Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 66761 

1Language expanding the scope of the Bank 

Secrecy Act to intelligence or counter-intelligence 

activities, including analysis, to protect against 

international terrorism was added by section 358 of 

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. 2 31 U.S.C. 5318(g) was added to the Bank 

Secrecy Act by section 1517 of the Annunzio-Wylie 

Anti-Money Laundering Act, Title XV of the 

Housing and Community Development Act of 1992, 

Public Law 102–550; it was expanded by section 

403 of the Money Laundering Suppression Act of 

1994 (the Money Laundering Suppression Act), 

Title IV of the Riegle Community Development and 

Regulatory Improvement Act of 1994, Public Law 

103–325, to require designation of a single 

government recipient for reports of suspicious 

transactions. 

(c) Minimum requirements. At a 

minimum, the program required by 

paragraph (b) of this section shall: 

(1) Incorporate policies, procedures, 

and internal controls based upon the 

insurance company’s assessment of the 

money laundering and terrorist 

financing risks associated with its 

covered products. Policies, procedures, 

and internal controls developed and 

implemented by an insurance company 

under this section shall include 

provisions for complying with the 

applicable requirements of subchapter II 

of chapter 53 of title 31, United States 

Code and this part, integrating the 

company’s insurance agents and 

insurance brokers into its anti-money 

laundering program, and obtaining all 

relevant customer-related information 

necessary for an effective anti-money 

laundering program. 

(2) Designate a compliance officer 

who will be responsible for ensuring 

that: 

(i) The anti-money laundering 

program is implemented effectively, 

including monitoring compliance by the 

company’s insurance agents and 

insurance brokers with their obligations 

under the program; 

(ii) The anti-money laundering 

program is updated as necessary; and 

(iii) Appropriate persons are educated 

and trained in accordance with 

paragraph (c)(3) of this section. 

(3) Provide for on-going training of 

appropriate persons concerning their 

responsibilities under the program. An 

insurance company may satisfy this 

requirement with respect to its 

employees, insurance agents, and 

insurance brokers by directly training 

such persons or verifying that persons 

have received training by another 

insurance company or by a competent 

third party with respect to the covered 

products offered by the insurance 

company. 

(4) Provide for independent testing to 

monitor and maintain an adequate 

program, including testing to determine 

compliance of the company’s insurance 

agents and insurance brokers with their 

obligations under the program. The 

scope and frequency of the testing shall 

be commensurate with the risks posed 

by the insurance company’s covered 

products. Such testing may be 

conducted by a third party or by any 

officer or employee of the insurance 

company, other than the person 

designated in paragraph (c)(2) of this 

section. 

(d) Anti-money laundering program 

requirements for insurance companies 

registered or required to register with the 

Securities and Exchange Commission as 

broker-dealers in securities. An 

insurance company that is registered or 

required to register with the Securities 

and Exchange Commission as a brokerdealer in securities shall be deemed to 

have satisfied the requirements of this 

section for its broker-dealer activities to 

the extent that the company is required 

to establish and has established an antimoney laundering program pursuant to 

§ 103.120 and complies with such 

program. 

(e) Compliance. Compliance with this 

section shall be examined by the 

Department of the Treasury, through the 

Financial Crimes Enforcement Network 

or its delegees, under the terms of the 

Bank Secrecy Act. Failure to comply 

with the requirements of this section 

may constitute a violation of the Bank 

Secrecy Act and of this part. 

Dated: October 28, 2005. 

William J. Fox, 

Director, Financial Crimes Enforcement 

Network. 

[FR Doc. 05–21917 Filed 11–2–05; 8:45 am] 

BILLING CODE 4810–02–P 

DEPARTMENT OF THE TREASURY 

31 CFR Part 103 

RIN 1506–AA36 

Financial Crimes Enforcement 

Network; Amendment to the Bank 

Secrecy Act Regulations—

Requirement That Insurance 

Companies Report Suspicious 

Transactions 

AGENCY: Financial Crimes Enforcement 

Network, Treasury. 

ACTION: Final rule. 

SUMMARY: This document contains an 

amendment to the regulations 

implementing the statute generally 

referred to as the Bank Secrecy Act. The 

amendment requires insurance 

companies to report suspicious 

transactions to the Financial Crimes 

Enforcement Network. The amendment 

constitutes a further step in the creation 

of a comprehensive system for the 

reporting of suspicious transactions by 

the major categories of financial 

institutions operating in the United 

States. 

DATES: Effective Date: December 5, 2005. 

Applicability Date: This rule applies 

to transactions occurring after May 2, 

2006. See 31 CFR 103.16(h) of the final 

rule contained in this document. 

FOR FURTHER INFORMATION CONTACT: 

Financial Crimes Enforcement Network, 

Office of Regulatory Programs on (202) 

354–6400 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory Provisions 

The Bank Secrecy Act, Public Law 

91–508, as amended, codified at 12 

U.S.C. 1829b, 12 U.S.C. 1951–1959, and 

31 U.S.C. 5311–14, 5316–5332, 

authorizes the Secretary of the Treasury 

to issue regulations requiring financial 

institutions to keep records and file 

reports that are determined to have a 

high degree of usefulness in criminal, 

tax, and regulatory matters, or in the 

conduct of intelligence or counterintelligence activities, including 

analysis, to protect against international 

terrorism, and to implement anti-money 

laundering programs and compliance 

procedures.1 Regulations implementing 

Title II of the Bank Secrecy Act appear 

at 31 CFR Part 103. The authority of the 

Secretary to administer the Bank 

Secrecy Act has been delegated to the 

Director of the Financial Crimes 

Enforcement Network. 

With the enactment of 31 U.S.C. 

5318(g) in 1992,2 Congress authorized 

the Secretary of the Treasury to require 

financial institutions to report 

suspicious transactions. As amended by 

the USA PATRIOT Act, subsection (g)(1) 

states generally: 

The Secretary may require any financial 

institution, and any director, officer, 

employee, or agent of any financial 

institution, to report any suspicious 

transaction relevant to a possible violation of 

law or regulation. 

Subsection (g)(2)(A) provides further 

that: 

[i]f a financial institution or any director, 

officer, employee, or agent of any financial 

institution, voluntarily or pursuant to this 

section or any other authority, reports a 

suspicious transaction to a government 

agency—

(i) The financial institution, director, 

officer, employee, or agent may not notify 

any person involved in the transaction that 

the transaction has been reported; and 

(ii) No officer or employee of the Federal 

Government or of any State, local, tribal, or 

territorial government within the United 

66762 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 

3This designation does not preclude any 

supervisory agency for any financial institutions 

from requiring such financial institutions to submit 

other reports to the same agency or another agency 

‘‘pursuant to any other applicable provision of 

law.’’ 31 U.S.C. 5318(g)(4)(C). 

4The Financial Action Task Force is an intergovernmental body whose purpose is the 

development and promotion of policies to combat 

money laundering. Originally created by the G–7 

nations, its membership now includes Argentina, 

Australia, Austria, Belgium, Brazil, Canada, 

Denmark, Finland, France, Germany, Greece, Hong 

Kong, Iceland, Ireland, Italy, Japan, Luxembourg, 

Mexico, the Kingdom of the Netherlands, New 

Zealand, Norway, Portugal, Russia, Singapore, 

South Africa, Spain, Sweden, Switzerland, Turkey, 

the United Kingdom, and the United States, as well 

as the European Commission and the Gulf 

Cooperation Council. 

5See Guidance Notes for the Special 

Recommendations on Terrorist Financing and the 

Self-Assessment Questionnaire, Special 

Recommendation Four, paragraph 19 (March 27, 

2002). 

States, who has any knowledge that such 

report was made may disclose to any person 

involved in the transaction that the 

transaction has been reported, other than as 

necessary to fulfill the official duties of such 

officer or employee. 

Subsection (g)(3)(A) provides that 

neither a financial institution, nor any 

director, officer, employee, or agent of 

any financial institution: 

That makes a voluntary disclosure of any 

possible violation of law or regulation to a 

government agency or makes a disclosure 

pursuant to this subsection or any other 

authority * * * shall * * * be liable to any 

person under any law or regulation of the 

United States, any constitution, law, or 

regulation of any State or political 

subdivision of any State, or under any 

contract or other legally enforceable 

agreement (including any arbitration 

agreement), for such disclosure or for any 

failure to provide notice of such disclosure 

to the person who is the subject of such 

disclosure or any other person identified in 

the disclosure. 

Finally, subsection (g)(4) requires the 

Secretary of the Treasury, ‘‘to the extent 

practicable and appropriate,’’ to 

designate ‘‘a single officer or agency of 

the United States to whom such reports 

shall be made.’’ 3 The designated agency 

is in turn responsible for referring any 

report of a suspicious transaction to 

‘‘any appropriate law enforcement, 

supervisory agency, or United States 

intelligence agency for use in the 

conduct of intelligence or 

counterintelligence activities, including 

analysis, to protect against international 

terrorism.’’ Id. at subsection (g)(4)(B). 

Published elsewhere in this separate 

part of the Federal Register is a final 

rule prescribing minimum standards 

applicable to insurance companies 

regarding the establishment of antimoney laundering programs pursuant to 

section 5318(h) of the Bank Secrecy Act, 

as amended by section 352 of the USA 

PATRIOT Act. That final rule applies to 

the same universe of insurance 

companies and covered products as this 

final rule. The requirement to detect and 

report suspicious activity is an integral 

part of an insurance company’s antimoney laundering program. 

B. Importance of Suspicious 

Transaction Reporting 

The Congressional authorization for 

requiring the reporting of suspicious 

transactions recognizes two basic 

principles. First, money launderers 

must go to financial institutions, either 

initially, to conceal their unlawful 

funds, or eventually, to recycle those 

funds back into the economy. Second, 

the employees and officers of those 

institutions are often more likely than 

government officials to have a sense as 

to which transactions appear to lack 

commercial justification or that 

otherwise cannot be explained as 

constituting a legitimate use of the 

institution’s financial products and 

services. 

The importance of extending 

suspicious transaction reporting to all 

relevant financial institutions, including 

non-bank financial institutions, relates 

to the concentrated scrutiny to which 

banks have been subject with respect to 

money laundering. This attention, 

combined with the cooperation that 

banks have given to government 

agencies responsible for detecting and 

investigating money laundering and 

other financial crime, has made it more 

difficult for criminals to pass large 

amounts of cash directly into the 

nation’s banks unnoticed. As it has 

become increasingly difficult to launder 

large amounts of cash through banks, 

criminals have turned to non-bank 

financial institutions, including 

insurance companies in attempts to 

launder funds. Indeed, many non-bank 

financial institutions have already 

recognized the increased pressure that 

money launderers have come to place 

upon their operations and the need for 

innovative programs of training and 

monitoring necessary to counter that 

pressure. 

The reporting of suspicious activity is 

recognized in the international 

community as essential to an effective 

anti-money laundering regime. One of 

the central recommendations of the 

Financial Action Task Force 4 is that 

‘‘[i]f a financial institution suspects or 

has reasonable grounds to suspect that 

funds are the proceeds of criminal 

activity, or are related to terrorist 

financing, it should be required * * * 

to report promptly its suspicions 

* * *.’’ Financial Action Task Force 

Forty Recommendations 

(Recommendation 13). The 

recommendation applies equally to 

banks and non-bank financial 

institutions, including insurance 

companies. 

Moreover, on October 31, 2001, the 

Financial Action Task Force issued its 

Special Recommendations on Terrorist 

Financing. Special Recommendation 

Four provides that: 

If financial institutions, or other businesses 

or entities subject to anti-money laundering 

obligations, suspect or have reasonable 

grounds to suspect that funds are linked or 

related to, or are to be used for terrorism, 

terrorist acts or by terrorist organisations, 

they should be required to report promptly 

their suspicions to the competent authorities. 

For purposes of the Financial Action 

Task Force’s Special Recommendation 

Four, the term ‘‘financial institutions’’ is 

intended to refer to both banks and nonbank financial institutions including, 

among other non-bank financial 

institutions, insurance companies.5

C. Insurance Company Regulation and 

Money Laundering 

This final rule applies only to 

insurance companies offering covered 

products, as defined in the rule. The 

limited definition of insurance company 

for purposes of this rule, as well as the 

final rule requiring insurance 

companies to establish anti-money 

laundering programs, is not intended to 

limit the kinds of financial institutions 

that may voluntarily report suspicious 

activity under the protection of the safe 

harbor from liability contained in 31 

U.S.C. 5318(g)(3). Insurance companies 

offer a variety of products aimed at 

transferring the financial risk of a 

certain event, such as personal injury or 

damage to property, from the insured to 

the insurer. These products include life 

insurance policies, annuity contracts, 

property and casualty insurance 

policies, and health insurance policies. 

These products are offered through a 

number of different distribution 

channels. Some insurance companies 

sell their products through direct 

marketing in which the insurance 

company sells a policy directly to the 

insured. Other companies employ 

agents, who may either be captive or 

independent. Captive agents generally 

represent only one insurance company 

or group of affiliated companies; 

independent agents may represent a 

variety of insurance carriers. A customer 

also may employ a broker (e.g., a person 

who searches the marketplace for 

insurance in the interest of the customer 

Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 66763 

6For an example of money laundering involving 

the fraudulent conversion of money in an insurance 

premium trust account, see U.S. v. Boscarino, 

Aulenta, and Mangurten, No. 02 CR 0086 (N.D. Ill. 

ED 2002) (Superseding Indictment). 

7United States of America v. Rodrigo Jose 

Murillo, Alexander Murillo, Jaime Eduardo Rey 

Albornoz, Arturo Delgado, and Esperanza Romero, 

Mag. Docket No. 02 CR 21007 (S.D. FL. 2002) 

(Grand Jury Indictment). 

8Certain insurance agents may be required under 

separate rules to report suspicious transactions. See 

infra note 14. 

rather than the insurer) to obtain 

insurance. 

This final rule focuses on those 

insurance products possessing features 

that make them susceptible to being 

used for money laundering or the 

financing of terrorism. For example, life 

insurance policies that have a cash 

surrender value are potential money 

laundering vehicles. Cash value can be 

redeemed by a money launderer or can 

be used as a source of further 

investment of tainted funds—for 

example, by taking out loans against 

such cash value. Similarly, annuity 

contracts also pose a money laundering 

risk because they allow a money 

launderer to exchange illicit funds for 

an immediate or deferred income stream 

or to purchase a deferred annuity and 

obtain clean funds upon redemption.6

These risks do not exist to the same 

degree in term life insurance products, 

group life insurance products, group 

annuities, or in insurance products 

offered by property and casualty 

insurers or by title or health insurers. 

A 2002 federal grand jury indictment 

illustrates the money laundering risks 

associated with insurance products and 

the corresponding need for vigilance in 

the insurance industry.7 That 

indictment charged five Colombian 

nationals with conspiring to launder 

millions of dollars originating from the 

illicit sale of cocaine. The scheme 

involved the purchase and subsequent 

redemption of life insurance policies. 

According to court documents and 

interviews related to that indictment, 

federal law enforcement officials have 

discovered that Colombian drug cartels 

bought life insurance policies in 

continental Europe, the United 

Kingdom, and in smaller jurisdictions 

such as the Isle of Man, to launder the 

proceeds of drug trafficking. Using 

narcotics proceeds from the United 

States and Mexico, the traffickers 

purchased 250 life insurance policies in 

the Isle of Man alone. The insurance 

policies, worth as much as $1.9 million 

each, were sometimes taken out in the 

names of cartel associates and members 

of their families. The traffickers would 

typically cash out all or part of the Isle 

of Man policies prematurely, in some 

cases after only a year, paying penalties 

of 25 percent or more. The penalties, 

however, merely represented a 

‘‘business cost’’ of using the insurance 

policies to launder the illicit narcotics 

proceeds. Thus far, federal law 

enforcement officials have seized more 

than $9.5 million in Florida in 

connection with the investigation. If the 

insurance companies in the relevant 

jurisdictions had been subject to antimoney laundering controls, they might 

have detected the money laundering 

scheme because the policyholders were 

authorizing unrelated third parties to 

withdraw money from the cash value of 

their policies or were frequently cashing 

out their policies early. 

A review of Suspicious Activity 

Reports filed with the Financial Crimes 

Enforcement Network also reveals 

instances in which financial institutions 

have reported the suspected use of 

insurance products for the purpose of 

laundering the proceeds of criminal 

activity. During the past five years, a 

number of Suspicious Activity Reports 

were filed that reference the use of an 

insurance product in suspected money 

laundering activity. For example, 

several reports describe as suspicious 

the large, lump-sum purchase of annuity 

contracts, followed almost immediately 

by several withdrawals of those funds. 

In some cases, the entire balance of the 

annuity contract was withdrawn shortly 

after the purchase of the contract. Other 

reports detail suspicious loans taken out 

against an annuity contract and life 

insurance premiums being paid by 

unrelated third parties. 

II. Notice of Proposed Rulemaking 

On October 17, 2002, we published a 

notice of proposed rulemaking, 67 FR 

64067, that would extend the 

requirement to report suspicious 

transactions to insurance companies. 

The comment period for the proposed 

rule ended on December 16, 2002. We 

received over 50 comments from 

insurance companies and agents, banks, 

trade associations, attorneys, and a 

government agency addressing issues 

raised by either the proposed rule, or by 

the related proposed rule, 67 FR 60625 

(September 26, 2002), that would 

require insurance companies to 

establish anti-money laundering 

programs. 

III. Summary of Comments 

Most of the comments focused on the 

following matters: (1) The potential 

application of a suspicious transaction 

reporting requirement to agents and 

brokers of insurance companies, rather 

than just their insurance company 

principals; and (2) the appropriate scope 

of the products that cause an entity to 

be considered an insurance company for 

purposes of the rule. These comments 

are discussed below. Other significant 

comments are discussed in the sectionby-section analysis. 

A. Treatment of Agents and Brokers 

The proposed rule posited that an 

insurance company, but not its agents or 

brokers, should be required to report 

suspicious transactions. Under the 

proposed rule, an insurance company 

would be responsible for obtaining 

customer information from all relevant 

sources, including from its agents and 

brokers, necessary to properly report 

suspicious activity involving the 

purchase of any of its covered products. 

We specifically sought comments on 

whether an insurance company’s agents 

and brokers should be subject to a 

separate obligation to report suspicious 

transactions. Commenters were almost 

evenly divided on this issue. Several 

agreed with the approach taken in the 

proposed rule, stating that the benefit of 

requiring tens of thousands of insurance 

agents and brokers to independently 

report suspicious transactions would be 

outweighed by the costs. Other 

commenters disagreed, arguing that a 

direct obligation is necessary because 

insurance companies lack sufficient 

control over their distribution channels 

to ensure the adequate reporting of 

suspicious customer activity. 

After careful consideration of all the 

views expressed, we are adopting the 

approach set forth in the proposed rule. 

Under the terms of the final rule, the 

obligation to identify and report 

suspicious transactions applies only to 

an insurance company, and not its 

agents or brokers.8 Nevertheless, 

because insurance agents and brokers 

are an integral part of the insurance 

industry due to their direct contact with 

customers, the final rule requires an 

insurance company to establish and 

implement policies and procedures 

reasonably designed to obtain customer 

information necessary to detect 

suspicious activity from all relevant 

sources, including from its agents and 

brokers, and to report suspicious 

activity based on such information. 

The final rule imposes a direct 

obligation only on insurance companies, 

and not their agents or brokers, for a 

number of reasons. First, whether an 

insurance company sells its products 

directly or through agents, we believe 

that it is appropriate to place on the 

insurance company, which develops 

and bears the risks of its products, the 

responsibility for guarding against such 

66764 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 

9Although some agents work within large 

structures, only a small fraction of agencies employ 

more than a handful of people. According to one 

commenter, there are ‘‘independent agents who 

operate on their own or in offices with just a few 

of their independent agent colleagues and thus 

comprise the quintessential notion of a small 

business operation.’’ Letter from the American 

Council of Life Insurers, Nov. 25, 2002, at 4. 

10See, e.g., Joint Letter from the Independent 

Insurance Agents and Brokers of America and the 

National Association of Professional Insurance 

Agents, Nov. 25, 2002, at 1 (‘‘This distinction 

[between life insurance and property and casualty 

insurance] is legitimate and provides relief from the 

administrative and regulatory burdens of the 

proposed rule for the segments of the insurance 

industry that are at very low risk of money 

laundering.’’). 

11For example, a tax-exempt organization that 

offers charitable gift annuities (as defined in section 

501(m)(5) of the Internal Revenue Code) as a vehicle 

for planned charitable giving to the tax-exempt 

organization, and that would not otherwise fall 

within the definition of an insurance company, 

generally would not be considered an insurance 

company under the final rule. 

products being used to launder illegally 

derived funds or to finance terrorist 

acts. Second, insurance companies, due 

to their much larger size relative to that 

of their numerous agents and brokers, 

are in a much better position to 

shoulder the costs of compliance 

connected with the sale of their 

products.9 Finally, numerous insurers 

already have in place compliance 

programs and best practices guidelines 

for their agents and brokers to prevent 

and detect fraud. We believe that 

insurance companies largely will be 

able integrate their obligation to report 

suspicious transactions into their 

existing compliance programs and best 

practices guidelines. 

Insurance agents and brokers will 

play an important role in the effective 

operation of an insurance company’s 

obligation to report suspicious 

transactions. By not placing an 

independent reporting obligation on 

agents and brokers, we do not intend to 

minimize their role and also intend to 

assess the effectiveness of the rule on an 

ongoing basis. If it appears that the 

effectiveness of the rule is being 

undermined by the failure of agents and 

brokers to cooperate with their 

insurance company principals, we will 

consider proposing appropriate 

amendments to the rule. We also expect 

that an insurance company faced with a 

non-compliant agent or broker will take 

the necessary actions to secure such 

compliance, including, when 

appropriate, terminating its business 

relationship with such an agent or 

broker. 

B. Covered Products 

Under the proposed rule, the issuing, 

underwriting, or reinsuring of a life 

insurance policy, an annuity product, or 

any product with investment or cash 

value features, would have caused an 

insurance company to fall within the 

scope of the rule. A company that 

offered exclusively other kinds of 

insurance products, such as a property 

and casualty insurance policy, would 

not have been required to report 

suspicious transactions. The 

overwhelming majority of commenters 

agreed with the distinction that we 

made between higher-risk and lowerrisk insurance products.10 Some of those 

commenters requested that we take the 

additional step of further excluding 

other kinds of insurance contracts and 

products relating to life insurance and 

annuities, such as reinsurance, group 

life insurance policies, group annuities, 

and term life insurance policies. 

We, not having been informed or 

otherwise having learned of examples 

proving otherwise, agree that some of 

these contracts and products pose little 

or no risk of being used for money 

laundering. For example, reinsurance 

and retrocession contracts and treaties 

are arrangements between insurance 

companies by which they reallocate 

risks within the insurance industry and 

do not involve transactions with 

customers. Similarly, group life 

insurance policies and group annuities 

are typically issued to a company, 

financial institution, or association, and 

generally do not allow an individual 

insured or participant to manipulate 

their investment. These products pose 

low money laundering risks. 

Consequently, the final rule does not 

include in its coverage reinsurance or 

retrocession contracts or treaties, group 

life insurance, or group annuities. 

After careful consideration of the 

comments, we also have decided not to 

cover term life (which includes credit 

life) insurance policies at this time. 

Given the operating characteristics of 

these products—e.g., the absence of a 

cash surrender value and the 

underwriting scrutiny given to term 

policies, especially those with large face 

amounts—we believe that it would be 

impractical to launder money through 

term life insurance policies, and that the 

corresponding money laundering risks 

associated with such products are not 

significant. Nevertheless, as with all 

new exclusions, we will reconsider this 

position if circumstances warrant. 

IV. Section-by-Section Analysis 

A. 103.16(a)—Definitions 

Section 103.16(a) defines the key 

terms used in the final rule. In response 

to comments seeking clarification of 

certain terms used in the proposed rule, 

the final rule includes definitions of the 

terms ‘‘annuity contract,’’ ‘‘bank,’’

‘‘broker-dealer in securities,’’ ‘‘covered 

product,’’ ‘‘group annuity contract,’’

‘‘group life insurance policy,’’

‘‘insurance agent,’’ ‘‘insurance broker,’’

and ‘‘permanent life insurance policy.’’

The final rule defines an annuity 

contract as ‘‘any agreement between the 

insurer and the contract owner whereby 

the insurer promises to pay out a fixed 

or variable income stream for a period 

of time.’’ For purposes of the rule, 

contracts of indemnity, as well as 

workers compensation insurance and 

structured settlements, are not annuity 

contracts. 

The definition of an insurance 

company reflects our determination that 

a suspicious activity reporting 

requirement should be imposed only on 

those sectors of the insurance industry 

that offer products that pose a 

significant risk of money laundering or 

terrorist financing. Thus, an ‘‘insurance 

company’’ includes any person engaged 

within the United States as a business 

in the issuing or underwriting of a 

covered product. The term ‘‘as a 

business’’ is intended to exclude those 

persons that offer annuities or another 

covered product as an incidental part of 

their non-insurance business.11 At this 

time, we believe that such persons 

present a much lower risk of being used 

for money laundering or terrorist 

financing than those persons that offer 

a covered product as an integral part of 

their business. We leave open the 

possibility of revisiting this issue in a 

future rulemaking if circumstances 

warrant. 

There is an explicit exception to the 

definition of an insurance company. 

That exception clarifies that insurance 

agents and insurance brokers are not 

required under the final rule to report 

suspicious transactions. However, as 

explained below, an insurance company 

is responsible for obtaining customer 

information from all relevant sources, 

including its agents and brokers, 

necessary for the purpose of detecting 

and reporting suspicious transactions. 

In addition, the definition of an 

insurance company refers only to the 

business of issuing or underwriting 

certain kinds of insurance products and, 

therefore, does not cover the reinsuring 

or retrocession of insurance products. 

The term ‘‘covered product’’ is 

defined to mean: (i) A permanent life 

insurance policy, other than a group life 

insurance policy; (ii) any annuity 

contract, other than a group annuity 

contract; and (iii) any other insurance 

product with features of cash value or 

investment. Permanent life insurance 

Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 66765 

12Many currency transactions are not indicative 

of money laundering or other violations of law, a 

fact recognized both by Congress, in authorizing 

reform of the currency transaction reporting system, 

and by FinCEN in issuing rules to implement that 

system (See 31 U.S.C. 5313(d) and 31 CFR 

103.22(d), 63 FR 50147 (September 21, 1998)). But 

many non-currency transactions, (for example, 

funds transfers) can indicate illicit activity, 

especially in light of the breadth of the statutes that 

make money laundering a crime. See 18 U.S.C. 1956 

and 1957. 

13The fourth reporting category has been added 

to the suspicious activity reporting rules 

promulgated since the passage of the USA 

PATRIOT Act to make it clear that the requirement 

to report suspicious activity encompasses the 

reporting of transactions in which legally-derived 

funds are used for criminal activity, such as the 

financing of terrorism. 

14 Variable insurance products that are deemed 

securities under the Securities Exchange Act of 

1934 must be sold by registered broker-dealers, 

which are themselves subject to a suspicious 

activity reporting obligation. See 31 CFR 103.19. 

and annuity products are all covered by 

the definition of a covered product, with 

the exception of group life insurance 

and group annuities. The definition also 

incorporates a functional approach, and 

encompasses any insurance product 

having the same kinds of features that 

make permanent life insurance and 

annuity products more at risk of being 

used for money laundering. To the 

extent that term life insurance, property 

and casualty insurance, health 

insurance, and other kinds of insurance 

do not exhibit these features, they are 

not products covered by the rule. 

B. 103.16(b)—General 

Section 103.16(b) contains the rules 

setting forth the obligation of insurance 

companies to report suspicious 

transactions that are conducted or 

attempted by, at, or through an 

insurance company and involve or 

aggregate at least $5,000 in funds or 

other assets. This threshold amount is 

not limited to insurance policies whose 

premiums meet or exceed $5,000; but 

rather, includes a policy in which either 

the premium or maximum potential 

payout meets the threshold. It is 

important to recognize that transactions 

are reportable under this rule and 31 

U.S.C. 5318(g) whether or not they 

involve currency.12

Section 103.16(b)(1) contains the 

general statement of the obligation to 

file reports of suspicious transactions. 

The obligation extends to transactions 

involving a covered product conducted 

or attempted by, at, or through the 

insurance company. The phrase 

‘‘involving a covered product’’ was 

added to the final rule to clarify that the 

reporting requirement extends only to 

transactions involving those products 

that we have determined pose a 

significant risk of money laundering. 

The second sentence of this section is 

designed to encourage the reporting of 

transactions that appear relevant to 

violations of law or regulation, even in 

cases in which the rule does not 

explicitly so require, for example in the 

case of a suspicious transaction falling 

below the $5,000 threshold in the rule. 

Section 103.16(b)(2) specifically 

describes the four categories of 

transactions that require reporting. An 

insurance company is required to report 

a transaction if it knows, suspects, or 

has reason to suspect that the 

transaction (or a pattern of transactions 

of which the transaction is a part): (i) 

Involves funds derived from illegal 

activity or is intended or conducted to 

hide or disguise funds or assets derived 

from illegal activity; (ii) is designed, 

whether through structuring or other 

means, to evade the requirements of the 

Bank Secrecy Act; (iii) has no business 

or apparent lawful purpose, and the 

insurance company knows of no 

reasonable explanation for the 

transaction after examining the available 

facts; or (iv) involves the use of the 

insurance company to facilitate criminal 

activity. The final category of reportable 

transactions is intended to ensure that 

transactions involving legally-derived 

funds that the insurance company 

suspects are being used for a criminal 

purpose, such as terrorist financing, are 

reported under the rule.13

A determination as to whether a 

report should be filed must be based on 

all the facts and circumstances relating 

to the transaction and customer (e.g., 

purchaser). Different fact patterns will 

require different judgments. Some 

examples of ‘‘red flags’’ associated with 

existing or potential customers include, 

but are not limited to, the following: 

• The purchase of an insurance 

product that appears to be inconsistent 

with a customer’s needs; 

• Any unusual method of payment, 

particularly by cash or cash equivalents 

(when such method is, in fact, unusual); 

• The purchase of an insurance 

product with monetary instruments in 

structured amounts; 

• The early termination of an 

insurance product, especially at a cost 

to the customer, or where cash was 

tendered and/or the refund check is 

directed to an apparently unrelated 

third party; 

• The transfer of the benefit of an 

insurance product to an apparently 

unrelated third party; 

• Little or no concern by a customer 

for the investment performance of an 

insurance product, but much concern 

about the early termination features of 

the product; 

• The reluctance by a customer to 

provide identifying information when 

purchasing an insurance product, or the 

provision of minimal or seemingly 

fictitious information; and 

• The borrowing of the maximum 

amount available soon after purchasing 

the product. 

The techniques of money laundering 

are continually evolving, and there is no 

way to provide an exhaustive list of 

suspicious transactions. 

Section 103.16(b)(3) provides that an 

insurance company is responsible for 

reporting suspicious transactions 

conducted through its insurance agents 

and insurance brokers. Suspicious 

activity that occurs at the time of sale of 

the covered product is most likely to be 

observed by the agent or broker, while 

suspicious activity that occurs following 

the issuance of a policy and during the 

ongoing administration of the product 

would most likely be observed by the 

insurance company. 

Insurance agents and insurance 

brokers are not independently required 

to report suspicious transactions under 

the final rule. Accordingly, section 

103.16(b)(3) also states that an insurance 

company shall have procedures in place 

reasonably designed to obtain customerrelated information (which includes 

observations and assessments) from its 

insurance agents and insurance brokers 

necessary to detect suspicious activity, 

and is responsible for reporting 

suspicious activity based on such 

information. The specific means to 

obtain such information are left to the 

discretion of the insurance company, 

although we anticipate that the 

insurance company may need to amend 

existing agreements with its agents and 

brokers to ensure that the company 

receives necessary customer 

information. 

Section 103.16(b)(3) acknowledges 

that certain insurance agents and 

insurance brokers, such as brokerdealers in securities with respect to the 

sale of variable insurance products, may 

have a separate obligation to report 

suspicious activity under another Bank 

Secrecy Act regulation.14 In those 

instances, the filing of a joint suspicious 

activity report is permissible. In all such 

joint filings, only one of the filing 

institutions should be identified as the 

‘‘filer’’ in the filer identification section 

of the form. The narrative of the 

Suspicious Activity Report must 

include the words ‘‘joint filing’’ and 

must identify the other financial 

institution or institutions on whose 

behalf the report is being filed. As set 

forth in section 103.16(e), an insurance 

company must keep a copy of any joint 

Suspicious Activity Report filed. To 

66766 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 

15See 31 CFR 103.130(a) (anti-money laundering 

program requirement for mutual funds). 

16The only Bank Secrecy Act regulatory 

requirement currently applicable to insurance 

companies is the obligation to report on Form 8300 

the receipt of cash or certain non-cash instruments 

totaling more than $10,000 in one transaction or in 

two or more related transactions. We understand 

that many insurance companies have used the Form 

8300 to voluntarily report suspicious transactions. 

Once the SAR–IC becomes effective, insurance 

companies should use the SAR–IC, rather than the 

Form 8300, to report suspicious transactions. In the 

interim, insurance companies may use the 

Suspicious Activity Report by Securities and 

Futures Industries form. 

avoid the filing of duplicative reports on 

the same suspicious transaction or 

transactions, all insurance companies, 

insurance agents, insurance brokers, and 

other financial institutions involved in 

the same suspicious transaction may 

share information with one another 

pertaining to that transaction, so long as 

such sharing does not notify the subject 

of the transaction that the transaction 

has been reported. Conforming language 

has been added to the retention and 

confidentiality provisions set forth at 

sections 103.16(e) and (f). 

In addition, some insurance 

companies issue variable insurance 

products funded by separate accounts, 

some of which meet the definition of a 

mutual fund,15 and therefore may be 

obligated to report suspicious activities 

relating to those products under any 

final rule that may be adopted requiring 

mutual funds to report suspicious 

activity. To avoid a duplicate filing 

requirement, we intend to amend this 

rule to require filing in such cases under 

the rule for mutual funds when a final 

rule is adopted. 

In order to evaluate customer activity 

and relationships for money laundering 

and terrorism risks, we expect that 

insurance companies will incorporate 

into their anti-money laundering 

programs a suspicious transaction 

monitoring program that is appropriate 

for the particular insurance company 

and its covered products in light of such 

risks. The design and implementation of 

such a program, rather than isolated 

instances of failing to report suspicious 

transactions, will be more important 

when assessing an insurance company’s 

compliance with the requirements of the 

rule. 

C. 103.16(c)—Filing Procedures 

Section 103.16(c) sets forth the filing 

procedures to be followed by insurance 

companies making reports of suspicious 

transactions. Within 30 days after an 

insurance company becomes aware of a 

reportable suspicious transaction, the 

business must report the transaction by 

completing a Suspicious Activity Report 

by Insurance Companies (SAR–IC) and 

filing it in a central location to be 

determined by the Financial Crimes 

Enforcement Network. The SAR–IC will 

resemble the Suspicious Activity Report 

forms used by depository institutions to 

report suspicious transactions, and a 

draft form will be made available for 

comment in accordance with the 

requirements of the Paperwork 

Reduction Act (44 U.S.C. 3501 et seq.) 

and the Office of Management and 

Budget’s implementing regulations (5 

CFR part 1320).16

Supporting documentation relating to 

each SAR–IC is to be collected and 

maintained separately by the insurance 

company and made available to 

appropriate law enforcement and 

supervisory agencies upon request. 

Special provision is made for situations 

requiring immediate attention, in which 

case insurance companies are to 

telephone the appropriate law 

enforcement authority in addition to 

filing a SAR–IC. 

D. 103.16(d)—Exception 

Section 103.16(d) provides an 

exception to the reporting requirement 

for false information submitted to the 

insurance company to obtain a policy or 

support a claim. Language has been 

added to the final rule to make clear that 

an insurance company is not required to 

report instances of suspected insurance 

fraud unless the company has reason to 

believe that the false or fraudulent 

submission of information relates to 

money laundering or terrorist financing. 

For example, we do not expect an 

insurance company to report the 

submission of false medical records by 

a customer seeking life insurance 

coverage unless the company has a 

reason to believe that the purchase of 

the covered product is related to money 

laundering or terrorist financing. Some 

of the fact patterns that are associated 

with potential money laundering or 

terrorist financing are described above. 

E. 103.16(e)—Retention of Records 

Section 103.16(e) provides that 

insurance companies must maintain 

copies of SAR–ICs and the original or 

business record equivalent of any 

supporting documentation for a period 

of five years from the date of filing. This 

provision has been modified to require 

an insurance company to retain copies 

of reports (and supporting 

documentation) provided to it by its 

agents that are required to make reports 

by another provision in 31 CFR part 103 

when the agents and the company file 

a joint report regarding a transaction 

involving both entities. As indicated 

above, all supporting documentation is 

to be made available to the Financial 

Crimes Enforcement Network and other 

appropriate law enforcement and 

supervisory authorities, on request. 

F. 103.16(f)—Confidentiality of Reports; 

Limitation on Liability 

Section 103.16(f) reflects the statutory 

prohibition against the disclosure of 

information filed in, or the fact of filing, 

a Suspicious Activity Report (whether 

the report is required by the final rule 

or is filed voluntarily). See 31 U.S.C. 

5318(g)(2). Thus, the paragraph 

specifically prohibits insurance 

companies filing SAR-ICs (or receiving 

a copy of filed joint Suspicious Activity 

Reports from another financial 

institution involved in the same 

transaction) from making any disclosure 

of a Suspicious Activity Report or the 

information contained therein, except to 

appropriate law enforcement and 

supervisory agencies. As amended by 

the USA PATRIOT Act, 31 U.S.C. 

5318(g)(3) provides a safe harbor from 

liability to any financial institution that 

makes a voluntary disclosure of any 

possible violation of law or regulation to 

a government agency and to any 

financial institution that reports 

suspicious activity pursuant to section 

5318(g) or pursuant to any other 

authority. Section 5318(g)(3) further 

provides protection from liability for the 

non-disclosure of the fact of such 

reporting. Section 103.16(f) does not 

prohibit insurance companies from 

obtaining customer information from its 

agents and brokers necessary to detect 

and report suspicious activity, as 

required by section 103.16(b)(3). This 

section also does not prohibit insurance 

companies from discussing with their 

agents and brokers, for purposes of 

section 103.16(b)(3), information 

pertaining to a suspicious transaction 

with which each institution is involved, 

and the determination of which 

institution will file the Suspicious 

Activity Report in such a case. 

G. 103.16(g)—Compliance 

Section 103.16(g) states that 

compliance with the obligation to report 

suspicious transactions will be 

examined, and failure to comply with 

the rule may constitute a violation of the 

Bank Secrecy Act and its implementing 

regulations. 

H. 103.16(h)—Insurance Companies 

That Are Registered Broker-Dealers in 

Securities. 

The proposed rule provided in section 

103.16(i) that an insurance company 

that is registered or required to register 

with the Securities and Exchange 

Commission shall be deemed to have 

Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 66767 

17 17 We are aware of only one such insurance 

company, although there may be others. 

18This is to be distinguished from a broker-dealer 

in securities acting as agent for an insurance 

company reporting under section 103.19, where a 

joint Suspicious Activity Report is permissible 

under subsection (b)(3)(ii) of the final rule. 

satisfied the requirements of this section 

for those activities regulated by the 

Securities and Exchange Commission, to 

the extent that the company complies 

with the reporting requirements 

applicable to such activities that are 

imposed under section 103.19. 17 The 

purpose of this provision is to provide 

that an insurance company that is also 

registered with the Securities and 

Exchange Commission as a brokerdealer in securities, and is therefore 

required to report suspicious activities 

under section 103.19, would not be 

subject to duplicate reporting 

requirements under this final rule as 

well.18 To the extent that any such 

insurance company would be required 

to report suspicious activities under this 

final rule that would not be reportable 

under section 103.19, it would be 

required to report under this final rule. 

The provision has been retained in the 

final rule with non-substantive changes. 

I. 103.16(i)—Applicability Date 

Section 103.16(i) provides that the 

new suspicious activity reporting rule 

applies to transactions occurring after 

May 2, 2006. 

V. Executive Order 12866 

This final rule is not a significant 

regulatory action for purposes of 

Executive Order 12866. Accordingly, a 

regulatory impact analysis is not 

required. 

VI. Regulatory Flexibility Act 

It is hereby certified, pursuant to the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.), that this final rule is not likely 

to have a significant economic impact 

on a substantial number of small 

entities. The Bank Secrecy Act 

anticipates that we will require financial 

institutions to report suspicious 

activities. Moreover, the final rule 

requires insurance companies, rather 

than their agents or brokers, to file 

reports of suspicious transactions, and 

most insurance companies are larger 

businesses. In addition, all insurance 

companies, in order to remain viable, 

have in place policies and procedures to 

prevent and detect fraud. Such antifraud measures should assist insurance 

companies in reporting suspicious 

transactions. We anticipate that 

insurance companies will be readily 

able to incorporate the suspicious 

reporting requirements of this rule into 

those anti-fraud measures. In addition, 

the costs associated with suspicious 

activity reporting will be commensurate 

with the size of an insurance company. 

If a company is small, the burden of 

complying with the final rule should be 

correspondingly small. 

Consistent with the principles of the 

Regulatory Flexibility Act, we 

considered exempting small insurance 

companies from some or all of the 

requirements of the final rule. We do 

not believe that such an exemption is 

appropriate, given that money 

laundering can also be conducted 

through small insurance companies. 

VII. Paperwork Reduction Act 

The collection of information 

contained in the final rule has been 

approved by the Office of Management 

and Budget in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)), and assigned Office of 

Management and Budget Control 

Number 1506–0029. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a valid 

control number assigned by the Office of 

Management and Budget. 

The only requirement in the final rule 

that is subject to the Paperwork 

Reduction Act is the recordkeeping 

requirement in section 103.16(e). The 

estimated annual average burden 

associated with this collection of 

information is three hours per 

recordkeeper. We received no comments 

concerning this burden estimate. 

Comments concerning the accuracy of 

this recordkeeping burden estimate and 

suggestions for reducing this burden 

should be sent (preferably by fax on 

202–395–6974) to Desk Officer for the 

Department of the Treasury, Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Washington, DC 20503 (or by the 

Internet to jlackeyj@omb.eop.gov), with 

a copy by paper mail to Financial 

Crimes Enforcement Network, P.O. Box 

39, Vienna, VA 22183, ‘‘ATTN: 

Insurance Company SAR Regulation’’ or 

by electronic mail to 

regcomments@fincen.treas.gov with the 

caption ‘‘ATTN: Insurance Company 

SAR Regulation’’ in the body of the text. 

List of Subjects in 31 CFR Part 103 

Administrative practice and 

procedure, Authority delegations 

(Government agencies), Insurance 

companies, Currency, Investigations, 

Law Enforcement, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, part 103 of title 31 of the 

Code of Federal Regulations is amended 

as follows: 

PART 103—FINANCIAL 

RECORDKEEPING AND REPORTING 

OF CURRENCY AND FINANCIAL 

TRANSACTIONS 

■ 1. The authority citation for part 103 

continues to read as follows: 

Authority: 12 U.S.C. 1829b and 1951–1959; 

31 U.S.C. 5311–5314, 5316–5332; title III, 

sec. 314, Pub. L. 107–56, 115 Stat. 307. 

■ 2. Subpart B of part 103 is amended 

by adding new § 103.16 to read as 

follows: 

§ 103.16 Reports by insurance companies 

of suspicious transactions. 

(a) Definitions. For purposes of this 

section: 

(1) Annuity contract means any 

agreement between the insurer and the 

contract owner whereby the insurer 

promises to pay out a fixed or variable 

income stream for a period of time. 

(2) Bank has the same meaning as 

provided in § 103.11(c). 

(3) Broker-dealer in securities has the 

same meaning as provided in 

§ 103.11(f). 

(4) Covered product means: 

(i) A permanent life insurance policy, 

other than a group life insurance policy; 

(ii) An annuity contract, other than a 

group annuity contract; or 

(iii) Any other insurance product with 

features of cash value or investment. 

(5) Group annuity contract means a 

master contract providing annuities to a 

group of persons under a single 

contract. 

(6) Group life insurance policy means 

any life insurance policy under which a 

number of persons and their 

dependents, if appropriate, are insured 

under a single policy. 

(7) Insurance agent means a sales 

and/or service representative of an 

insurance company. The term 

‘‘insurance agent’’ encompasses any 

person that sells, markets, distributes, or 

services an insurance company’s 

covered products, including, but not 

limited to, a person who represents only 

one insurance company, a person who 

represents more than one insurance 

company, and a bank or broker-dealer in 

securities that sells any covered product 

of an insurance company. 

(8) Insurance broker means a person 

who, by acting as the customer’s 

representative, arranges and/or services 

covered products on behalf of the 

customer. 

66768 Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 

(9) Insurance company or insurer. (i) 

Except as provided in paragraph 

(a)(9)(ii) of this section, the term 

‘‘insurance company’’ or ‘‘insurer’’

means any person engaged within the 

United States as a business in the 

issuing or underwriting of any covered 

product. 

(ii) The term ‘‘insurance company’’ or 

‘‘insurer’’ does not include an insurance 

agent or insurance broker. 

(10) Permanent life insurance policy 

means an agreement that contains a cash 

value or investment element and that 

obligates the insurer to indemnify or to 

confer a benefit upon the insured or 

beneficiary to the agreement contingent 

upon the death of the insured. 

(11) Person has the same meaning as 

provided in § 103.11(z). 

(12) United States has the same 

meaning as provided in § 103.11(nn). 

(b) General. (1) Each insurance 

company shall file with the Financial 

Crimes Enforcement Network, to the 

extent and in the manner required by 

this section, a report of any suspicious 

transaction involving a covered product 

that is relevant to a possible violation of 

law or regulation. An insurance 

company may also file with the 

Financial Crimes Enforcement Network 

by using the form specified in paragraph 

(c)(1) of this section or otherwise, a 

report of any suspicious transaction that 

it believes is relevant to the possible 

violation of any law or regulation but 

the reporting of which is not required by 

this section. 

(2) A transaction requires reporting 

under this section if it is conducted or 

attempted by, at, or through an 

insurance company, and involves or 

aggregates at least $5,000 in funds or 

other assets, and the insurance company 

knows, suspects, or has reason to 

suspect that the transaction (or a pattern 

of transactions of which the transaction 

is a part): 

(i) Involves funds derived from illegal 

activity or is intended or conducted in 

order to hide or disguise funds or assets 

derived from illegal activity (including, 

without limitation, the ownership, 

nature, source, location, or control of 

such funds or assets) as part of a plan 

to violate or evade any federal law or 

regulation or to avoid any transaction 

reporting requirement under federal law 

or regulation; 

(ii) Is designed, whether through 

structuring or other means, to evade any 

requirements of this part or of any other 

regulations promulgated under the Bank 

Secrecy Act, Public Law 91–508, as 

amended, codified at 12 U.S.C. 1829b, 

12 U.S.C. 1951–1959, and 31 U.S.C. 

5311–5314; 5316–5332; 

(iii) Has no business or apparent 

lawful purpose or is not the sort in 

which the particular customer would 

normally be expected to engage, and the 

insurance company knows of no 

reasonable explanation for the 

transaction after examining the available 

facts, including the background and 

possible purpose of the transaction; or 

(iv) Involves use of the insurance 

company to facilitate criminal activity. 

(3) (i) An insurance company is 

responsible for reporting suspicious 

transactions conducted through its 

insurance agents and insurance brokers. 

Accordingly, an insurance company 

shall establish and implement policies 

and procedures reasonably designed to 

obtain customer-related information 

necessary to detect suspicious activity 

from all relevant sources, including 

from its insurance agents and insurance 

brokers, and shall report suspicious 

activity based on such information. 

(ii) Certain insurance agents may have 

a separate obligation to report 

suspicious activity pursuant to other 

provisions of this part. In those 

instances, no more than one report is 

required to be filed by the financial 

institutions involved in the transaction, 

as long as the report filed contains all 

relevant facts, including the names of 

both institutions and the words ‘‘joint 

filing’’ in the narrative section, and both 

institutions maintain a copy of the 

report filed, along with any supporting 

documentation. 

(c) Filing procedures—(1) What to file. 

A suspicious transaction shall be 

reported by completing a Suspicious 

Activity Report by Insurance Companies 

(SAR–IC), and collecting and 

maintaining supporting documentation 

as required by paragraph (e) of this 

section. 

(2) Where to file. The SAR–IC shall be 

filed with the Financial Crimes 

Enforcement Network as indicated in 

the instructions to the SAR–IC. 

(3) When to file. A SAR–IC shall be 

filed no later than 30 calendar days after 

the date of the initial detection by the 

insurance company of facts that may 

constitute a basis for filing a SAR–IC 

under this section. If no suspect is 

identified on the date of such initial 

detection, an insurance company may 

delay filing a SAR–IC for an additional 

30 calendar days to identify a suspect, 

but in no case shall reporting be delayed 

more than 60 calendar days after the 

date of such initial detection. In 

situations that require immediate 

attention, such as terrorist financing or 

ongoing money laundering schemes, the 

insurance company shall immediately 

notify by telephone an appropriate law 

enforcement authority in addition to 

filing timely a SAR–IC. Insurance 

companies wishing voluntarily to report 

suspicious transactions that may relate 

to terrorist activity may call the 

Financial Crimes Enforcement 

Network’s Financial Institutions Hotline 

at 1–866–556–3974 in addition to filing 

timely a SAR–IC if required by this 

section. 

(d) Exception. An insurance company 

is not required to file a SAR–IC to report 

the submission to it of false or 

fraudulent information to obtain a 

policy or make a claim, unless the 

company has reason to believe that the 

false or fraudulent submission relates to 

money laundering or terrorist financing. 

(e) Retention of records. An insurance 

company shall maintain a copy of any 

SAR–IC filed and the original or 

business record equivalent of any 

supporting documentation for a period 

of five years from the date of filing the 

SAR–IC. Supporting documentation 

shall be identified as such and 

maintained by the insurance company 

and shall be deemed to have been filed 

with the SAR–IC. When an insurance 

company has filed or is identified as a 

filer in a joint Suspicious Activity 

Report, the insurance company shall 

maintain a copy of such joint report 

(together with copies of any supporting 

documentation) for a period of five 

years from the date of filing. An 

insurance company shall make all 

supporting documentation available to 

the Financial Crimes Enforcement 

Network and any other appropriate law 

enforcement agencies or supervisory 

agencies upon request. 

(f) Confidentiality of reports; 

limitation of liability. No insurance 

company, and no director, officer, 

employee, agent, or broker of any 

insurance company, who reports a 

suspicious transaction under this part 

(whether such a report is required by 

this section or made voluntarily), may 

notify any person involved in the 

transaction that the transaction has been 

reported, except to the extent permitted 

by paragraph (b)(3) of this section. Thus, 

any insurance company subpoenaed or 

otherwise requested to disclose a SAR–

IC or the information contained in a 

SAR–IC (or a copy of a joint Suspicious 

Activity Report filed with another 

financial institution involved in the 

same transaction, including an 

insurance agent), except where such 

disclosure is requested by the Financial 

Crimes Enforcement Network or another 

appropriate law enforcement or 

supervisory agency, shall decline to 

produce the Suspicious Activity Report 

or to provide any information that 

would disclose that a Suspicious 

Activity Report has been prepared or 

Federal Register / Vol. 70, No. 212 / Thursday, November 3, 2005 / Rules and Regulations 66769 

filed, citing as authority 31 CFR 103.16 

and 31 U.S.C. 5318(g)(2), and shall 

notify the Financial Crimes Enforcement 

Network of any such request and its 

response thereto. An insurance 

company, and any director, officer, 

employee, agent, or broker of such 

insurance company, that makes a report 

pursuant to this section, including a 

joint report (whether such report is 

required by this section or made 

voluntarily) shall be protected from 

liability for any disclosure contained in, 

or for failure to disclose the fact of, such 

report, or both, to the extent provided 

by 31 U.S.C. 5318(g)(3). 

(g) Compliance. Compliance with this 

section shall be examined by the 

Department of the Treasury, through the 

Financial Crimes Enforcement Network 

or its delegees, under the terms of the 

Bank Secrecy Act. Failure to comply 

with the requirements of this section 

may constitute a violation of the 

reporting rules of the Bank Secrecy Act 

and of this part. 

(h) Suspicious transaction reporting 

requirements for insurance companies 

registered or required to register with the 

Securities and Exchange Commission as 

broker-dealers in securities. An 

insurance company that is registered or 

required to register with the Securities 

and Exchange Commission as a brokerdealer in securities shall be deemed to 

have satisfied the requirements of this 

section for its broker-dealer activities to 

the extent that the company complies 

with the reporting requirements 

applicable to such activities pursuant to 

§ 103.19. 

(i) Applicability date. This section 

applies to transactions occurring after 

May 2, 2006. 

Dated: October 28, 2005. 

William J. Fox, 

Director, Financial Crimes Enforcement 

Network. 

[FR Doc. 05–21918 Filed 11–2–05; 8:45 am] 

BILLING CODE 4810–02–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[VA200–5100; FRL–7985–6] 

Approval and Promulgation of Air 

Quality Implementation Plans; Virginia; 

Update to Materials Incorporated by 

Reference 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule; Notice of 

administrative change. 

SUMMARY: EPA is updating the materials 

submitted by The Commonwealth of 

Virginia that are incorporated by 

reference (IBR) into the State 

implementation plan (SIP). The 

regulations affected by this update have 

been previously submitted by the State 

agency, the Virginia Department of 

Environmental Quality, and approved 

by EPA. This update affects the SIP 

materials that are available for public 

inspection at the National Archives and 

Records Administration (NARA), the 

Air and Radiation Docket and 

Information Center located at EPA 

Headquarters in Washington, DC, and 

the Regional Office. 

EFFECTIVE DATE: This action is effective 

November 3, 2005. 

ADDRESSES: SIP materials which are 

incorporated by reference into 40 CFR 

part 52 are available for inspection at 

the following locations: Air Protection 

Division, U.S. Environmental Protection 

Agency, Region III, 1650 Arch Street, 

Philadelphia, Pennsylvania 19103; the 

Air and Radiation Docket and 

Information Center, U.S. Environmental 

Protection Agency, 1301 Constitution 

Avenue, NW., Room B108, Washington, 

DC 20460; or the National Archives and 

Records Administration (NARA). For 

information on the availability of this 

material at NARA, call 202–741–6030, 

or go to: http://www.archives.gov/ 

federal_register/ 

code_of_federal_regulations/ 

ibr_locations.html. 

FOR FURTHER INFORMATION CONTACT: 

Harold A. Frankford, (215) 814–2108 or 

by e-mail at frankford.harold@epa.gov. 

SUPPLEMENTARY INFORMATION: The SIP is 

a living document which the State can 

revise as necessary to address the 

unique air pollution problems. 

Therefore, EPA from time to time must 

take action on SIP revisions containing 

new and/or revised regulations as being 

part of the SIP. On May 22, 1997 (62 FR 

27968), EPA revised the procedures for 

incorporating by reference federallyapproved SIPs, as a result of 

consultations between EPA and the 

Office of the Federal Register (OFR). 

The description of the revised SIP 

document, IBR procedures and 

‘‘Identification of plan’’ format are 

discussed in further detail in the May 

22, 1997 Federal Register document. On 

April 21, 2000 (65 FR 21315), EPA 

published a Federal Register beginning 

the new IBR procedure for Virginia. On 

September 8, 2004 (69 FR 54216), EPA 

published an update to the IBR material 

for Virginia. In this document, EPA is 

doing the following: 

1. Announcing the second update to 

the IBR material. 

2. Making corrections to the charts 

listed in paragraphs 52.2420(c) and (d), 

as described below: 

a. Chapter 20, the two entries for 

Section 5–20–206 are combined into a 

single entry, with two separate Federal 

Register date and page citations and 

expanded text in the ‘‘Explanation 

[former SIP citation]’’ column. 

b. Chapter 40, entries for Articles 42 

(Emissions Standards for Portable Fuel 

Container Spillage in the Northern 

Virginia Volatile Organic Compound 

Emissions Control Area), 47 (Emission 

Standards for Solvent Metal Cleaning 

Operations in the Northern Virginia 

Volatile Organic Compound Emissions 

Control Area), and 48 (Emission 

Standards for Mobile Equipment Repair 

and Refinishing Operations in the 

Northern Virginia Volatile Organic 

Compound Emissions Control Area)—

the text in the ‘‘Explanation [former SIP 

citation]’’ column is removed. 

c. Chapter 40, entry 5–40–120—the 

text in the ‘‘Title/subject’’ column is 

revised. 

d. Chapter 50, entry 5–50–120—the 

text in the ‘‘Title/subject’’ column is 

revised. 

e. Code of Virginia, entry 10.1–

1316.1.A.—the text in the ‘‘EPA 

approval date’’ column is revised by 

adding a Federal Register page citation. 

f. Prince William County Landfill—

the text in the ‘‘40 CFR part 52 citation’’

column is revised. 

EPA has determined that today’s rule 

falls under the ‘‘good cause’’ exemption 

in section 553(b)(3)(B) of the 

Administrative Procedures Act (APA) 

which, upon finding ‘‘good cause,’’

authorizes agencies to dispense with 

public participation, and section 

553(d)(3) which allows an agency to 

make a rule effective immediately 

(thereby avoiding the 30-day delayed 

effective date otherwise provided for in 

the APA). Today’s rule simply codifies 

provisions which are already in effect as 

a matter of law in Federal and approved 

State programs. Under section 553 of the 

APA, an agency may find good cause 

where procedures are ‘‘impractical, 

unnecessary, or contrary to the public 

interest.’’ Public comment is 

‘‘unnecessary’’ and ‘‘contrary to the 

public interest’’ since the codification 

only reflects existing law. Immediate 

notice in the CFR benefits the public by 

removing outdated citations and 

incorrect chart entries. 

Statutory and Executive Order Reviews 

A. General Requirements 

Under Executive Order 12866 (58 FR 

51735, October 4, 1993), this action is 

not a ‘‘significant regulatory action’’ and