#  BILLING CODE 4810-02

**DEPARTMENT OF THE TREASURY**

**31 CFR Part 103**

**RIN 1505-AA87**

**Financial Crimes Enforcement Network; Anti-Money Laundering
Requirements  Correspondent Accounts for Foreign Shell Banks;
Recordkeeping and Termination of Correspondent Accounts for Foreign
Banks.**

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

**ACTION:** Final Rule.

**SUMMARY:** The Financial Crimes Enforcement Network (FinCEN) is
issuing this final rule to extend the time by which certain financial
institutions must obtain information from each foreign bank for which
they maintain a correspondent account concerning (1) the foreign bank's
status as "shell" bank, (2) whether the foreign bank provides banking
services to foreign shell banks, (3) certain owners of the foreign bank,
and (4) the identity of a person in the United States to accept service
of legal process.

**DATES:** This final rule is effective \[INSERT DATE OF PUBLICATION IN
THE FEDERAL REGISTER\].

**FOR FURTHER INFORMATION CONTACT:** Office of the Chief Counsel
(FinCEN), (703) 905-3590; Office of the Assistant General Counsel for
Banking & Finance (Treasury), (202) 622-0480, or Office of the Assistant
General Counsel for Enforcement (Treasury), (202) 622-1927 (not
toll-free numbers).

**SUPPLEMENTARY INFORMATION:**

**I. Background**

On September 26, 2002, FinCEN published a final rule (67 FR 60562)
implementing sections 313(a) and 319(b) of the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT) Act of 2001 (the Act). Section 313(a)
of the Act added subsection (j) to 31 U.S.C. 5318, which prohibits a
covered financial institution from providing correspondent accounts
in the United States to foreign banks that do not have a physical
presence in any country (foreign shell banks). Section 313(a) also
requires those financial institutions to take reasonable steps to ensure
that correspondent accounts provided to foreign banks are not being used
to provide banking services indirectly to foreign shell banks. Section
319(b) of the Act added subsection (k) to 31 U.S.C. 5318, which requires
any covered financial institution that provides a correspondent account
to a foreign bank to maintain records of the foreign banks owners and
to maintain the name and address of an agent in the United States
designated to accept service of legal process for the foreign bank for
records regarding the correspondent account.

The September 26, 2002 final rule provided that a covered financial
institution could satisfy the requirements of section 313(a) and 319(b)
by obtaining from a foreign bank a certification that contained the
necessary information, or by otherwise obtaining documentation of the
required information. With respect to correspondent accounts that
existed on October 28, 2002, the final rule required a covered financial
institution to close a correspondent account, within a commercially
reasonable time, if the covered financial institution did not receive
the certification from the foreign bank, or otherwise obtain
documentation of the required information, on or before December 26,
2002.

A significant number of covered financial institutions, principally in
the securities industry, have noted that the December 26, 2002 deadline
to obtain the required information is proving to be inadequate. Many
securities firms indicated that providing an effective explanation of
their duties under the Act to a wide variety of foreign banks, which may
speak different languages and operate in different ways than their U.S.
counterparts, has in some cases, lengthened the process. Moreover, the
broad definition of a correspondent account found in the Final Rule has
increased the number of accounts subject to these requirements and,
consequently, has increased the burden on U.S. banks and broker-dealers
to secure the required information. Finally, because the Act has
generally increased the overall level of regulatory requirements for
securities firms and depository institutions, they have been managing an
increased overall workload as a result of additional regulations, within
a finite set of resources. For these reasons, the process of gathering
the necessary information to comply with section 313(a) and 319(b) of
the Act is taking longer than the time provided in the September 28
final rule.

**II. The Current Rulemaking**

This rule extends the time by which a covered financial institution must
obtain the information required to satisfy the requirements of sections
313(a) and 319(b) from December 26, 2002 to March 31, 2003. Treasury and
FinCEN do not anticipate granting a further extension beyond March 31
and expect that covered financial institutions will comply with the
September 26, 2002 final rule with respect to correspondent accounts
established for foreign banks that have not provided the required
information by that date.

**III. Procedural Requirements**

Because this rule extends the time by which a covered financial
institution must obtain the information necessary to satisfy the
requirements of section 313(a) and 319(b) of the Act before taking
actions to terminate a correspondent account, it has been determined
that notice and public procedure are unnecessary pursuant to 5 U.S.C.
553 (b)(B) and that a delayed effective date is not required pursuant to
5 U.S.C. 553(d)(1).

It has been determined that this rule is not a significant regulatory
action for purposes of Executive Order 12866. Because no notice of
proposed rulemaking is required, the provisions of the Regulatory
Flexibility Act (5 U.S.C. 601 *et seq*.) do not apply.

## List of Subjects in 31 CFR Part 103

> Banks, banking; Brokers; Counter money laundering; Counter-terrorism;
> Currency; Foreign banking; Reporting and recordkeeping requirements.

## Authority and Issuance

For the reasons set forth in the preamble, 31 CFR part 103 is amended as
follows:

## PART 103―FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND FOREIGN TRANSACTIONS

##  1. The authority citation for part 103 is revised to read as follows:

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

2\. Section 103.177 is revised by amending paragraph (d)(1) to read as
follows:

** 103.177 Prohibition on correspondent accounts for foreign shell
banks; Records concerning owners of foreign banks and agents for service
of legal process.**

\* \* \* \* \*

\(d\) *[Closure of correspondent accounts]{.underline}*. (1) *[Accounts
existing on October 28, 2002]{.underline}*. In the case of any
correspondent account that was in existence on October 28, 2002, if the
covered financial institution has not obtained a certification (or
recertification) from the foreign bank, or has not otherwise obtained
documentation of the information required by such certification (or
recertification), on or before
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