[Federal Register Volume 89, Number 128 (Wednesday, July 3, 2024)]
[Rules and Regulations]
[Pages 55051-55059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14415]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506-AB65


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

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

ACTION: Final rule.

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SUMMARY: FinCEN is issuing this final rule to prohibit covered U.S. 
financial institutions from opening or maintaining a correspondent 
account for, or on behalf of Al-Huda Bank, a foreign financial 
institution based in Iraq found to be of primary money laundering 
concern pursuant to section 311 of the USA PATRIOT Act. The rule 
further requires covered U.S. financial institutions to take reasonable 
steps not to process transactions for the correspondent account of a 
foreign banking institution in the United States if such a transaction 
involves Al-Huda Bank. It also requires covered institutions to apply 
special due diligence to their foreign correspondent accounts that is 
reasonably designed to guard against their use to process transactions 
involving Al-Huda Bank.

DATES: This final rule is effective August 2, 2024.

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

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Provisions

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (USA 
PATRIOT Act). Title III of the USA PATRIOT Act 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.\1\ 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.'' 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\ 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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[[Page 55052]]

    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 a correspondent account for or on 
behalf of a foreign banking institution, if such correspondent 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).
    \4\ 31 U.S.C. 5318A(b)(5).
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B. Al-Huda Bank

    Al-Huda Bank is a private commercial bank registered and 
headquartered in Baghdad, Iraq, with five branch locations in Baghdad, 
Karbala, and Nasiriyah, Iraq. Al-Huda Bank has no subsidiaries or 
branches outside of Iraq and is regulated by the Central Bank of Iraq 
(CBI).
    Al-Huda Bank has no direct U.S. correspondent banking relationships 
but interacts with the U.S. financial system indirectly through U.S. 
dollar (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.

II. FinCEN's Section 311 Rulemaking Regarding Al-Huda Bank

A. Finding

    In a notice of proposed rulemaking (NPRM) published in the Federal 
Register on January 31, 2024, FinCEN found that reasonable grounds 
exist for concluding that Al-Huda Bank is a foreign financial 
institution of primary money laundering concern pursuant to 31 U.S.C. 
5318A.\5\
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    \5\ 89 FR 6074 (Jan. 31, 2024).
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    As described in the NPRM, FinCEN assesses that Al-Huda Bank has 
exploited its access to 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).\6\ 
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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    \6\ The U.S. 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 CBI account at the Federal Reserve Bank of New York (FRBNY), a 
process known as the wire auction, or more generally the ``CBI dollar 
auction.'' \7\ 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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    \7\ 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 Iraqi dinar (IQD). The 
latter is known as the ``cash auction'' and is a separate process 
from the wire auction. Al-Huda Bank's known illicit finance 
activities described herein are related to the wire auction.
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1. Al-Huda Bank Has Exploited Its Access to USD Through the Wire 
Auction
    Individual Iraqi businesses that import goods into Iraq rely on 
wire transfers of USD from CBI's account at the FRBNY. The wire 
auction, a part of what is known as the CBI dollar 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 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, FinCEN assesses that Al-Huda Bank has deliberately embarked on 
a strategy that relies on illegitimate exploitation of the CBI 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 CBI dollar auction was 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 were 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.
    Since at least 2012, Al-Huda Bank has used fraudulent documentation 
to purchase foreign currency--including USD--from the CBI at CBI dollar 
auctions. Based on media reporting, between 2012 and 2014, Al-Huda Bank 
filed false documentation to justify international transfers of over $6 
billion to banks and companies.\8\ 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 CBI 
dollar auctions. The fake check deposits would allow Al-Huda Bank to 
purchase USD using that false higher balance before the fake check

[[Page 55053]]

bounced, which Al-Huda Bank would then write off.
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    \8\ Al-Arabiya, ``Billions of Dollars'' Smuggled Out of Iraq 
During Maliki's Rule (Nov. 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 
CBI 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 CBI 
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.
2. Through the Exploitation of the Wire Auction, Al-Huda Bank Has 
Provided 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 beneficiaries, 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 
into Iraq that did not exist 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 CBI dollar auction resulted in 
approximately $70 billion USD in profit, from 2019 through 2020.

B. Proposed Special Measure

    In the NPRM, FinCEN proposed: (1) to prohibit covered financial 
institutions from opening or maintaining a correspondent account in the 
United States for, or on behalf of, Al-Huda Bank; (2) to prohibit 
covered financial institutions from processing a transaction involving 
Al-Huda Bank through the United States correspondent account of a 
foreign banking institution; and (3) a requirement for covered 
financial institutions to apply special due diligence to their foreign 
correspondent accounts that is reasonably designed to guard against 
their use to process transactions involving Al-Huda Bank.\9\ The 
comment period for the NPRM closed on March 1, 2024.
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    \9\ 89 FR 6074 (Jan. 31, 2024).
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    As further described below, FinCEN is adopting the proposal as a 
final rule. In so doing, FinCEN has considered public comments and the 
relevant statutory factors and has engaged in the required 
consultations prescribed by 31 U.S.C. 5318A.

C. Subsequent Developments

    Following the issuance of the NPRM, the CBI banned Al-Huda Bank 
from accessing the CBI dollar auction.\10\ However, in light of Al-Huda 
Bank's consistent and longstanding ties to terrorist organizations 
since its inception and its history of obfuscating transactions and 
account holders in support of those organizations, it is reasonable to 
assess that Al-Huda Bank will seek ways to continue that support even 
without access to the CBI dollar auction, through its access to USD 
correspondent banking relationships in the region. Therefore, Al-Huda 
Bank remains of primary money laundering concern.
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    \10\ Reuters, Iraq bans 8 local banks from US dollar 
transactions (Feb. 4, 2024), available at https://www.reuters.com/business/finance/iraq-bans-8-local-banks-us-dollar-transactions-2024-02-04/.
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D. Consideration of Comments

    Concurrent with the issuance of the NPRM on January 31, 2024, 
FinCEN opened a comment period that closed on March 1, 2024. FinCEN 
received seven comments; they are described below, along with FinCEN's 
response. Neither Al-Huda Bank nor its officers submitted any comments.
1. Comments Attesting to Al-Huda Bank's or Bank Owner Hamad al-
Moussawi's Good Reputation
    In response to the NPRM, FinCEN received four comments attesting to 
the good reputation of the owner and chairman of Al-Huda Bank, Hamad 
al-Moussawi (al-Moussawi). Commenters claimed that al-Moussawi is 
``pro-Western,'' a ``democracy supporter,'' and holds ``purely liberal 
ideas.'' Several commenters also claimed that al-Moussawi ``does not 
have any suspicious relationships'', or ties with ``Iranian backed 
groups'' or ``extremist Islamic parties or other sectarian parties.'' 
Two commenters commented on the reputation of Al-Huda Bank itself. One 
described the bank as ``one of the disciplined banks with a good 
reputation.'' The second claimed that ``the bank has not faced any 
accusations of this kind previously.'' These commenters have not 
provided any specific evidence or documentation to support their 
claims. Further, even if they could be substantiated, such general 
claims about Al-Huda Bank and its owner al-Moussawi would not allay 
FinCEN's concerns regarding Al-Huda Bank's specific illicit conduct.
2. Comments Disputing the Feasibility of Money Laundering Typologies 
Outlined in the NPRM
    Two commenters claimed that it would be ``impossible'' or 
``unrealistic'' for a bank to conduct the type of illicit activity 
described in the NPRM, given the CBI's supervision and controls. 
Specifically, these commenters disputed the ability of any Iraqi bank 
to utilize forged checks and counterfeit IQD.
    These comments do not allay FinCEN's concerns regarding Al-Huda 
Bank, as the commenters have not provided specific evidence or 
documentation to support their claims.

[[Page 55054]]

3. Comments Questioning the Sources Cited in the NPRM
    Four comments claimed that FinCEN did not provide sufficient 
evidence, and/or relied upon inaccurate, biased public and non-public 
information. Four comments questioned the veracity of media reporting 
as evidence in the NPRM. One commenter found that the NPRM ``relied on 
information from media sources'' and stated that ``media in the Middle 
East, as a whole, is unprofessional, participates in corrupt practices, 
lacks neutrality, and is irresponsible.'' Another commenter claimed 
that information FinCEN used, including media reporting, ``is often not 
thoroughly researched, and if the reports received by [FinCEN] 
originated from Iraqi parties, [. . .] those reports were built on the 
basis of animosity towards individuals and a desire to harm their 
interests, rather than a desire to present facts.'' These comments do 
not allay FinCEN's concerns regarding Al-Huda Bank, as they cite no 
specific evidence that would call into question the reliability of the 
media reporting and sources upon which FinCEN has relied.
    Moreover, FinCEN based its findings on corroborated evidence from 
both public and non-public sources, of which media reporting was only a 
small part. In making its finding of primary money laundering concern 
and adopting special measure five to address it, FinCEN has considered 
the totality of information available to it, including from media 
organizations, and has independently evaluated its sources for 
credibility, potential bias, and accuracy. One commenter claimed to 
have ``found a document issued by the Central Bank of Iraq denying the 
accuracy'' of an article cited in the NPRM. The article reported that, 
from 2012 to 2014, Al-Huda Bank used forged documents in transfers of 
over $6 billion to banks and companies outside of Iraq.\11\ The 
document stated that there were no such personal money transfers 
transferred out of Iraq to the account of Al-Huda Bank's owner. Because 
the document focuses narrowly on the owner's personal money transfers, 
it does not contradict the information reported in the article, which 
is also corroborated by other sources.
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    \11\ Al-Arabiya, ``Billions of Dollars'' Smuggled Out of Iraq 
During Maliki's Rule (Nov. 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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E. Summary of FinCEN's Ongoing Concerns Regarding Al-Huda Bank

    After considering comments received from the public, as well as 
other information available to the agency, including both public and 
non-public information, FinCEN is issuing this final rule, imposing a 
prohibition on U.S. financial institutions from opening or maintaining 
a correspondent account for, or on behalf of, Al-Huda Bank. The 
information available to FinCEN provides reason to conclude that Al-
Huda Bank continues to be a foreign financial institution of primary 
money laundering concern.

III. Imposition of a Special Measure Regarding Al-Huda Bank as a 
Foreign Financial Institution of Primary Money Laundering Concern

    Based upon this finding, FinCEN is authorized to impose one or more 
special measures. Following the required consultations and the 
consideration of all relevant factors discussed in the NPRM, FinCEN 
proposed a prohibition under the fifth special measure.\12\
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    \12\ Prior to issuing the January 2024 NPRM and this final rule, 
FinCEN consulted with representatives and staff of the following 
Departments and agencies regarding this action: Department of 
Justice; the Department of State; the Board of Governors of the 
Federal Reserve System; the Federal Deposit Insurance Corporation; 
the Securities and Exchange Commission; the Commodity Futures 
Trading Commission; the Office of the Comptroller of the Currency; 
and the National Credit Union Administration. During those 
consultations, FinCEN shared drafts and information for the purpose 
of obtaining interagency views on: (1) the finding that Al-Huda Bank 
is of primary money laundering concern; (2) the imposition of 
special measure five prohibiting covered U.S. financial institutions 
from opening or maintaining a correspondent account for, or on 
behalf of Al-Huda Bank and requiring covered U.S. financial 
institutions to take reasonable steps not to process transactions 
for the correspondent account of a foreign banking institution in 
the United States if such a transaction involves Al-Huda Bank; and 
(3) the effect such prohibition would have on the domestic and 
international financial system. Those views are reflected in 
FinCEN's explanation of the reasons for issuing this final rule.
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    After reviewing the comments and considering all potential special 
measures, FinCEN concludes that a prohibition under special measure 
five is warranted. Consistent with the finding that Al-Huda Bank is a 
foreign financial institution of primary money laundering concern, and 
in consideration of additional relevant factors, this final rule 
imposes a prohibition on the opening or maintaining of correspondent 
accounts by covered financial institutions for, or on behalf of, Al-
Huda Bank. This prohibition will help guard against the money 
laundering and terrorist financing risks to the U.S. financial system 
posed by Al-Huda Bank, as identified in the NPRM and this final rule.

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

    Following the issuance of the NPRM, the CBI banned Al-Huda Bank 
from accessing the CBI dollar auction.\13\ Nevertheless, as indicated 
above, FinCEN remains concerned by Al-Huda Bank's continued potential 
to interact with the U.S. financial system indirectly through U.S. 
dollar (USD) correspondent accounts at six foreign financial 
institutions.
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    \13\ Reuters, Iraq bans 8 local banks from US dollar 
transactions (Feb. 4, 2024), available at https://www.reuters.com/business/finance/iraq-bans-8-local-banks-us-dollar-transactions-2024-02-04/.
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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 final rule will 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 in the NPRM, 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. 
Further, 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 correspondent banking 
relationships with Al-Huda Bank.
    As such, a prohibition on correspondent banking with Al-Huda Bank 
will impose minimal additional compliance costs for covered financial 
institutions, which would most commonly involve merely 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

[[Page 55055]]

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 final rule will 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 should not affect overall cross-border 
transaction volumes.
    Further, a prohibition under special measure five will 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 dirham accounts.\14\ Provided 
that its legitimate activities do not involve a correspondent account 
maintained in the United States, and so long as Al-Huda Bank maintains 
non-USD correspondent relationships in the region, the bank could 
continue to engage in those activities.
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    \14\ BankCheck, Al-Huda Bank--Iraq (accessed May 28, 2024), 
available at https://bankcheck.app.
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D. The Effect of the Action on United States National Security and 
Foreign Policy

    As described in the NPRM, 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 a prohibition under special measure five will: (1) limit Al-
Huda Bank's ability to facilitate illicit finance within an 
international network of front companies and sanctions evasion 
infrastructure supporting these FTOs, by removing its access to 
correspondent accounts in the United States; and (2) 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, 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 was 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 were 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 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. 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

[[Page 55056]]

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 
these 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. For these reasons, and after thorough 
consideration of alternate measures, 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.

IV. Section-by-Section Analysis

A. 1010.663(a)--Definitions

1. Definition of Al-Huda Bank
    The final rule defines the term ``Al-Huda Bank'' to mean 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 final rule defines the term ``correspondent account'' to have 
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 
final 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.\15\ Under this definition, ``payable-through 
accounts'' are a type of correspondent account.
---------------------------------------------------------------------------

    \15\ 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 final 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.\16\
---------------------------------------------------------------------------

    \16\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
---------------------------------------------------------------------------

3. Definition of Covered Financial Institution
    In a change from the proposed rule,\17\ and consistent with prior 
section 311 actions imposing special measure five, the final rule 
defines the term ``covered financial institution'' by reference to 31 
CFR 1010.605(e)(1), the same definition used in the BSA rule (31 CFR 
1010.610) requiring the establishment of due diligence programs for 
correspondent accounts for financial institutions. In general, this 
definition includes the following:
---------------------------------------------------------------------------

    \17\ When defining a covered financial institution, the proposed 
regulatory text incorrectly referenced 31 CFR 1010.605(e)(2), 
instead of 31 CFR 1010.605(e)(1). In addition, although the 
regulatory impact analysis properly considered those financial 
institutions listed in 31 CFR 1010.605(e)(1), it incorrectly cited 
31 CFR 1010.100(t) (as did the section-by-section analysis).
---------------------------------------------------------------------------

     a bank;
     a broker or dealer in securities;
     a futures commission merchant or an introducing broker in 
commodities; and
     a mutual fund.
4. Definition of Foreign Banking Institution
    The final rule defines the term ``foreign banking institution'' to 
mean 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(u). This final 
rule interprets Al-Huda Bank to be a foreign banking institution.
5. Definition of Subsidiary
    The final rule defines the term ``subsidiary'' to mean 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 final rule prohibits 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 final rule requires 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 is 
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 sections 
1010.663(b)(1) and (b)(2), section 1010.663(b)(3) of the final rule 
requires covered financial institutions to apply special due diligence 
to all of their foreign 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 are 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

[[Page 55057]]

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 is expected to apply an appropriate screening mechanism to 
identify a funds transfer order that on its face lists Al-Huda Bank as 
the financial institution of the originator or beneficiary, or 
otherwise references Al-Huda Bank in a manner detectable under the 
financial institution's normal screening mechanisms. An appropriate 
screening mechanism could be one of the tools 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 OFAC.
4. Recordkeeping and Reporting
    Section 1010.663(b)(4) of the final rule clarifies that the 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.

V. Regulatory Impact Analysis

    FinCEN has analyzed this final rule under Executive Orders 12866, 
13563, and 14094, the Regulatory Flexibility Act,\18\ the Unfunded 
Mandates Reform Act,\19\ and the Paperwork Reduction Act.\20\
---------------------------------------------------------------------------

    \18\ 5 U.S.C. 603.
    \19\ 2 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
    \20\ 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 final rule and assess 
such expectations in more granular detail. This discussion includes a 
detailed explanation of certain ways FinCEN's conclusions may be 
sensitive to methodological choices and underlying assumptions made in 
drawing inferences from available data.

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 final 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 final rule, 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.'' \21\ 
However, Section 605 of the RFA allows an agency to certify a rule, in 
lieu of preparing an analysis, if the final rule is not expected to 
have a significant economic impact on a substantial number of small 
entities. This final rule applies to all covered financial institutions 
and affects a substantial number of small entities. However, for the 
reasons described below, FinCEN assesses that these changes do not have 
a significant economic impact on such entities.
---------------------------------------------------------------------------

    \21\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    In addition to prohibiting covered financial institutions from 
opening or maintaining in the United States a correspondent account 
for, or on behalf of, Al-Huda Bank, this final rule requires that 
covered financial institutions 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 final rule. 
Thus, the special due diligence that is required under the final rule--
i.e., preventing the processing of transactions involving Al-Huda Bank 
and the transmittal of notification to certain correspondent account 
holders--does not impose a significant additional economic burden upon 
small U.S. financial institutions. For these reasons, FinCEN certifies 
that the requirements contained in this rulemaking do not have a 
significant economic impact on a substantial number of small entities.

C. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 \22\ 
(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.\23\ 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

[[Page 55058]]

regulatory alternatives before promulgating a rule.\24\
---------------------------------------------------------------------------

    \22\ 2 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
    \23\ Id.
    \24\ Id.
---------------------------------------------------------------------------

    FinCEN has determined that this final 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).\25\ Accordingly, FinCEN has not 
prepared a budgetary impact statement or specifically addressed the 
regulatory alternatives considered.
---------------------------------------------------------------------------

    \25\ 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 Dec. 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 final rule were submitted by FinCEN to the OMB for 
review in accordance with the Paperwork Reduction Act of 1995 (PRA) and 
were assigned OMB Control Number 1506-0079.\26\ 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.
---------------------------------------------------------------------------

    \26\ 44 U.S.C. 3507(a)(1)(D).
---------------------------------------------------------------------------

    The notification requirement in section 1010.663(b)(3)(i)(A) is 
intended to aid cooperation from foreign correspondent account holders 
in preventing transactions involving Al-Huda Bank from being processed 
by the U.S. financial system. The information required to be maintained 
by section 1010.663(b)(4)(i) will be used by federal agencies and 
certain self-regulatory organizations to verify compliance by covered 
financial institutions with the notification requirements of section 
663(b)(3)(i)(A). The collection of information is mandatory.
    Frequency: As required.
    Description of Affected Financial Institutions: Banks, broker-
dealers in securities, futures commission merchants, introducing 
brokers in commodities, and mutual funds.
    Estimated Number of Affected Financial Institutions: Approximately 
15,000.\27\
---------------------------------------------------------------------------

    \27\ 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 \28\..................................................  \29\ 9,209
Broker-Dealers in securities \30\...........................  \31\ 3,477
Mutual Funds \32\...........................................  \33\ 1,495
Futures Commission Merchants \34\...........................     \35\ 62
Introducing Brokers in Commodities \36\.....................    \37\ 937
------------------------------------------------------------------------

    Estimated Average Annual Burden in Hours per Affected Financial 
Institution: The estimated average annual burden associated with the 
collection of information in this final rule is one hour per affected 
financial institution.
---------------------------------------------------------------------------

    \28\ See 31 CFR 1010.605(e)(1)(i).
    \29\ Bank data is as of December 14, 2023, from Federal Deposit 
Insurance Corporation BankFind. See Federal Deposit Insurance 
Corporation, BankFind, available at https://banks.data.fdic.gov/bankfind-suite/bankfind. Credit union data is as of December 31, 
2023, from the National Credit Union Administration Quarterly Data 
Summary Reports. See National Credit Union Administration, Quarterly 
Data Summary Reports, available at https://ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-data-summary-reports.
    \30\ 31 CFR 1010.605(e)(1)(ii).
    \31\ According to the Securities and Exchange Commission (SEC), 
there are 3,477 broker-dealers in securities as of December 2023. 
See SEC, Company Information About Active Broker-Dealers, available 
at https://www.sec.gov/help/foiadocsbdfoia.
    \32\ 31 CFR 1010.605(e)(1)(iv).
    \33\ 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. See SEC, Form N-CEN Data Sets, available at https://www.sec.gov/dera/data/form-ncen-data-sets.
    \34\ 31 CFR 1010.605(e)(1)(iii).
    \35\ According to the Commodity Futures Trading Commission 
(CFTC), there are 62 futures commission merchants as of October 31, 
2023. See CFTC, Financial Data for FCMs, available at https://www.cftc.gov/MarketReports/financialfcmdata/index.htm.
    \36\ 31 CFR 1010.605(e)(1)(iii).
    \37\ 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.

VI. 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, 31 CFR part 1010 is 
amended 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)(1)(ii).
    (3) Covered financial institution. The term ``covered financial 
institution'' has the same meaning as provided in Sec.  1010.605(e)(1).
    (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:

[[Page 55059]]

    (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 paragraph (b)(3)(i)(A) of this 
section.
    (ii) Nothing in this paragraph (b) shall require a covered 
financial institution to report any information not otherwise required 
to be reported by law or regulation.

Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-14415 Filed 7-2-24; 8:45 am]
BILLING CODE 4810-02-P