(BILLINGCODE: 4810-02P) 

DEPARTMENT OF THE TREASURY 

31 CFR Part 103 

RIN 1506-AB11 

Financial Crimes Enforcement Network; Amendment to the Bank Secrecy Act 

Regulations – Imposition of Special Measure against the Lebanese Canadian Bank 

SAL as a Financial Institution of Primary Money Laundering Concern 

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

ACTION: Notice of proposed rulemaking. 

SUMMARY: In a notice of finding published elsewhere in this issue of the Federal 

Register, the Secretary of the Treasury, through his delegate, the Director of FinCEN, 

found that reasonable grounds exist for concluding that the Lebanese Canadian Bank 

SAL (“LCB”) is a financial institution of primary money laundering concern pursuant to 

31 U.S.C. 5318A. FinCEN is issuing this notice of proposed rulemaking to impose a 

special measure against LCB. 

DATES: Written comments on the notice of proposed rulemaking must be submitted on 

or before [INSERT DATE 60 DAYS AFTER THE DATE OF PUBLICATION OF THIS 

DOCUMENT IN THE FEDERAL REGISTER]. 

ADDRESSES: You may submit comments, identified by RIN 1506-XXX by any of the 

following methods: 

 Federal e-rulemaking portal: http://www.regulations.gov. Follow the 

instructions for submitting comments. 
 E-mail: regcomments@fincen.treas.gov. Include RIN 1 506-XXX in the 

subject line of the message. 

 Mail: The Financial Crimes Enforcement Network, P.O. Box 39, Vienna, 

VA 22183. Include RIN 1506-XXX in the body of the text. 

Instructions. It is preferable for comments to be submitted by electronic mail because 

paper mail in the Washington, D.C. area may be delayed. Please submit comments by 

one method only. All submissions received must include the agency name and the 

Regulatory Information Number (RIN) for this rulemaking. All comments received will 

be posted without change to http://www.fincen.gov, including any personal information 

provided. Comments may be inspected at FinCEN between 10 a.m. and 4 p.m., in the 

FinCEN reading room in Washington, D.C. Persons wishing to inspect the comments 

submitted must request an appointment by telephoning (202) 354-6400 (not a toll-free 

number). 

FOR FUTHER INFORMATION CONTACT: Regulatory Policy and Programs 

Division, FinCEN, (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 Intercept and Obstruct Terrorism 

Act of 2001 (the “USA PATRIOT Act”), Public Law 107-56. Title III of the USA 

PATRIOT Act amended the anti-money laundering provisions of the Bank Secrecy Act 

(“BSA”), codified at 12 U.S.C. 1829b, 12 U.S.C 1951-1959, and 31 U.S.C. 5311-5314 

2 
and 5316-5332, to promote the prevention, detection, and prosecution of international 

money laundering and the financing of terrorism. Regulations implementing the BSA 

appear at 31 CFR Part 103. The authority of the Secretary of the Treasury (“the 

Secretary”) to administer the BSA and its implementing regulations has been delegated to 

the Director of FinCEN.1

Section 311 of the USA PATRIOT Act (“section 311”) added section 5318A to 

the BSA, granting the Secretary the authority, upon finding that reasonable grounds exist 

for concluding that a foreign jurisdiction, institution, class of transaction, or type of 

account is of “primary money laundering concern,” to require domestic financial 

institutions and financial agencies to take certain “special measures” against the primary 

money laundering concern. Section 311 identifies factors for the Secretary to consider 

and Federal agencies to consult before the Secretary may conclude that a jurisdiction, 

institution, class of transaction, or type of account is of primary money laundering 

concern. The statute also provides similar procedures, i.e., 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 Secretary with a range of options that 

can be adapted to target specific money laundering and terrorist financing concerns most 

effectively. These options give the Secretary the authority to bring additional pressure on 

those jurisdictions and institutions that pose money laundering threats. Through the 

imposition of various special measures, the Secretary can gain more information about 

the jurisdictions, institutions, transactions, or accounts of concern; can more effectively 

 

1

 Therefore, references to the authority of the Secretary of the Treasury under section 311 of the USA 

PATRIOT Act apply equally to the Director of FinCEN. 

3 
monitor the respective jurisdictions, institutions, transactions, or accounts; or can protect 

U.S. financial institutions from involvement with jurisdictions, institutions, transactions, 

or accounts that are of 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 Secretary is 

required to consult with the both the Secretary of State and the Attorney General. The 

Secretary is also required by section 311 to consider ‘‘such information as the Secretary 

determines 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 the finding that the institution is of primary money 

laundering concern is sufficient to ensure, with respect to transactions 

involving the institution operating in the jurisdiction, that the purposes of 

the BSA continue to be fulfilled, and to guard against international money 

laundering and other financial crimes. 

If the Secretary determines that reasonable grounds exist for concluding that a 

financial institution is of primary money laundering concern, the Secretary 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, 

jointly, in any combination, and in any sequence.2

 The Secretary’s imposition of special 

 

2

 Available special measures include requiring: (1) recordkeeping and reporting of certain financial 

transactions; (2) collection of information relating to beneficial ownership; (3) collection of information 

4 
measures requires additional consultations to be made and factors to be considered. The 

statute requires the Secretary to consult with appropriate federal agencies and other 

interested parties3 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 measures 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 the United States national security and foreign 

policy.4

 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)(l)-(5). For a complete discussion of the range of possible 

countermeasures, see 68 FR 18917 (April 17, 2003) (proposing special measures against Nauru). 3

 Section 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 (SEC), the Commodity Futures Trading Commission (CFTC), the 

National Credit Union Administration (NCUA), and, in the sole discretion of the Secretary, “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 on 

domestic financial institutions opening or maintaining correspondent account relationships with the 

designated jurisdiction. 

4

 Classified information used in support of a section 311 finding and 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)). 

5 
B. The Lebanese Canadian Bank SAL

In this rulemaking, FinCEN proposes to impose the fifth special measure (31 

U.S.C. 5318A(b)(5)) against LCB. The fifth special measure prohibits or conditions the 

opening or maintaining of correspondent or payable-through accounts for the designated 

institution by U.S. financial institutions. This special measure may be imposed only 

through the issuance of a regulation. 

LCB is based in Beirut, Lebanon, and maintains a network of 35 branches in 

Lebanon and a representative office in Montreal, Canada.5 The bank is considered 

among the top 10 banks in Lebanon in assets and has over 600 employees.6 Originally 

established in 1960 as Banque des Activities Economiques SAL, it operated as a 

subsidiary of the Royal Bank of Canada Middle East (1968-1988) and is now a privately 

owned bank.7

 LCB offers a broad range of corporate, retail, and investment products, 

and it maintains extensive correspondent accounts with banks worldwide, including 

several U.S. financial institutions.8

 As of 2009, LCB’s total assets were worth over 

$5 billion.9

LCB has a controlling financial interest in a number of subsidiaries, including 

LCB Investments SAL, LCB Finance SAL, LCB Estates SAL, LCB Insurance Brokerage 

House SAL, Dubai-based Tabadul for Shares and Bonds LLC, Prime Bank Limited 

(“Prime Bank”) of Gambia.10 Prime Bank is a private commercial bank located in 

Serrekunda, Gambia.11 LCB owns 51% of Prime Bank, while the remaining shares are 

 

5

 Bankers Almanac, Lebanese Canadian Bank SAL, June 22, 2010 (http://www.bankersalmanac.com). 6 Id.

7 Id.

8 Id.

9

 Lebanese Canadian Bank, 2009 Annual Report. 

10 Id. 11 See http://primebankgambia.gm/index. 

6 
held by local and Lebanese partners.12 LCB apparently serves as the sole correspondent 

bank for Prime Bank.13 For purposes of this document and, unless expressly stated 

otherwise, references to LCB include the aforementioned subsidiaries. 

II. Imposition of Special Measure against the Lebanese Canadian Bank SAL as 

a financial institution of Primary Money Laundering Concern 

As a result of the finding on [INSERT DATE OF PUBLICATION] by the 

Secretary, through his delegate, the Director of FinCEN, that reasonable grounds exist for 

concluding that LCB is a financial institution of primary money laundering concern (see 

the notice of this finding published elsewhere today in the Federal Register), and based 

upon the additional consultations and the consideration of all relevant factors discussed in 

the finding and in this notice of proposed rulemaking, the Secretary, through FinCEN, 

has determined that reasonable grounds exist for the imposition of the special measure 

authorized by section 5318A(b)(5).14 That special measure authorizes the prohibition 

against the opening or maintaining of correspondent accounts15 by any domestic financial 

institution or agency for or on behalf of a targeted financial institution. A discussion of 

the section 311 factors relevant to imposing this particular special measure follows. 

1. Whether Similar Actions Have Been or Will Be Taken by Other 

Nations or Multilateral Groups against LCB 

Other countries or multilateral groups have not taken action similar to the one 

proposed in this rulemaking that would prohibit domestic financial institutions and 

agencies from opening or maintaining a correspondent account for or on behalf of LCB, 

 

12 Id. 13 Id. 14 In connection with this action, FinCEN consulted with staff of the Federal functional regulators, the 

Department of Justice, and the Department of State. 

15 For purposes of the proposed 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. 

7 
and require those domestic financial institutions and agencies to screen their 

correspondents in a manner that is reasonably designed to guard against their indirect use 

by nested correspondent accounts held by LCB. FinCEN encourages other countries to 

take similar action based on the findings contained in this rulemaking. 

2. Whether the Imposition of the Fifth 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 fifth special measure sought to be imposed by this rulemaking would prohibit 

covered financial institutions from opening and maintaining correspondent accounts for, 

or on behalf of, LCB. As a corollary to this measure, covered financial institutions also 

would be required to take reasonable steps to apply special due diligence, as set forth 

below, to all of their correspondent accounts to help ensure that no such account is being 

used indirectly to provide services to LCB. FinCEN does not expect the burden 

associated with these requirements to be significant, given its understanding that few U.S. 

financial institutions currently maintain a correspondent account for LCB.16 There is a 

minimal burden involved in transmitting a one-time notice to correspondent account 

holders concerning the prohibition on indirectly providing services to LCB. In addition, 

U.S. 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 

Office of Foreign Assets Control (OFAC) of the Department of the Treasury. As 

explained in more detail in the section-by-section analysis below, financial institutions 

should, if necessary, be able to easily adapt their current screening procedures to comply 

 

16 Bankers Almanac, Lebanese Canadian Bank SAL, June 22, 2010 (http://www.bankersalmanac.com). 

8 
with this special measure. Thus, the special due diligence that would be required by this 

rulemaking is not expected to impose a significant additional burden upon U.S. financial 

institutions. 

3. The Extent to Which the Proposed Action or Timing of the Action 

Will Have a Significant Adverse Systemic Impact on the 

International Payment, Clearance, and Settlement System, or on 

Legitimate Business Activities of the Lebanese Canadian Bank 

SAL 

This proposed rulemaking targets LCB specifically; it does not target a class of 

financial transactions (such as wire transfers) or a particular jurisdiction. LCB 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 LCB would not have a significant adverse 

systemic impact on the international payment, clearance, and settlement system. In light 

of the reasons for imposing this special measure, FinCEN does not believe that it would 

impose an undue burden on legitimate business activities, and notes that the presence of 

several larger banks in Lebanon would alleviate the burden on legitimate business 

activities within that jurisdiction. 

4. The Effect of the Proposed Action on United States National 

Security and Foreign Policy 

The exclusion from the U.S. financial system of banks that serve as conduits for 

significant money laundering activity and other financial crimes enhances national 

security, making it more difficult for money launderers to access the substantial resources 

of the U.S. financial system. More generally, the imposition of the fifth special measure 

would complement the U.S. Government’s worldwide efforts to expose and disrupt 

international money laundering. 

9 
Therefore, pursuant to the finding of the Secretary of the Treasury that LCB is an 

institution of primary money laundering concern, and after conducting the required 

consultations and weighing the relevant factors, FinCEN has determined that reasonable 

grounds exist for imposing the special measure. 

III. Section-by-Section Analysis 

The proposed rule would prohibit covered financial institutions from establishing, 

maintaining, or managing in the United States any correspondent account for or on behalf 

of LCB. As a corollary to this prohibition, covered financial institutions would be 

required to apply special due diligence to their correspondent accounts to guard against 

their indirect use by LCB. At a minimum, that special due diligence must include two 

elements. First, a covered financial institution must notify those correspondent account 

holders that the covered financial institution knows or has reason to know provide 

services to LCB that such correspondents may not provide LCB with access to the 

correspondent account maintained at the covered financial institution. Second, a covered 

financial institution must take reasonable steps to identify any indirect use of its 

correspondent accounts by LCB, 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 should 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 LCB, based on risk factors such 

as the type of services it offers and geographic locations of its correspondents. 

10 
A. 103.194(a) – Definitions

1. The Lebanese Canadian Bank SAL 

Section 103.194(a)(1) of the proposed rule defines LCB to include all branches, 

offices, and subsidiaries of LCB operating in Lebanon or in any jurisdiction. These 

branches, offices, and subsidiaries include, but are not necessarily limited to, LCB 

Investments (Holding) SAL, LCB Finance SAL, LCB Estates SAL, LCB Insurance 

Brokerage House SAL, Dubai-based Tabadul for Shares and Bonds LLC, and Prime 

Bank Limited in Serrekunda, Gambia. 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 LCB. 

2. Correspondent account 

Section 103.194(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 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. 

In the case of a U.S. depository institution, this broad definition includes most 

types of banking relationships between a U.S. depository institution and a foreign bank 

that are established to provide regular services, dealings, and other financial transactions 

including a demand deposit, savings deposit, or other transaction or asset account, and a 

credit account or other extension of credit. 

In the case of securities broker-dealers, futures commission merchants, 

introducing brokers in commodities, and investment companies that are open-end 

11 
companies (mutual funds), we are using the same definition of “account” for purposes of 

this rule as was established in the final rule implementing section 312 of the USA 

PATRIOT Act.17

3. Covered financial institution 

Section 103.194(a)(3) of the proposed rule defines “covered financial institution” 

with the same definition used in the final rule implementing section 312 of the USA 

PATRIOT Act,18 which in general includes 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); 

 A trust bank or trust company; 

 A broker or dealer in securities; 

 A futures commission merchant or an introducing broker; or 

 A mutual fund. 

B. 103.194(b) – Requirements for Covered Financial Institutions

For purposes of complying with the proposed rule’s prohibition on the opening or 

maintaining of correspondent accounts for, or on behalf of, LCB, FinCEN expects that a 

 

17 See 31 CFR 103.175(d)(2)(ii)-(iv). 18 See 31 CFR 103.175(f)(1). 

12 
covered financial institution would take such steps that a reasonable and prudent financial 

institution would take to protect itself from loan fraud or other fraud or loss based on 

misidentification of a person’s status. 

1. Prohibition on Direct Use of Correspondent Accounts 

Section 103.194(b)(1) of the proposed rule would prohibit all covered financial 

institutions from establishing, maintaining, administering, or managing a correspondent 

or payable-through account in the United States for, or on behalf of, LCB. The 

prohibition would require all covered financial institutions to review their account 

records to ensure that they maintain no accounts directly for, or on behalf of, LCB. 

2. Special Due Diligence of Correspondent Accounts to Prohibit 

Indirect Use 

As a corollary to the prohibition on maintaining correspondent accounts directly 

for LCB, section 103.194(b)(2) would require a covered financial institution to apply 

special due diligence to its correspondent accounts19 that is reasonably designed to guard 

against their indirect use by LCB. At a minimum, that special due diligence must include 

notifying those correspondent account holders that the covered financial institution 

knows or has reason to know provide services to LCB, that such correspondents may not 

provide LCB with access to the correspondent account maintained at the covered 

financial institution. A covered financial institution would, for example, have knowledge 

that the correspondents provide access to LCB through transaction screening software. A 

covered financial institution may satisfy this requirement by transmitting the following 

 

19 Again, for purposes of the proposed 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. 

13 
notice to its correspondent account holders that it knows or has reason to know provide 

services to LCB: 

Notice: Pursuant to U.S regulations issued under section 311 of the 

USA PATRIOT Act, 31 CFR 103.194, we are prohibited from 

establishing, maintaining, administering or managing a 

correspondent account for, or on behalf of, the Lebanese Canadian 

Bank SAL or any of its subsidiaries (including, but not limited to, 

LCB Investments (Holding) SAL, LCB Finance SAL, LCB Estates 

SAL, LCB Insurance Brokerage House SAL, Dubai-based Tabadul 

for Shares and Bonds LLC, and Prime Bank Limited of Gambia). 

The regulations also require us to notify you that you may not 

provide the Lebanese Canadian Bank SAL or any of its 

subsidiaries with access to the correspondent account you hold at 

our financial institution. If we become aware that the Lebanese 

Canadian Bank SAL or any of its subsidiaries is indirectly using 

the correspondent account you hold at our financial institution for 

transactions, we will be required to take appropriate steps to 

prevent such access, including terminating your account. 

The purpose of the notice requirement is to help ensure cooperation from 

correspondent account holders in denying LCB access to the U.S. financial system. 

However, FinCEN does not require or expect a covered financial institution to obtain a 

certification from any of its correspondent account holders 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 onetime notice by mail, fax, or e-mail to certain of the covered financial institution’s 

correspondent account customers, informing them that they may not provide LCB with 

access to the covered financial institution’s correspondent account, or including such 

information in the next regularly occurring transmittal from the covered financial 

institution to those correspondent account holders. FinCEN specifically solicits 

comments on the form and scope of the notice that would be required under the rule. 

14 
A covered financial institution also would be required under this rulemaking to 

take reasonable steps to identify any indirect use of its correspondent accounts by LCB, 

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 would be expected to apply an appropriate 

screening mechanism to be able to identify a funds transfer order that on its face listed 

LCB as the originator’s or beneficiary’s financial institution, or otherwise referenced 

LCB in a manner detectable under the financial institution’s normal screening processes. 

An appropriate screening mechanism could be the mechanism used by a covered 

financial institution to comply with various legal requirements, such as the commercially 

available software programs used to comply with the economic sanctions programs 

administered by OFAC. FinCEN specifically solicits comments on the requirement 

under the proposed rule that covered financial institutions take reasonable steps to screen 

their correspondent accounts in order to identify any indirect use of such accounts by 

LCB. 

Notifying certain correspondent account holders and taking reasonable steps to 

identify any indirect use of its correspondent accounts by LCB in the manner discussed 

above would be the minimum due diligence requirements under the proposed rule. 

Beyond these minimum steps, a covered financial institution should adopt a risk-based 

approach for determining what, if any, additional due diligence measures it should 

implement to guard against the indirect use of its correspondent accounts by LCB, based 

on risk factors such as the type of services it offers and the geographic locations of its 

correspondent account holders. 

15 
A covered financial institution that obtains knowledge that a correspondent 

account is being used by a foreign bank to provide indirect access to LCB must take all 

appropriate steps to prevent such indirect access, including the notification of its 

correspondent account holder per section 103.194(b)(2)(i)(A) and, where necessary, 

terminating the correspondent account. A covered financial institution may afford the 

foreign bank a reasonable opportunity to take corrective action prior to terminating the 

correspondent account. Should the foreign bank refuse to comply, or if the covered 

financial institution cannot obtain adequate assurances that the account will no longer be 

available to LCB, 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 the proposed rule if it determines that 

the account will not be used to provide banking services indirectly to LCB. FinCEN 

specifically solicits comments on the requirement under the proposed rule that covered 

financial institutions prevent indirect access to LCB, once such indirect access is 

identified. 

3. Reporting Not Required 

Section 103.194(b)(3) of the proposed rule clarifies that the rule would not 

impose any reporting requirement upon any covered financial institution that is not 

otherwise required by applicable law or regulation. A covered financial institution must, 

however, document its compliance with the requirement that it notify those correspondent 

account holders that the covered financial institution knows or has reason to know 

16 
provide services to LCB, that such correspondents may not provide LCB with access to 

the correspondent account maintained at the covered financial institution. 

IV. Request for Comments 

FinCEN invites comments on all aspects of the proposal to prohibit the opening or 

maintaining of correspondent accounts for or on behalf of LCB, and specifically invites 

comments on the following matters: 

1. The form and scope of the notice to certain correspondent account holders 

that would be required under the rule; 

2. The appropriate scope of the proposed requirement for a covered financial 

institution to take reasonable steps to identify any indirect use of its correspondent 

accounts by LCB; 

3. The appropriate steps a covered financial institution should take once it 

identifies an indirect use of one of its correspondent accounts by LCB; and 

4. The impact of the proposed special measure upon legitimate transactions 

with LCB involving, in particular, U.S. persons and entities; foreign persons, entities, and 

governments; and multilateral organizations doing legitimate business with persons or 

entities operating in Lebanon. 

V. Regulatory Flexibility Act 

It is hereby certified that this proposed rule will not have a significant economic 

impact on a substantial number of small entities. FinCEN understands that LCB 

currently maintains few correspondent accounts in the United States.20 Thus, the 

prohibition on maintaining such accounts would not have a significant impact on a 

substantial number of small entities. In addition, all U.S. persons, including U.S. 

 

20 Bankers Almanac, Lebanese Canadian Bank SAL, June 22, 2010 (http://www.bankersalmanac.com). 

17 
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 programs 

administered by OFAC, can easily be modified to monitor for the use of correspondent 

accounts by LCB. Thus, the special due diligence that would be required by this 

rulemaking – i.e., the one-time transmittal of notice to certain correspondent account 

holders and the screening of transactions to identify any indirect use of correspondent 

accounts, would not be expected to impose a significant additional economic burden 

upon small U.S. financial institutions. FinCEN invites comments about the impact on 

small entities. 

VI. Paperwork Reduction Act 

The collection of information contained in this proposed rule is being submitted to 

the Office of Management and Budget for review in accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information 

should be sent to the Desk Officer for the Department of Treasury, Office of Information 

and Regulatory Affairs, Office of Management and Budget, Paperwork Reduction Project 

(1506), Washington, D.C. 20503 (or by e-mail to oira_submission@omb.eop.gov ) with a 

copy to FinCEN by mail or e-mail at the addresses previously specified. Comments 

should be submitted by one method only. Comments on the collection of information 

should be received by [INSERT DATE THAT IS 60 DAYS AFTER DATE OF 

PUBLICATION IN THE FEDERAL REGISTER]. In accordance with the requirements 

of the Paperwork Reduction Act of 1995, 44 U.S.C. 3506(c)(2)(A), and its implementing 

regulations, 5 CFR 1320, the following information concerning the collection of 

18 
information as required by 31 CFR 103.194 is presented to assist those persons wishing 

to comment on the information collection. 

The collection of information in this proposed rule is in 103.194(b)(2)(i) and 

103.194(b)(3)(i). The notification requirement in 103.194(b)(2)(i) would be intended to 

ensure cooperation from correspondent account holders in denying LCB access to the 

U.S. financial system. The information required to be maintained by 103.194(b)(3)(i) 

would be used by federal agencies and certain self-regulatory organizations to verify 

compliance by covered financial institutions with the provisions of 31 CFR 103.194. The 

class of financial institutions affected by the notification requirement would be identical 

to the class of financial institutions affected by the recordkeeping requirement. The 

collection of information is mandatory. 

Description of Affected Financial Institutions: Banks, broker-dealers in 

securities, futures commission merchants and introducing brokers, and mutual funds 

maintaining correspondent accounts. 

Estimated Number of Affected Financial Institutions: 5,000. 

Estimated Average Annual Burden Hours Per Affected Financial Institutions: The 

estimated average burden associated with the collection of information in this proposed 

rule is one hour per affected financial institution. 

Estimated Total Annual Burden: 5,000 hours. 

FinCEN specifically invites comments on: (a) whether the proposed collection of 

information is necessary for the proper performance of the mission of FinCEN, including 

whether the information shall have practical utility; (b) the accuracy of FinCEN’s 

estimate of the burden of the proposed collection of information; (c) ways to enhance the 

19 
quality, utility, and clarity of the information required to be maintained; (d) ways to 

minimize the burden of the required collection of information, including through the use 

of automated collection techniques or other forms of information technology; and (e) 

estimates of capital or start-up costs and costs of operation, maintenance, and purchase of 

services to maintain the information. 

VII. Location in Chapter X 

As discussed in Federal Register Notice 75 FR 65806, October 26, 2010, 

FinCEN will be removing Part 103 of Chapter I of Title 31, Code of Federal Regulations, 

and adding Parts 1000 to 1099 (“Chapter X”) effective March 1, 2010. As of this 

effective date, the changes in the present proposed rule, if finalized, would be reorganized 

according to Chapter X. The planned reorganization will have no substantive effect on 

the regulatory changes herein. The regulatory changes of this specific rulemaking would 

be renumbered according to Chapter X as follows: 

Section 103.194 would be moved to § 1010.656. 

VIII. Executive Order 12866 

The proposed 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, Currency, 

Foreign banking, Foreign currencies, Gambling, Investigations, Penalties, Reporting and 

recordkeeping requirements, Securities, Terrorism. 

20 
Authority and Issuance

For the reasons set forth in the preamble, part 103 of title 31 of the Code of 

Federal Regulations is proposed to be amended as follows: 

PART 103 – FINANCIAL RECORDKEEPING AND REPORTING OF 

CURRENCY AND FINANCIAL TRANSACTIONS 

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

Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 5316-

5332 Title III, secs. 311, 312, 313, 314, 319, 326, 352, Pub. L. 107-56, 

115 Stat. 307. 

2. Subpart I of Part 103 is proposed to be amended by adding new § 103.194 

under the undesignated center heading “SPECIAL DUE DILIGENCE FOR 

CORRESPONDENT ACCOUNTS AND PRIVATE BANKING ACCOUNTS” to read 

as follows: 

§ 103.194 Special measures against the Lebanese Canadian Bank SAL 

(a) Definitions. For purposes of this section: 

(1) The Lebanese Canadian Bank SAL means all 

branches, offices, and subsidiaries of the Lebanese Canadian Bank operating in 

any jurisdiction. 

(2) Correspondent account has the same meaning as provided in 

§ 103.175(d)(1)(ii). 

(3) Covered financial institution has the same meaning as provided in 

§103.175(f)(1). 

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(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, the 

Lebanese Canadian Bank SAL. 

(2) Special due diligence of correspondent accounts to prohibit indirect use. 

(i) A covered financial institution shall apply special due diligence to its 

correspondent accounts that is reasonably designed to guard against their indirect 

use by the Lebanese Canadian Bank SAL. At a minimum, that special due 

diligence must include: 

(A) Notifying those correspondent account holders that the covered financial 

institution knows or has reason to know provide services to the Lebanese 

Canadian Bank SAL, that such correspondents may not provide the Lebanese 

Canadian Bank SAL with access to the correspondent account maintained at the 

covered financial institution; and 

(B) Taking reasonable steps to identify any indirect use of its correspondent 

accounts by the Lebanese Canadian Bank SAL, 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, other due diligence measures it should adopt to guard 

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against the indirect use of its correspondent accounts by the Lebanese Canadian 

Bank SAL. 

(iii) A covered financial institution that obtains knowledge that a 

correspondent account is being used by the foreign bank to provide indirect access 

to the Lebanese Canadian Bank SAL, shall take all appropriate steps to prevent 

such indirect access, including the notification of its correspondent account holder 

under paragraph (b)(2)(i)(A) and, where necessary, terminating the correspondent 

account. 

(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:______________ 

 ____________________________ 

 James H. Freis, Jr. 

 Director 

 Financial Crimes Enforcement Network