[Federal Register Volume 75, Number 27 (Wednesday, February 10, 2010)]
[Rules and Regulations]
[Pages 6560-6570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2928]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AB04


Financial Crimes Enforcement Network; Expansion of Special 
Information Sharing Procedures To Deter Money Laundering and Terrorist 
Activity

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

ACTION: Final rule.

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SUMMARY: FinCEN is issuing this final rule to amend the relevant Bank 
Secrecy Act (``BSA'') information sharing rules to allow certain 
foreign law enforcement agencies, and State and local law enforcement 
agencies, to submit requests for information to financial institutions. 
The rule also clarifies that FinCEN itself, on its own behalf and on 
behalf of other appropriate components of the Department of the 
Treasury (``Treasury''), may submit such requests. Modification of the 
information sharing rules is a part of Treasury's continuing effort to 
increase the efficiency and effectiveness of its anti-money laundering 
and counter-terrorist financing policies.

DATES: Effective Date: February 10, 2010.

FOR FURTHER INFORMATION CONTACT: The FinCEN regulatory helpline at 
(800) 949-2732 and select Option 2.

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 (``USA PATRIOT ACT''), 
Public Law 107-56 (``the Act''). Title III of the Act amends the anti-
money laundering provisions of the BSA, codified at 12 U.S.C. 1829b and 
1951-1959 and 31 U.S.C. 5311-5314 and 5316-5332, to promote the 
prevention, detection, and prosecution of international money 
laundering and the financing of terrorism. Regulations implementing the 
BSA appear at 31 CFR Part 103. The authority of the Secretary of the 
Treasury (``the Secretary'') to administer the BSA has been delegated 
to the Director of FinCEN.
    Of the Act's many goals, the facilitation of information sharing 
among governmental entities and financial institutions for the purpose 
of combating terrorism and money laundering is of paramount importance. 
Section 314 of the Act furthers this goal by providing for the sharing 
of information between the government and financial institutions, and 
among financial institutions themselves. As with many other provisions 
of the Act, Congress has charged Treasury with promulgating regulations 
to implement these information-sharing provisions.
    Subsection 314(a) of the Act states in part that:

[t]he Secretary shall * * * adopt regulations to encourage further 
cooperation among financial institutions, their regulatory 
authorities, and law enforcement authorities, with the specific 
purpose of encouraging regulatory authorities and law enforcement 
authorities to share with financial institutions information 
regarding individuals, entities, and organizations engaged in or 
reasonably suspected based on credible evidence of engaging in 
terrorist acts or money laundering activities.

B. Overview of the Current Regulatory Provisions Regarding the 314(a) 
Program

    On September 26, 2002, FinCEN published a final rule implementing 
the authority contained in section 314(a) of the Act.\1\ That rule 
(``the 314(a) rule'') allows FinCEN to require financial institutions 
to search their records to determine whether they have maintained an 
account or conducted a transaction with a person that a Federal law 
enforcement agency has certified is suspected based on credible 
evidence of engaging in terrorist activity or money laundering.\2\ 
Before processing a request from a Federal law enforcement agency, 
FinCEN also requires the requesting agency to certify that, in the case 
of money laundering, the matter is significant, and that the requesting 
agency has been unable to locate the information sought through 
traditional methods of investigation and analysis before attempting to 
use this authority (``the 314(a) program'').
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    \1\ Special Information Sharing Procedures to Deter Money 
Laundering and Terrorist Activity, 67 FR 60,579 (Sept. 26, 2002).
    \2\ 31 CFR 103.100.
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    Since its inception, the 314(a) program has yielded significant 
investigative benefits to Federal law enforcement users in terrorist 
financing and major money laundering cases. Feedback from the 
requesters and illustrations from sample case studies consistently 
demonstrate how useful the program is in enhancing the scope and 
expanding the universe of investigations. In view of the proven success 
of the 314(a) program, FinCEN is broadening access to the program as 
outlined in the following paragraphs.

C. Objectives of Changes

1. Allowing Certain Foreign Law Enforcement Agencies To Initiate 314(a) 
Queries
    In order to satisfy the United States' treaty obligation with 
certain foreign governments, FinCEN is extending the use of the 314(a) 
program to include foreign law enforcement agencies. On June 25, 2003, 
the Agreement on Mutual Legal Assistance between the United States and 
the European Union (``EU'') (hereinafter, the ``U.S.-EU MLAT'') was 
signed. In 2006, the U.S.-EU MLAT, along with twenty-five bilateral 
instruments, were submitted to the U.S. Senate for its advice and 
consent for

[[Page 6561]]

ratification. The U.S.-EU MLAT and all twenty-seven bilateral 
instruments were ratified by the President on September 23, 2008, upon 
the advice and consent of the U.S. Senate.\3\
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    \3\ An additional two bilateral instruments, with Romania and 
Bulgaria, were concluded and submitted to the Senate in 2007, 
following those countries' accession to the EU.
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    Article 4 of the U.S.-EU MLAT (entitled ``Identification of Bank 
Information'') obligates a requested Signatory State to search on a 
centralized basis for bank accounts within its territory that may be 
important to a criminal investigation in the requesting Signatory 
State. Article 4 also contemplates that Signatory States may search for 
information in the possession of a non-bank financial institution. 
Under Article 4, a Signatory State receiving a request may limit the 
scope of its obligation to provide assistance to terrorist activity and 
money laundering offenses, and many did so in their respective 
bilateral instruments with the United States.\4\ In negotiating the 
terms of Article 4, the United States expressly envisioned that EU 
member States would be able to access the 314(a) program. Expanding 
that process to include certain foreign law enforcement requesters will 
greatly benefit the United States by granting law enforcement agencies 
in the United States reciprocal rights to obtain information about 
matching accounts in EU member States.
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    \4\ In addition, Article 4 makes clear that the United States 
and the EU are under an obligation to ensure that the application of 
Article 4 does not impose extraordinary burdens on States that 
receive search requests.
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    Foreign law enforcement agencies will be able to use the 314(a) 
program in a way analogous to how Federal law enforcement agencies 
currently access the program. Thus, a foreign law enforcement agency, 
prior to initiating a 314(a) query, will have to certify that, in the 
case of a money laundering investigation, the matter is significant, 
and that it has been unable to locate the information sought through 
traditional methods of investigation and analysis before attempting to 
use the 314(a) program. A Federal law enforcement official serving as 
an attach[eacute] to the requesting jurisdiction will be notified of 
and will review the foreign request prior to its submission to FinCEN. 
The application of these internal procedures will help ensure that the 
314(a) program is utilized only in significant situations, thereby 
minimizing the cost to reporting financial institutions. Comments 
addressed to the expansion of the 314(a) program to include foreign law 
enforcement agencies will be discussed below.
2. Allowing State and Local Law Enforcement Agencies To Initiate 314(a) 
Queries
    Money laundering and terrorist-related financial crimes are not 
limited by jurisdiction or geography. Detection and deterrence of these 
crimes require information sharing across all levels of investigative 
authorities, to include State and local law enforcement, to ensure the 
broadest U.S. Government defense.
    Access to the 314(a) program by State and local law enforcement 
agencies will provide them a platform from which they can more 
effectively and efficiently fill information gaps, including those 
connected with multi-jurisdictional financial transactions, in the same 
manner as Federal law enforcement agencies. This expansion of the 
314(a) program, in certain limited circumstances, to include State and 
local law enforcement authorities, will benefit overall efforts to 
ensure that all law enforcement resources are made available to combat 
money laundering and terrorist financing.
    As is the case currently with requesting Federal law enforcement 
agencies, State and local law enforcement, prior to initiating a 314(a) 
query, will have to certify that, in the case of a money laundering 
investigation, the matter is significant, and that it has been unable 
to locate the information sought through traditional methods of 
investigation and analysis before attempting to use the 314(a) program. 
The application of these internal procedures will help ensure that the 
314(a) program will be utilized only in the most compelling situations, 
thereby minimizing the cost incurred by reporting financial 
institutions. Comments addressed to the expansion of the 314(a) program 
to allow State and local law enforcement participation will be 
discussed below.
3. Clarifying That FinCEN, on Its Own Behalf and on Behalf of 
Appropriate Components of the Department of the Treasury, May Initiate 
314(a) Queries
    FinCEN's statutory mandate includes working to identify possible 
criminal activity to appropriate Federal, State, local, and foreign law 
enforcement agencies, and to support ongoing criminal financial 
investigations and prosecutions.\5\ FinCEN also routinely assists the 
law enforcement community through proactive analyses to discover 
trends, patterns, and common activity in the financial information 
contained in BSA reports. FinCEN's use of the 314(a) program will 
enhance the scope and utility of its case support efforts, including 
insights provided from BSA data, thereby delivering critical 
information about significant criminal activity on a timelier basis.
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    \5\ See 31 U.S.C. 310.
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    FinCEN assists law enforcement by providing advanced or specialized 
analysis of BSA data on significant investigations involving offenses 
of money laundering or terrorist financing. These investigations often 
involve multiple locations or are otherwise linked to other 
investigations. A single 314(a) request issued by FinCEN can more 
efficiently coordinate and simultaneously support several 
investigations, thereby eliminating the need for separate requests from 
each investigating agency or jurisdiction.
    There also are instances in which FinCEN's analytical products will 
benefit from access to the 314(a) program by providing a more complete 
picture of financial transactions and mechanisms, as well as 
interrelationships among investigative subjects and financial 
transactions or entities. In addition, other appropriate components of 
Treasury that provide analytical support in areas such as Treasury's 
counter-terrorist financing and anti-money laundering efforts will be 
better equipped to fulfill their missions with access to the 314(a) 
program. It is anticipated that the findings from the use of the 314(a) 
program will reveal additional insights and overall patterns of 
suspicious financial activities. Comments addressed to the expansion of 
the 314(a) program to allow FinCEN to self-initiate requests will be 
discussed below.

II. Notice of Proposed Rulemaking

    The final rule contained in this document is based on the Notice of 
Proposed Rulemaking published in the Federal Register on November 16, 
2009 (``Notice'').\6\ With the intent of broadening access to the 
314(a) program, the Notice proposed to allow certain foreign law 
enforcement agencies, and State and local law enforcement agencies, to 
initiate 314(a) queries. In addition, the Notice proposed to clarify 
that FinCEN, on its own behalf and on behalf of appropriate components 
of Treasury, may initiate 314(a) queries.
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    \6\ See 74 FR 58926 (Nov. 16, 2009).
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III. Comments on the Notice--Overview and General Issues

    The comment period for the Notice ended on December 16, 2009. We

[[Page 6562]]

received a total of 13 comment letters from 14 entities and 
individuals.\7\ Of these, 7 were submitted by trade groups or 
associations, 4 were submitted by individuals, 2 were submitted by 
Federal law enforcement agencies, and 1 was submitted by an individual 
financial institution.\8\
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    \7\ All comments to the Notice are available for public viewing 
at www.regulations.gov.
    \8\ One comment letter was submitted on behalf of two entities.
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    Comments on the Notice focused on the following matters: (1) 
Requirements for foreign, State, and local law enforcement 314(a) 
requests; (2) Confidentiality and privacy concerns regarding 
information provided to foreign, State, and local law enforcement; (3) 
Requirements for FinCEN self-initiated 314(a) requests; (4) FinCEN's 
authority to expand the 314(a) rule; (5) The 314(a) statutory goal of 
sharing information with financial institutions; and (6) Estimate of 
burden.

A. Requirements for Foreign, State, and Local Law Enforcement 314(a) 
Requests

    Some commenters requested that FinCEN clarify what the requirements 
are for foreign, State, and local law enforcement to submit 314(a) 
requests. In addition, those commenters asked FinCEN to clarify how the 
requests will be monitored to ensure that regulatory and procedural 
requirements are met. For example, some commenters requested 
clarification as to how FinCEN will determine whether a money 
laundering investigation is ``significant'' and that more traditional 
means of investigation have been exhausted. FinCEN will require these 
law enforcement agencies to certify that each individual, entity, or 
organization about which the law enforcement agency is seeking 
information is engaged in, or is reasonably suspected based on credible 
evidence of engaging in, terrorist financing, or money laundering. As 
discussed above, FinCEN will require these law enforcement agencies to 
certify that, in the case of money laundering, the matter is 
significant, and the requesting agency has been unable to locate the 
information sought through traditional methods of investigation before 
attempting to make a 314(a) request. In addition, foreign, State, and 
local law enforcement agencies making 314(a) requests are required to 
include the following information in their certification request: A 
citation of the relevant statutory provisions; a description of the 
suspected criminal conduct; for money laundering cases, a description 
as to why the case is significant, and a list of the traditional 
methods of investigation and analysis which have been conducted prior 
to making the request. Factors that contribute towards evaluating the 
significance of a money laundering case include, for example: The 
seriousness and magnitude of suspected criminal conduct; the dollar 
amount involved; whether the analysis is being conducted as part of a 
multi-agency task force; the importance of analysis to agency program 
goals; criminal organization involvement; and multi-regional and/or 
cross border implications.
    All requests made by foreign, State, and local law enforcement 
agencies will be submitted to FinCEN for review and approval. With 
regard to a request made by a foreign law enforcement agency, the 
request will be submitted to a Federal law enforcement attach[eacute]. 
The attach[eacute] will review the request to ensure that the request 
is from a legitimate entity. The attach[eacute] will then forward the 
request to FinCEN for review. Following FinCEN's approval, the request 
will be made available to financial institutions via the 314(a) Secure 
Information Sharing System. The financial institutions may contact 
FinCEN's 314 Program Office with any questions regarding a foreign law 
enforcement request. With regard to a State or local law enforcement 
request, the financial institution may contact FinCEN, or the State or 
local law enforcement agency with any questions regarding its request. 
FinCEN's determination to subject foreign, State, and local law 
enforcement requests to the same procedural review and vetting process 
imposed upon Federal law enforcement requests goes directly to the 
recommendations offered by many commenters.
    One commenter asked whether foreign, State, or local law 
enforcement will be identified as the requester on 314(a) requests sent 
by FinCEN to financial institutions. Currently, in a request made by a 
Federal law enforcement agency, the request made available by FinCEN to 
financial institutions only includes the name and contact number of the 
agency representative making the request. The Federal law enforcement 
agency making the request is not identified on 314(a) requests sent by 
FinCEN to financial institutions. For a request made by a State or 
local law enforcement agency, the request made available by FinCEN to 
financial institutions also will include the name and contact number of 
the agency representative making the request. For a request made by a 
foreign law enforcement agency, the request made available by FinCEN to 
financial institutions will include the contact number for FinCEN's 314 
Program Office. This decision was made to alleviate the need for 
financial institutions to call overseas.
    One commenter asked for clarification as to whether foreign, State, 
and local law enforcement requests could be made independent of a 
Federal investigation. There is no obligation that requests from these 
agencies be linked to a Federal investigation. However, with regard to 
State and local law enforcement requests, the law enforcement agency 
must include in the certification the identity of any Federal law 
enforcement agency with whom they have consulted. In addition, for 
terrorism cases FinCEN will review the request with the FBI liaison to 
FinCEN prior to further processing the request.
    A few commenters suggested that FinCEN should limit access to those 
countries that cooperate with the United States via a treaty or other 
bilateral agreement. As we discuss above, only foreign law enforcement 
agencies with criminal investigative authority that are from a 
jurisdiction that is a party to a treaty that provides for, or in the 
determination of FinCEN is from a jurisdiction that otherwise allows, 
law enforcement agencies in the United States reciprocal access to 
information comparable to that obtainable under section 103.100 will be 
allowed to access the 314(a) program. Some commenters suggested that 
FinCEN should clarify which State and local law enforcement agencies 
will be allowed to access the 314(a) program. All State and local law 
enforcement agencies with criminal investigative authority will be 
allowed to access the 314(a) program.
    One association suggested that before any expansion in the proposal 
is considered, the current internal controls over the 314(a) program 
should be incorporated into the rule. FinCEN is not inclined to 
incorporate its internal operating procedures into the regulation, as 
this would not allow us sufficient latitude to revise our internal 
operating procedures as needed.
    A few commenters asked for clarification as to what steps foreign, 
State, and local law enforcement will be required to take to obtain 
information from a financial institution if a match to their request is 
identified. The steps required to be taken by one of these law 
enforcement agencies to obtain information from a financial institution 
once a match has been confirmed is not addressed within the 314(a) 
rule. These law enforcement agencies will have to follow the standard 
procedures that they currently follow in order to obtain financial 
information from financial

[[Page 6563]]

institutions, for example through issuance of a subpoena, a letter 
rogatory, or national security letter.
    Two commenters noted that Federal law enforcement is required to 
track their use of the 314(a) data to provide feedback, demonstrate 
program value, and maintain accountability. FinCEN routinely provides 
feedback and data to the regulated public as to the effectiveness of 
the 314(a) program (e.g., SAR Activity Review articles \9\) and will 
continue to do so in the future. The commenters suggested that the data 
reporting requirements be made explicit in the implementing regulations 
and the same data reporting requirements should apply to foreign, 
State, and local law enforcement. As noted above, FinCEN is not 
inclined to incorporate its internal operating procedures into the 
regulation. However, the same data reporting requirements will apply to 
foreign, State, and local law enforcement.
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    \9\ See, e.g., ``BSA Records, 314(a) Request Assists 
Investigation of International Money Laundering Using Stored Value 
Cards,'' SAR Activity Review--Trends, Tips & Issues, Issue 12, 
October 2007, http://www.fincen.gov/law_enforcement/ss/html/008.html.
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    One commenter asked how FinCEN would address overlapping interests 
of different law enforcement agencies pursuing the same subject. With 
regard to foreign requests, while processing the request, any existing 
cases the 314(a) subject(s) hits against will be brought to the 
immediate attention of FinCEN's 314 Team Leader to determine what 
further action will take place. FinCEN will automatically network 
(i.e., notify) all international terrorism-related requests with the 
FBI only, and will automatically network all international money 
laundering requests with both Federal and non-Federal law enforcement 
agencies, as applicable. With regard to State and local law enforcement 
requests, the law enforcement agency must include in the certification 
the identity of any Federal law enforcement agency with whom they have 
consulted. For State and local law enforcement requests related to 
terrorism cases, FinCEN will review the request with the FBI liaison to 
FinCEN prior to further processing the request. In addition, it is 
FinCEN's policy to network different requesters that have submitted 
requests for information to FinCEN on the same subject. Networking 
gives requesters the opportunity to coordinate their efforts with U.S. 
law enforcement and other international entities on matters of mutual 
interest. Networking will apply to requests made by foreign, State, and 
local law enforcement.
    A few commenters suggested that FinCEN provide training to foreign, 
State, and local law enforcement regarding the proper procedures for 
utilizing the 314(a) program. While a formal process has not been 
instituted at this point, FinCEN's intention is to provide outreach to 
the new law enforcement users.
    Another commenter suggested that instead of allowing all State and 
local law enforcement agencies to access the 314(a) program, a 2-year 
pilot program allowing access to two or three large State and local law 
enforcement agencies be implemented instead. The commenter noted that 
FinCEN could monitor the results of the pilot program and report the 
results to Congress and the public. While FinCEN will monitor the 
effectiveness of the program's expansion, arbitrarily limiting access 
to certain large local jurisdictions would deny potential access to 
smaller communities confronting serious criminal threats.
    One commenter suggested that local law enforcement agencies be 
required to enter into a memorandum of understanding with FinCEN in 
order to access the 314(a) program. FinCEN has an active cooperative 
relationship with law enforcement at every level in the country, and 
expanding the 314(a) program to allow local law enforcement access is 
part of the ongoing support FinCEN provides to law enforcement. This 
support includes, for example, providing access to BSA data, fostering 
information exchange with international counterparts, and offering 
financial subject matter knowledge in key realms.

B. Confidentiality and Privacy Concerns Regarding Information Provided 
to Foreign, State, and Local Law Enforcement

    A few commenters expressed concern about the confidentiality of 
information that financial institutions would provide to FinCEN as a 
result of the rule, particularly when such information is shared by 
FinCEN with requesting foreign, State and local law enforcement 
agencies. At least one commenter drew an analogy between section 314(a) 
``hit'' information and information in suspicious activity reports 
(``SARs'') to argue that section 314(a) information should be accorded 
the same protections and assurances of confidentiality when such 
information is shared with foreign law enforcement agencies.
    FinCEN believes these concerns are unfounded. Section 314(a) 
information is extremely limited. Unlike SAR information, section 
314(a) information will continue to consist of only a confirmation that 
a matching account or transaction exists. Also unlike the documentation 
supporting the filing of a SAR, the underlying account and transaction 
information relating to a 314(a) hit that contains sensitive customer 
financial information is not deemed to be part of the 314(a) response, 
and can only be obtained by the requesting agency through appropriate 
legal process, such as a subpoena. FinCEN is not part of that legal 
process to obtain the underlying information; its involvement ends at 
informing requesting agencies that a match exists. In addition, unlike 
with SARs, the personally-identifiable information (e.g., subject 
names, aliases, dates of birth, and social security numbers) that a 
financial institution uses to conduct a section 314(a) search is 
provided not by the institution, but by the requesting agency.
    Another commenter questioned whether sharing section 314(a) 
information with foreign law enforcement agencies may run afoul of the 
Right to Financial Privacy Act (``RFPA''), 12 U.S.C. 3401 et seq., or 
any other Federal or state privacy law. Because any hit information 
provided to FinCEN would be reported pursuant to a Federal rule, the 
reporting of such information to FinCEN would fall within an exception 
to the RFPA.\10\ FinCEN is not aware of any other Federal or state law 
that would prohibit a financial institution from reporting section 
314(a) information to FinCEN in response to a foreign law enforcement 
agency's request or that would prevent FinCEN from sharing such 
information with the foreign requester.
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    \10\ 12 U.S.C. 3413(d).
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C. Requirements for FinCEN Self-Initiated 314(a) Requests

    Some commenters requested that FinCEN clarify the reason FinCEN 
needs access to expand the 314(a) program to allow it to make self-
initiated requests, how FinCEN will use the information, the procedures 
that will apply to initiating the requests, the parties who will screen 
such requests, and any limitations that will apply to FinCEN's self-
initiated requests. FinCEN self-initiated requests will be for the 
purpose of conducting analysis to deter and detect terrorist financing 
activity or money laundering. These requests will be made in order to 
increase the value of analytical support to law enforcement. FinCEN or 
the appropriate Treasury component making the request shall certify in 
writing in the same manner as a requesting law enforcement agency that 
each individual, entity or

[[Page 6564]]

organization about which FinCEN or the appropriate Treasury component 
is seeking information is engaged in, or is reasonably suspected based 
on credible evidence of engaging in, terrorist activity or money 
laundering. FinCEN or the other appropriate Treasury component making 
the request shall also certify that, in the case of money laundering, 
the matter is significant, and the requesting agency has been unable to 
locate the information sought through traditional methods of analysis 
before attempting to make a 314(a) request. In addition, FinCEN or the 
appropriate Treasury component making the 314(a) request is required to 
include information such as the following in their certification 
request: For money laundering cases, a description as to why the case 
is significant, and a list of the traditional methods of analysis which 
have been conducted prior to making the request. If FinCEN uses the 
314(a) process in support of proactive target development, FinCEN will 
first brief law enforcement to ensure that the analysis is of interest 
to law enforcement and to ensure de-confliction with any ongoing 
investigation. In addition, FinCEN self-initiated 314(a) requests will 
be independently reviewed and approved by multiple offices within 
FinCEN.
    In addition, some commenters requested that FinCEN clarify the 
components of Treasury that will have access to the 314(a) program and 
under what circumstances. The components of Treasury that will have 
access to the 314(a) program will be those components that provide 
analytical support, such as those providing support to Treasury's 
counter-terrorist financing and anti-money laundering efforts. The 
components of Treasury which submit 314(a) requests will be required to 
comply with the same procedures and certification requirements as 
FinCEN self-initiated requests.
    Two commenters noted that permitting FinCEN and other components of 
Treasury to self-initiate 314(a) requests may be detrimental to law 
enforcement and may cause many unnecessary searches by banks. The same 
commenters noted that it appears that FinCEN is lowering the threshold 
as to when FinCEN can initiate 314(a) requests. The commenters 
explained that law enforcement must exhaust all traditional methods of 
investigation before they can initiate a 314(a) request. Because FinCEN 
is not a law enforcement agency, FinCEN cannot exhaust all traditional 
methods of investigation, and therefore FinCEN will be held to a much 
lower threshold than law enforcement. In addition, the commenters are 
concerned that law enforcement may be precluded from making a 314(a) 
request on a subject, at a crucial point of an investigation, if FinCEN 
has previously conducted a self-initiated request on the same subject, 
because this would create a duplicative search, something that has been 
discouraged by FinCEN. The commenters also are concerned that a FinCEN 
or Treasury 314(a) request may be submitted on a subject who is already 
under investigation by law enforcement, because the broad audience that 
receives these requests could cause operational concerns for the 
investigation. In addition, the commenters noted that it is not clear 
what FinCEN will do with the information once it learns of a previously 
unknown bank account through the 314(a) process if FinCEN does not have 
subpoena or summons authority to pursue the lead any further. Finally 
these commenters noted that FinCEN's requests will be competing with 
law enforcement for access to the limited number of 314(a) requests 
that can be made, due to the need not to overburden financial 
institutions.
    FinCEN will be implementing review procedures to ensure that any 
request it intends to make will not conflict with ongoing law 
enforcement efforts. As noted above, in the certification FinCEN or 
other components of Treasury will submit for a 314(a) request, they 
must certify that to ensure de-confliction with any possible on-going 
investigation within the Federal law enforcement community, they have 
consulted with FinCEN's Federal law enforcement liaisons. In addition, 
FinCEN must also certify that they have been unable to locate the 
information sought through traditional methods of analysis, and they 
must list the type of analysis they have conducted. It is anticipated 
that any direct use by FinCEN of the 314(a) program will not cause any 
significant increase in the amount of case requests going to the 
industry. The primary scenarios in which we would envision FinCEN 
making a 314(a) request are as follows: (1) A request could be made for 
FinCEN to serve as a conduit in issuing a consolidated 314(a) request 
on behalf of a multi-agency task force investigation. In this instance, 
it might actually reduce/preclude an otherwise larger number of 
separate requests emanating from individual agencies. FinCEN would 
request that these agencies conduct the subpoena/investigative followup 
on any positive hits received from the industry. (2) FinCEN may 
occasionally develop significant, multi-state proactive targets/leads 
which might be appropriate for a 314(a) request. These are typically 
long-term selective efforts and therefore not likely to constitute any 
significant increase in the number of 314(a) requests. In addition, 
FinCEN would first brief the law enforcement community on the target 
package before deciding to issue a 314(a) request to ensure it is of 
substantial interest to law enforcement agencies and also to ensure an 
opportunity for de-confliction. If positive hits occur, FinCEN would 
collaborate with law enforcement on any subpoena/investigative follow-
up. Furthermore, for any FinCEN self-initiated 314(a) requests, the 
same parameters will exist for justifying the significance of the `case 
request' which, in turn, will also likely limit the number of such 
requests.

D. FinCEN's Authority To Expand the 314(a) Rule

    A few commenters questioned FinCEN's authority to expand the 
section 314(a) program to include requesters other than Federal law 
enforcement agencies. Section 314(a) authorizes Treasury to adopt 
regulations to encourage further cooperation among ``financial 
institutions, their regulatory authorities, and law enforcement 
authorities.'' Nowhere in section 314(a) is the term ``law 
enforcement'' limited to just Federal law enforcement agencies. That 
FinCEN initially included only Federal law enforcement agencies when it 
first established the section 314(a) program in 2002 was never meant to 
suggest a limitation on FinCEN's authority. On the contrary, the 
section 314(a) program began with Federal law enforcement because of 
uncertainty about how the program would work in practice and 
uncertainty about the resulting burden to financial institutions. 
FinCEN has had almost eight years of experience in administering the 
section 314(a) program, and for the reasons outlined elsewhere in this 
rulemaking, believes that its expansion to include other requesters 
will reap benefits that far outweigh the additional obligations on 
financial institutions. This is particularly true in the case of 
foreign requesters because law enforcement agencies in the United 
States, as a result of FinCEN accommodating foreign requesters, now 
will have the opportunity to obtain information about matching accounts 
and transactions in those EU jurisdictions that have signed the U.S.-EU 
MLAT. FinCEN therefore believes that its expansion of the section 
314(a) program is entirely consistent with the stated goals of section 
314(a) of

[[Page 6565]]

encouraging cooperation between financial institutions and law 
enforcement agencies.
    FinCEN received another comment questioning its ``expansion'' of 
the term ``money laundering,'' as that term is used in the rule. 
Currently, that term is defined to mean activity criminalized by 18 
U.S.C. 1956 or 1957. The one change to the definition of the term 
``money laundering'' would be to clarify that the term includes 
activity that would be criminalized by 18 U.S.C. 1956 or 1957 if such 
activity occurred in the United States. The change is necessary because 
of the addition of foreign law enforcement agencies as an authorized 
requester. Aside from making the provisions of the rule relevant to 
foreign requesters, the change is not intended and should not be viewed 
as expanding the scope of activity for which the section 314(a) program 
may be used.
    One commenter also expressed concern about the pace at which FinCEN 
is seeking to amend the section 314(a) process, given its belief that 
section 314(a) information may be obtained through existing processes. 
As was explained in the Notice and elsewhere in this rulemaking, FinCEN 
is seeking to finalize a rule as quickly as possible so that the U.S. 
Government can comply with its obligations under the U.S.-E.U. MLAT and 
related bilateral instruments. Those treaties enter into force on 
February 1, 2010. Contrary to that commenter's belief, there is no 
current mechanism available to State, local and foreign law enforcement 
agencies that would allow those agencies to ascertain quickly whether 
financial institutions throughout the United States have established an 
account or conducted a transaction for a particular person or entity.

E. 314(a) statutory goal of sharing information with financial 
institutions

    A few commenters noted that the proposed rule sets forth additional 
reporting requirements for the industry, but does not address how this 
furthers the statutory goal of sharing information with financial 
institutions. One of these commenters noted that FinCEN should develop 
mechanisms, in addition to its bi-annual SAR Activity Review 
publication, that will help share information with financial 
institutions. The overarching policy directive of the Act generally, 
and section 314 in particular, is that more information sharing will 
better enable the Federal Government and financial institutions to 
guard against money laundering and terrorist financing. This rule 
supports the policy directive of the Act. FinCEN recognizes the 
importance of providing financial institutions information to assist 
them in identifying and reporting suspected terrorist activity and 
money laundering. For this reason, FinCEN regularly provides sample 
case feedback studies to the industry which illustrate how the use of 
314(a) has often made a `breakthrough' difference in terrorist 
financing and significant money laundering cases. The studies also 
convey insight on related trends and patterns. FinCEN also has posted 
several Federal law enforcement informational alerts on the 314(a) 
Secure Information Sharing System, which has provided for enhanced 
sharing of information between the financial industry and law 
enforcement in a secure environment. In addition, the final rule does 
not preclude law enforcement, when submitting a list of suspects to 
FinCEN, from providing additional information relating to suspicious 
trends and patterns, and FinCEN specifically will encourage law 
enforcement to share such information with the financial community.

F. Estimate of burden

    Refer to section V-Administrative Matters, item D--Paperwork 
Reduction Act for details regarding comments on the estimate of burden.

IV. Section-by-Section Analysis

A. Section 103.90(a)

    FinCEN proposed to amend 31 CFR 103.90(a) by changing the 
definition of the term ``money laundering'' to include activity that 
would be criminalized by 18 U.S.C. 1956 or 1957 if such activity 
occurred in the United States.\11\ The change will allow the term to be 
applied to information requests by foreign law enforcement agencies. 
State and local law enforcement requesters will be subject to the same 
definition of money laundering that currently applies to Federal law 
enforcement agencies--i.e., activity that is criminalized by 18 U.S.C. 
1956 or 1957. Thus, in the case of a significant money laundering 
matter, a State or local law enforcement agency seeking information 
under the section 314(a) program will have to certify that it is 
investigating activity that would be criminalized under 18 U.S.C. 1956 
or 1957. Such activity could include, for example, conducting a 
financial transaction with proceeds of murder, kidnapping, or dealing 
in a controlled substance (as defined in section 102 of the Controlled 
Substances Act), which is punishable as a felony under State law.\12\ 
FinCEN is adopting this amendment as proposed.
---------------------------------------------------------------------------

    \11\ Two commenters noted that they are opposed to redefining 
what constitutes money laundering for 314(a) information sharing 
purposes by incorporating guidance that was issued in 2009 under the 
companion statutory provision, section 314(b), that allows U.S. 
financial institutions to share information. The commenters noted 
that broadening the scope improperly sends a signal that serious 
money-laundering and terrorist financing crimes have no greater 
priority than standard financial fraud or other criminal cases. 
FinCEN has not expanded the definition of the term ``money 
laundering'' beyond the change noted above.
    \12\ See 18 U.S.C. 1956(c)(7) (defining the term ``specified 
unlawful activity'' to include, inter alia, an offense listed in 18 
U.S.C. 1961(1)).
---------------------------------------------------------------------------

B. Section 103.100(a)(4)

    FinCEN proposed to add 31 CFR 103.100(a)(4), which will define a 
``law enforcement agency'' to include a Federal, State, local, or 
foreign law enforcement agency with criminal investigative authority, 
provided that the foreign law enforcement agency is from a jurisdiction 
that is a party to a treaty that provides, or in the determination of 
FinCEN is from a jurisdiction that otherwise allows, law enforcement 
agencies in the United States with reciprocal access to information 
comparable to that obtainable under section 103.100. The addition of 
foreign law enforcement agencies will enable the United States to be 
compliant with its obligations under the U.S.-EU MLAT, thereby 
providing law enforcement agencies in the United States with the 
benefit of reciprocal access to information in EU member States.\13\
---------------------------------------------------------------------------

    \13\ The U.S.-EU MLAT, and 27 bilateral instruments with EU 
Member States implementing its terms, require each EU member State 
to be able to search for the kind of information covered by 31 CFR 
103.100 and to report to the requesting State the results of such a 
search promptly.
---------------------------------------------------------------------------

    The addition of State and local law enforcement agencies, as 
discussed above, will provide a platform for such agencies to deal more 
effectively with multi-jurisdictional financial transactions in the 
same manner as Federal law enforcement agencies. Access to the 314(a) 
program will provide State and local law enforcement agencies with 
another resource to aid in discovering the whereabouts of stolen 
proceeds. FinCEN is adopting these amendments as proposed.

C. Section 103.100(b)(1)

    FinCEN proposed, for the reasons discussed above, to amend section 
103.100(b)(1) to make conforming changes to reflect the addition of 
State and local law enforcement agencies, and foreign law enforcement 
agencies, as potential requesters of information.\14\

[[Page 6566]]

FinCEN adopts this amendment as proposed.
---------------------------------------------------------------------------

    \14\ Two Federal law enforcement agencies noted that the NPRM's 
appeal to add the EU countries as well as state and local law 
enforcement to the 314(a) program is understandable, because these 
elements are all law enforcement entities.
---------------------------------------------------------------------------

D. Section 103.100(b)(2)

    FinCEN proposed to add a new 31 CFR 103.100(b)(2) which will 
clarify that FinCEN may request directly, on its own behalf and on 
behalf of appropriate components of Treasury, whether a financial 
institution or a group of financial institutions maintains or has 
maintained accounts for, or has engaged in transactions with, specified 
individuals, entities, or organizations. Comments directed to this 
amendment were discussed above and FinCEN has reviewed and weighed the 
concerns expressed by some commenters. FinCEN, however, continues to 
hold that expanding the 314(a) program to allow itself, and acting on 
behalf of other appropriate Treasury components, to initiate search 
requests for the purpose of conducting analyses to deter and detect 
terrorist financing activity or money laundering will enhance 
Treasury's ability to fulfill its collective mission. FinCEN, 
therefore, adopts the amendments as proposed.

V. Administrative Matters

A. Executive Order 12866

    It has been determined that this rule is a significant regulatory 
action for purposes of Executive Order 12866 because it raises a novel 
policy issue. However, a regulatory impact analysis was not required.

B. Unfunded Mandates Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that may result in expenditure by that State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 202 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. FinCEN has determined that it 
is not required to prepare a written statement under section 202.

C. Regulatory Flexibility Act

    When an agency issues a final rule, the Regulatory Flexibility Act 
(``RFA'') (5 U.S.C. 601 et seq.), requires the agency to prepare either 
a final regulatory flexibility analysis, which will ``describe the 
impact of the rule on small entities,'' or to certify that the final 
rule is not expected to have a significant economic impact on a 
substantial number of small entities. For the reasons stated below, 
FinCEN certifies that the final rule will not have a significant 
economic impact on a substantial number of small entities.
    Estimate of the number of small entities to which the rule will 
apply:
    The proposed rule applies to all financial institutions of which 
FinCEN estimates there are 55,000. However, FinCEN has limited its 
inquiries to banks,\15\ broker-dealers in securities, future commission 
merchants, trust companies, and life insurance companies (``Covered 
Institutions''). Because entities of all sizes are vulnerable to abuse 
by money launderers and financers of terrorism, the final rule will 
apply to all Covered Institutions regardless of size. As discussed 
below, FinCEN acknowledges that the final rule will affect a 
substantial number of small entities.
---------------------------------------------------------------------------

    \15\ 31 CFR 103.11(c).
---------------------------------------------------------------------------

    For purposes of the RFA, both banks and credit unions are 
considered small entities if they have less than $175 million in 
assets.\16\ Of the estimated 8,000 banks, 80% have less than $175 
million in assets and are considered small entities.\17\ Of the 
estimated 7,000 credit unions, 90% have less than $175 million in 
assets.\18\ A broker-dealer is considered a small entity if its total 
capital is less than $500,000, and it is not affiliated with a broker-
dealer that has $500,000 or more in total capital.\19\ Of the estimated 
5,000 broker-dealers, 15% are small entities.\20\ FinCEN estimates that 
the majority of the remaining 250 affected Covered Institutions are 
small entities. Therefore, FinCEN acknowledges that the rule will 
affect a substantial number of small entities.
---------------------------------------------------------------------------

    \16\ U.S. Small Business Administration, ``Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes'' at 28 (Aug. 22, 2008).
    \17\ See FDIC, Bank Find (Number of Banks), http://www2.fdic.gov/idasp/main_bankfind.asp (last visited Mar. 24, 2009).
    \18\ See also NCUA, Credit Union Data (Number of Credit Unions), 
http://webapps.ncua.gov/customquery/ (last visited Mar. 24, 2009).
    \19\ 17 CFR 240.0-10.
    \20\ See 73 FR 13692, 13704 (Mar. 13, 2008) (The Securities and 
Exchange Commission (``SEC'') reports from commission records that 
there are 6016 broker-dealers, 894 of which are small businesses. 
FinCEN only sends 314(a) requests to an estimated 5,000 broker-
dealers; however we rely on the SEC numbers to estimate that 15% are 
small businesses).
---------------------------------------------------------------------------

    Description of the projected reporting and recordkeeping 
requirements of the rule:
    Currently, Covered Institutions are already subject to the 
reporting requirements of section 314 of the USA PATRIOT Act and 
FinCEN's implementing regulation.\21\ However, FinCEN estimates that 
the final amendment may potentially increase the cost of reporting. 
Under the 314(a) program, Covered Institutions are provided a list of 
individuals and entities that are subjects of significant money 
laundering or terrorist financing investigations. The list is primarily 
provided bi-weekly. Covered Institutions are required to review their 
records to determine whether the institutions currently maintain, or 
have maintained, an account for a named subject during the preceding 12 
months, or have conducted any transactions involving any named subjects 
during the previous six months.\22\ Covered Institutions are required 
to report any positive matches to FinCEN.\23\ Currently, only Federal 
law enforcement agencies participate in the 314(a) program. The final 
rule will allow State and local law enforcement, as well as certain 
foreign law enforcement agencies, and FinCEN, as well as other Treasury 
components, to add subjects to this list. This expansion will most 
likely result in additional requests for information from Covered 
Institutions.
---------------------------------------------------------------------------

    \21\ 31 CFR 103.100.
    \22\ 31 CFR 103.100(b)(2).
    \23\ 31 CFR 103.100(b)(2)(ii).
---------------------------------------------------------------------------

    As discussed in the Paperwork Reduction Act analysis below, FinCEN 
estimates 120 search requests \24\ per year associated with the 
recordkeeping requirement in this rule and 9 subjects (including 
aliases) per request, resulting in an estimated 1,080 subjects per 
year. The estimated burden associated with searching and identifying 
each subject is 4 minutes per subject.\25\ FinCEN

[[Page 6567]]

therefore estimates that each recordkeeper will, on average, spend 
approximately 4,320 minutes, or roughly 72 hours per year to comply 
with the recordkeeping requirement in this rule. According to the 
Bureau of Labor Statistics, a compliance officer's mean hourly wage is 
$24.47. This would equate to a cost of $1,761.84 per year for a 
financial institution to comply with this recordkeeping 
requirement.\26\ Because this is a minimal increase to the annual 
payroll of small businesses within the regulated industries, FinCEN 
does not expect the impact of the rule to be significant. FinCEN was 
unable to quantify an exact number of this effect due to a lack of 
available information specific to the regulated industries.
---------------------------------------------------------------------------

    \24\ Estimated requests per annum subject to the Paperwork 
Reduction Act include 10 from FinCEN, 50 from State/local law 
enforcement, and 60 from foreign law enforcement agencies, for a 
total of 120 requests.
    \25\ FinCEN based its estimate on experience and contact with 
the regulated industries. However, due to one of the comments 
received on the proposed rule, FinCEN re-assessed this original 
estimate. For example, FinCEN considered the time necessary for a 
depository institution to process basic customer transactions. These 
types of transactions are similar to searching and identifying the 
subject of a 314(a) request because, in order to process a 
transaction for a customer, a depository institution teller must 
confirm that a customer maintains an account with the depository 
institution. In many cases, this requires the customer to provide 
some sort of identifying information to the depository institution 
teller, such as a driver's license, which contains specific 
identifying information, including name, address, and date of birth. 
When a 314(a) request is submitted to a Covered Institution, the 
request includes the following identification information for a 
subject: name, address, date of birth, and social security number. 
Therefore, an employee of a Covered Institution researching the 
subject of a 314(a) request, has the same type of information 
available to them, as a depository institution teller processing a 
customer transaction. In addition, they both, most likely, will be 
accessing similar systems to confirm whether the individual 
maintains an account with the depository institution. These types of 
depository institution transactions can be processed in a matter of 
a few minutes regardless of institution size.
    \26\ See Bureau of Labor Statistics, ``Occupational Employment 
and Wages, May 2006,'' http://www.bls.gov/oes/2006/may/oes131041.htm.
---------------------------------------------------------------------------

    In the proposed rule, FinCEN requested comment on whether 4 minutes 
to search and identify each subject that is part of a 314(a) request 
was an accurate estimate. A few commenters stated that this estimate 
may be low, however only one association offered an alternative 
estimate. The association suggested that the estimate of time to search 
and identify each subject be increased to more than 30 minutes per 
subject. In describing this estimate, the association explained that it 
included the time required to verify a positive match and to determine 
whether a Covered Institution should file a SAR. FinCEN disagrees with 
the reasoning behind the association's increased estimate. Including 
the time necessary to conduct additional due diligence to confirm a 
positive match in the estimate of researching each subject overstates 
the time required to search and identify a positive match. Based upon 
the experience of FinCEN's 314(a) program office, the average Covered 
Institution will experience a positive hit on a subject only a handful 
of times per year. In addition, incorporating the time necessary to 
conduct due diligence on a positive match to a subject to determine 
whether filing a SAR is necessary also overstates the time required to 
search and identify a positive match. Conducting research to determine 
whether to file a SAR on a customer who is a positive match to a 314(a) 
request is not required by this rule. A financial institution's 
determination as to whether to research a customer and file a SAR is 
based upon its own policies and procedures to identify suspicious 
activity. Additionally, this time is already reflected in FinCEN's 
burden estimates for filing a SAR. The association's estimate relies on 
time spent outside the scope of the regulation, and the association did 
not provide a breakdown of the time required to search and identify a 
match to a 314(a) request in their suggested estimate of over 30 
minutes. For these reasons, along with the fact that FinCEN received no 
other comments providing an alternative estimate to 4 minutes per 
subject, FinCEN will continue to rely on this estimate.
Certification
    As acknowledged above, the final rule will impact a substantial 
number of small entities. However, as also discussed above, FinCEN 
estimates that the impact from these requirements will not be 
significant. Accordingly, FinCEN certifies that the final rule will not 
have a significant economic impact on a substantial number of small 
entities.

D. Paperwork Reduction Act

    The collection of information contained in this rule has been 
approved by the Office of Management and Budget in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control 
number 1506-0049. The collection of information in this final rule is 
in 31 CFR 103.100. The information will be used by Federal \27\ and 
State and local law enforcement agencies, as well as certain foreign 
law enforcement agencies, and FinCEN and other appropriate components 
of Treasury, in the conduct of investigating money laundering and 
terrorist financing activity. The collection of information is 
mandatory.
---------------------------------------------------------------------------

    \27\ The Paperwork Reduction Act does not apply to the 
requirement in section 103.100(b)(2) concerning reports by financial 
institutions in response to a request from FinCEN on behalf of a 
Federal law enforcement agency. See 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------

    International Requests: FinCEN estimates that there will be no more 
than 60 requests for research submitted to the 314(a) program by 
foreign law enforcement agencies annually.\28\
---------------------------------------------------------------------------

    \28\ These calculations were based on previous requests for 
information. A review of incoming requests from European Union 
countries revealed an average of about 350 cases per year from 2006-
2008. Of these, approximately 75% (an average of 269) were money 
laundering and/or terrorism related, however, the majority were not 
identified as complex cases. Conversations with FinCEN personnel 
responsible for European Union countries indicated not more than 10% 
of the money laundering and/or terrorism related cases will be 
significant enough to meet 314(a) use criteria, however, it is 
anticipated that there may be additional requests that will be 
submitted outside of the normal Financial Intelligence Unit 
channels.
---------------------------------------------------------------------------

    State and Local Requests: While there are more than 18,000 State 
and local law enforcement agencies, FinCEN estimates that the number of 
cases that will meet the stringent 314(a) submission criteria will be 
relatively few. The majority of significant money laundering and 
terrorist financing related cases are worked jointly with Federal 
investigators and are thus already eligible for 314(a) request 
submission. FinCEN estimates that there will be no more than 50 State 
and local cases per annum of 314(a) requests that meet submission 
criteria.
    FinCEN and appropriate components of Treasury Requests: FinCEN 
estimates that the 314(a) program will be used by FinCEN and other 
appropriate Treasury components in fewer than 10 cases per annum. 
Taking into consideration the estimated number of potential use cases 
that will fit recommended internal 314(a) criteria, FinCEN does not 
believe that this expansion will be a significant strain on existing 
program resources.
    Description of Recordkeepers: Covered financial institutions as 
defined in 31 CFR 103.100.
    Estimated Number of Recordkeepers: On an annual basis, there are 
approximately 20,134 covered financial institutions, consisting of 
15,106 commercial banks, savings associations, and credit unions, 4,793 
securities broker-dealers, 139 future commission merchants, 79 trust 
companies, and 17 life insurance companies.
    Estimated Average Annual Burden Hours per Recordkeeper: FinCEN 
estimates 120 search requests \29\ per year associated with the 
recordkeeping requirement in this rule and 9 subjects (including 
aliases) per request, resulting in an estimated 1,080 subjects per 
year. The estimated average burden associated with searching each 
subject is 4 minutes per subject. FinCEN therefore estimates that each 
recordkeeper will, on average, spend approximately 4,320 minutes, or 
roughly 72 hours per year to comply with the recordkeeping requirement 
in this rule.
---------------------------------------------------------------------------

    \29\ Estimated requests per annum subject to the Paperwork 
Reduction Act include 10 from FinCEN, 50 from State/local law 
enforcement, and 60 from foreign law enforcement agencies, for a 
total of 120 requests.
---------------------------------------------------------------------------

    Estimated Total Annual Recordkeeping Burden: 1,449,648 annual 
burden hours (20,134

[[Page 6568]]

recordkeepers x 72 average annual burden hours per recordkeeper).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number. Records required to be 
retained under the BSA must be retained for five years.
    In the Notice, FinCEN specifically invited comments on: (a) Whether 
the recordkeeping requirement is necessary for the proper performance 
of the mission of the Financial Crimes Enforcement Network, and whether 
the information shall have practical utility; (b) the accuracy of our 
estimate of the burden of the recordkeeping requirement; (c) ways to 
enhance the quality, utility, and clarity of the information required 
to be maintained; (d) ways to minimize the burden of the recordkeeping 
requirement, 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 maintain the information. With regard to item 
(a), two commenters noted that this recordkeeping requirement does 
further the mission and goals of FinCEN. With regard to item (c), two 
commenters suggested that it would be helpful if financial institutions 
had a standardized form to complete when sharing information with law 
enforcement. The same process by which a financial institution confirms 
a positive match to a 314(a) request, made by a Federal law enforcement 
agency, via the 314(a) Secure Information Sharing System, will apply to 
requests made by all other requesting agencies. In addition, the same 
commenters suggested that law enforcement utilize a standardized form 
to request information from financial institutions when a match to a 
314(a) request is identified. The underlying account and transaction 
information related to a positive 314(a) match is not deemed to be part 
of the 314(a) response, and can only be obtained by the requesting 
agency through appropriate legal processes, such as a subpoena. FinCEN 
is not part of that legal process to obtain the underlying information; 
its involvement ends at informing requesting agencies that a match 
exists. Therefore, each requesting agency is responsible for 
determining the method by which they will request additional 
transaction information related to a 314(a) match. With regard to items 
(d) and (e), two commenters noted that the recordkeeping requirement 
should not place any additional burden or start-up costs on financial 
institutions, because the 314(a) program is already in place and 
financial institutions should have procedures in place to process these 
requests.
    With regard to our request for comment on the accuracy of our 
estimate of the burden of the recordkeeping requirement, we received a 
variety of different comments. A few commenters suggested that 
expanding access to the 314(a) program would increase the volume of 
inquiries to an unmanageable level for financial institutions, which 
would be disproportionate to the benefits obtained by law enforcement. 
Other commenters suggested that increasing the volume of 314(a) 
requests would substantially increase financial institutions' employee-
hours required to complete searches, increase the cost to financial 
institutions, and may lead to the inability of financial institutions 
conducting manual searches to provide timely responses. Other 
commenters noted that the proposal would exponentially increase the 
burden on financial institutions, FinCEN, and the 314(a) program. 
However, these commenters did not provide any alternative estimates of 
the increase in the volume of inquiries to support their concerns. On 
the other hand, as noted above, two other commenters noted that the 
recordkeeping requirement should not place any additional burden or 
start-up costs on financial institutions, because the 314(a) program is 
already in place, and financial institutions should have procedures in 
place to process these requests. Two commenters suggested that FinCEN 
engage in additional industry outreach beyond the comment period to 
better gauge the impact on the industry.
    Some commenters felt that the estimates that only 60 foreign law 
enforcement requests, 50 State and local law enforcement requests, and 
10 FinCEN requests would occur annually were low estimates. FinCEN's 
estimates are extrapolated from an analysis of the volume and type of 
information requests it has received in past years from foreign as well 
as State and local law enforcement agencies. Additionally, FinCEN's 
internal review process is stringent and also will serve as a buffer to 
an unreasonable increase in the volume of 314(a) requests. Other 
commenters suggested that FinCEN should track the increase in requests 
in order to verify the estimates in the proposal. FinCEN already 
monitors the volume of requests and will continue to do so after this 
final rule goes effective. Another commenter asked how FinCEN would 
control the number of requests from foreign, State, and local law 
enforcement if they exceed the estimates in the proposal. As discussed 
above, FinCEN has internal procedures that will help ensure that the 
314(a) program will be utilized only in compelling situations, thereby 
minimizing the burden on financial institutions.
    A few commenters noted that they felt FinCEN's estimate of 4 
minutes to research each subject was low, but only one commenter 
offered an alternative figure for us to consider, as noted above. The 
commenters explained that some small financial institutions conduct 
searches manually. In addition, although most larger financial 
institutions are likely to conduct automated searches, there is still a 
manual element to their research. Further, financial institutions have 
to access a variety of internal systems to research subjects, such as 
commercial and consumer loan systems. Also, financial institutions of 
all sizes manually review matches to ensure accuracy. As described 
above, one of these commenters suggested that to reflect the time 
needed to research a subject more accurately, the estimate be increased 
to more than 30 minutes per subject. The commenter did not offer 
sufficient evidence to support the suggestion. The same commenter noted 
that the estimate misses the most burdensome element, which is 
responding to law enforcement requests when there has been a data match 
to a 314(a) request. The commenter noted that while an accurate 
estimate of this aspect of the research is difficult to identify, it 
should be factored into the estimate of burden. As noted above, section 
314(a) information will continue to consist of only a confirmation that 
a matching account or transaction exists. The underlying account and 
transaction information relating to a 314(a) match is not deemed to be 
part of the 314(a) response, and can only be obtained by the requesting 
agency through appropriate legal process, such as a subpoena. FinCEN is 
not part of that legal process to obtain the underlying information; 
its involvement ends at informing requesting agencies that a match 
exists. Any interaction between a requesting law enforcement agency and 
a financial institution subsequent to a 314(a) match occurs outside the 
context of this rule and this analysis and should not be factored into 
our burden estimates.
    One commenter suggested that requests from foreign, State, and 
local law enforcement be submitted to financial institutions on the 
same schedule as requests from Federal law enforcement currently are, 
in order to keep the number of searches to a

[[Page 6569]]

minimum. FinCEN intends to submit requests from all agencies on the 
same schedule. Another commenter suggested that 314(a) requests made by 
foreign, State, and local law enforcement be limited to terrorist 
financing investigations, initially, in order to minimize the number of 
requests. While FinCEN will monitor the effectiveness of the program's 
expansion, limiting access to terrorist financing investigations would 
deny these law enforcement agencies the ability to confront serious 
money laundering investigations which they are pursuing.

E. Effective Date

    Publication of a substantive rule not less than 30 days before its 
effective date is required by the Administrative Procedure Act except 
as otherwise provided by the agency for good cause.\30\ In order to 
satisfy the United States' treaty obligation with certain foreign 
governments to provide access to the 314(a) program within the deadline 
to comply with the U.S.-EU MLAT, FinCEN finds that there is good cause 
for making this amendment effective on February 10, 2010. In finding 
good cause, FinCEN considered the possible effect of providing less 
than 30 days notice to affected persons. FinCEN determined that 
immediate implementation would not unfairly burden these persons 
because, as explained above, persons affected by the rule have already 
implemented the procedures necessary to comply with the 314(a) rule 
since its original implementation on September 26, 2002.
---------------------------------------------------------------------------

    \30\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

List of Subjects in 31 CFR Part 103

    Administrative practice and procedure, Authority delegations 
(Government agencies), Banks and banking, Currency, Foreign banking, 
Foreign currencies, Gambling, Investigations, Law enforcement, 
Penalties, Reporting and recordkeeping requirements, Securities, Taxes.

Authority and Issuance

    For the reasons set forth above, FinCEN is amending 31 CFR Part 103 
as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FINANCIAL TRANSACTIONS

0
1. The authority citation for part 103 continues to read as follows:

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


0
2. Section 103.90(a) is revised to read as follows:


Sec.  103.90  Definitions.

* * * * *
    (a) Money laundering means an activity criminalized by 18 U.S.C. 
1956 or 1957, or an activity that would be criminalized by 18 U.S.C. 
1956 or 1957 if it occurred in the United States.
* * * * *

0
3. Section 103.100 is amended by--
0
a. Adding new paragraph (a)(4);
0
b. Revising paragraph (b)(1);
0
c. Redesignating paragraphs (b)(2) through (4) as paragraphs (b)(3) 
through (5);
0
d. Adding new paragraph (b)(2);
0
e. Revising newly redesignated paragraph (b)(3)(i) introductory text;
0
f. Revising newly redesignated paragraph (b)(3)(iv)(B)(1);
0
g. Revising newly redesignated paragraph (b)(3)(iv)(B)(2);
0
h. Revising newly redesignated paragraph (b)(3)(iv)(C);
0
i. Revising newly redesignated paragraph (b)(4); and
0
j. Revising newly redesignated paragraph (b)(5).
    The revisions and additions read as follows:


Sec.  103.100  Information sharing between government agencies and 
financial institutions.

    (a) * * *
    (4) Law enforcement agency means a Federal, State, local, or 
foreign law enforcement agency with criminal investigative authority, 
provided that in the case of a foreign law enforcement agency, such 
agency is from a jurisdiction that is a party to a treaty that 
provides, or in the determination of FinCEN is from a jurisdiction that 
otherwise allows, law enforcement agencies in the United States 
reciprocal access to information comparable to that obtainable under 
this section.
    (b) Information requests based on credible evidence concerning 
terrorist activity or money laundering--(1) In general. A law 
enforcement agency investigating terrorist activity or money laundering 
may request that FinCEN solicit, on the investigating agency's behalf, 
certain information from a financial institution or a group of 
financial institutions. When submitting such a request to FinCEN, the 
law enforcement agency shall provide FinCEN with a written 
certification, in such form and manner as FinCEN may prescribe. At a 
minimum, such certification must: state that each individual, entity, 
or organization about which the law enforcement agency is seeking 
information is engaged in, or is reasonably suspected based on credible 
evidence of engaging in, terrorist activity or money laundering; 
include enough specific identifiers, such as date of birth, address, 
and social security number, that would permit a financial institution 
to differentiate between common or similar names; and identify one 
person at the agency who can be contacted with any questions relating 
to its request. Upon receiving the requisite certification from the 
requesting law enforcement agency, FinCEN may require any financial 
institution to search its records to determine whether the financial 
institution maintains or has maintained accounts for, or has engaged in 
transactions with, any specified individual, entity, or organization.
    (2) Requests from FinCEN. FinCEN may solicit, on its own behalf and 
on behalf of appropriate components of the Department of the Treasury, 
whether a financial institution or a group of financial institutions 
maintains or has maintained accounts for, or has engaged in 
transactions with, any specified individual, entity, or organization. 
Before an information request under this section is made to a financial 
institution, FinCEN or the appropriate Treasury component shall certify 
in writing in the same manner as a requesting law enforcement agency 
that each individual, entity or organization about which FinCEN or the 
appropriate Treasury component is seeking information is engaged in, or 
is reasonably suspected based on credible evidence of engaging in, 
terrorist activity or money laundering. The certification also must 
include enough specific identifiers, such as date of birth, address, 
and social security number, that would permit a financial institution 
to differentiate between common or similar names, and identify one 
person at FinCEN or the appropriate Treasury component who can be 
contacted with any questions relating to its request.
    (3) Obligations of a financial institution receiving an information 
request--(i) Record search. Upon receiving an information request from 
FinCEN under this section, a financial institution shall expeditiously 
search its records to determine whether it maintains or has maintained 
any account for, or has engaged in any transaction with, each 
individual, entity, or organization named in FinCEN's request. A 
financial institution may contact the law enforcement agency, FinCEN or 
requesting Treasury component representative, or U.S. law enforcement 
attach[eacute] in the case of a request by a foreign law enforcement 
agency, which

[[Page 6570]]

has been named in the information request provided to the institution 
by FinCEN with any questions relating to the scope or terms of the 
request. Except as otherwise provided in the information request, a 
financial institution shall only be required to search its records for:
* * * * *
    (iv) * * *
    (B)(1) A financial institution shall not disclose to any person, 
other than FinCEN or the requesting Treasury component, the law 
enforcement agency on whose behalf FinCEN is requesting information, or 
U.S. law enforcement attach[eacute] in the case of a request by a 
foreign law enforcement agency, which has been named in the information 
request, the fact that FinCEN has requested or has obtained information 
under this section, except to the extent necessary to comply with such 
an information request.
    (2) Notwithstanding paragraph (b)(3)(iv)(B)(1) of this section, a 
financial institution authorized to share information under Sec.  
103.110 may share information concerning an individual, entity, or 
organization named in a request from FinCEN in accordance with the 
requirements of such section. However, such sharing shall not disclose 
the fact that FinCEN has requested information concerning such 
individual, entity, or organization.
    (C) Each financial institution shall maintain adequate procedures 
to protect the security and confidentiality of requests from FinCEN for 
information under this section. The requirements of this paragraph 
(b)(3)(iv)(C) shall be deemed satisfied to the extent that a financial 
institution applies to such information procedures that the institution 
has established to satisfy the requirements of section 501 of the 
Gramm-Leach-Bliley Act (15 U.S.C. 6801), and applicable regulations 
issued thereunder, with regard to the protection of its customers' 
nonpublic personal information.
* * * * *
    (4) Relation to the Right to Financial Privacy Act and the Gramm-
Leach-Bliley Act. The information that a financial institution is 
required to report pursuant to paragraph (b)(3)(ii) of this section is 
information required to be reported in accordance with a federal 
statute or rule promulgated thereunder, for purposes of subsection 
3413(d) of the Right to Financial Privacy Act (12 U.S.C. 3413(d)) and 
subsection 502(e)(8) of the Gramm-Leach-Bliley Act (15 U.S.C. 
6802(e)(8)).
    (5) No effect on law enforcement or regulatory investigations. 
Nothing in this subpart affects the authority of a Federal, State or 
local law enforcement agency or officer, or FinCEN or another component 
of the Department of the Treasury, to obtain information directly from 
a financial institution.

    Dated: February 4, 2010.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2010-2928 Filed 2-9-10; 8:45 am]
BILLING CODE 4810-02-P