Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Rules and Regulations 231

credit card transaction) for the

transmittal of funds. If the transmittor’s

financial institution has knowledge that

the person placing the transmittal order

is not the transmittor, the transmittor’s

financial institution shall obtain and

retain a record of the transmittor’s

taxpayer identification number (e.g.,

social security or employer

identification number) or, if none, alien

identification number or passport

number and country of issuance, if

known by the person placing the order,

or a notation in the record the lack

thereof.

(3) Recipients other than established

customers. For each transmittal order

that it accepts as a recipient’s financial

institution for a recipient that is not an

established customer, in addition to

obtaining and retaining the information

required in paragraph (f)(1)(iii) of this

section:

(i) If the proceeds are delivered in

person to the recipient or its

representative or agent, the recipient’s

financial institution shall verify the

identity of the person receiving the

proceeds and shall obtain and retain a

record of the name and address, the type

of identification reviewed, and the

number of the identification document

(e.g., driver’s license), as well as a

record of the person’s taxpayer

identification number (e.g., social

security or employer identification

number) or, if none, alien identification

number or passport number and country

of issuance, or a notation in the record

of the lack thereof. If the recipient’s

financial institution has knowledge that

the person receiving the proceeds is not

the recipient, the recipient’s financial

institution shall obtain and retain a

record of the recipient’s name and

address, as well as the recipient’s

taxpayer identification number (e.g.,

social security or employer

identification number) or, if none, alien

identification number or passport

number and country of issuance, if

known by the person receiving the

proceeds, or a notation in the record of

the lack thereof.

(ii) If the proceeds are delivered other

than in person, the recipient’s financial

institution shall retain a copy of the

check or other instrument used to effect

payment, or the information contained

thereon, as well as the name and

address of the person to which it was

sent.

(4) Retrievability. The information

that a transmittor’s financial institution

must retain under paragraphs (f)(1)(i)

and (f)(2) of this section shall be

retrievable by the transmittor’s financial

institution by reference to the name of

the transmittor. If the transmittor is an

established customer of the transmittor’s

financial institution and has an account

used for transmittals of funds, then the

information also shall be retrievable by

account number. The information that a

recipient’s financial institution must

retain under paragraphs (f)(1)(iii) and

(f)(3) of this section shall be retrievable

by the recipient’s financial institution

by reference to the name of the

recipient. If the recipient is an

established customer of the recipient’s

financial institution and has an account

used for transmittals of funds, then the

information also shall be retrievable by

account number. This information need

not be retained in any particular

manner, so long as the financial

institution is able to retrieve the

information required by this paragraph,

either by accessing transmittal of funds

records directly or through reference to

some other record maintained by the

financial institution.

(5) Verification. Where verification is

required under paragraphs (f)(2) and

(f)(3) of this section, a financial

institution shall verify a person’s

identity by examination of a document

(other than a customer signature card),

preferably one that contains the person’s

name, address, and photograph, that is

normally acceptable by financial

institutions as a means of identification

when cashing checks for persons other

than established customers. Verification

of the identity of an individual who

indicates that he or she is an alien or is

not a resident of the United States may

be made by passport, alien

identification card, or other official

document evidencing nationality or

residence (e.g., a foreign driver’s license

with indication of home address).

(6) Exceptions. The following

transmittals of funds are not subject to

the requirements of this section:

(i) Transmittals of funds where the

transmittor and the recipient are any of

the following:

(A) A domestic bank;

(B) A wholly-owned domestic

subsidiary of a domestic bank;

(C) A domestic broker or dealer in

securities;

(D) A wholly-owned domestic

subsidiary of a domestic broker or

dealer in securities;

(E) The United States;

(F) A state or local government; or

(G) A federal, state or local

government agency or instrumentality;

and

(ii) Transmittals of funds where both

the transmittor and recipient are the

same person and the transmittor’s

financial institution and the recipient’s

financial institution are the same

domestic broker or dealer in securities.

In concurrence:

By the Board of Governors of the Federal

Reserve System, December 21, 1994.

William W. Wiles,

Secretary of the Board.

By the Department of the Treasury,

December 19, 1994.

Stanley E. Morris,

Director, Financial Crimes Enforcement

Network.

[FR Doc. 94–31977 Filed 12–30–94; 8:45 am]

BILLING CODE 6210–01–P; 4810–25–P

FEDERAL RESERVE SYSTEM

12 CFR Part 219

[Regulation S; Docket No. R–0807]

Reimbursement for Providing Financial

Records; Recordkeeping

Requirements for Certain Financial

Records

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: The Board of Governors of the

Federal Reserve System (Board) has

finalized the enhanced recordkeeping

requirements relating to certain wire

transfers (which include funds transfers

and transmittals of funds) by financial

institutions. The final rule takes into

consideration the public comments

received on the initial notice of

proposed rulemaking. These

recordkeeping requirements are being

promulgated jointly by the Board and

the Department of Treasury (Treasury).

A companion notice published

elsewhere in today’s Federal Register by

the Treasury and the Board (Joint

Notice) sets forth the substantive

provisions of the recordkeeping

requirements and provides an analysis

of comments received on the proposal.

This notice sets forth the regulation for

codification at 12 CFR Part 219, subpart

B, which cross-references the

substantive provisions set forth in the

Joint Notice. Under the Joint Notice,

each domestic financial institution

involved in either a domestic or

international wire transfer must collect

and retain certain information. The

amount and type of information

collected and retained will depend

upon the nature of the financial

institution, its role in the particular wire

transfer, and the relationship of the

parties to the transaction with the

financial institution.

EFFECTIVE DATE: January 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Louise L. Roseman, Associate Director,

(202) 452–2789; Gayle Brett, Manager,
232 Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Rules and Regulations

1When this rule becomes effective, the citation

for the definition of financial institution will be 31

CFR 103.11(n).

Fedwire, (202) 452–2934, Division of

Reserve Bank Operations and Payment

Systems; Oliver Ireland, Associate

General Counsel, (202) 452–3625, or

Elaine M. Boutilier, Senior Counsel,

(202) 452–2418, Legal Division, Board of

Governors of the Federal Reserve

System. For the hearing impaired only,

Telecommunication Device for the Deaf

(TDD), Dorothea Thompson (202) 452–

3544.

SUPPLEMENTARY INFORMATION: The

statute generally referred to as the Bank

Secrecy Act (Pub. L. 91–508, codified at

12 U.S.C. 1829b and 1951–1959, and 31

U.S.C. 5311–5329) authorizes the

Secretary of the Treasury to require

financial institutions to keep records

and file reports that the Secretary

determines have a high degree of

usefulness in criminal, tax, or regulatory

investigations or proceedings. The

primary purpose of the Bank Secrecy

Act is to identify the source, volume,

and movement of funds into and out of

the country and through domestic

financial institutions. The Bank Secrecy

Act was amended by the AnnunzioWylie Anti-Money Laundering Act of

1992, Title XV of the Housing and

Community Development Act of 1992,

Pub. L. 102–550 (referred to hereafter as

the 1992 Amendment) to specifically

authorize the Treasury and the Board

jointly to prescribe regulations to

require maintenance of records

regarding domestic and international

funds transfers.

The 1992 Amendment authorizes the

Board and the Treasury to promulgate

recordkeeping requirements for

domestic wire transfers by insured

depository institutions whenever the

agencies determine that such records

have a high degree of usefulness in

criminal, tax, or regulatory

investigations or proceedings. In

addition, the 1992 Amendment requires

the Treasury and the Board to issue final

regulations with regard to international

transactions. The recordkeeping

requirements for international

transactions will apply to financial

institutions as defined in 31 CFR

103.11(i),1 which include insured

depository institutions, brokers and

dealers in securities, as well as other

businesses that provide money

transmitting services. In prescribing

these required regulations, the Board

and the Treasury considered the

usefulness of these records in criminal,

tax, or regulatory investigations or

proceedings and the effect on the cost

and efficiency of the payment system.

The Board and the Treasury decided

that it would be simpler to issue

regulations for both domestic and

international funds transfers

simultaneously, because the

recordkeeping requirements will be

substantially the same.

The number of wire transfers

completed is substantial. For example,

more than 71 million funds transfers

with an aggregate dollar value of

approximately $208 trillion were made

over Fedwire in 1993. More than 42

million funds transfers with a value of

approximately $266 trillion were made

over the Clearing House Interbank

Payments System (CHIPS). Nonbank

providers of money transmitting

services make an estimated 12.7 million

transmittals annually.

Money laundering is a vital

component of drug trafficking and other

criminal activity throughout the world,

and Federal law enforcement agencies

believe that a significant amount of the

money laundered involves wire

transfers. Proceeds from illegal activities

may be processed through money

laundering schemes involving domestic

and/or international payments by wire

transfers. Such activity has been

documented in several recent

investigations conducted by the

Treasury and other Federal law

enforcement agencies.

In August 1993, the Treasury and the

Board jointly issued for public comment

a proposal to enhance the recordkeeping

requirements relating to certain wire

transfers by financial institutions (58 FR

46014, August 31, 1993). Based on the

comments received, the Treasury and

the Board have modified the proposed

rule to reduce the burden associated

with the rule, while maintaining the

usefulness of the rule to law

enforcement agencies. The Board and

the Treasury believe that maintenance

of these records will have a high degree

of usefulness in criminal, tax, or

regulatory investigations or proceedings.

Further, the Board and the Treasury

believe that these recordkeeping

requirements will not have a significant

adverse effect on the cost or the

efficiency of the payments system.

Codification of the Rule

To minimize potential confusion by

affected entities regarding the scope of

this joint rule and its interaction with

other anti-money laundering

regulations, the substantive

requirements of the rule will be codified

with other Bank Secrecy Act

regulations, as part of the Treasury’s

regulations in 31 CFR Part 103. Because

the Board is required to prescribe these

regulations jointly with the Treasury,

the Board is adding a new subpart B to

12 CFR Part 219, which will crossreference the jointly prescribed

requirements in 31 CFR Part 103. The

current text of 12 CFR Part 219,

concerning reimbursement to financial

institutions for assembling and

providing financial records pursuant to

the Right to Financial Privacy Act, will

become subpart A of 12 CFR Part 219.

Summary Description of the Rule

The Joint Notice, published elsewhere

in today’s Federal Register, provides an

extensive description of the substantive

requirements of the rule. While the

Board is authorized to promulgate

jointly with the Treasury recordkeeping

and reporting requirements with regard

to domestic wire transfers by insured

depository institutions, the Board

specifically is required to promulgate

jointly with the Treasury recordkeeping

and reporting requirements for

international wire transfers by both

insured depository institutions and

nonbank financial institutions. The

Board is not authorized to promulgate

recordkeeping and reporting

requirements for domestic wire transfers

by nonbank financial institutions. (The

Treasury has this authority under other

statutory provisions.) This limitation is

reflected in the Board’s subpart B of 12

CFR Part 219. The Board’s

recordkeeping and reporting

requirements for international wire

transfers by nonbank financial

institutions, however, are identical to

those adopted by the Treasury for

domestic and international wire

transfers by nonbank financial

institutions. Therefore, compliance by

nonbank financial institutions with the

requirements will not be affected by this

limitation in the Board’s regulatory

authority.

Regulatory Flexibility Analysis

Three requirements of a final

regulatory flexibility analysis (5 U.S.C.

604), (1) a succinct statement of the

need for and the objectives of the rule,

(2) a summary of the issues raised by the

public comments, the agency’s

assessment of the issues, and a

statement of the changes made in the

final rule in response to the comments,

and (3) a description of significant

alternatives to the rule that would

minimize the rule’s economic impact on

small entities and reasons why the

alternatives were rejected, are discussed

in the Joint Notice.

Competitive Impact Analysis

In considering an operational or legal

change that would affect a Federal

Reserve Bank priced service, the Board
Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Rules and Regulations 233

2 Ibid.

determines whether the change would

have a direct and material adverse effect

on the ability of other service providers

to compete effectively with the Federal

Reserve in providing similar services,

due to differing legal powers or

constraints or due to a dominant market

position of the Federal Reserve deriving

from such legal differences.

Unlike other providers of wire

transfer services, the Federal Reserve

Banks are not subject to the wire

transfer recordkeeping rules, because

they are not considered by the Treasury

to be financial institutions, as defined in

31 CFR 103.11(i).2 The Board believes,

however, that the exclusion of the

Federal Reserve Banks from the scope of

this rule will not adversely affect the

ability of other service providers to

compete effectively with the Federal

Reserve in providing similar services.

The Federal Reserve Banks will

continue to maintain records of the

payment orders that they accept, similar

to the records required by the rule to be

kept by intermediary banks.

For funds transfers effected over the

Federal Reserve’s Fedwire funds

transfer system, banks and domestic

brokers or dealers in securities would

not have to retain as many of the

elements of beneficiary identification as

provided by the originator, because the

current Fedwire format may not have

sufficient space to include such

information. The Board, however, does

not believe that this temporary

exception would make use of the

Fedwire system more desirable than

other funds transfer systems. A financial

institution will be required to comply

fully with the requirement to retain full

beneficiary information at such time

that it completes its conversion to the

expanded Fedwire message format.

Paperwork Reduction Act

The collection of information required

by the final rule has been submitted by

the Treasury to the Office of

Management and Budget in accordance

with the requirements of the Paperwork

Reduction Act (44 U.S.C. 3504(h)) under

control number 1505–0063.

The collection of information in this

regulation is authorized by 12 U.S.C.

1829b and 1951–1959 and 31 U.S.C.

5311–5328. The likely recordkeepers are

financial institutions that perform

transmittals of funds.

Estimated number of respondents

and/or recordkeepers: 60,000.

Estimated total annual recordkeeping

burden: 1 million hours.

Estimated average annual burden per

respondent and/or recordkeeper: 16.3

hours.

Estimated annual frequency of

responses: Upon request.

The estimated average annual burden

hours have decreased significantly from

those included in the August 1993

proposal. The decrease is due to the

significant reduction in the number of

transmittals of funds subject to the

recordkeeping requirements as a result

of the establishment of the $3,000

threshold, and due to the reduction of

circumstances in which additional

recordkeeping and verification

requirements for noncustomers would

apply.

List of Subjects in 12 CFR Part 219

Banks, Banking, Currency, Reporting

and recordkeeping requirements,

Foreign banking.

For the reasons set out in the

preamble, 12 CFR Part 219 is amended

as set forth below.

PART 219—REIMBURSEMENT FOR

PROVIDING FINANCIAL RECORDS;

RECORDKEEPING REQUIREMENTS

FOR CERTAIN FINANCIAL RECORDS

(REGULATION S)

1. The title of part 219 is revised to

read as set forth above.

Subpart A—Reimbursement to

Financial Institutions for Providing

Financial Records

§§ 219.1 through 219.7 [Designated as

Subpart A]

2. Sections 219.1 through 219.7 are

designated as Subpart A, and a new

Subpart A heading is added to read as

set forth above.

3. The authority citation for Part 219

is designated as the authority for

Subpart A and continues to read as

follows:

Authority: 12 U.S.C. 3415.

4. Subpart A is amended by revising

§ 219.1 to read as follows:

§ 219.1 Authority, purpose and scope.

This subpart of Regulation S (12 CFR

part 219, subpart A) is issued by the

Board of Governors of the Federal

Reserve System (the Board) under

section 1115 of the Right to Financial

Privacy Act (the Act) (12 U.S.C. 3415).

It establishes the rates and conditions

for reimbursement of reasonably

necessary costs directly incurred by

financial institutions in assembling or

providing customer financial records to

a government authority pursuant to the

Act.

5. Section 219.2 is amended by

revising the introductory text to read as

follows:

§ 219.2 Definitions.

For the purposes of this subpart, the

following definitions shall apply:

* * * * *

6. Subpart B is added to Part 219 to

read as follows:

Subpart B—Recordkeeping and Reporting

Requirements for Funds Transfers and

Transmittals of Funds

Sec.

219.21 Authority, purpose and scope.

219.22 Definitions.

219.23 Recordkeeping and reporting

requirements.

219.24 Retention period.

Subpart B—Recordkeeping and

Reporting Requirements for Funds

Transfers and Transmittals of Funds

Authority: 12 U.S.C. 1829b(2) and (3).

§ 219.21 Authority, purpose and scope.

This subpart of Regulation S (12 CFR

part 219, subpart B) is issued by the

Board under the authority of section

21(b) of the Federal Deposit Insurance

Act (12 U.S.C. 1829b), as amended by

the Annunzio-Wylie Anti-Money

Laundering Act of 1992 (Pub. L. 102–

550, Title XV; 106 Stat. 3672, 4044),

which authorizes the Board and the

Secretary of the Treasury jointly to

prescribe recordkeeping and reporting

requirements for domestic wire transfers

by insured depository institutions; and

which also requires the Board and the

Treasury jointly to prescribe

recordkeeping and reporting

requirements for international wire

transfers by insured depository

institutions and by nonbank financial

institutions. The definitions and

recordkeeping and reporting

requirements referenced in this subpart

are promulgated and administered

jointly by the Board and the Treasury

and are codified in 31 CFR 103.11 and

103.33(e) and (f). Such recordkeeping

and reporting requirements will assist in

the prosecution of money laundering

activities and are determined to have a

high degree of usefulness in criminal,

tax or regulatory investigations or

proceedings.

§ 219.22 Definitions.

The following terms are defined in 31

CFR 103.11 under the joint authority of

the Board and the Treasury:

Accept.

Beneficiary.

Beneficiary’s bank.

Established customer.

Execution date.

Funds transfer.
234 Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Rules and Regulations

Intermediary bank.

Intermediary financial institution.

Originator.

Originator’s bank.

Payment date.

Payment order.

Receiving bank.

Receiving financial institution.

Recipient.

Recipient’s financial institution.

Sender.

Transmittal of funds.

Transmittal order.

Transmittor.

Transmittor’s financial institution.

§ 219.23 Recordkeeping and reporting

requirements.

(a) Domestic and international funds

transfers by insured depository

institutions. The Board and the Treasury

are authorized to promulgate jointly

recordkeeping and reporting

requirements for domestic and

international funds transfers by insured

depository institutions whenever the

agencies determine that the

maintenance of such records has a high

degree of usefulness in criminal, tax, or

regulatory investigations or proceedings.

These regulations are codified at 31 CFR

103.33(e). For the purposes of this

subpart, the provisions of 31 CFR

103.33(e) apply only to funds transfers

by insured depository institutions.

(b) International transmittals of funds

by financial institutions other than

insured depository institutions. The

Board and the Treasury are required to

promulgate jointly reporting and

recordkeeping requirements for

international transmittals of funds by

financial institutions, including brokers

and dealers in securities and businesses

that provide money transmitting

services. In prescribing these

requirements, the Board and the

Treasury take into account the

usefulness of these records in criminal,

tax, or regulatory investigations or

proceedings and the effect the

recordkeeping will have on the cost and

efficiency of the payment system. These

regulations are codified at 31 CFR

103.33(f). For the purposes of this

subpart, the provisions of 31 CFR

103.33(f) apply only to international

transmittals of funds.

§ 219.24 Retention period.

All records that are required to be

retained by this subpart shall be

retained for a period of five years. All

these records shall be filed or stored in

such a way as to be accessible within a

reasonable period of time, taking into

consideration the nature of the record

and the amount of time that has expired

since the record was made. Any records

required to be retained by this subpart

shall be made available to the Board

upon request.

By order of the Board of Governors of the

Federal Reserve System, December 21, 1994.

William W. Wiles,

Secretary of the Board.

[FR Doc. 94–31978 Filed 12–30–94; 8:45 am]

BILLING CODE 6210–01–P

DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1505–AA46

Amendment to the Bank Secrecy Act

Regulations Relating to Orders for

Transmittals of Funds by Financial

Institutions

AGENCY: Financial Crimes Enforcement

Network, Treasury.

ACTION: Final rule.

SUMMARY: This final rule requires banks

and nonbank financial institutions that

act as transmittors’ financial institutions

and intermediary financial institutions

in transmittals of funds to include

certain information in transmittal orders

sent to receiving financial institutions.

A companion final rule (the final

recordkeeping rule), published

elsewhere in today’s Federal Register,

requires financial institutions to collect

and retain the information that, under

this final rule, must be included with

transmittal orders.

The final recordkeeping rule sets forth

collection of information and

recordkeeping requirements with

respect to certain transmittals of funds

by financial institutions. The amount

and type of information required to be

collected and retained depends upon

the type of financial institution, its role

in a particular transaction, the amount

of the transaction and whether the

parties to the transaction are established

customers of the financial institution.

To ensure a full understanding of this

final rule, the reader is encouraged to

review its provisions together with

those of the final recordkeeping rule.

This final rule is promulgated by

Treasury under the Annunzio-Wylie

Anti-Money Laundering Act of 1992

(Annunzio-Wylie), which is part of the

statute generally referred to as the Bank

Secrecy Act. Annunzio-Wylie

authorizes the Secretary of the Treasury

to require financial institutions to

maintain appropriate procedures to

comply with the Bank Secrecy Act and

guard against money laundering, and to

carry out anti-money laundering

programs. The final recordkeeping rule

is promulgated jointly by the Board of

Governors of the Federal Reserve

System (Federal Reserve Board) and by

Treasury pursuant to a special statutory

requirement under Annunzio-Wylie.

The authority of the Secretary to

administer the Bank Secrecy Act has

been delegated to the Director of the

Financial Crimes Enforcement Network

(FinCEN).

EFFECTIVE DATE: January 1, 1996.

FOR FURTHER INFORMATION CONTACT:

FinCEN, Office of Financial

Enforcement ((202) 622–0400): A. Carlos

Correa, Assistant Director for Rules and

Regulations; Roger Weiner, Deputy

Director; Peter Djinis, Director; FinCEN,

Office of Legal Counsel: Stephen R.

Kroll, Legal Counsel (703) 905–3534;

Nina A. Nichols, Attorney-Advisor,

(703) 905–3598.

SUPPLEMENTARY INFORMATION:

Background

This final rule is promulgated by

Treasury under 31 U.S.C. 5318 (a)(2)

and (h), which are part of the statute

generally referred to as the Bank Secrecy

Act (Pub. L. 91–508, codified at 12

U.S.C. 1829b and 1951–1959, and 31

U.S.C. 5311–5329), and which were

added to the Bank Secrecy Act by

Annunzio-Wylie. 31 U.S.C. 5318 (a)(2)

and (h) authorize the Secretary of the

Treasury to require financial institutions

to maintain appropriate procedures to

comply with the Bank Secrecy Act and

guard against money laundering, and to

carry out anti-money laundering

programs. The final recordkeeping rule

is promulgated jointly by the Federal

Reserve Board and by Treasury pursuant

to a special statutory requirement for

such joint issuance contained in 12

U.S.C. 1829b(b), added to the Bank

Secrecy Act by section 1515 of

Annunzio-Wylie. The authority of the

Secretary to administer the Bank

Secrecy Act has been delegated to the

Director of FinCEN.

On August 31, 1993, Treasury and the

Federal Reserve Board jointly issued a

proposed recordkeeping rule (58 FR

46014) requiring financial institutions to

obtain and retain information relating to

certain transmittals of funds. Treasury

also issued a companion proposed

travel rule (58 FR 46021, August 31,

1993), which was subsequently

modified (58 FR 51269, October 1,

1993), proposing to require any

transmittor’s financial institution

involved in a transmittal of funds to

include in its corresponding transmittal

order:

(1) The name and address of the

transmittor and the transmittor’s deposit

account number, if the payment were

ordered from a deposit account;