59024 Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 

List of Subjects in 21 CFR Part 520 

Animal drugs. 

Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to 

the Center for Veterinary Medicine, 21 

CFR part 520 is amended as follows: 

PART 520—ORAL DOSAGE FORM 

NEW ANIMAL DRUGS 

■ 1. The authority citation for 21 CFR 

part 520 continues to read as follows: 

Authority: 21 U.S.C. 360b. 

■ 2. In § 520.2640, add paragraph (b)(3); 

and revise paragraphs (a), (b)(1), (b)(2), 

(d)(2)(ii), (d)(3)(ii)(A), (d)(3)(ii)(B), and 

(d)(3)(iii) to read as follows: 

§ 520.2640 Tylosin. 

(a) Specifications. Each container of 

soluble powder contains tylosin tartrate 

equivalent to either 100 or 256 grams 

tylosin base. 

(b) * * * 

(1) No. 000986 for use of a 100-gram 

jar as in paragraph (d) of this section. 

(2) No. 016592 for use of a 100-gram 

jar or pouch as in paragraphs (d)(1), 

(d)(2), (d)(3)(i), (d)(3)(ii)(B), (d)(3)(iii), 

and (d)(4) of this section. 

(3) No. 061623 for use of a 100- or 

256-gram jar or pouch as in paragraphs 

(d)(1), (d)(2), (d)(3)(i), (d)(3)(ii)(B), 

(d)(3)(iii), and (d)(4) of this section. 

* * * * * 

(d) * * * 

(2) * * * 

(ii) Indications for use. For 

maintaining weight gain and feed 

efficiency in the presence of infectious 

sinusitis associated with Mycoplasma 

gallisepticum sensitive to tylosin. 

* * * * * 

(3) * * * 

(ii) * * * 

(A) For the treatment and control of 

swine dysentery associated with 

Brachyspira hyodysenteriae when 

followed immediately by tylosin 

phosphate medicated feed; and for the 

control of porcine proliferative 

enteropathies (PPE, ileitis) associated 

with Lawsonia intracellularis when 

followed immediately by tylosin 

phosphate medicated feed. 

(B) For the treatment and control of 

swine dysentery associated with 

Brachyspira hyodysenteriae. 

(iii) Limitations. Prepare a fresh 

solution daily. Do not administer within 

48 hours of slaughter. As indicated in 

paragraph (d)(3)(ii)(A) of this section, 

follow with tylosin phosphate 

medicated feed as in 

§ 558.625(f)(1)(vi)(c) of this chapter. 

* * * * * 

Dated: September 20, 2011. 

Bernadette Dunham, 

Director, Center for Veterinary Medicine. 

[FR Doc. 2011–24461 Filed 9–22–11; 8:45 am] 

BILLING CODE 4160–01–P 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Part 210 

RIN 1510–AB24 

Federal Government Participation in 

the Automated Clearing House 

AGENCY: Financial Management Service, 

Fiscal Service, Treasury. 

ACTION: Final rule. 

SUMMARY: The Department of the 

Treasury, Financial Management 

Service (FMS) is issuing this final rule 

which amends our regulation governing 

the use of the Automated Clearing 

House (ACH) network by Federal 

agencies. The rule adopts, with some 

exceptions, the 2009 ACH Rules 

published by NACHA—The Electronic 

Payments Association (NACHA) as the 

rules governing the use of the ACH 

Network by Federal agencies. Among 

other things, the final rule includes new 

requirements to identify all 

international payment transactions 

using a new Standard Entry Class Code 

and to include certain information in 

the ACH record sufficient to allow the 

receiving financial institution to 

identify the parties to the transaction 

and to allow screening to comply with 

requirements administered by the Office 

of Foreign Assets Control (OFAC). In 

addition, the rule requires financial 

institutions to provide limited accountrelated customer information related to 

the reclamation of post-death benefit 

payments as permitted under the 

Payment Transactions Integrity Act of 

2008. It also allows Federal payments to 

be delivered to pooled or master 

accounts established by nursing 

facilities for residents of those facilities 

or held by religious orders whose 

members have taken vows of poverty. 

DATES: October 24, 2011. The 

incorporation by reference of certain 

publications listed in the rule is 

approved by the Director of the Federal 

Register as of October 24, 2011. 

FOR FURTHER INFORMATION CONTACT: Bill 

Brushwood, Director of the Settlement 

Services Division, at (202) 874–1251 or 

bill.brushwood@fms.treas.gov; Natalie 

H. Diana, Senior Counsel, at (202) 874– 

6680 or natalie.diana@fms.treas.gov; or 

Frank Supik, Senior Counsel, at (202) 

874–6638 or frank.supik@fms.treas.gov. 

SUPPLEMENTARY INFORMATION: 

I. Proposed Rulemaking 

We issued a Notice of Proposed 

Rulemaking (NPRM) on May 14, 2010, 

requesting comment on a number of 

proposed amendments to title 31 CFR 

part 210 (Part 210). 75 FR 27239. Part 

210 governs the use of the ACH Network 

by Federal agencies. The ACH Network 

is a nationwide electronic fund transfer 

(EFT) system that provides for the interbank clearing of electronic credit and 

debit transactions and for the exchange 

of payment-related information among 

participating financial institutions. Part 

210 incorporates the ACH Rules 

adopted by NACHA, with certain 

exceptions. From time to time we 

amend Part 210 in order to address 

changes that NACHA periodically 

makes to the ACH Rules or to revise the 

regulation as otherwise appropriate. 

International ACH Transactions 

In the NPRM, we proposed to 

incorporate in Part 210 some, but not 

all, of the changes that NACHA adopted 

in 2007 and 2008, as reflected in the 

2009 ACH Rules book. Those changes 

include requirements to identify all 

international payment transactions 

using a new Standard Entry Class Code 

and to include in the ACH record 

certain information sufficient to allow 

the receiving financial institution to 

identify the parties to the transaction 

and the path of the transaction. Effective 

September 18, 2009, the ACH Rules 

required Originating Depository 

Financial Institutions (ODFIs) and 

Gateway Operators to identify all 

international payment transactions 

transmitted via the ACH Network for 

any portion of the money trail with a 

new Standard Entry Class Code for 

International ACH Transactions (IAT). 

IAT transactions must include the 

specific data elements defined within 

the Bank Secrecy Act’s (BSA) ‘‘Travel 

Rule’’ so that all parties to the 

transaction have the information 

necessary to comply with U.S. law, 

including the laws administered by 

OFAC. 

Previously, many payments that are 

international in nature were being 

introduced as domestic transactions into 

the U.S. ACH Network through 

correspondent banking relationships, 

making it difficult for processing 

depository financial institutions to 

identify them for purposes of complying 

with U.S. law. NACHA’s IAT Standard 

Entry Class Code classifies international 

payments based on the geographical 

location of the financial institutions or 


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Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 59025 

money transmitting businesses involved 

in the transaction, instead of the 

location of the originator or receiver. As 

defined in the 2009 ACH Rules, an 

International ACH Transaction (IAT) 

entry is: 

A debit or credit Entry that is part of a 

payment transaction involving a financial 

agency’s office that is not located in the 

territorial jurisdiction of the United States. 

For purposes of this definition, a financial 

agency means an entity that is authorized by 

applicable law to accept deposits or is in the 

business of issuing money orders or 

transferring funds. An office of a financial 

agency is involved in the payment 

transaction if it (1) holds an account that is 

credited or debited as part of the payment 

transaction; (2) receives payment directly 

from a Person or makes payment directly to 

a Person as part of the payment transaction; 

or (3) serves as an intermediary in the 

settlement of any part of the payment 

transaction. 

See 2009 ACH Rules, Subsection 

14.1.36. The 2009 Operating Guidelines 

provide various examples of 

transactions that would be classified as 

IAT entries. One example deals with 

pension or Social Security benefit 

payments delivered to the U.S. bank 

accounts of retirees residing offshore. If 

the U.S. bank to which such a payment 

is delivered further credits the payment 

to an offshore bank with which it has a 

correspondent relationship, the entry is 

to be classified by the ODFI as IAT. In 

other words, despite being destined to 

U.S. bank accounts, the transactions 

would be IATs because the ultimate 

destinations of the payments are 

accounts held with offshore banks or 

financial agencies. The 2009 Operating 

Guidelines indicate that it is the 

Originator’s obligation to understand 

the legal domicile of its retirees and 

inquire whether they hold accounts in 

U.S. banks or with offshore financial 

institutions. See 2009 Operating 

Guidelines, Section IV, Chapter XI, 

Scenario F, p. 209. As applied to 

Federal payments, this would mean that 

an agency certifying a payment to a 

recipient residing overseas must inquire 

whether the payment, although directed 

to a domestic bank, will be further 

credited to a foreign correspondent 

bank. If so, the agency must classify the 

payment as IAT. 

In the NPRM, we proposed to accept 

the IAT rule for Federal payments. For 

Federal benefit payments delivered to 

overseas recipients in Mexico, Canada 

and Panama through the FedGlobal 

ACH Payment Services, we have already 

implemented the requirements of the 

IAT rule. For other payments, however, 

we proposed an effective date of January 

1, 2012 in order to allow for the system 

and operational changes necessary to 

implement the IAT requirements. We 

further indicated that we planned to 

phase in IAT requirements in stages, 

based on the type of payment and the 

agency issuing the payment, as 

expediently as operationally possible. 

The January 1, 2012 effective date does 

not affect agencies’ obligation to comply 

to the full extent of their authority with 

OFAC-administered sanctions programs 

when certifying payments to Treasury 

for disbursement. 

Lastly, we stated that in implementing 

the IAT requirements, we anticipated 

that some agencies will format as an IAT 

entry any payment to an individual or 

entity with an address outside the 

territorial jurisdiction of the U.S. This 

may result in the identification of some 

transactions as IATs even though funds 

do not ultimately leave the United 

States. However, taking an ‘‘overinclusive’’ approach to implementing 

IAT greatly eases the administrative 

burden that Federal agencies would 

otherwise face. We requested comment 

from agencies and financial institutions 

on this over-inclusive approach. 

NACHA Rules Enforcement 

Effective December 21, 2007, NACHA 

modified its rules to broaden the scope 

of Appendix Eleven (The National 

System of Fines). The Appendix was 

revised to (1) Allow NACHA to request 

data from ODFIs for an Originator or 

Third-Party Sender that appears to 

exceed a rate of one percent for debit 

entries returned as unauthorized; and 

(2) define the circumstances under 

which NACHA may submit violations 

related to the ODFI reporting 

requirement to the National System of 

Fines. Several other provisions of the 

National System of Fines were also 

modified. 

Part 210 currently does not 

incorporate Appendix 11 of the NACHA 

Rules. See 31 CFR 210.2(d)(3). The 

Federal government is constrained from 

entering into arrangements that may 

result in unfunded liabilities. Moreover, 

we do not believe that subjecting 

Federal agencies to the System of Fines 

is necessary or appropriate in light of its 

underlying purpose. Accordingly, we 

proposed not to adopt the modifications 

to Appendix 11. In the event that a 

Federal agency were to experience a 

high rate of debit entries returned as 

unauthorized, we would work with the 

agency and coordinate with NACHA to 

address the situation. 

ODFI Reporting Requirements 

Effective March 20, 2009, NACHA 

amended its rules to incorporate new 

reporting requirements for ODFIs within 

Article Two (Origination of Entries). 

These reporting requirements require 

ODFIs to provide, when requested by 

NACHA, certain information about 

specific Originators or Third-Party 

Senders believed to have a return rate 

for unauthorized debit entries in excess 

of 1 percent. The rule also requires 

ODFIs to reduce the return rate for any 

such Originator or Third-Party Sender to 

a rate below 1% within 60 days. The 

amendment replaced a reporting 

requirement for Telephone-Initiated 

(TEL) entries that was previously in the 

ACH Rules. 

We proposed not to adopt these 

reporting requirements. When NACHA 

adopted the TEL reporting requirement 

in 2003, we did not adopt it, in part 

because we did not believe that agencies 

were likely to experience excessive rates 

of returned entries, which has proved to 

be true. Similarly, we do not believe 

that it is necessary or appropriate to 

subject Federal agencies to a formal 

reporting process for unauthorized 

entries. 

Automated Reclamations Process 

In addition to addressing ACH Rule 

changes, we proposed to amend Part 

210 to streamline the reclamation 

process for post-death benefit payments. 

We requested comment on a proposal to 

replace the current manual, paper-based 

reclamation process with a process in 

which Treasury would proceed with an 

automatic debit to the financial 

institution’s reserve account in cases 

where a reclamation is limited to 

payments received within 45 days after 

the recipient’s death. In the current 

reclamation process, Treasury sends out 

a paper Notice of Reclamation to the 

financial institution. The financial 

institution must complete, certify and 

return the paper Notice of Reclamation 

to Treasury. We requested comment on 

an approach in which Treasury would 

proceed with an automatic debit to the 

financial institution’s reserve account, 

following advance notice to the 

financial institution of the debit with a 

right to challenge. We proposed that the 

automated process apply to situations in 

which a notice of reclamation is limited 

to payments received within 45 days 

after the recipient’s death, which 

constitutes 85% of all reclamations. 

Payment Transactions Integrity Act of 

2008 Changes 

We proposed in the NPRM to require 

financial institutions to provide certain 

withdrawer information for all types of 

benefit payments being reclaimed. Prior 

to the enactment of the Payment 

Transactions Integrity Act of 2008, 

account-related information could be 

shared only for certain types of benefit 


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59026 Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 

1On December 22, 2010 we published an interim 

final rule that allows the delivery of Federal 

payments to a prepaid card or access device, 

provided the account is not attached to a line of 

credit or loan agreement under which repayment 

from the account is triggered upon delivery of the 

Federal payments; and the account is set up to meet 

the requirements for pass-through deposit or share 

insurance such that the funds accessible through 

the card or access device are insured for the benefit 

of the recipient by the Federal Deposit Insurance 

Corporation or the National Credit Union Share 

Insurance Fund; and the issuer of the card or access 

device provides the holder of the card with all of 

the consumer protections that apply to a payroll 

card account under the rules implementing the 

Electronic Funds Transfer Act. 

payments. Accordingly, Part 210 

currently requires banks to provide only 

the name and address (not the phone 

number) of account owners and 

withdrawers, and only in connection 

with the reclamation of Social Security 

Federal Old-Age, survivors, and 

Disability Insurance benefit payments or 

benefit payments certified by the 

Railroad Retirement Board or the 

Department of Veterans’ Affairs. We 

proposed to require Receiving 

Depository Financial Institutions 

(RDFIs) to provide the name and lastknown address and phone number for 

account owners and others who have 

withdrawn, or were authorized to 

withdraw, funds subject to a 

reclamation. 

‘‘In the Name of the Recipient’’ 

Requirements 

Finally, we proposed to add three 

exceptions to our long-standing 

requirement in Part 210 that non-vendor 

payments be delivered to a deposit 

account at a financial institution in the 

name of the recipient. Specifically, we 

proposed to allow the delivery of 

Federal payments to resident trust or 

patient fund accounts held by nursing 

homes; to accounts held by religious 

orders for members who have taken a 

vow of poverty; and to prepaid and 

stored value card accounts provided 

that the cardholder’s balance is FDIC 

insured and covered by the consumer 

protections of the Federal Reserve’s 

Regulation E. This final rule does not 

address the proposal relating to prepaid 

cards. We have addressed that proposal 

in a separate rulemaking published on 

December 22, 2010.1 See 75 FR 80335. 

Title 31 CFR 210.5(a) provides that, 

notwithstanding ACH rules 2.1.2, 4.1.3, 

and Appendix Two, section 2.2 (listing 

general ledger and loan accounts as 

permissible transaction codes), an ACH 

credit entry representing a Federal 

payment other than a vendor payment 

shall be deposited into a deposit 

account at a financial institution. For all 

payments other than vendor payments, 

the account at the financial institution 

must be in the name of the recipient, 

subject to certain exceptions. Our longstanding interpretation of the words ‘‘in 

the name of the recipient,’’ has been that 

the payment recipient’s name must 

appear in the account title. See, e.g., 64 

FR 17480, referring to discussion at 63 

FR 51490, 51499. The requirement is 

not met if the recipient has an 

ownership interest in a pooled account 

and that individual’s interest is reflected 

only in a subacccount record. The ‘‘in 

the name of the recipient’’ requirement 

is, in essence, a consumer protection 

policy designed to ensure that a 

payment reaches the intended recipient. 

See discussion at 63 FR 51490, 51499. 

We have had concerns in the past that 

a Federal benefit payment recipient 

could enter into, or otherwise be subject 

to, a master/sub account relationship in 

which the intended recipient has little 

control (if any) over the account to 

which their benefit payments is 

directed. 

1. Accounts Held by Nursing Facilities 

On April 21, 2008, the Social Security 

Administration (SSA) published a 

Federal Register notice requesting 

comments on arrangements in which 

Social Security benefit payments are 

deposited into a third-party’s ‘‘master’’ 

account when the third party maintains 

separate ‘‘sub’’ accounts for individual 

beneficiaries. See 73 FR 21403. SSA 

specifically asked if nursing homes 

would be able to receive and manage 

benefits for their residents without the 

use of master/sub accounts. The 

comments received by SSA indicated 

that the use of master/sub account 

arrangements by residents of nursing 

facilities is widespread, and that these 

arrangements are beneficial for 

recipients. Based on the comments 

received, SSA’s view is that master/sub 

accounts held by nursing facilities serve 

useful purposes and do not present 

concerns. After consulting with SSA 

and upon review of the comments 

submitted to SSA, we proposed in the 

NPRM an exception to the ‘‘in the name 

of the recipient’’ requirement which 

would allow payments to be deposited 

to pooled accounts held by nursing 

homes. 

In the NPRM, we described the 

specific requirements to which resident 

trust or patient fund accounts held by 

nursing facilities are subject under 

Federal statute and regulation, 

including the Federal Nursing Home 

Reform Act. For example, upon written 

authorization of a resident, facilities 

must ‘‘hold, safeguard, manage and 

account for’’ the personal funds of the 

resident deposited with the facility. 42 

U.S.C. 1396r(c)(1)(B); 42 CFR 

483.10(c)(2). The statute requires that 

residents be provided a written 

description of their legal rights that 

includes a description of the protection 

of personal funds and a statement that 

a resident may file a complaint with a 

state survey and certification agency 

respecting resident abuse and neglect 

and misappropriation of resident 

property in the facility. 42 U.S.C. 

1396r(c)(1)(B); 42 CFR 483.10(b)(7)(i). 

Other statutory provisions address the 

management of personal funds, 

including requirements for maintaining 

separate accounts, the provision of a 

complete separate accounting of each 

resident’s personal funds, and the 

maintenance of a written record of all 

financial transactions involving the 

personal funds of a resident deposited 

with the facility. 42 U.S.C. 

1396r(c)(6)(B)(i); 42 U.S.C. 

1396r(c)(6)(B)(ii). To protect personal 

funds of residents deposited with a 

nursing facility, the nursing facility 

must purchase a security bond to assure 

the security of all personal funds. 42 

U.S.C. 1396r(c)(6)(C). Lastly, nursing 

facilities may not charge anything for 

these services. A facility may not 

impose a charge against the personal 

funds of a resident for any item or 

service for which payment is made 

under Medicare or Medicaid. 42 U.S.C. 

1396r(c)(6)(D). 

In light of the extensive protections 

provided to residents of nursing 

facilities whose funds are maintained in 

resident trust or patient fund accounts, 

we proposed to establish an exception 

to the ‘‘in the name of the recipient’’ 

requirement in order to permit 

payments to be deposited into resident 

trust or patient fund accounts 

established by nursing facilities. 

2. Accounts for Members of Religious 

Orders Who Have Taken Vows of 

Poverty 

We also proposed in the NPRM to 

allow payments disbursed to a member 

of a religious order who has taken a vow 

of poverty to be deposited to an account 

established by the religious order. SSA’s 

Federal Register notice regarding 

master/sub accounts specifically 

requested comment on accounts 

established by religious orders for 

members of such orders who have taken 

vows of poverty. The comments 

received did not indicate that there are 

any problems associated with these 

accounts, and commenters 

recommended that they be permitted. 

For purposes of defining who is a 

‘‘member of a religious order who has 

taken a vow of poverty,’’ we proposed 

to utilize existing guidance issued by 

the Internal Revenue Service (IRS). The 


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Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 59027 

treatment for Federal tax purposes of 

services performed by a member of a 

religious order who has taken a vow of 

poverty is addressed in IRS Publication 

517 (2008). We requested comment on 

whether it is appropriate to define the 

phrase ‘‘member of a religious order 

who has taken a vow of poverty’’ in the 

same way that the phrase would be 

defined by IRS for Federal tax purposes. 

II. Comments and Analysis 

We received 12 comments in response 

to the NPRM. The commenters 

represented a variety of perspectives. 

Comments were submitted by financial 

institutions, consumer advocacy groups, 

industry associations, the Senate 

Committee on Finance, and the House 

Committee on Ways and Means. 

International ACH Transactions 

Several entities commented upon the 

proposal to amend Part 210 to accept 

NACHA’s international ACH transaction 

(IAT) rule for Federal payments. Most of 

the commenters supported the 

application of the IAT rule to Federal 

payments, including the proposed 

effective date of January 1, 2012. 

However, the commenters generally 

opposed the use by Federal agencies of 

an ‘‘over-inclusive’’ approach to 

compliance with the IAT requirements 

in which, as discussed above, Federal 

agencies would use the IAT Standard 

Entry Class Code for all payments to 

individuals or entities with an address 

outside the territorial jurisdiction of the 

U.S. Commenters stated that Federal 

agencies should be expected to comply 

with the IAT rules in the same manner 

as the private sector. One commenter 

stated that the use of an over-inclusive 

approach ‘‘would result in a shift of the 

government’s compliance costs to 

receiving depository financial 

institutions (RDFIs), which would be 

overly burdensome on and unfair to 

RDFIs.’’ 

Commenters indicated that IAT 

transactions are typically viewed as 

riskier than other transactions and are 

therefore subject to additional scrutiny, 

which may increase the time, effort and 

cost of processing the payments, and 

potentially may delay the delivery of 

funds to the recipient. Commenters 

argued that by overclassifying payments 

as IATs, the Federal government would 

be increasing the volume of IAT 

transactions that financial institutions 

must handle, which would result in 

needlessly excessive OFAC screening 

and other processing costs for financial 

institutions. Commenters also stated 

that the overclassification of payments 

as IATs may result in the delay of 

delivery of funds to the recipients in 

some cases, due to the time required to 

investigate and clear any payments that 

potentially match the OFAC Specially 

Designated Nationals (SDN) List. 

In view of commenters’ concerns 

regarding the burdens to financial 

institutions that would result from 

agencies’ use of an overinclusive 

approach, we have conducted research 

to quantify the anticipated burden. 

Based on our research, the burden to 

financial institutions appears to be 

minimal. SSA, which is the primary 

agency interested in pursuing an 

overinclusive approach, has identified 

approximately 170,000 benefit 

payments for recipients with a foreign 

address that are sent each month to 

domestic correspondent banks. We 

believe that most of these 170,000 

would be properly classified as IAT 

entries if SSA undertook to query each 

payment recipient regarding the 

ultimate destination of the funds. The 

payments are generally being delivered 

to retirees who reside overseas and who, 

like other retirees, presumably use these 

benefits for their daily living expenses. 

SSA and FMS believe that many of 

these payments are likely to be further 

credited by U.S. financial institutions to 

accounts outside the U.S. through 

correspondent relationships. Therefore, 

it appears reasonable to assume that 

many of these 170,000 payments would 

be properly classified as IAT entries, 

meaning that the actual number of 

payments that are improperly classified 

–and that thus present an unnecessary 

processing burden for banks—is likely 

to be relatively insignificant. 

Moreover, these 170,000 monthly 

payments are delivered to over 4,600 

domestic financial institutions. Over 

3,800 financial institutions receive 

fewer than 10 of these payments per 

month, which is a relatively 

inconsequential number for any 

particular financial institution. Only 

thirteen very large financial institutions 

receive more than 1,000 of these foreign 

benefit payments monthly. Accordingly, 

the potential burden to the vast majority 

of potentially affected financial 

institutions does not appear to be 

significant. 

Finally, it’s important to note that 

FMS will conduct OFAC screening of all 

170,000 payments prior to their 

origination into the ACH network. 

FMS’s service provider that conducts 

the OFAC screening will have 

information that may be used to assist 

financial institutions that are seeking to 

clear any of the payments that match the 

OFAC list. For these reasons, we believe 

that it is reasonable for agencies to 

classify payments made to individuals 

with foreign addresses as IAT entries. 

In the NPRM, we discussed the IAT 

requirements from the perspective of 

payments made by the Federal 

government. The IAT requirements also 

affect collections made by the Federal 

government, including systems by 

which individuals or entities authorize 

the government to originate ACH debits 

to their domestic accounts for the 

collection amounts owed. After the 

effective date of the NACHA IAT rule 

changes, FMS learned that a few entries 

were being returned by domestic 

financial institutions based upon 

customer instructions to fund a Federal 

ACH collection debit from a foreign 

source of funds. 

Generally, the IAT requirements will 

impact two collection systems operated 

by FMS: Pay.gov, which both originates 

ACH WEB entries online and ACH PPD, 

TEL and CCD entries received 

individually or in files from agencies; 

and FMS’s Debit Gateway, through 

which ACH debit entries are presented 

and settled. We have determined that it 

will take a significant effort over an 

extended period to implement the 

changes necessary to process IAT 

entries. This effort will require that FMS 

coordinate with affected agencies and 

reallocate resources. Accordingly, we 

are establishing a new date of June 30, 

2013, as of which the IAT requirements 

will be implemented into Pay.gov and 

the Debit Gateway. After June 30, 2013, 

FMS will work with agencies to 

transition them into compliance based 

upon the readiness of the systems 

involved and the business need of the 

agency. In an effort to continue 

progressing forward with implementing 

the IAT requirements, we expect to 

implement a limited IAT pilot in 

Pay.Gov and the Debit Gateway in late 

2012. 

Finally, we are exempting entries 

representing Federal tax payments made 

to the IRS from the IAT classification 

requirements due to their extremely low 

risk, and the need for taxpayers to 

receive timely credit for their payments 

made as a result of tax liabilities. IRS 

rules require receipt of funds on exact 

tax due dates, with substantial penalties 

and interest charged to individuals and 

corporations for late payments received. 

Millions of taxpayers authorize payment 

entries for tax payments using FMS’s 

Electronic Federal Tax Payment System 

(EFTPS) with an enrollment process 

through which the taxpayer can 

authorize the origination of a debit entry 

to his or her bank account. The accounts 

from which EFTPS transactions are 

funded are accounts confirmed to be at 

domestic depository institutions as 

determined by the bank’s routing 

number, and these accounts are 


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59028 Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 

monitored for OFAC compliance by the 

account-holding financial institutions. 

In light of these facts and the unique 

nature of tax payments, as opposed to 

transactions involving the purchase of 

goods or services or other government 

fees, we believe the risk associated with 

tax payments processed through EFTPS 

is very low. We have consulted with 

OFAC staff regarding this matter and 

they have concurred that our approach 

toward tax payments is reasonable from 

a risk-based compliance perspective. 

In the NPRM FMS proposed to adopt 

the IAT rule for Federal benefit 

payments delivered to Mexico, Canada 

and Panama through the FedGlobal 

ACH Payment Service, effective 

immediately. For all other Federal 

payments, we proposed an effective date 

of January 1, 2012. We are finalizing this 

proposal for ACH credit entries 

originated by Federal agencies. For ACH 

debit entries originated by Federal 

agencies, we are establishing a later 

effective date of June 30, 2013. 

NACHA Rules Enforcement 

Two commenters provided comments 

regarding the proposed continued 

exclusion from NACHA’s national 

system of fines. One commenter 

expressed a preference that the Federal 

government be subject to the NACHA 

National System of Fines (Appendix 

Eleven of the NACHA Operating Rules). 

The other commenter recognized that 

FMS has consistently excluded the 

Federal government from the national 

system of fines because the Federal 

government is prohibited from entering 

into agreements for contingent liabilities 

that might result in unfunded liabilities. 

The commenters did not identify any 

problems that have resulted from FMS’s 

prior decisions to exempt the Federal 

government from Appendix Eleven. 

We believe that modifying Part 210 to 

subject the Federal government to 

Appendix Eleven could contravene the 

government’s obligation to avoid 

unfunded liabilities. Moreover, none of 

the commenters indicated that this 

position has caused undue hardship in 

the past. If an agency experiences a high 

rate of debit entries that are returned as 

unauthorized, or if an agency or FMS 

identifies an ACH rule issue, FMS 

remains willing to coordinate with 

NACHA and the agency to address the 

issue. Therefore, we are adopting this 

proposal without modification. 

ODFI Reporting Requirements 

Two commenters provided comments 

regarding FMS’s proposal not to adopt 

NACHA’s new reporting requirements 

for ODFIs when certain Originators or 

Third-Party Senders are believed to 

have a return rate for unauthorized debit 

entries in excess of one percent. One 

commenter expressed a preference that 

the Federal government be subject to the 

reporting requirements, whereas the 

other commenter recognized that FMS 

has consistently excluded the Federal 

government from the reporting 

requirements when those requirements 

may unduly burden the Federal 

government without yielding 

countervailing benefits. Neither 

commenter identified specific problems 

that would result from continuing to 

exempt the Federal government from 

these reporting requirements. 

We are adopting this proposal without 

modification. We remain willing to 

coordinate with NACHA to address 

issues that may arise if an agency 

experiences an excessive unauthorized 

return rate. 

Automated Reclamations Process 

Several commenters submitted 

comments regarding our proposal for 

automating reclamations. Commenters 

were generally supportive of the 

objectives of achieving cost savings and 

efficiencies in the reclamations process. 

Some commenters acknowledged that 

the current paper-based process can be 

burdensome for FMS and financial 

institutions, and that an updated 

process could benefit both parties. 

However, commenters generally 

expressed significant concerns that the 

proposed process was not sufficiently 

developed or clear, would be 

burdensome for financial institutions 

and would add complexity to the 

current reclamation procedures, thereby 

negating efforts to streamline the 

process and reduce the amount of paper 

produced. Several commenters 

suggested that FMS work with affected 

financial institutions to further refine 

and test any proposed process before 

final implementation. 

In light of commenters’ concerns, 

which we agree are generally valid, and 

our desire to identify the most effective 

solution to respond to the issues 

identified by commenters, we are not 

finalizing the proposal to automate the 

reclamations process at this time. 

Instead, we will work to develop an 

approach that addresses the concerns 

raised by commenters, which we may 

publish for comment in a future notice 

of proposed rulemaking. During this 

period of further study, we plan to 

continue to expand and refine the use 

of the Centralized Reclamation 

Application currently in use. 

Payment Transactions Integrity Act of 

2008 Changes 

Several commenters provided input 

on FMS’s proposal to require RDFIs to 

provide the name, last-known address 

and phone number for account owners 

and others who have withdrawn, or 

were authorized to withdraw, funds 

subject to reclamation. The commenters 

stated that financial institutions may not 

have telephone numbers for all deposit 

account owners and authorized signers, 

or that financial institutions may not 

have accurate or current information. 

The commenters expressed concern that 

financial institutions would be held 

accountable for the accuracy of the 

information in their records or might 

even be required to obtain that 

information. 

We are finalizing the requirement to 

provide the proposed information. To 

clarify that a financial institution is only 

required to provide information in its 

records, and would have no liability for 

the accuracy of that information, we 

have modified the wording of the 

regulation text to state that the RDFI 

must provide the name, last known 

address and phone number ‘‘as reflected 

on the RDFI’s records.’’ 

‘‘In the Name of the Recipient’’ 

Requirements 

1. Accounts Held by Nursing Facilities 

The comments we received generally 

supported the proposed exception, 

which would allow a Federal payment 

that is disbursed to a resident of a 

qualifying nursing facility to be 

deposited into a resident trust or patient 

fund account established by the nursing 

facility. One commenter stated its belief 

that this change will assist nursing 

home residents. Another commenter 

suggested that the final rule further 

clarify that eligible nursing homes 

should be subject to certain types of 

oversight. Some financial institutions 

that commented expressed some 

concern that financial institutions could 

be held liable if funds are misapplied 

and suggested that the final rule either: 

(1) Specify that the payment be 

deposited into an account that is 

designated as a resident trust or patient 

fund account; or (2) allow the payment 

to be deposited into a deposit account 

established by the nursing facility. 

We are finalizing the exception for 

accounts held by nursing facilities as 

proposed, with one change. We have 

revised the wording of the exception to 

provide that where a Federal payment is 

disbursed to a resident of a nursing 

facility, as defined in 42 U.S.C. 1396r, 

the payment may be deposited into a 

resident trust or patient fund account 


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Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 59029 

established by the nursing facility 

‘‘pursuant to requirements under 

Federal law relating to the protection of 

such funds.’’ We believe that this 

wording addresses commenters’ 

concerns by making clear that an 

eligible account is restricted to ‘‘a 

resident trust or patient fund account’’ 

established by ‘‘a nursing facility as 

defined in 42 U.S.C. 1396r’’ and that the 

account is subject to all of the 

requirements governing the protection 

of funds held in resident trust or patient 

fund accounts. 

2. Accounts for Members of Religious 

Orders Who Have Taken Vows of 

Poverty 

Commenters generally supported this 

proposal and none of the commenters 

criticized or voiced concerns regarding 

this proposal. In light of the comments 

and the reasons discussed above, we are 

finalizing this exception as proposed. 

III. Final Rule 

Summary 

In the final rule, we are adopting all 

of the proposed amendments to Part 210 

set forth in the NPRM, except as 

follows: 

1. International ACH Transactions: 

We are finalizing the effective date of 

the IAT rule as proposed in the NPRM 

for credit entries originated by Federal 

agencies. We are extending the effective 

date for the application of the IAT rule 

to debit entries originated by Federal 

agencies in Pay.gov and the Debit 

Gateway until June 30, 2013. We plan to 

implement a limited IAT pilot in late 

2012, and then transition agencies into 

compliance after June 30, 2013, based 

upon the readiness of the systems 

involved and the business need of the 

agency. 

2. Automated Reclamations Process: 

We are not finalizing the proposal to 

automate the reclamations process at 

this time. FMS plans to expand the use 

of the Centralized Reclamation 

Application to additional financial 

institutions and work with the financial 

industry to further streamline the 

reclamation process. We will continue 

to evaluate solutions to respond to 

commenters’ concerns about automating 

the reclamation process. If we decide to 

pursue changes to the reclamation 

process that require an amendment to 

Part 210, we will publish a new notice 

of proposed rulemaking with request for 

comment. 

3. Payment Transactions Integrity Act 

of 2008 Changes: We are finalizing the 

requirement that RDFIs provide certain 

information in connection with a 

reclamation, but have added language to 

make it clear that the financial 

institution’s obligation to provide the 

information is limited to information 

contained in its records and that the 

financial institution is not liable if that 

information is inaccurate. 

4. Prepaid Card Exception: The final 

rule does not address the proposed 

exception to the ‘‘in the name of the 

recipient’’ requirement for prepaid 

cards. That proposal was addressed in a 

separate rulemaking published on 

December 22, 2010. See 75 FR 80335. 

Section-by-Section Analysis 

In order to incorporate in Part 210 the 

ACH rule changes that we are accepting, 

we are replacing references to the 2007 

ACH Rules book with references to the 

2009 ACH Rules book. No change to 

Part 210 is necessary in order to exclude 

the amendments to the rules 

enforcement provisions, since Part 210 

already provides that the rules 

enforcement provisions of Appendix 11 

of the ACH Rules do not apply to 

Federal agency ACH transactions. See 

§ 210.2(d). 

§ 210.2(d) 

The definition of applicable ACH 

Rules at § 210.2(d) is amended to refer 

to the rules published in NACHA’s 2009 

Rules book. Section 210.2(d)(6) is 

revised to reflect a numbering change to 

the ACH Rules pursuant to which 

former ACH Rule 2.11.2.3 is now ACH 

Rule 2.12.2.3. Section 210.2(d)(7) is 

revised to remove a reference to former 

ACH Rule 2.13.3, which required 

reporting regarding unauthorized 

Telephone-Initiated entries. NACHA has 

replaced that reporting requirement 

with a broader reporting requirement 

(ACH Rule 2.18). Section § 210.2(d)(7) 

sets forth the broader reporting 

requirement, which we are not 

adopting. 

Section 210.2(d)(8) has been added in 

order to exclude debit entries originated 

by agencies from ACH Rule 2.11 

(International ACH Transactions) until 

June 30, 2013. Credit entries originated 

by agencies, other than Federal benefit 

payments delivered to Mexico, Canada 

and Panama through the FedGlobal(SM) 

ACH Payment Service, are excluded 

from ACH Rule 2.11 until January 1, 

2012. In addition, entries representing 

the payment of a Federal tax obligation 

are entirely excluded from ACH Rule 

2.11. 

§ 210.3(b) 

We are amending § 210.3(b) by 

replacing the references to the ACH 

Rules as published in the 2007 Rules 

book with references to the ACH Rules 

as published in the 2009 Rules book. 

§ 210.5(b) 

New paragraphs (b)(6) and (b)(7) 

create additional exceptions to the 

requirement in paragraph (a) that all 

payments other than vendor payments 

be delivered to an account in the name 

of the recipient. Paragraph (b)(6) allows 

payments disbursed to a resident of a 

nursing facility, as defined in 42 U.S.C. 

1396r, to be deposited into a resident 

trust or patient fund account established 

by the nursing facility. Paragraph (b)(7) 

allows payments disbursed to a member 

of a religious order who has taken a vow 

of poverty, as defined for purposes of 

IRS regulations, to be deposited to an 

account established by the religious 

order. 

§ 210.11 

Section 210.11(b)(3)(i) requires RDFIs 

to provide the name, last-known address 

and phone number for account owners 

and others who have withdrawn, or 

were authorized to withdraw, funds 

from the account, as permitted by the 

Payment Transactions Integrity Act of 

2008. The RDFI is only obligated to 

provide information shown on its 

records, and is not liable to the 

government if the information is 

inaccurate. 

IV. Procedural Requirements 

Regulatory Planning and Review 

Executive Orders 13563 and 12866 

direct agencies to assess costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated a ‘‘significant 

regulatory action’’ although not 

economically significant, under section 

3(f) of Executive Order 12866. 

Accordingly, the rule has been reviewed 

by the Office of Management and 

Budget. 

Regulatory Flexibility Act Analysis 

It is hereby certified that the rule will 

not have a significant economic impact 

on a substantial number of small 

entities. We believe the rule will affect 

only a limited number of small entities 

and that any economic impact will be 

minimal. The rule requires financial 

institutions that hold accounts to which 

post-death benefit payments have been 

delivered to provide the government 


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59030 Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 

with the name, address and phone 

number for account owners and others 

who have withdrawn funds. Financial 

institutions are already required to 

provide detailed information to the 

government in connection with such 

accounts by completing and returning 

Form FMS–133. In most cases financial 

institutions are already required to 

provide names and addresses on Form 

FMS–133 and the only additional 

information required will be a phone 

number. Financial institutions that 

commented on the rule did not indicate 

that the requirement would be 

burdensome or have any economic 

effect if they are only required to 

provide information contained in their 

records, which the final rule expressly 

provides. The Burden Estimate 

Statement on FMS–133 states that the 

estimated average time associated with 

filling out the form is 12 minutes. FMS 

does not believe that the requirement to 

provide a phone number or, in limited 

cases, the name and address of a 

withdrawer, will affect the 12 minute 

estimate. 

The final rule will allow, but not 

require, the delivery of Federal nonvendor payments to certain types of 

pooled accounts held by nursing homes 

and religious orders, regardless of size. 

For nursing homes that do not wish to 

receive Federal payments on behalf of 

residents, there will be no economic 

impact. For nursing homes that wish to 

receive Federal payments to established 

patient funds accounts, there should be 

no economic impact because there is no 

cost to receive a direct deposit payment. 

For nursing homes that wish to receive 

Federal payments for patients but that 

have not already established patient 

fund accounts for the management of 

other patient funds, the costs would 

include the fees, if any, charged by a 

financial institution to maintain the 

account and the cost of obtaining a 

surety bond. The average monthly 

payment amount for a Supplemental 

Security Income (SSI) check recipient is 

$545 and the average monthly payment 

amount for a Social Security (SSA) 

check recipient ranges from $808–$915. 

For small nursing homes that have, by 

definition, a small number of residents, 

the cost of a bond to insure against 

defalcation of these modest monthly 

payments should be insignificant. Any 

economic impact for these entities 

therefore is not expected to be 

significant. Accordingly, a regulatory 

flexibility analysis under the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.) is 

not required. 

Unfunded Mandates Act of 1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995, 2 U.S.C. 

1532 (Unfunded Mandates Act), 

requires that the agency prepare a 

budgetary impact statement before 

promulgating any rule likely to result in 

a Federal mandate that may result in the 

expenditure by 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 205 of the 

Unfunded Mandates Act also requires 

the agency to identify and consider a 

reasonable number of regulatory 

alternatives before promulgating the 

rule. We have determined that the rule 

will not result in expenditures by State, 

local, and tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more in any one year. 

Accordingly, we have not prepared a 

budgetary impact statement or 

specifically addressed any regulatory 

alternatives. 

List of Subjects in 31 CFR Part 210 

Automated Clearing House, Electronic 

funds transfer, Financial institutions, 

Fraud, and Incorporation by reference. 

For the reasons set forth in the 

preamble, 31 CFR part 210 is amended 

as follows: 

PART 210—FEDERAL GOVERNMENT 

PARTICIPATION IN THE AUTOMATED 

CLEARING HOUSE 

■ 1. The authority citation for part 210 

continues to read as follows: 

Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 

U.S.C. 321, 3301, 3302, 3321, 3332, 3335, and 

3720. 

■ 2. In § 210.2, revise paragraph (d) to 

read as follows: 

§ 210.2 Definitions. 

* * * * * 

(d) Applicable ACH Rules means the 

ACH Rules with an effective date on or 

before September 18, 2009, as published 

in Parts IV, V and VII of the ‘‘2009 ACH 

Rules: A Complete Guide to Rules & 

Regulations Governing the ACH 

Network’’ (incorporated by reference, 

§ 210.3) except: 

(1) ACH Rule 1.1 (limiting the 

applicability of the ACH Rules to 

members of an ACH association); 

(2) ACH Rule 1.2.2 (governing claims 

for compensation); 

(3) ACH Rules 1.2.4 and 2.2.1.12; 

Appendix Eight; and Appendix Eleven 

(governing the enforcement of the ACH 

Rules, including self-audit 

requirements); 

(4) ACH Rules 2.2.1.10; 2.6; and 4.8 

(governing the reclamation of benefit 

payments); 

(5) ACH Rule 9.3 and Appendix Two 

(requiring that a credit entry be 

originated no more than two banking 

days before the settlement date of the 

entry—see definition of ‘‘Effective Entry 

Date’’ in Appendix Two); 

(6) ACH Rule 2.12.2.3 (requiring that 

originating depository financial 

institutions (ODFIs) establish exposure 

limits for Originators of Internetinitiated debit entries); 

(7) ACH Rule 2.18 (requiring reporting 

and reduction of high rates of entries 

returned as unauthorized); and 

(8) ACH Rule 2.11 (International ACH 

Transactions), which shall not apply (i) 

until January 1, 2012 to credit entries 

other than Federal benefit payments 

delivered to Mexico, Canada and 

Panama through the FedGlobal ACH 

Payment System; (ii) until June 30, 2013 

for debit entries originated by agencies; 

and (iii) to entries representing the 

payment of a Federal tax obligation by 

a taxpayer. 

* * * * * 

■ 3. In § 210.3, revise paragraph (b) to 

read as follows: 

§ 210.3 Governing law. 

* * * * * 

(b) Incorporation by reference— 

applicable ACH Rules. (1) This part 

incorporates by reference the applicable 

ACH Rules, including rule changes with 

an effective date on or before September 

18, 2009, as published in Parts IV, V, 

and VII of the ‘‘2009 ACH Rules: A 

Complete Guide to Rules & Regulations 

Governing the ACH Network.’’ The 

Director of the Federal Register 

approves this incorporation by reference 

in accordance with 5 U.S.C. 552(a) and 

1 CFR part 51. Copies of the ‘‘ACH 

Rules’’ are available from NACHA—The 

Electronic Payments Association, 13450 

Sunrise Valley Drive, Suite 100, 

Herndon, Virginia 20171. You may 

inspect a copy at the Financial 

Management Service, 401 14th Street, 

SW., Room 400A, Washington, DC 

20227 or at the National Archives and 

Records Administration (NARA). For 

information on the availability of this 

material at NARA, visit http:// 

www.archives.gov/federal_register/ 

code_of_federal_regulations/ 

ibr_locations.html or call 202–741– 

6030. 

(2) Any amendment to the applicable 

ACH Rules that is approved by 

NACHA—The Electronic Payments 

Association after January 1, 2009, shall 

not apply to Government entries unless 

the Service expressly accepts such 


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Federal Register / Vol. 76, No. 185 / Friday, September 23, 2011 / Rules and Regulations 59031 

amendment by publishing notice of 

acceptance of the amendment to this 

part in the Federal Register. An 

amendment to the ACH Rules that is 

accepted by the Service shall apply to 

Government entries on the effective date 

of the rulemaking specified by the 

Service in the Federal Register notice 

expressly accepting such amendment. 

* * * * * 

■ 4. In § 210.5, redesignate paragraph 

(b)(6) as (b)(8) and add new paragraphs 

(b)(6) and (b)(7) to read as follows: 

§ 210.5 Account requirements for Federal 

payments. 

* * * * * 

(b) * * * 

(6) Where a Federal payment is 

disbursed to a resident of a nursing 

facility, as defined in 42 U.S.C. 1396r, 

the payment may be deposited into a 

resident trust or patient fund account 

established by the nursing facility 

pursuant to requirements under Federal 

law relating to the protection of such 

funds. 

(7) Where a Federal payment is 

disbursed to a member of a religious 

order who has taken a vow of poverty, 

the payment may be deposited to an 

account established by the religious 

order. As used in this paragraph, the 

phrase ‘‘member of a religious order 

who has taken a vow of poverty’’ is 

defined as it would be by the Internal 

Revenue Service for Federal tax 

purposes. 

* * * * * 

■ 5. In § 210.11, revise paragraph 

(b)(3)(i) to read as follows: 

§ 210.11 Limited liability. 

* * * * * 

(b) * * * 

(3)(i) Provide the name, last known 

address and phone number, as shown 

on the RDFI’s records, of the following 

person(s): 

(A) The recipient and any co-owner(s) 

of the recipient’s account; 

(B) All other person(s) authorized to 

withdraw funds from the recipient’s 

account; and 

(C) All person(s) who withdrew funds 

from the recipient’s account after the 

death or legal incapacity of the recipient 

or death of the beneficiary. 

* * * * * 

Dated: September 12, 2011. 

Richard L. Gregg, 

Fiscal Assistant Secretary. 

[FR Doc. 2011–23898 Filed 9–22–11; 8:45 am] 

BILLING CODE 4810–35–P 

CENTRAL INTELLIGENCE AGENCY 

32 CFR Part 1907 

Classification Challenge Regulations 

AGENCY: Central Intelligence Agency. 

ACTION: Final rule. 

SUMMARY: Consistent with Executive 

Order 13526, the Central Intelligence 

Agency (CIA) has undertaken and 

completed a review of its public 

Classification Challenge regulations. As 

a result of this review, the Agency has 

revised its Classification Challenge 

regulations to more clearly reflect the 

current CIA organizational structure and 

policies and practices, and to eliminate 

ambiguous, redundant and obsolete 

regulatory provisions. This rule is being 

issued as a final rule without prior 

notice of proposed rulemaking as 

allowed by the Administrative 

Procedures Act for rules of agency 

procedure and interpretation and the 

CIA Act. 

DATES: Effective September 23, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Joseph W. Lambert, (703) 613–1379. 

SUPPLEMENTARY INFORMATION: Consistent 

with Executive Order 13526, the CIA 

has undertaken and completed a review 

of its public Classification Challenge 

regulations. As a result of this review, 

the Agency has revised its Classification 

Challenge regulations to more clearly 

reflect the current CIA organizational 

structure, record system configuration, 

and policies and practices and to 

eliminate ambiguous, redundant and 

obsolete regulatory provisions. This rule 

is being issued as a final rule without 

prior notice of proposed rulemaking as 

allowed by the Administrative 

Procedures Act, 5 U.S.C. 553(b)(3)(A) for 

rules of agency procedure and 

interpretation and Section 6 of the CIA 

Act, as amended, 50 U.S.C. 403g. 

List of Subjects in 32 CFR Part 1907 

Classification challenge, Classified 

information. 

Accordingly, the CIA is amending 32 

CFR part 1907 as follows: 

PART 1907—CHALLENGES TO 

CLASSIFICATION OF DOCUMENTS BY 

AUTHORIZED HOLDERS PURSUANT 

TO SEC. 1.8 OF EXECUTIVE ORDER 

13526 

■ 1. The authority citation for part 1907 

is revised to read as follows: 

Authority: Executive Order 13526 75 FR 

707, 3 CFR 2010 Comp., P. 298–327; section 

102 of the National Security Act of 1947; 

section 6 of the CIA Act of 1949. 

■ 2. Revise the part heading to read as 

set forth above. 

■ 3. Revise § 1907.01 to read as follows: 

§ 1907.01 Authority and purpose. 

(a) Authority: This Part is issued 

under the authority of and in order to 

implement section 1.8 of E.O. 13526, 

section 102 of the National Security Act 

of 1947, and section 6 of the CIA Act of 

1949. 

(b) Purpose: This part prescribes 

procedures for non-Agency personnel 

who are authorized holders of CIA 

information, to challenge the 

classification status, whether classified 

or unclassified, based on a good faith 

belief that the current status of CIA 

information is improper. This part and 

section 1.8 of Executive Order 13526 

confer no rights upon members of the 

general public or individuals who are 

not authorized holders of CIA 

information. 

■ 4. In § 1907.02, revise paragraphs (b) 

and (j) and add paragraphs (k) and (l) as 

follows: 

§ 1907.02 Definitions. 

* * * * * 

(b) Authorized holder means anyone 

who has satisfied the conditions for 

access to classified information stated in 

section 4.1(a) of Executive Order 13526 

and who has been granted access to 

such information; the term does not 

include anyone authorized such access 

by section 4.4 of Executive Order 13526. 

* * * * * 

(j) The Order means Executive Order 

13526 of December 29, 2009 and 

published at 75 FR 707 (or successor 

Orders). 

(k) Chief, Classification Management 

and Collaboration Group refers to the 

Agency official authorized to make the 

initial Agency determination with 

respect to a challenge of the 

classification status of CIA information. 

(l) Agency Release Panel refers to the 

Agency’s forum for reviewing 

information review and release policy, 

the adequacy of resources available to 

all Agency declassification and release 

programs, and hearing appeals in 

accordance with this section. 

■ 5. Revise § 1907.12 to read as follows: 

§ 1907.12 Requirements as to form. 

The challenge shall include 

identification of the challenger by full 

name, Executive Branch agency, title of 

position, and information required for 

verification of access, security 

clearance, and status as an authorized 

holder of the CIA information in 

question. In addition, the challenger 

must clearly identify documents or 


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