12730 Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 

automatically take effect at the end of 45 

days of continuous session of Congress 

beginning on October 12, 2006. The 45- 

day review period ended on February 

16, 2007. This document confirms the 

effective date as February 16, 2007. 

DATES: Effective Date: The final rule 

published on October 12, 2006 (71 FR 

60055) took effect on February 16, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Becky Shortland, Gray’s Reef National 

Marine Sanctuary, 10 Ocean Science 

Circle, Savannah, Georgia 31411; 912–

598–2381; Becky.Shortland@noaa.gov. 

(Federal Domestic Assistance Catalog 

Number 11.429 Marine Sanctuary Program) 

Dated: March 13, 2007. 

John H. Dunnigan, 

Assistant Administrator for Ocean Services 

and Coastal Zone Management. 

[FR Doc. 07–1303 Filed 3–16–07; 8:45 am] 

BILLING CODE 3510–08–M 

SOCIAL SECURITY ADMINISTRATION 

20 CFR Part 416 

Revised Medical Criteria for 

Determination of Disability, 

Musculoskeletal System and Related 

Criteria 

CFR Correction 

In Title 20 of the Code of Federal 

Regulations, Parts 400 to 499, revised as 

of April 1, 2006, on page 948, § 416.933 

is corrected by adding a sentence after 

the second sentence to read as follows: 

§ 416.933 How we make a finding of 

presumptive disability or presumptive 

blindness. 

* * * For other impairments, a 

finding of disability or blindness must 

be based on medical evidence or other 

information that, though not sufficient 

for a formal determination of disability 

or blindness, is sufficient for us to find 

that there is a high degree of probability 

that you are disabled or blind. * * * 

[FR Doc. 07–55503 Filed 3–16–07; 8:45 am] 

BILLING CODE 1505–01–D 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 341 

[Docket No. 1976N–0052G] (formerly Docket 

No. 76N–052G) 

Cold, Cough, Allergy, Bronchodilator, 

and Antiasthmatic Drug Products for 

Over-the-Counter Human Use; 

Technical Amendment 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final rule; technical 

amendment. 

SUMMARY: The Food and Drug 

Administration (FDA) is amending its 

regulations to change the location of a 

section in an over-the-counter (OTC) 

drug monograph. This action is editorial 

in nature and is intended to improve the 

accuracy of the agency’s regulations. 

DATES: This rule is effective March 19, 

2007. 

FOR FURTHER INFORMATION CONTACT: 

Gerald M. Rachanow, Center for Drug 

Evaluation and Research, Food and 

Drug Administration, 10903 New 

Hampshire Ave., Bldg. 22, rm. 5496, 

Silver Spring, MD 20993, 301–796–

2090. 

SUPPLEMENTARY INFORMATION: FDA 

published the final monograph (FM) for 

cold, cough, allergy, bronchodilator, and 

antiasthmatic combination drug 

products for OTC human use in the 

Federal Register of December 23, 2002 

(67 FR 78158). In that FM, FDA 

inadvertently added § 341.40 (21 CFR 

341.40) to subpart C of the monograph, 

when that section should have been 

added to subpart B of the monograph. 

Accordingly, FDA is now moving 

§ 341.40 from subpart C to subpart B of 

the monograph. 

Publication of this document 

constitutes final action on this change 

under the Administrative Procedure Act 

(5 U.S.C. 553). Notice and public 

procedures are unnecessary because 

FDA is merely implementing a change 

in the location of a section in an OTC 

drug monograph. No other changes are 

being made to that section of the 

monograph. 

List of Subjects in 21 CFR Part 341 

Labeling, Over-the-counter drugs. 

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs, 21 CFR part 341 is 

amended as follows: 

PART 341—COLD, COUGH, ALLERGY, 

BRONCHODILATOR, AND 

ANTIASTHMATIC DRUG PRODUCTS 

FOR OVER-THE-COUNTER HUMAN 

USE 

■ 1. The authority citation for 21 CFR 

part 341 continues to read as follows: 

Authority: 21 U.S.C. 321, 351, 352, 353, 

355, 360, 371. 

Subpart B—Active Ingredients 

[Amended] 

■ 2. Remove § 341.40 Permitted 

combinations of active ingredients from 

subpart C and add it to subpart B of part 

341. 

Dated: March 12, 2007. 

Jeffrey Shuren, 

Assistant Commissioner for Policy. 

[FR Doc. E7–4957 Filed 3–16–07; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF THE TREASURY 

31 CFR Part 103 

RIN 1506–AA83 

Financial Crimes Enforcement 

Network; Amendment to the Bank 

Secrecy Act Regulations—Imposition 

of Special Measure Against Banco 

Delta Asia, Including Its Subsidiaries 

Delta Asia Credit Limited and Delta 

Asia Insurance Limited, as a Financial 

Institution of Primary Money 

Laundering Concern 

AGENCY: Financial Crimes Enforcement 

Network, Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: The Financial Crimes 

Enforcement Network (‘‘FinCEN’’) is 

issuing a final rule imposing a special 

measure against Banco Delta Asia SARL 

(‘‘Banco Delta Asia’’ or ‘‘the bank’’) as 

a financial institution of primary money 

laundering concern, pursuant to the 

authority contained in 31 U.S.C. 5318A 

of the Bank Secrecy Act. 

DATES: This final rule is effective on 

April 18, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Regulatory Policy and Programs 

Division, Financial Crimes Enforcement 

Network, (800) 949–2732. 

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 


cprice-sewell on PROD1PC66 with RULES
Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 12731 

1Therefore, references to the authority of the 

Secretary of the Treasury under section 311 of the 

USA PATRIOT Act apply equally to the Director of 

the Financial Crimes Enforcement Network. 

Accordingly, authorities granted to the Secretary are 

attributed to the Director of FinCEN in this 

rulemaking. 

2Language expanding the scope of the Bank 

Secrecy Act to intelligence or counter-intelligence 

activities to protect against international terrorism 

was added by section 358 of the USA PATRIOT 

Act. 

3Available special measures include requiring: 

(1) Recordkeeping and reporting of certain financial 

transactions; (2) collection of information relating to 

beneficial ownership; (3) collection of information 

relating to certain payable-through accounts; (4) 

collection of information relating to certain 

correspondent accounts; and (5) prohibition or 

conditions on the opening or maintaining of 

correspondent or payable-through accounts. 31 

U.S.C. 5318A(b)(1)–(5). For a complete discussion 

of the range of possible countermeasures, see 68 FR 

18917 (April 17, 2003) (proposing to impose special 

measures against Nauru). 

4Section 5318A(a)(4)(A) requires the Secretary to 

consult with the Chairman of the Board of 

Governors of the Federal Reserve System, any other 

appropriate Federal banking agency, the Secretary 

of State, the Securities and Exchange Commission, 

the Commodity Futures Trading Commission, the 

National Credit Union Administration, and, in our 

sole discretion, ‘‘such other agencies and interested 

parties as the Secretary may find to be appropriate.’’

The consultation process must also include the 

Attorney General if the Secretary is considering 

prohibiting or imposing conditions upon the 

opening or maintaining of a correspondent account 

by any domestic financial institution or domestic 

financial agency for the foreign financial institution 

of primary money laundering concern. 31 U.S.C. 

5318(c)(1). 

5Classified information used in support of a 

section 311 finding of primary money laundering 

concern and imposition of special measure(s) may 

be submitted by Treasury to a reviewing court ex 

parte and in camera. See section 376 of the 

Intelligence Authorization Act for Fiscal Year 2004, 

Pub. L. 108–177 (amending 31 U.S.C. 5318A by 

adding new paragraph (f)). 

Intercept and Obstruct Terrorism Act of 

2001, Public Law 107–56 (‘‘USA 

PATRIOT Act’’). Title III of the USA 

PATRIOT Act amends the anti-moneylaundering provisions of the Bank 

Secrecy Act, codified at 12 U.S.C. 

1829b, 12 U.S.C. 1951–1959, and 31 

U.S.C. 5311–5314 and 5316–5332, to 

promote the prevention, detection, and 

prosecution of money laundering and 

the financing of terrorism. Regulations 

implementing the Bank Secrecy Act 

appear at 31 CFR part 103. The 

authority of the Secretary of the 

Treasury (‘‘the Secretary’’) to administer 

the Bank Secrecy Act and its 

implementing regulations has been 

delegated to the Director of FinCEN 

(‘‘the Director’’).1 The Bank Secrecy Act 

authorizes the Director to issue 

regulations to require all financial 

institutions defined as such in the Act 

to maintain or file certain reports or 

records that have been determined to 

have a high degree of usefulness in 

criminal, tax, or regulatory 

investigations or proceedings, or in the 

conduct of intelligence or counterintelligence activities, including 

analysis, to protect against international 

terrorism, and to implement anti-money 

laundering programs and compliance 

procedures.2

Section 311 of the USA PATRIOT Act 

added section 5318A to the Bank 

Secrecy Act, granting the Director the 

authority, after finding that reasonable 

grounds exist for concluding that a 

foreign jurisdiction, institution, class of 

transactions, or type of account is of 

‘‘primary money laundering concern,’’

to require domestic financial 

institutions and domestic financial 

agencies to take certain ‘‘special 

measures’’ against the primary money 

laundering concern. Section 311 

identifies factors for the Director to 

consider and Federal agencies to consult 

before we may find that reasonable 

grounds exist for concluding that a 

jurisdiction, institution, class of 

transactions, or type of account is of 

primary money laundering concern. The 

statute also provides similar procedures, 

including factors and consultation 

requirements, for selecting the specific 

special measures to be imposed against 

the primary money laundering concern. 

Taken as a whole, section 311 

provides the Director with a range of 

options that can be adapted to target 

specific money laundering and terrorist 

financing concerns most effectively. 

These options provide the authority to 

bring additional and useful pressure on 

those jurisdictions and institutions that 

pose money laundering threats and the 

ability to take steps to protect the U.S. 

financial system. Through the 

imposition of various special measures, 

we can gain more information about the 

concerned jurisdictions, institutions, 

transactions, and accounts; monitor 

more effectively the respective 

jurisdictions, institutions, transactions, 

and accounts; and ultimately protect 

U.S. financial institutions from 

involvement with jurisdictions, 

institutions, transactions, or accounts 

that pose a money laundering concern. 

Before making a finding that 

reasonable grounds exist for concluding 

that a foreign financial institution is of 

primary money laundering concern, the 

Director is required by the Bank Secrecy 

Act to consult with both the Secretary 

of State and the Attorney General. 

In addition to these consultations, 

when finding that a foreign financial 

institution is of primary money 

laundering concern, the Director is 

required by section 311 to consider 

‘‘such information as [we] determine[ ] 

to be relevant, including the following 

potentially relevant factors:’’

• The extent to which such financial 

institution is used to facilitate or 

promote money laundering in or 

through the jurisdiction; 

• The extent to which such financial 

institution is used for legitimate 

business purposes in the jurisdiction; 

and 

• The extent to which such action is 

sufficient to ensure, with respect to 

transactions involving the institution 

operating in the jurisdiction, that the 

purposes of the Bank Secrecy Act 

continue to be fulfilled, and to guard 

against international money laundering 

and other financial crimes. 

If we determine that reasonable 

grounds exist for concluding that a 

foreign financial institution is of 

primary money laundering concern, we 

must determine the appropriate special 

measure(s) to address the specific 

money laundering risks. Section 311 

provides a range of special measures 

that can be imposed, individually or 

jointly, in any combination, and in any 

sequence.3 In the imposition of special 

measures, we follow procedures similar 

to those for finding a foreign financial 

institution to be of primary money 

laundering concern, but we also engage 

in additional consultations and consider 

additional factors. Section 311 requires 

us to consult with other appropriate 

Federal agencies and parties 4 and to 

consider the following specific factors: 

• Whether similar action has been or 

is being taken by other nations or 

multilateral groups; 

• Whether the imposition of any 

particular special measure would create 

a significant competitive disadvantage, 

including any undue cost or burden 

associated with compliance, for 

financial institutions organized or 

licensed in the United States; 

• The extent to which the action or 

the timing of the action would have a 

significant adverse systemic impact on 

the international payment, clearance, 

and settlement system, or on legitimate 

business activities involving the 

particular institution; and 

• The effect of the action on U.S. 

national security and foreign policy.5

In this final rule, we are imposing the 

fifth special measure (31 U.S.C. 

5318A(b)(5)) against Banco Delta Asia, a 

commercial bank in Macau, Special 

Administrative Region, China 

(‘‘Macau’’). The fifth special measure 

allows for the imposition of conditions 

upon, or the prohibition of, the opening 

or maintaining of correspondent or 

payable-through accounts in the United 

States for or on behalf of a foreign 

financial institution of primary money 


cprice-sewell on PROD1PC66 with RULES
12732 Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 

6The Bankers’ Almanac (2006). For purposes of 

this rulemaking, our finding of primary money 

laundering concern and imposition of special 

measures shall apply exclusively to Banco Delta 

Asia and its branches, offices, and subsidiaries, and 

not to Delta Asia Group (Holdings) Ltd., or any of 

its other subsidiaries. 

7Banco Delta Asia’s historical name, Banco Hang 

Sang, is not to be confused with Hang Seng Bank, 

a Hong Kong bank, nor the Hang Seng Index, an 

index of certain shares traded on the Hong Kong 

Stock Exchange. 

8As of November 2006, Bankers’ Almanac 

indicated that the bank maintained one U.S. 

correspondent relationship, although it is possible 

that the self-reported data had not been updated. 

9The Bankers’ Almanac (2006). 

10See 70 FR 55214 (Finding) (Sept. 20, 2005); 70 

FR 55217 (Notice of Proposed Rulemaking) (Sept. 

20, 2005). 

11 Id. 

12See, e.g.: http://www.fas.org/irp/threat/ 

pub45270index.html (International Crime Threat 

Assessment, 2000) http://archives.cnn.com/1999/ 

ASIANOW/east/macau/stories/macau.north.korea/

index.html (1999); http://www.asiapacificms.com/

articles/north_korea_banking/ (2003); http:// 

www.gluckman.com/MacauHo.html (1997); http:// 

www.asiaweek.com/asiaweek/98/1030/nat7.html 

(1999); http://archives.cnn.com/1999/ASIANOW/

east/macau/profiles/edmond.ho/ (1999); http:// 

www.asianpacificpost.com/portal2/ 

pageView.html?id

=402881910674ebab010674f4ca74141f; etc. 

13Macao, China, Jurisdiction Report (to Asia 

Pacific Group Annual Meeting), 2006. PROGRESS 

REPORT ON THE IMPLEMENTATION OF THE 

RECOMMENDATIONS OF THE APG 

EVALUATION REPORT, 2006. 

14 ‘‘Serious crimes’’ are defined as crimes carrying 

a punishment of two to eight years imprisonment. 

laundering concern. Unlike the other 

special measures, this special measure 

may be imposed only through the 

issuance of a regulation. 

B. Banco Delta Asia 

Banco Delta Asia, located and 

licensed in Macau, is the commercial 

banking arm of its parent company, 

Delta Asia Group (Holdings) Ltd. (‘‘Delta 

Asia Group’’).6 In addition to 

commercial banking, Delta Asia Group 

engages in investment banking and 

insurance activities. Banco Delta Asia 

was originally established in 1935 as 

Banco Hang Sang,7 and its name 

changed to Banco Delta Asia in 

December 1993. According to Banco 

Delta Asia’s representations to us, the 

bank had roughly $205 million (U.S. 

dollars) in assets as of July 2006. Banco 

Delta Asia operates eight branches in 

Macau (including a branch at a casino) 

and is served by a representative office 

in Japan. According to statements made 

by Banco Delta Asia, many of its foreign 

correspondent relationships in North 

America, Europe, and Asia were 

terminated after the publication of our 

finding of primary money laundering 

concern, and the bank no longer 

maintains a foreign correspondent 

account in the United States.8 Banco 

Delta Asia may still have indirect access 

to the U.S. financial system, however, 

via nested correspondent accounts at 

other foreign financial institutions that 

have correspondent accounts at covered 

financial institutions. Banco Delta Asia 

has two wholly owned subsidiaries: 

Delta Asia Credit Limited and Delta 

Asia Insurance Limited.9

II. The 2005 Finding and Subsequent 

Developments 

A. The 2005 Finding 

Based upon review and analysis of 

pertinent information, consultations 

with relevant Federal agencies and 

parties, and consideration of the factors 

enumerated in section 311, in 

September 2005 the Director found that 

reasonable grounds existed for 

concluding that Banco Delta Asia was a 

financial institution of primary money 

laundering concern. This finding was 

published in conjunction with a Notice 

of Proposed Rulemaking,10 which 

proposed prohibiting covered financial 

institutions from, directly or indirectly, 

opening or maintaining correspondent 

accounts in the United States for Banco 

Delta Asia or any of its branches, offices, 

or subsidiaries, pursuant to the 

authority under 31 U.S.C. 5318A. 

The Notice of Proposed Rulemaking 

outlined the various factors supporting 

the finding and proposed prohibition.11

Specifically, we stated that Banco Delta 

Asia had provided financial services for 

more than 20 years to multiple North 

Korean-related individuals and entities 

that were engaged in illicit activities. 

Sources showed that certain of such 

entities had paid a fee to Banco Delta 

Asia for financial access to the banking 

system with little oversight or control, 

and that the bank helped conduct 

surreptitious, multi-million dollar cash 

deposits and withdrawals on their 

behalf. In fact, the bank facilitated 

several multi-million dollar wire 

transfers connected to alleged criminal 

activity on behalf of one such company. 

Banco Delta Asia maintained an 

uninterrupted banking relationship with 

one North Korean front company 

despite the fact that the head of the 

company was charged with attempting 

to deposit large sums of counterfeit 

currency into Banco Delta Asia, for 

which he was expelled from Macau. 

Banco Delta Asia also serviced the 

account of a known international drug 

trafficker. Treasury’s September 2005 

Notice also noted that any legitimate 

business use of Banco Delta Asia 

appeared to be significantly outweighed 

by its use to promote or facilitate money 

laundering and other financial crimes. 

Treasury determined that a finding 

that Banco Delta Asia was of primary 

money laundering concern and 

prohibiting covered financial 

institutions from opening or 

maintaining correspondent accounts for 

that institution would prevent suspect 

accountholders at Banco Delta Asia 

from accessing the U.S. financial system 

to facilitate money laundering. It would 

also bring criminal conduct occurring at 

or through Banco Delta Asia to the 

attention of the international financial 

community and thus serve the purposes 

of the Bank Secrecy Act as well as guard 

against international money laundering 

and other financial crime. 

B. Jurisdictional Developments 

As Special Administrative Region to 

the People’s Republic of China, Macau 

retains substantial autonomy in all areas 

related to the regulation and oversight of 

its financial services sector and 

domestic economic affairs. Macau’s 

financial system, including its robust 

casino and gaming sector, has 

historically been known to be 

vulnerable to financial crime,12 due in 

large part to an under-developed antimoney laundering regime. As discussed 

below, however, Macau has begun to 

take important steps to address those 

systemic concerns. 

While Macau has worked to develop 

its anti-money laundering and counterterrorist financing framework since the 

1990s, and has joined regional groups 

such as the Asia Pacific Group on 

Money Laundering (APG) to aid these 

efforts, Macanese authorities have taken 

a number of additional important steps 

since the September 2005 Notice of 

Proposed Rulemaking on Banco Delta 

Asia to address the reported money 

laundering risks and systemic 

vulnerabilities.13 In April 2006, Macau 

enacted Law no. 2/2006 on Prevention 

and Repression of the Crime of Money 

Laundering and Law no. 3/2006 on 

Prevention and Repression of the Crime 

of Terrorism. The new law on money 

laundering replaces and supersedes 

existing money laundering legislation, 

Decree-Law 24/98/M, and the 

provisions on money laundering in Law 

6/97/M against organized crime, and 

makes comprehensive and stand-alone 

the crime of money laundering. Further, 

it broadens the scope of predicate 

offences to all serious crimes,14

including terrorism, and is extended to 

conduct occurring outside of Macau. 

Violations of the anti-money laundering 

law are punishable with a penalty of 

imprisonment of not less than three 

years, ‘‘as well as [forfeiture of] any 

assets obtained therefrom.’’


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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 12733 

15The domestic currency of Macau. As of 

February 2007, the exchange rate for patacas to U.S. 

dollars was approximately 8:1. 

16The Macanese government recognizes both 

‘‘Macau’’ and ‘‘Macao’’ as the correct spelling of the 

jurisdiction. Certain government agencies and 

publications use the more traditional Portuguese 

spelling, Macao. 

17The administrative committee consists of the 

Chief Executive Officer of a note-issuing bank in 

Macau, the Deputy Director of the Macau Monetary 

Authority Internal Audit Department, and an 

attorney from a prominent Macanese law firm. No 

employees or former employees of the bank were 

appointed to the administrative committee. The 

present term is scheduled to continue through 

March 2007. 

18Even to the extent that the bank’s former 

management is permanently replaced, we note that 

the former chief executive officer and chairman of 

the board is also the controlling owner of the bank 

and would still possess significant influence over 

the operations of the bank. 

19The bank met with representatives from the 

U.S. Government in November 2005, and February 

and July 2006. The bank also provided information 

in writing through the comment process described 

in the Notice of Proposed Rulemaking. 

20According to the bank’s representations to us, 

one firm was retained by the Macau Monetary 

Authority and one was retained by the bank under 

the oversight of the administrative committee. 

21We have recently been informed that Banco 

Delta Asia has hired a compliance officer. 

22These conclusions were derived in part from 

classified sources, but primarily from an 

independent review by a large international 

accounting firm of Banco Delta Asia’s activity with 

North Korean-related clients and a separate U.S. 

Government review of Banco Delta Asia 

documentation, including that used to conduct the 

independent review. 

In addition, in May 2006, Macau 

enacted Administrative Regulation no. 

7/2006—Preventive Measures Against 

Money Laundering and Financing 

Terrorism—a set of implementing 

measures related to the new laws which 

statutorily went into full legal effect on 

November 12, 2006. The regulation 

broadens and clarifies the obligations of 

covered institutions regarding 

identification of customers and contract 

parties as well as the nature, purpose, 

and source of funds and transactions 

performed; requires recordkeeping and 

reporting of suspicious and large cash 

transactions; and obligates institutions 

to refuse transactions absent adequate 

information. Further, the regulation 

provides for fines (between 10,000 and 

500,000 patacas 15 for a natural person 

and between 100,000 and 5,000,000 

patacas for a legal person) against those 

found to be in violation of the antimoney laundering laws. The regulation, 

applicable to multiple sectors (financial 

and designated non-financial businesses 

and professions) now covered under the 

new provisions, is aimed at combating 

the financing of terrorism and money 

laundering and stipulates that the duties 

established under the new provisions 

will be applied by the following 

supervisory and regulatory agencies in 

relation to the entities subject to their 

respective supervision: Macao 16

Monetary Authority, Gaming Inspection 

and Coordination Bureau, Macao Trade 

and Investment Bureau, Finance 

Department, Macao Lawyers 

Association, Independent Commission 

for the Exercise of the Disciplinary 

Power over Solicitors, Legal Affairs 

Bureau, and Macau Economic 

Department. The new regulation has 

also specified penalties for noncompliance by covered institutions. 

The Office of Financial Intelligence 

(‘‘GIF’’) was established by Order of the 

Chief Executive no. 227/2006 in August 

2006 and began operations on 

November 12, 2006. As provided in the 

order, this office will function as 

Macau’s financial intelligence unit 

(‘‘FIU’’), collecting, analyzing and 

disseminating information on 

suspicious and large cash transactions 

and cooperating as necessary with 

international FIUs. GIF also has the 

responsibility for reporting suspected 

money laundering activities to the 

Public Prosecutions Office and, to the 

extent capable and necessary, for 

providing technical assistance to 

covered institutions and all regulatory 

bodies subject to the new legislation. 

Macanese authorities have created a 

Money Laundering Related Crime 

Division (a special investigative agency 

dedicated to financial crimes) within 

the Judiciary Police. A separate law 

governing international mutual legal 

assistance in criminal matters, Law no. 

6/2006 on Judicial Cooperation in 

Criminal Matters, was approved by the 

Legislative Assembly (‘‘LA’’) in July 

2006 and became effective November 1, 

2006. 

Finally, while Customs authorities in 

Macau require declaration of crossborder trade movements in goods and 

valuables, there are currently no 

provisions to monitor or declare crossborder currency movements in and out 

of Macau. Macanese authorities have 

stated they are undertaking a study on 

this issue that will help inform 

authorities on the development of a 

potential strategy to effectively address 

cross-border currency movements. 

However, no specific strategy has been 

formulated to date. 

While these efforts are important and 

welcome signs of Macau’s overall 

progress in strengthening its anti-money 

laundering and combating the financing 

of terrorism regime, full and 

comprehensive implementation of these 

measures in all the covered sectors will 

need to follow. 

C. Banco Delta Asia’s Subsequent 

Developments 

Shortly after the issuance of our 

finding and Notice of Proposed 

Rulemaking, the Macau Monetary 

Authority appointed a three person 

‘‘administrative committee’’ that 

temporarily replaced the senior 

management of the bank to oversee the 

daily operations of the bank and address 

the concerns we raised.17 Although the 

executive order appointing the 

committee and establishing their sixmonth term has twice been extended, no 

plan has been proffered to change 

permanently the management or 

ownership structure of the bank, 

notwithstanding the egregious historical 

practices detailed below.18 Given the 

possibility that the bank will be 

returned to the control of its former 

management and primary shareholder 

in the future, our ongoing concerns 

about their historical practices and their 

potential for recidivism detailed below 

remain a reasonable basis both for our 

conclusion that Banco Delta Asia is of 

primary money laundering concern and 

for our imposition of a special measure 

to safeguard the U.S. financial system. 

Representatives of the bank informed 

us that the government-appointed 

administrative committee has taken 

steps to address many of the money 

laundering concerns that we previously 

identified.19 For example, two 

independent accounting firms were 

retained 20 to investigate the allegations 

in the Notice of Proposed Rulemaking, 

to assess the weaknesses in the bank’s 

internal anti-money laundering 

procedures, and to assist in the 

development of a revised anti-money 

laundering program (a process that 

reportedly is still ongoing more than a 

year later). These representatives also 

reported that the administrative 

committee has begun to recruit a 

permanent compliance officer 21 and 

that all North Korean-related accounts 

previously maintained by the bank have 

been closed. 

Despite these representations, we 

continue to have serious concerns 

regarding the bank’s potential to be 

used, wittingly or unwittingly, for illicit 

purposes. In fact, questions regarding 

the completeness and accuracy of the 

information and records provided by the 

bank to the accounting firm retained to 

help address the bank’s weaknesses 

resulted in the firm’s disclaimer that its 

reported findings did not constitute a 

reliable audit. Our investigation has 

corroborated these concerns.22 For 

example, we are aware of multiple 

North Korean-related accounts that the 

bank did not identify to the accounting 


cprice-sewell on PROD1PC66 with RULES
12734 Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 

23See supra footnote 22. 

24See supra footnote 22. 

25 Inasmuch as Banco Delta Asia was the sole 

institution involved in the processing of these 

transactions, and considering our concerns 

regarding the bank’s potential complicity involving 

illicit activity, the commingling of funds and the 

rapid movement of large round-figure amounts via 

such intra-bank transfers is particularly suspicious 

as a means of obscuring the true nature and source 

of the funds involved. 

26See supra footnote 22. 

27This level of activity is significant considering 

the bank reported the equivalent of only $390 

million in total customer deposits immediately 

prior to our Notice of Proposed Rulemaking. 28See supra footnote 22. 

firm and, hence, the accounting firm did 

not review. 

In a review of recently obtained data 

pertaining to Banco Delta Asia, we 

verified the bank had grossly inadequate 

controls in place to deter or detect 

money laundering or other illicit 

activity.23 Prior to the government’s 

appointment of the administrative 

committee, there was a systemic lack of 

due diligence, including: 

• Failure to take reasonable measures 

to identify suspicious activity, 

suspicious entities, and bulk cash 

activity inconsistent with the stated 

business of the bank’s clients; 

• Failure to obtain or maintain 

sufficient information regarding identity 

verification and the nature of business 

activities in customer files; 

• Failure to adequately control and 

retain documents relating to the bank’s 

largest wholesale bulk cash customers; 

• Failure to consistently follow its 

own policies and procedures with 

respect to multiple business offerings, 

including screening for counterfeit 

currency; 

• Failure to effectively rate the risk of 

its customer base; to monitor, on an 

ongoing basis, accounts that should 

have been designated as high risk; to 

take corrective action against entities in 

which illicit activity was detected; 

• Failure to update or use sufficient 

information technology systems when 

manual systems proved inadequate; 

• Failure to regularly update its antimoney laundering policies with new 

information or best practices; and 

• Failure to internally audit the 

adequacy of the compliance department 

at the bank. 

In a review of this same data,24 we 

have also verified that the bank’s grossly 

inadequate due diligence facilitated 

unusual or deceptive financial practices 

by North Korean-related clients. These 

practices have included: 

• Suppressing the identity and 

location of originators of transactions 

and arranging for funds transfers via 

third parties. 

• Repeated bank transfers of large, 

round-figure sums both to and from 

accounts held at other banks that appear 

to have no licit purpose and may be 

indicative of layering activity. 

• The routine use of cash couriers to 

move large amounts of currency, usually 

U.S. dollars, in the absence of any 

credible explanation of the origin or 

purpose for the cash transactions. For 

example, records from 2002 show that 

one North Korean-linked entity 

deposited the equivalent of over U.S. 

$50 million, accounting for more than 

half of Banco Delta Asia’s bulk cash 

deposits that year. 

• Internal book transfers involving 

the movement of funds among accounts 

and accountholders via intra-bank 

transfers occurring repeatedly and in 

large, round-figure sums. This 

sometimes involved shifting currencies 

and significant round-figure transfers 

between business and personal 

accounts.25

Moreover, in our review of this same 

data, we became aware that the extent 

to which the bank was historically used 

for illicit activity exceeds our original 

findings and reveals a deliberate effort 

to attract and maintain high-risk 

accounts regardless of their nexus to 

illicit activities. A review of recently 

obtained data pertaining to Banco Delta 

Asia’s historical activity has established 

the following: 26

• Many North Korean-related 

individuals and companies banking at 

Banco Delta Asia had connections to 

entities involved in trade in counterfeit 

U.S. currency, counterfeit cigarettes, 

and narcotics, including several front 

companies suspected of laundering 

hundreds of millions of dollars in cash 

through Banco Delta Asia.27 The bank 

did not conduct due diligence to 

attempt to verify the source of the 

unusually large currency deposits made 

involving these clients. 

• Despite widely reported currency 

counterfeiting concerns, the bank 

provided a discount as an incentive to 

a high-risk North Korean-related bulk 

currency depositor to encourage its 

continued use of the bank, and 

continued to accept deposits from that 

customer even after it had knowledge 

that another institution had rejected 

those transactions. 

These activities, in aggregate, should 

have raised significant concerns at the 

bank. Internal bank documents reveal 

that in the few cases where bank 

employees documented their concerns 

over the potential for money laundering 

activity by entities making 

commercially unjustifiable large cash 

deposits or engaged in other suspicious 

behavior, senior management of the 

bank consistently failed to take any 

action when appropriate explanations 

for the activity were not provided. In 

fact, senior management in certain cases 

would verbally vouch for the customers 

in question without any documentary 

evidence and indicate that the 

transactions should continue to be 

processed.28

Banco Delta Asia provided North 

Korean-related entities with tailored 

services that allowed those entities to 

engage in extraordinarily deceptive 

financial activity. For example, two 

related business accountholders, which 

accounted for more than 30 percent of 

the bank’s bulk cash turnover over a 

multiple year period, provided 

intermediary financial services on 

behalf of North Korean banks at least in 

part to disguise the origins of the 

transactions. Bank documents reveal 

that Banco Delta Asia had knowledge of 

the relationships between the banks and 

these entities, willingly obscured the 

identity of the transacting institutions, 

and agreed to continue treating the 

accounts as business accounts, not 

banking accounts, despite activity 

consistent with banking. 

Even after our finding of primary 

money laundering concern, the bank’s 

management dismissed concerns 

presented by independent reviewers of 

the bank’s shortcomings involving 

customer identification and ongoing due 

diligence obligations. For example, bank 

managers asserted that Banco Delta 

Asia’s North Korean client banks were 

low-risk based on the effective 

supervision by the Central Bank of 

North Korea and the unlikelihood that 

North Korean government-owned 

entities would be used for illicit 

purposes. As publicly available 

information clearly contradicted these 

assumptions, the bank management’s 

claims seem overly permissive and fail 

to meet even the most basic due 

diligence standards. In fact, the Macau 

Monetary Authority informed the bank 

in 2004 in writing that North Korea 

lacked transparency in supervisory 

standards. It recommended that the 

bank either strengthen its due diligence 

procedures and establish a detailed 

procedure manual for dealing with 

North Korean banks, or scale down or 

terminate this type of risky business. 

Nevertheless, the management of the 

bank continued to provide 

uninterrupted financial services to such 

customers with minimal or no due 

diligence. In fact, in the face of concerns 

expressed by the Macau Monetary 

Authority and the U.S. Department of 

the Treasury, a senior bank official 


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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 12735 

29See http://www.forbes.com/finance/feeds/afx/ 

2005/09/18/afx2230247.html ‘‘Macau Banco Delta 

Asia halts NKorea business, denies money 

laundering-report.’’ (19 September 2005) 

30The bank has indicated that it has not yet fully 

implemented new policies, procedures, and 

controls for money laundering prevention. 

31Additional comments submitted on behalf of 

the bank are discussed in Section IV of this Final 

Rule. 

32See supra footnote 3. 

33For purposes of the rule, a correspondent 

account is defined as an account established to 

receive deposits from, or make payments or other 

disbursements on behalf of, a foreign bank, or 

handle other financial transactions related to the 

foreign bank (see 31 U.S.C. 5318A(e)(1)(B), as 

implemented in 31 CFR 103.175(d)(1)(ii)). 

assured the public that Banco Delta 

Asia’s cessation of business with North 

Korean accountholders was only a 

temporary measure to resolve the bank’s 

dispute with FinCEN.29

Representatives of the bank maintain 

that the administrative committee has 

taken or is in the process of taking some 

measures to address the concerns raised 

in our finding and Notice of Proposed 

Rulemaking, including terminating all 

North Korean-related accounts, 

conducting a risk assessment of all 

accountholders, drafting a revised antimoney laundering program, and 

upgrading its information technology 

systems.30 In one of its comments 

submitted in response to the Notice of 

Proposed Rulemaking, the bank stated 

that these remedial measures and 

Macau’s new regulatory controls would 

prevent the bank from returning to its 

former business practices.31 However, 

the totality of the information presented 

above casts significant doubt upon the 

commitment of the bank, apart from the 

administrative committee, to resolve 

effectively the ongoing money 

laundering vulnerabilities at the bank. 

The administrative committee’s 

termination of North Korean-related 

customer relationships does not address 

effectively the bank’s historical 

proclivity to seek out such customers or 

the potential of the bank to return to 

such practices. In fact, historical 

attempts by bank employees to follow 

the limited procedures or best practices 

that were in place at that time were 

quashed at the highest levels of the 

bank. 

Despite any remedial measures and 

regulatory changes, this historical 

pattern of disregard by the bank’s 

management and primary shareholder 

regarding both the systemic due 

diligence failures at the bank and the 

potential use of the bank for illicit 

purposes, and the resultant likelihood of 

recidivism upon the dissolution of the 

administrative committee, leave us 

concerned about the potential for the 

bank to continue to be used for money 

laundering and other illicit purposes. 

Accordingly, we find that Banco Delta 

Asia continues to be a financial 

institution of primary money laundering 

concern. 

III. Imposition of the Fifth Special 

Measure 

Consistent with the finding that 

Banco Delta Asia is a financial 

institution of primary money laundering 

concern, and based upon additional 

consultations with required Federal 

agencies and parties, as well as 

consideration of additional relevant 

factors, including the comments 

received on the proposed rule, we are 

imposing the fifth special measure 

authorized by 31 U.S.C. 5318A(b)(5) 

with regard to Banco Delta Asia.32 That 

special measure authorizes the 

prohibition of, or the imposition of 

conditions upon, the opening or 

maintaining of correspondent or 

payable-through accounts 33 by any 

domestic financial institution or 

domestic financial agency for, or on 

behalf of, a foreign financial institution 

found to be of primary money 

laundering concern. A discussion of the 

additional section 311 factors relevant 

to the imposition of this particular 

special measure follows. 

A. Similar Actions Have Not Been or 

May Not Be Taken by Other Nations or 

Multilateral Groups Against Banco Delta 

Asia 

At this time, other countries and 

multilateral groups have not taken any 

action against Banco Delta Asia similar 

to the imposition of the fifth special 

measure pursuant to section 311, which 

prohibits U.S. financial institutions and 

financial agencies from opening or 

maintaining a correspondent account in 

the United States for or on behalf of 

Banco Delta Asia and requires those 

institutions and agencies to guard 

against indirect use by Banco Delta Asia 

of the foreign correspondent accounts 

they maintain. After the issuance of the 

Notice of Proposed Rulemaking, 

however, the government of Macau did 

indicate its concern with illicit money 

flows into Banco Delta Asia by freezing 

accounts believed to be associated with 

illicit North Korean-related activity. 

B. The Imposition of the Fifth Special 

Measure Would Not Create a Significant 

Competitive Disadvantage, Including 

Any Undue Cost or Burden Associated 

With Compliance for Financial 

Institutions Organized or Licensed in 

the United States 

The fifth special measure imposed by 

this rule prohibits covered financial 

institutions from opening or 

maintaining correspondent accounts in 

the United States for, or on behalf of, 

Banco Delta Asia. As a corollary to this 

measure, covered financial institutions 

also are required to take reasonable 

steps to apply due diligence to all of 

their correspondent accounts to ensure 

that no such account is being used 

indirectly to provide services to Banco 

Delta Asia. The burden associated with 

these requirements is not expected to be 

significant, given that we are not aware 

of any covered financial institution that 

maintains a correspondent account 

directly for Banco Delta Asia. Moreover, 

there is a minimal burden involved in 

transmitting a one-time notice to all 

correspondent accountholders 

concerning the prohibition on indirectly 

providing services to Banco Delta Asia. 

In addition, covered financial 

institutions generally apply some degree 

of due diligence in screening their 

transactions and accounts, often through 

the use of commercially available 

software, such as that used for 

compliance with the economic 

sanctions programs administered by the 

Department of the Treasury’s Office of 

Foreign Assets Control. As explained in 

more detail in the section-by-section 

analysis below, financial institutions 

should be able to adapt their existing 

screening procedures to comply with 

this special measure. Thus, the due 

diligence that is required by this rule is 

not expected to impose a significant 

additional burden upon covered 

financial institutions. 

C. The Action or Timing of the Action 

Will Not Have a Significant Adverse 

Systemic Impact on the International 

Payment, Clearance, and Settlement 

System, or on Legitimate Business 

Activities Involving Banco Delta Asia 

Banco Delta Asia is not a major 

participant in the international payment 

system and is not relied upon by the 

international banking community for 

clearance or settlement services. Thus, 

the imposition of the fifth special 

measure against Banco Delta Asia will 

not have a significant adverse systemic 

impact on the international payment, 

clearance, and settlement system. In 

addition, as the bank historically sought 

out high-risk customers that represented 


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12736 Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 

34As previously mentioned, although Macau’s 

legislative and regulatory developments regarding 

its overall anti-money laundering and counterfinancing of terrorism regime are encouraging, 

Macau will need to more fully demonstrate 

implementation to continue improving its 

weaknesses. 

35Comments were to be submitted by October 20, 

2005. See 70 FR 55217 (September 20, 2005). 

36See 70 FR 55214 (September 20, 2005) at 

55215. 37See 70 FR 55218, FN 5. 

entire business lines and a material 

amount of its overall business, we 

believe that any legitimate use of Banco 

Delta Asia is significantly outweighed 

by its potential and reported use to 

promote or facilitate money laundering. 

Moreover, in light of the existence of 

multiple alternative banks in Macau, we 

believe that imposition of the fifth 

special measure against Banco Delta 

Asia will not impose an undue burden 

on legitimate business activities in 

Macau. 

D. The Action Enhances U.S. National 

Security and Complements U.S. Foreign 

Policy 

The exclusion from the U.S. financial 

system of banks such as Banco Delta 

Asia that serve as conduits for 

significant money laundering activity 

and that participate in other financial 

crime enhances U.S. national security 

by making it more difficult for criminals 

to access the substantial resources and 

services of the U.S. financial system. In 

addition, the imposition of the fifth 

special measure against Banco Delta 

Asia complements the U.S. 

government’s overall foreign policy 

strategy of making entry into the U.S. 

financial system more difficult for highrisk financial institutions located in 

jurisdictions with weak or poorly 

implemented and enforced anti-money 

laundering controls.34

IV. Notice of Proposed Rulemaking and 

Comments 

We received two comment letters on 

the Notice of Proposed Rulemaking 

within the timeframe established in the 

Notice.35 Additional comments were 

submitted on behalf of Banco Delta Asia 

subsequent to that timeframe but were 

considered at the bank’s request for 

purposes of this rulemaking. 

Additionally, we met with 

representatives of Banco Delta Asia on 

three separate occasions after the close 

of the comment period. We did not 

receive any comments addressing our 

description in the Notice of Proposed 

Rulemaking of the illicit activities of 

North Korea.36

One comment letter was from an 

individual at a U.S. university. This 

comment suggested that the potential 

for indirect access by an entity of 

primary money laundering concern was 

not adequately addressed by the 

notification provision and requirement 

to monitor for indirect access. The 

commenter did not suggest a viable 

alternative, and we believe that the 

combination of notification and 

screening provides the appropriate 

balance between effectiveness and 

burden in preventing Banco Delta Asia 

from accessing correspondent accounts 

at covered financial institutions. This 

commenter also expressed concern over 

the potential difficulty for detecting 

indirect access by Banco Delta Asia, 

considering its multiple branches and 

subsidiaries and its relationship to its 

parent company and its other 

subsidiaries. The commenter provided a 

description of what she considered best 

practices for institutions to identify 

indirect access in light of this perceived 

difficulty. As we indicated in the Notice 

of Proposed Rulemaking, the scope of 

the finding of primary money 

laundering concern, and therefore the 

target of the imposition of special 

measure, is limited only to Banco Delta 

Asia and its subsidiaries, not to its 

parent company or any of the parent 

company’s other subsidiaries.37

Additionally, although this final rule 

requires covered financial institutions to 

take certain minimum due diligence 

measures, the methodology or best 

practices for implementing those 

requirements falls outside the scope of 

this rulemaking. 

All of the remaining comments, both 

within and outside of the timeframe 

designated in the Notice of Proposed 

Rulemaking, were submitted on behalf 

of Banco Delta Asia. The bank requested 

that FinCEN revoke the finding of 

primary money laundering concern and 

the Notice of Proposed Rulemaking in 

light of remedial steps the bank claims 

that it, and the government of Macau, 

had taken or are in the process of taking 

to address the concerns we raised. As 

indicated above, however, our primary 

concern regards a pattern of activity by 

the former and presumed future senior 

management and owners of the bank to 

ignore, facilitate, or even encourage 

illicit activity. Consequently, despite 

any preliminary steps taken under the 

oversight of the administrative 

committee, we remain concerned about 

the extent to which the bank still could 

be used for illicit purposes. 

In its comments, the bank also 

addressed the statutory criteria we are 

required to consider when imposing the 

special measure to prohibit covered 

financial institutions from opening or 

maintaining correspondent accounts for 

Banco Delta Asia. The bank cited the 

fact, and we acknowledged in the 

proposed rule, that no other countries or 

jurisdictions had taken similar action to 

the one we were proposing. However, 

after the issuance of the Notice of 

Proposed Rulemaking asserting illicit 

flows of money into Banco Delta Asia 

involving North Korean-related entities, 

the Government of Macau was 

concerned enough to freeze some of the 

funds in those accounts. The bank 

further indicated that the jurisdiction of 

Macau, immediately following the 

issuance of the Notice of Proposed 

Rulemaking, had assumed operational 

control of the bank and provided 

liquidity after roughly one-third of the 

bank’s total deposits were withdrawn by 

the bank’s depositors. The bank cited 

these measures as indicia of Macau’s 

faith in the bank and suggested that any 

concerns we may have had about the 

bank should be satisfied in light of 

Macau’s oversight of and investment in 

the future of the bank. Despite our 

comments about the jurisdictional 

developments in section II.B., above, 

Macau’s imposed oversight of the bank 

not only does not negate our original 

findings but, to the extent such action 

indicates a lack of faith in the bank’s 

ability to autonomously address its 

significant money laundering 

vulnerabilities, may be viewed as 

supporting our finding of primary 

money laundering concern. 

The bank also cited the lack of 

confidence in the bank by the bank’s 

depositors as evidence of a ‘‘significant 

adverse impact * * * on legitimate 

business activities involving [the 

bank],’’ another statutory criteria we 

must consider. Although we recognize 

that certain customers of Banco Delta 

Asia will be affected by this rulemaking, 

the availability of alternative banking 

services in Macau will alleviate the 

burden on legitimate business activities 

within that jurisdiction. Moreover, to 

the extent that the bank has not 

sufficiently implemented remedial 

measures that address the deficiencies 

outlined above, we continue to believe 

that the impact of the rule upon any 

legitimate activities of the bank is 

significantly outweighed by the 

potential for the bank to be used for 

money laundering or other illicit 

financial activity. 

Finally, the bank suggested in its 

comments that imposing the fifth 

special measure would be inconsistent 

with U.S. foreign policy considerations. 

We disagree. 

Accordingly, the statutory criteria for 

finding Banco Delta Asia to be a 

financial institution of primary money 

laundering concern and for imposing 


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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 12737 

38See 31 CFR 103.175(d)(2)(ii)-(iv). 

39Again, for purposes of the final rule, a 

correspondent account is defined as an account 

Continued 

the fifth special measure have been fully 

addressed. 

V. Section-by-Section Analysis 

The final rule prohibits covered 

financial institutions from opening or 

maintaining any correspondent account 

for, or on behalf of, Banco Delta Asia. 

Covered financial institutions are 

required to apply due diligence to their 

correspondent accounts to guard against 

their indirect use by Banco Delta Asia. 

At a minimum, that due diligence must 

include two elements. First, a covered 

financial institution must notify its 

correspondent accountholders that the 

account may not be used to provide 

Banco Delta Asia with access to the 

covered financial institution. Second, a 

covered financial institution must take 

reasonable steps to identify any indirect 

use of its correspondent accounts by 

Banco Delta Asia, to the extent that such 

indirect use can be determined from 

transactional records maintained by the 

covered financial institution in the 

normal course of business. A covered 

financial institution must take a riskbased approach when deciding what, if 

any, additional due diligence measures 

it should adopt to guard against the 

indirect use of correspondent accounts 

by Banco Delta Asia, based on risk 

factors such as the type of services 

offered by, and geographic locations of, 

its correspondents. 

A. 103.193(a)—Definitions 

1. Banco Delta Asia 

Section 103.193(a)(1) of this rule 

defines Banco Delta Asia to include all 

branches, offices, and subsidiaries of 

Banco Delta Asia operating in Macau or 

in any jurisdiction. These branches and 

offices include, but are not necessarily 

limited to, the Amaral, Antonio, Barca, 

Campo, Ioa Hon, Lisboa, Outubro, and 

Tap Sac branches in Macau, the Airport 

Service Centre, Financial Services 

Centre, Macao Administrative Centre, 

The Bank Centre, and the Tokyo 

Representative Office. Banco Delta 

Asia’s subsidiaries include, but are not 

necessarily limited to, Delta Asia Credit 

Ltd. and Delta Asia Insurance Limited. 

FinCEN will provide updated 

information, as it is available; however, 

covered financial institutions should 

take commercially reasonable measures 

to determine whether a customer is a 

branch, office, or subsidiary of Banco 

Delta Asia. 

2. Correspondent Account 

Section 103.193(a)(2) defines the term 

‘‘correspondent account’’ by reference to 

the definition contained in 31 CFR 

103.175(d)(1)(ii). Section 

103.175(d)(1)(ii) defines a 

correspondent account to mean an 

account established for a foreign bank to 

receive deposits from, or make 

payments or other disbursements on 

behalf of the foreign bank, or to handle 

other financial transactions related to 

the foreign bank. 

In the case of a depository institution 

in the United States, this broad 

definition of account includes most 

types of banking relationships between 

the 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. 

In the case of securities brokerdealers, futures commission merchants, 

introducing brokers in commodities, 

and investment companies that are 

open-end companies (‘‘mutual funds’’), 

we are using the same definition of 

‘‘account’’ for purposes of this rule that 

was established in the final rule 

implementing section 312 of the USA 

PATRIOT Act.38

3. Covered Financial Institution 

Section 103.193(a)(3) of the rule 

defines covered financial institution to 

include the following: 

• An insured bank (as defined in 

section 3(h) of the Federal Deposit 

Insurance Act (12 U.S.C. 1813(h)); 

• A commercial bank; 

• An agency or branch of a foreign 

bank in the United States; 

• A federally insured credit union; 

• A savings association; 

• A corporation acting under section 

25A of the Federal Reserve Act (12 

U.S.C. 611 et seq.); 

• A trust bank or trust company that 

is federally regulated and is subject to 

an anti-money laundering program 

requirement; 

• A broker or dealer in securities 

registered, or required to be registered, 

with the U.S. Securities and Exchange 

Commission under the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et 

seq.), except persons who register 

pursuant to section 15(b)(11) of the 

Securities Exchange Act of 1934; 

• A futures commission merchant or 

an introducing broker registered, or 

required to be registered, with the 

Commodity Futures Trading 

Commission under the Commodity 

Exchange Act (7 U.S.C. 1 et seq.), except 

persons who register pursuant to section 

4(f)(a)(2) of the Commodity Exchange 

Act; and 

• A mutual fund, which means an 

investment company (as defined in 

section 3(a)(1) of the Investment 

Company Act of 1940 (‘‘Investment 

Company Act’’) (15 U.S.C. 80a-3(a)(1))) 

that is an open-end company (as defined 

in section 5(a)(1) of the Investment 

Company Act (15 U.S.C. 80a-5(a)(1))) 

and that is registered, or is required to 

register, with the U.S. Securities and 

Exchange Commission pursuant to the 

Investment Company Act. 

In the Notice of Proposed Rulemaking, 

we defined ‘‘covered financial 

institution’’ by reference to 31 CFR 

103.175(f)(2), the operative definition of 

that term for purposes of the rules 

implementing sections 313 and 319 of 

the USA PATRIOT Act, and we also 

included in the definition futures 

commission merchants, introducing 

brokers, and mutual funds. The 

definition of ‘‘covered financial 

institution’’ we are adopting for 

purposes of this final rule is 

substantially the same as originally 

proposed. 

B. 103.193(b)—Requirements for 

Covered Financial Institutions 

For purposes of complying with the 

final rule’s prohibition on the opening 

or maintaining in the United States of 

correspondent accounts for, or on behalf 

of, Banco Delta Asia, we expect a 

covered financial institution to take 

such steps that a reasonable and 

prudent financial institution would take 

to protect itself from loan or other fraud 

or loss based on misidentification of a 

person’s status. 

1. Prohibition of Direct Use of 

Correspondent Accounts 

Section 103.193(b)(1) of the rule 

prohibits all covered financial 

institutions from opening or 

maintaining a correspondent account in 

the United States for, or on behalf of, 

Banco Delta Asia. The prohibition 

requires all covered financial 

institutions to review their account 

records to ensure that they maintain no 

accounts directly for, or on behalf of, 

Banco Delta Asia. 

2. Due Diligence Upon Correspondent 

Accounts To Prohibit Indirect Use 

As a corollary to the prohibition on 

the opening or maintaining of 

correspondent accounts directly for 

Banco Delta Asia, section 103.193(b)(2) 

requires a covered financial institution 

to apply due diligence to its 

correspondent accounts 39 that is 


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12738 Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 

established by a covered financial institution for a 

foreign bank to receive deposits from, or to make 

payments or other disbursements on behalf of, a 

foreign bank, or to handle other financial 

transactions related to the foreign bank. For 

purposes of this definition, the term account means 

any formal banking or business relationship 

established to provide regular services, dealings, 

and other financial transactions. See 31 CFR 

103.175(d)(2). 

40 Despite Banco Delta Asia’s representation that 

the majority of its correspondent accounts at foreign 

financial institutions were terminated after our 

finding of primary money laundering concern, the 

self-reported list of the bank’s correspondent 

accounts in the Banker’s Almanac was identical 

before and after our finding, making it difficult to 

know with certainty what institutions actually 

maintain correspondent accounts with the bank. 

reasonably designed to guard against 

their indirect use by Banco Delta Asia. 

At a minimum, that due diligence must 

include notifying correspondent 

accountholders that correspondent 

accounts may not be used to provide 

Banco Delta Asia with access to the 

covered financial institution. For 

example, a covered financial institution 

may satisfy this requirement by 

transmitting the following notice to all 

of its correspondent accountholders: 

Notice: Pursuant to U.S. regulations issued 

under section 311 of the USA PATRIOT Act, 

31 CFR 103.193, we are prohibited from 

establishing, maintaining, administering or 

managing a correspondent account for, or on 

behalf of, Banco Delta Asia or any of its 

subsidiaries (including, but not limited to, 

Delta Asia Credit Limited, and Delta Asia 

Insurance Limited). The regulations also 

require us to notify you that you may not 

provide Banco Delta Asia or any of its 

subsidiaries with access to the correspondent 

account you hold at our financial institution. 

If we become aware that Banco Delta Asia or 

any of its subsidiaries is indirectly using the 

correspondent account you hold at our 

financial institution, we will be required to 

take appropriate steps to prevent such access, 

including, where necessary, terminating your 

account. 

The purpose of the notice requirement 

is to help ensure that Banco Delta Asia 

is denied access to the U.S. financial 

system, as well as to increase awareness 

within the international financial 

community of the risks and deficiencies 

of Banco Delta Asia. However, we do 

not require or expect a covered financial 

institution to obtain a certification from 

its correspondent accountholders that 

indirect access will not be provided in 

order to comply with this notice 

requirement. Instead, methods of 

compliance with the notice requirement 

could include, for example, transmitting 

a one-time notice by mail, fax, or e-mail 

to a covered financial institution’s 

correspondent accountholders, 

informing those accountholders that 

their correspondent accounts may not 

be used to provide Banco Delta Asia 

with indirect access to the covered 

financial institution, or including such 

information in the next regularly 

occurring transmittal from the covered 

financial institution to its correspondent 

accountholders. 

This final rule also requires a covered 

financial institution to take reasonable 

steps to identify any indirect use of its 

correspondent accounts by Banco Delta 

Asia, to the extent that such indirect use 

can be determined from transactional 

records maintained by the covered 

financial institution in the normal 

course of business. For example, a 

covered financial institution is expected 

to apply an appropriate screening 

mechanism to be able to identify a funds 

transfer order that, on its face, lists 

Banco Delta Asia as the originator’s or 

beneficiary’s financial institution, or 

otherwise references Banco Delta Asia 

in a manner detectable under the 

financial institution’s normal business 

screening procedures. We acknowledge 

that not all institutions are capable of 

screening every field in a funds transfer 

message and that the risk-based controls 

of some institutions may not necessitate 

such comprehensive screening. 

Alternatively, other institutions may 

perform more thorough screening as 

part of their risk-based determination to 

perform ‘‘additional due diligence,’’ as 

described below. An appropriate 

screening mechanism could be the 

mechanism currently used by a covered 

financial institution to comply with 

various legal requirements, such as the 

commercially available software used to 

comply with the sanctions programs 

administered by the Office of Foreign 

Assets Control. 

Notifying correspondent 

accountholders and taking reasonable 

steps to identify any indirect use of 

correspondent accounts by Banco Delta 

Asia in the manner discussed above are 

the minimum due diligence 

requirements under this final rule. 

Beyond these minimum steps, a covered 

financial institution should adopt a riskbased approach for determining what, if 

any, additional due diligence measures 

it should implement to guard against the 

indirect use of its correspondent 

accounts by Banco Delta Asia, based on 

risk factors such as the type of services 

it offers and the geographic locations of 

its correspondent accountholders. 

A covered financial institution that 

obtains knowledge that a correspondent 

account is being used by a foreign bank 

to provide indirect access to Banco 

Delta Asia must take all appropriate 

steps to prevent such indirect access, 

including, when necessary, terminating 

the correspondent account. A covered 

financial institution may afford such 

foreign bank a reasonable opportunity to 

take corrective action prior to 

terminating the correspondent account. 

We have added language in the final 

rule clarifying that, should the foreign 

bank refuse to comply, or if the covered 

financial institution cannot obtain 

adequate assurances that the account 

will not be available to Banco Delta 

Asia, the covered financial institution 

must terminate the account within a 

commercially reasonable time. This 

means that the covered financial 

institution should not permit the foreign 

bank to establish any new positions or 

execute any transactions through the 

account, other than those necessary to 

close the account. A covered financial 

institution may reestablish an account 

closed under this rule if it determines 

that the account will not be used to 

provide banking services indirectly to 

Banco Delta Asia. 

3. Reporting Not Required 

Section 103.193(b)(3) of the 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. However, a covered financial 

institution must document its 

compliance with the requirement that it 

notify its correspondent accountholders 

that the accounts may not be used to 

provide Banco Delta Asia with access to 

the covered financial institution. 

VI. Regulatory Flexibility Act 

It is hereby certified that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. The correspondent accounts 

that the bank previously held in the 

United States were closed, and we have 

no knowledge of any small covered 

financial institutions maintaining 

correspondent accounts for other foreign 

banks that presently maintain a 

correspondent relationship with Banco 

Delta Asia.40 It therefore appears that 

Banco Delta Asia no longer holds 

correspondent accounts in the United 

States and that most if not all of the 

nested correspondent accounts to which 

Banco Delta Asia has indirect access 

would be with large covered financial 

institutions. Thus, the prohibition on 

establishing or maintaining such 

correspondent accounts will not have a 

significant impact on a substantial 

number of small entities. In addition, all 

covered financial institutions currently 

must exercise some degree of due 

diligence in order to comply with 

various legal requirements. The tools 

used for such purposes, including 

commercially available software used to 

comply with the economic sanctions 


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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 12739 

programs administered by the Office of 

Foreign Assets Control, can be modified 

to monitor for the use of correspondent 

accounts by Banco Delta Asia. Thus, the 

due diligence that is required by this 

rule—i.e., the one-time transmittal of 

notice to correspondent accountholders 

and screening of transactions to identify 

any indirect use of a correspondent 

account—is not expected to impose a 

significant additional economic burden 

on small covered financial institutions. 

VII. Paperwork Reduction Act of 1995 

The collection of information 

contained in the final rule has been 

approved by the Office of Management 

and Budget (OMB) in accordance with 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3507(d)), and has been 

assigned OMB Control Number 1506–

0045. 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 OMB. 

The only requirements in the final 

rule that are subject to the Paperwork 

Reduction Act are the requirements that 

a covered financial institution notify its 

correspondent accountholders that the 

correspondent accounts maintained on 

their behalf may not be used to provide 

Banco Delta Asia with access to the 

covered financial institution and the 

requirement that a covered financial 

institution document its compliance 

with this obligation to notify its 

correspondents. The estimated annual 

average burden associated with this 

collection of information is one hour per 

affected financial institution. We 

received no comments on this 

information collection burden estimate. 

Comments concerning the accuracy of 

this information collection estimate and 

suggestions for reducing this burden 

should be sent (preferably by fax (202–

395–6974)) to the Desk Officer for the 

Department of the Treasury, Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Washington, DC 20503 (or by the 

Internet to 

Alexander_T._Hunt@omb.eop.gov), with 

a copy to FinCEN by paper mail to 

FinCEN, P.O. Box 39, Vienna, VA 

22183, ‘‘Attn: Section 311—Imposition 

of Special Measure Against Banco Delta 

Asia’’ or by electronic mail to 

regcomments@fincen.treas.gov with the 

caption ‘‘Attn: Section 311—Imposition 

of Special Measure Against Banco Delta 

Asia’’ in the body of the text. 

VIII. Executive Order 12866 

This rule is not a significant 

regulatory action for purposes of 

Executive Order 12866, ‘‘Regulatory 

Planning and Review.’’

List of Subjects in 31 CFR Part 103 

Administrative practice and 

procedure, Banks and banking, Brokers, 

Counter-money laundering, Counterterrorism, and Foreign banking. 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, Part 103 of title 31 of the 

Code of Federal Regulations is amended 

as follows: 

PART 103—FINANCIAL 

RECORDKEEPING AND REPORTING 

OF CURRENCY AND FINANCIAL 

TRANSACTIONS 

■ 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. 

■ 2. Subpart I of Part 103 is amended by 

adding new § 103.193 as follows: 

§ 103.193 Special measures against Banco 

Delta Asia. 

(a) Definitions. For purposes of this 

section: 

(1) Banco Delta Asia means all 

branches, offices, and subsidiaries of 

Banco Delta Asia operating in any 

jurisdiction, including its subsidiaries 

Delta Asia Credit Limited and Delta 

Asia Insurance Limited. 

(2) Correspondent account has the 

same meaning as provided in 

§ 103.175(d)(1)(ii). 

(3) Covered financial institution 

includes: 

(i) An insured bank (as defined in 

section 3(h) of the Federal Deposit 

Insurance Act (12 U.S.C. 1813(h))); 

(ii) A commercial bank; 

(iii) An agency or branch of a foreign 

bank in the United States; 

(iv) A federally insured credit union; 

(v) A savings association; 

(vi) A corporation acting under 

section 25A of the Federal Reserve Act 

(12 U.S.C. 611 et seq.); 

(vii) A trust bank or trust company 

that is federally regulated and is subject 

to an anti-money laundering program 

requirement; 

(viii) A broker or dealer in securities 

registered, or required to be registered, 

with the U.S. Securities and Exchange 

Commission under the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et 

seq.), except persons who register 

pursuant to section 15(b)(11) of the 

Securities Exchange Act of 1934; 

(ix) A futures commission merchant 

or an introducing broker registered, or 

required to register, with the 

Commodity Futures Trading 

Commission under the Commodity 

Exchange Act (7 U.S.C. 1 et seq.), except 

persons who register pursuant to section 

4(f)(a)(2) of the Commodity Exchange 

Act; and 

(x) A mutual fund, which means an 

investment company (as defined in 

section 3(a)(1) of the Investment 

Company Act of 1940 (‘‘Investment 

Company Act’’) (15 U.S.C. 80a-3(a)(1))) 

that is an open-end company (as defined 

in section 5(a)(1) of the Investment 

Company Act (15 U.S.C. 80a–5(a)(1))) 

and that is registered, or is required to 

register, with the U.S. Securities and 

Exchange Commission pursuant to the 

Investment Company Act. 

(4) Subsidiary means a company of 

which more than 50 percent of the 

voting stock or analogous equity interest 

is owned by another company. 

(b) Requirements for covered financial 

institutions—(1) Prohibition on direct 

use of correspondent accounts. A 

covered financial institution shall 

terminate any correspondent account 

that is established, maintained, 

administered, or managed in the United 

States for, or on behalf of, Banco Delta 

Asia. 

(2) Due diligence of correspondent 

accounts to prohibit indirect use. 

(i) A covered financial institution 

shall apply due diligence to its 

correspondent accounts that is 

reasonably designed to guard against 

their indirect use by Banco Delta Asia. 

At a minimum, that due diligence must 

include: 

(A) Notifying correspondent 

accountholders the correspondent 

account may not be used to provide 

Banco Delta Asia with access to the 

covered financial institution; and 

(B) Taking reasonable steps to identify 

any indirect use of its correspondent 

accounts by Banco Delta Asia, to the 

extent that such indirect 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, additional due 

diligence measures it should adopt to 

guard against the indirect use of its 

correspondent accounts by Banco Delta 

Asia. 

(iii) A covered financial institution 

that obtains knowledge that a 

correspondent account is being used by 

the foreign bank to provide indirect 

access to Banco Delta Asia shall take all 

appropriate steps to prevent such 

indirect access, including, where 

necessary, terminating the 

correspondent account. 


cprice-sewell on PROD1PC66 with RULES
12740 Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations 

(iv) A covered financial institution 

required to terminate a correspondent 

account pursuant to paragraph (b)(2)(iii) 

of this section: 

(A) Should do so within a 

commercially reasonable time, and 

should not permit the foreign bank to 

establish any new positions or execute 

any transaction through such 

correspondent account, other than those 

necessary to close the correspondent 

account; and 

(B) May reestablish a correspondent 

account closed pursuant to this 

paragraph if it determines that the 

correspondent account will not be used 

to provide banking services indirectly to 

Banco Delta Asia. 

(3) Recordkeeping and reporting. (i) A 

covered financial institution is required 

to document its compliance with the 

notice requirement set forth in 

paragraph (b)(2)(i)(A) of this section. 

(ii) Nothing in this section shall 

require a covered financial institution to 

report any information not otherwise 

required to be reported by law or 

regulation. 

Dated: March 14, 2007. 

William F. Baity, 

Acting Director, Financial Crimes 

Enforcement Network. 

[FR Doc. 07–1313 Filed 3–14–07; 11:41 am] 

BILLING CODE 4810–02–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[CGD05–07–001] 

RIN 1625–AA08 

Special Local Regulations for Marine 

Events; Severn River, College Creek, 

Weems Creek and Carr Creek, 

Annapolis, MD 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is amending 

the special local regulations at 33 CFR 

100.518. This rulemaking is intended to 

accommodate changes in event dates for 

recurring marine events specified in this 

regulation. The marine events included 

in this special local regulation include 

the Safety at Sea Seminar, U.S. Naval 

Academy Crew Races and the Blue 

Angels Air Show. This rule is intended 

to restrict vessel traffic in portions of the 

Severn River during the period of these 

marine events and is necessary to 

provide for the safety of life on 

navigable waters during the event. 

DATES: This rule is effective March 24, 

2007. 

ADDRESSES: Documents indicated in this 

preamble as being available in the 

docket, are part of docket (CGD05–07–

001) and are available for inspection or 

copying at Commander (dpi), Fifth 

Coast Guard District, 431 Crawford 

Street, Portsmouth, Virginia 23704–

5004, between 9 a.m. and 2 p.m., 

Monday through Friday, except Federal 

holidays. 

FOR FURTHER INFORMATION CONTACT: 

Dennis M. Sens, Project Manager, 

Inspections and Compliance Branch, at 

(757) 398–6204. 

SUPPLEMENTARY INFORMATION: 

Regulatory Information 

On February 1, 2007, we published a 

Notice of proposed rulemaking (NPRM) 

entitled Special Local Regulations for 

Marine Events; College Creek, Weems 

Creek and Carr Creek, Annapolis, MD in 

the Federal Register (72 FR 4669). We 

received no letters commenting on the 

proposed rule. No public meeting was 

requested, and none was held. 

Under 5 U.S.C. 553(d)(3), the Coast 

Guard finds that good cause exists for 

making this rule effective less than 30 

days after publication in the Federal 

Register. Delaying the effective date 

would be contrary to the public interest, 

since immediate action is needed to 

ensure the safety of the event 

participants, support craft and other 

vessels transiting the event area. 

However, advance notifications will be 

made to affected waterway users via 

marine information broadcasts, area 

newspapers and local radio stations. 

Background and Purpose 

We are amending 33 CFR 100.518 to 

accommodate changes to the 

enforcement period for U.S. Naval 

Academy sponsored marine events. 

Each year the U.S. Naval Academy hosts 

various marine events on the Severn 

River adjacent to the academy. 

Organized collegiate crew races are 

typically held annually during 

weekends in March, April and May. The 

Blue Angels air show is normally 

scheduled during graduation week at 

the U.S. Naval Academy. Maritime 

traffic is prohibited from using the 

regulated area of the Severn River 

during air show performances in 

accordance with Federal Aviation 

Administration requirements. The dates 

for marine events for 2007 will be; 

Safety at Sea Seminar on March 24, 

2007; U.S. Naval Academy crew races 

on May 6 and May 27, 2007; and the 

Blue Angels air show on May 23 and 

May 24, 2007. The special regulation 

will be enforced from 5 a.m. to 6 p.m. 

on those days and if the event’s daily 

activities should conclude prior to 6 

p.m., enforcement of this regulation may 

be terminated for that day at the 

discretion of the Patrol Commander. 

The U.S. Naval Academy is the sponsor 

for all of these events and intends to 

hold them annually on the dates 

provided in 33 CFR 100.518. 

Discussion of Comments and Changes 

The Coast Guard did not receive 

comments in response to the Notice of 

proposed rulemaking (NPRM) published 

in the Federal Register. Accordingly, 

the Coast Guard is establishing 

temporary special local regulations on 

specified waters of the Severn River, 

College Creek, Weems Creek and Carr 

Creek, Annapolis, Maryland. 

Regulatory Evaluation 

This rule is not a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866, Regulatory 

Planning and Review, and does not 

require an assessment of potential costs 

and benefits under section 6(a)(3) of that 

Order. The Office of Management and 

Budget has not reviewed it under that 

Order. It is not ‘‘significant’’ under the 

regulatory policies and procedures of 

the Department of Homeland Security 

(DHS). 

We expect the economic impact of 

this rule to be so minimal that a full 

Regulatory Evaluation under the 

regulatory policies and procedures of 

DHS is unnecessary. The effect of this 

action merely establishes the dates on 

which the existing regulations would be 

enforced. It would not impose any 

additional restrictions on vessel traffic. 

Small Entities 

Under the Regulatory Flexibility Act 

(5 U.S.C. 601–612), we have considered 

whether this rule would have a 

significant economic impact on a 

substantial number of small entities. 

The term ‘‘small entities’’ comprises 

small businesses, not-for-profit 

organizations that are independently 

owned and operated and are not 

dominant in their fields, and 

governmental jurisdictions with 

populations of less than 50,000. 

The Coast Guard certifies under 5 

U.S.C. 605(b) that this rule would not 

have a significant economic impact on 

a substantial number of small entities. 

This rule would affect the following 

entities, some of which might be small 

entities: the owners or operators of 

vessels intending to transit or anchor in 

a portion of the Severn River during the 

event. 


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