions generally have suspicious 
activity reporting requirements and systems in place to screen 
transactions to comply with OFAC sanctions and section 311 special 
measures administered by FinCEN. The systems that U.S. financial 
institutions have in place to comply with these requirements can easily 
be modified to adapt to this proposed rule. Thus, the special due 
diligence that would be required under the proposed rule -- i.e., 
preventing the processing of transactions involving Al-Huda Bank and 
the transmittal of notification to certain correspondent account 
holders--would not impose a significant additional economic burden upon 
small U.S. financial institutions. For these reasons, FinCEN certifies 
that the proposals contained in this rulemaking would not have a 
significant impact on a substantial number of small businesses.
    FinCEN invites comments from members of the public who believe 
there would be a significant economic impact on small entities from the 
imposition of a prohibition under the fifth special measure regarding 
Al-Huda Bank.

C. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 \25\ 
(Unfunded Mandates Reform Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that may result 
in expenditure by the state, local, and tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year, adjusted for inflation.\26\ If a budgetary impact statement is 
required, section 202 of the Unfunded Mandates Reform Act also requires 
an agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule.\27\
---------------------------------------------------------------------------

    \25\ 12 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
    \26\ Id.
    \27\ Id.
---------------------------------------------------------------------------

    FinCEN has determined that this proposed rule will not result in 
expenditures by state, local, and tribal governments, in the aggregate, 
or by the private sector, of an annual $100 million or more, adjusted 
for inflation ($184.7 million).\28\ Accordingly, FinCEN has not 
prepared a budgetary impact statement or specifically addressed the 
regulatory alternatives considered.
---------------------------------------------------------------------------

    \28\ The Unfunded Mandates Reform Act requires an assessment of 
mandates that will result in an annual expenditure of $100 million 
or more, adjusted for inflation. The U.S. Bureau of Economic 
Analysis reports the annual value of the gross domestic product 
(GDP) deflator in the first quarter of 1995, the year of the 
Unfunded Mandates Reform Act, as 66.452, and as 122.762 in the third 
quarter of 2023, the most recent available. See U.S. Bureau of 
Economic Analysis, ``Table 1.1.9. Implicit Price Deflators for Gross 
Domestic Product'' (accessed December 14, 2023) available at https://www.bea.gov/itable/. Thus, the inflation adjusted estimate for $100 
million is 122.762/66.452 x 100 = $184.7 million.
---------------------------------------------------------------------------

D. Paperwork Reduction Act

    The recordkeeping and reporting requirements, referred to by the 
Office of Management and Budget (OMB) as a collection of information, 
contained in this proposed rule will be submitted by FinCEN to the OMB 
for review in accordance with the Paperwork Reduction Act of 1995 
(PRA).\29\ Under the PRA, 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 control number assigned by the OMB. Written 
comments and recommendations for the proposed prohibition can be 
submitted by visiting www.reginfo.gov/public/do/PRAMain. Find this 
particular document by selecting ``Currently under Review--Open for 
Public Comments'' or by using the search function. Comments are welcome 
and must be received by [30 DAYS AFTER DATE OF PUBLICATION IN THE 
FEDERAL REGISTER]. In accordance with requirements of the PRA and its 
implementing regulations, 5 CFR part 1320, the following information 
concerning the collection of information as required by 31 CFR 1010.663 
is presented to assist those persons wishing to comment on the 
information collections.
---------------------------------------------------------------------------

    \29\ 44 U.S.C. 3507(a)(1)(D).
---------------------------------------------------------------------------

    The provisions in this proposed rule pertaining to the collection 
of information can be found in section 1010.663(b)(4). The information 
required to be maintained by that section will be used by federal 
agencies and certain self-regulatory organizations to verify compliance 
by covered financial institutions with the notification requirements in 
31 CFR 1010.663(b)(3)(i)(A), which are intended to aid cooperation from 
correspondent account holders in denying the Al Huda Bank access to the 
U.S. financial system. The collection of information would be 
mandatory.
    Frequency: As required.
    Description of Affected Financial Institutions: Only those covered 
financial institutions defined in section 1010.663(a)(3) engaged in 
correspondent banking with, or processing transactions potentially 
involving, Al-Huda Bank as defined in section 1010.663(b)(1) and (2) 
would be affected.
    Estimated Number of Affected Financial Institutions: Approximately 
15,000.\30\
---------------------------------------------------------------------------

    \30\ This estimate is informed by public and non-public data 
sources regarding both an expected maximum number of entities that 
may be affected and the number of active, or currently reporting, 
registered financial institutions.

      Table 1--Estimates of Affected Financial Institutions by Type
------------------------------------------------------------------------
                                                               Number of
                 Financial institution type                    entities
------------------------------------------------------------------------
Banks \31\..................................................  \32\ 9,250
Broker-Dealers in securities \33\...........................  \34\ 3,477
Mutual Funds \35\...........................................  \36\ 1,495
Futures Commission Merchants \37\...........................     \38\ 62
Introducing Brokers in Commodities \39\.....................    \40\ 937
------------------------------------------------------------------------

    Estimated Average Annual Burden in Hours per Affected Financial 
Institution: The estimated average annual burden associated with the 
collection of information in this

[[Page 6082]]

proposed rule is one hour per affected financial institution.
---------------------------------------------------------------------------

    \31\ See 31 CFR 1010.100(t)(1); see also 31 CFR 1010.100(d).
    \32\ Bank data is as of December 14, 2023, from Federal Deposit 
Insurance Corporation BankFind (https://banks.data.fdic.gov/bankfind-suite/bankfind). Credit union data is as of September 30, 
2023 from the National Credit Union Administration Quarterly Data 
Summary Reports (https://ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-data-summary-reports).
    \33\ 31 CFR 1010.100(t)(2).
    \34\ According to the Securities and Exchange Commission (SEC), 
there are 3,477 broker-dealers in securities as of December 2023 
from website ``Company Information About Active Broker-Dealers'' 
(https://www.sec.gov/help/foiadocsbdfoia).
    \35\ 31 CFR 1010.100(t)(10).
    \36\ According to the SEC, as of the third quarter of 2023, 
there are 1,495 open-end registered investment companies that report 
on Form N-CEN. (https://www.sec.gov/dera/data/form-ncen-data-sets).
    \37\ 31 CFR 1010.100(t)(8).
    \38\ According to the Commodity Futures Trading Commission 
(CFTC), there are 62 futures commission merchants as of October 31, 
2023. See Financial Data for FCMs, available at https://www.cftc.gov/MarketReports/financialfcmdata/index.htm.
    \39\ 31 CFR 1010.100(t)(9).
    \40\ According to National Futures Association, there are 937 
introducing brokers in commodities as of November 30, 2023.
---------------------------------------------------------------------------

    Estimated Total Annual Burden: Approximately 15,000 hours.
    FinCEN specifically invites comments on: (a) whether the proposed 
collection of information found in section 1010.663(b)(4) is necessary 
for the proper performance of the mission of FinCEN, including whether 
the information would 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.

VIII. Regulatory Text

List of Subjects in 31 CFR Part 1010

    Administrative practice and procedure, Banks, Banking, Brokers, 
Crime, Foreign banking, Terrorism.

Authority and Issuance

    For the reasons set forth in the preamble, FinCEN proposes amending 
31 CFR part 1010 as follows:

PART 1010--GENERAL PROVISIONS

0
1. The authority citation for part 1010 continues to read as follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 
5316-5336; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec. 
2006, Pub. L. 114-41, 129 Stat. 458-459; sec. 701 Pub. L. 114-74, 
129 Stat. 599; sec. 6403, Pub. L. 116-283, 134 Stat. 3388.

0
2. Add Sec.  1010.663 to read as follows:


Sec.  1010.663  Special measures regarding Al-Huda Bank.

    (a) Definitions. For purposes of this section, the following terms 
have the following meanings.
    (1) Al-Huda Bank. The term ``Al-Huda Bank'' means all subsidiaries, 
branches, and offices of Al-Huda Bank operating as a bank in any 
jurisdiction.
    (2) Correspondent account. The term ``correspondent account'' has 
the same meaning as provided in Sec.  1010.605(c)(l)(ii).
    (3) Covered financial institution. The term ``covered financial 
institution'' has the same meaning as provided in Sec.  1010.605(e)(2).
    (4) Foreign banking institution. The term ``foreign banking 
institution'' 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.
    (5) Subsidiary. The term ``subsidiary'' means a company of which 
more than 50 percent of the voting stock or analogous equity interest 
is owned by another company.
    (b) Prohibition on accounts and due diligence requirements for 
covered financial institutions--(1) Prohibition on opening or 
maintaining correspondent accounts for Al-Huda Bank. A covered 
financial institution shall not open or maintain in the United States a 
correspondent account for, or on behalf of, Al-Huda Bank.
    (2) Prohibition on processing transactions involving Al-Huda Bank. 
A covered financial institution shall take reasonable steps not to 
process a transaction for the correspondent account in the United 
States of a foreign banking institution if such a transaction involves 
Al-Huda Bank.
    (3) Special due diligence of correspondent accounts to prohibit 
transactions. (i) A covered financial institution shall apply special 
due diligence to its foreign correspondent accounts that is reasonably 
designed to guard against their use to process transactions involving 
Al-Huda Bank. At a minimum, that special due diligence must include:
    (A) Notifying those foreign correspondent account holders that the 
covered financial institution knows or has reason to believe provide 
services to Al-Huda Bank that such correspondents may not provide Al-
Huda Bank with access to the correspondent account maintained at the 
covered financial institution; and
    (B) Taking reasonable steps to identify any use of its foreign 
correspondent accounts by Al-Huda Bank, to the extent that such 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 
reasonably must adopt to guard against the use of its foreign 
correspondent accounts to process transactions involving Al-Huda Bank.
    (iii) A covered financial institution that knows or has reason to 
believe that a foreign bank's correspondent account has been or is 
being used to process transactions involving Al-Huda Bank shall take 
all appropriate steps to further investigate and prevent such access, 
including the notification of its correspondent account holder under 
paragraph (b)(3)(i)(A) of this section and, where necessary, 
termination of the correspondent account.
    (4) Recordkeeping and reporting. (i) A covered financial 
institution is required to document its compliance with the 
notification requirement set forth in this section.
    (ii) Nothing in paragraph (b) of this section shall require a 
covered financial institution to report any information not otherwise 
required to be reported by law or regulation.

    Dated: January 29, 2024.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-02004 Filed 1-30-24; 8:45 am]
BILLING CODE 4810-02-P