51758 Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Rules and Regulations 

1Therefore, references to the authority of the 

Secretary of the Treasury under Section 311 of the 

USA PATRIOT Act apply equally to the Director of 

FinCEN. 2 81 FR 78715 (November 9, 2016). 

‘‘1301.24’’ and removing ‘‘1301.21’’ and 

adding in its place ‘‘1301.31’’. 

§ 1301.27 [Amended] 

■ 9. Amend newly redesignated 

§ 1301.27 as follows: 

■ a. In paragraph (b), by removing 

‘‘1301.14’’ and adding in its place 

‘‘1301.24’’. 

■ b. In paragraph (d), by removing 

‘‘1301.11 to 1301.24’’ and adding in its 

place ‘‘1301.21 to 1301.34’’. 

§ 1301.30 [Amended] 

■ 10. Amend newly redesignated 

§ 1301.30 by removing ‘‘1301.11 to 

1301.24’’ and adding in its place 

‘‘1301.21 to 1301.34’’. 

Christopher A. Marsalis, 

Senior Privacy Program Manager Enterprise 

Information Security & Policy, Tennessee 

Valley Authority. 

[FR Doc. 2017–24300 Filed 11–7–17; 8:45 am] 

BILLING CODE 8120–08–P 

DEPARTMENT OF THE TREASURY 

Financial Crimes Enforcement Network 

31 CFR Part 1010 

RIN 1506–AB38 

Imposition of Special Measure Against 

Bank of Dandong as a Financial 

Institution of Primary Money 

Laundering Concern 

AGENCY: Financial Crimes Enforcement 

Network (‘‘FinCEN’’), Treasury. 

ACTION: Final rule. 

SUMMARY: FinCEN is issuing this final 

rule to prohibit covered U.S. financial 

institutions from opening or 

maintaining a correspondent account 

for, or on behalf of, Bank of Dandong 

Co., Ltd. (Bank of Dandong) as a 

financial institution of primary money 

laundering concern pursuant to Section 

311 of the USA PATRIOT Act (Section 

311). The rule further requires covered 

U.S. financial institutions to take 

reasonable steps not to process 

transactions for the correspondent 

account of a foreign banking institution 

in the United States if such a transaction 

involves Bank of Dandong. It also 

requires covered institutions to apply 

special due diligence to their foreign 

correspondent accounts that is 

reasonably designed to guard against 

their use to process transactions 

involving Bank of Dandong. 

DATES: This final rule is effective 

December 8, 2017. 

FOR FURTHER INFORMATION CONTACT: The 

FinCEN Resource Center, (800) 949– 

2732. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory Provisions 

On October 26, 2001, the President 

signed into law the Uniting and 

Strengthening America by Providing 

Appropriate Tools Required to Intercept 

and Obstruct Terrorism Act of 2001, 

Public Law 107–56 (the USA PATRIOT 

Act). Title III of the USA PATRIOT Act 

amended the anti-money laundering 

(AML) provisions of the Bank Secrecy 

Act (BSA), codified at 12 U.S.C. 1829b, 

12 U.S.C. 1951–1959, and 31 U.S.C. 

5311–5314, 5316–5332, to promote the 

prevention, detection, and prosecution 

of international money laundering and 

the financing of terrorism. Regulations 

implementing the BSA appear at 31 CFR 

chapter X. The authority of the 

Secretary of the Treasury (the Secretary) 

to administer the BSA and its 

implementing regulations has been 

delegated to the Director of FinCEN.1

Section 311 of the USA PATRIOT Act 

(Section 311), codified at 31 U.S.C. 

5318A, grants FinCEN the authority, 

upon finding that reasonable grounds 

exist for concluding that a foreign 

jurisdiction, financial institution, class 

of transactions, or type of account is of 

‘‘primary money laundering concern,’’ 

to require domestic financial 

institutions and financial agencies to 

take certain ‘‘special measures’’ to 

address the primary money laundering 

concern. The special measures 

enumerated under Section 311 are 

prophylactic safeguards that protect the 

U.S. financial system from money 

laundering and terrorist financing. 

FinCEN may impose one or more of 

these special measures in order to 

protect the U.S. financial system from 

these threats. Special measures one 

through four, codified at 31 U.S.C. 

5318A(b)(1)–(b)(4), impose additional 

recordkeeping, information collection, 

and reporting requirements on covered 

U.S. financial institutions. The fifth 

special measure, codified at 31 U.S.C. 

5318A(b)(5), allows FinCEN to prohibit 

or impose conditions on the opening or 

maintaining of correspondent or 

payable-through accounts for the 

identified institution by U.S. financial 

institutions. Section 311 identifies 

factors for the Secretary to consider and 

requires consultations with certain 

Federal agencies before making a 

finding that reasonable grounds exist for 

concluding that a jurisdiction, 

institution, class of transactions or type 

of account is of primary money 

laundering concern. The statute also 

provides similar procedures, including 

factors to consider and consultation 

requirements for selecting and imposing 

special measures. 

II. Background on North Korea 

Sanctions Evasion and Bank of 

Dandong 

A. North Korea’s Evasion of Sanctions 

North Korea continues to advance its 

nuclear and ballistic missile programs 

despite international censure and U.S. 

and international sanctions. In response 

to North Korea’s continued actions to 

proliferate weapons of mass destruction 

(WMDs), the United Nations Security 

Council (UNSC) has issued a number of 

United Nations Security Council 

resolutions (UNSCRs), including 1718 

(2006), 1874 (2009), 2087 (2013), 2094 

(2013), 2270 (2016), 2321 (2016), 2371 

(2017), and 2375 (2017) that restrict 

North Korea’s financial and operational 

activities related to its nuclear and 

ballistic missile programs. Additionally, 

Executive Orders 13466, 13551, 13570, 

13687, 13722, and 13810 have been 

issued to impose economic sanctions on 

North Korea pursuant to the 

International Emergency Economic 

Powers Act, and the U.S. Department of 

the Treasury has designated North 

Korean persons for asset freezes 

pursuant to other Executive Orders, 

such as Executive Order 13382, which 

targets WMD proliferators worldwide. 

To further protect the United States 

from North Korea’s illicit financial 

activity, FinCEN has issued multiple 

advisories since 2005 detailing its 

concerns surrounding the deceptive 

financial practices used by North Korea 

and North Korean entities and called on 

U.S. financial institutions to take 

appropriate risk mitigation measures. 

Moreover, on November 9, 2016, 

FinCEN finalized a rule under Section 

311 prohibiting the opening or 

maintaining of correspondent accounts 

in the United States by covered 

financial institutions for, or on behalf of, 

North Korean banks.2 The final rule also 

requires U.S. financial institutions to 

apply additional due diligence measures 

in order to prevent North Korean 

financial institutions from gaining 

improper indirect access to U.S. 

correspondent accounts. The notice of 

finding associated with the final rule 

highlighted North Korea’s use of statecontrolled financial institutions and 


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3 81 FR 35441 (June 2, 2016). 

4 82 FR 31537 (July 7, 2017). 5 82 FR 31543 (July 7, 2017). 

front companies to conduct 

international financial transactions that, 

among other things, support the 

proliferation of its WMD and 

conventional weapons programs.3 As 

explained below, Bank of Dandong 

facilitates such activity through the U.S. 

financial system. 

B. Bank of Dandong 

Established in 1997, Bank of Dandong 

is a small commercial bank located in 

Dandong, China that offers domestic 

and international financial services to 

both individuals and businesses. 

According to commercial database 

research, Bank of Dandong is ranked as 

the 148th-largest financial institution 

out of a total of 196 financial 

institutions in China’s banking sector. 

As discussed further below, FinCEN is 

concerned that Bank of Dandong serves 

as a financial conduit between North 

Korea and the U.S. and international 

financial systems in violation of U.S. 

and UN sanctions. 

III. FinCEN’s Section 311 Rulemaking 

Regarding Bank of Dandong 

A. Finding Regarding Bank of Dandong 

In a Notice of Proposed Rulemaking 

(NPRM) published in the Federal 

Register on July 7, 2017, FinCEN found 

that reasonable grounds exist for 

concluding that Bank of Dandong is a 

financial institution of primary money 

laundering concern pursuant to 31 

U.S.C. 5318A.4

As described in the NPRM, FinCEN 

believes that Bank of Dandong serves as 

a gateway for North Korea to access the 

U.S. and international financial systems 

despite U.S. and UN sanctions. 

Increasing U.S. and international 

sanctions on North Korea have caused 

most banks worldwide to sever their ties 

with North Korean banks, impeding 

North Korea’s ability to gain direct 

access to the global financial system. As 

a result, North Korea uses front 

companies and banks outside North 

Korea to conduct financial transactions, 

including transactions in support of its 

WMD and conventional weapons 

programs. For example, as of midFebruary 2016, North Korea was using 

bank accounts under false names and 

conducting financial transactions 

through banks located in China, Hong 

Kong, and various Southeast Asian 

countries. The primary bank in China 

was Bank of Dandong. 

In early 2016, accounts at Bank of 

Dandong were used to facilitate millions 

of dollars of transactions on behalf of 

companies involved in the procurement 

of ballistic missile technology. This 

includes facilitating financial activity 

for North Korean entities designated by 

the United States and listed by the 

United Nations (UN) for WMD 

proliferation, as well as for front 

companies acting on their behalf. 

Bank of Dandong has, for example, 

facilitated financial activity for Korea 

Mining Development Trading 

Corporation (KOMID), a U.S.- and UNdesignated entity. As of early 2016, a 

front company for KOMID maintained 

multiple bank accounts with Bank of 

Dandong. The President blocked 

KOMID by listing it in the Annex of 

Executive Order 13382 in 2005, and the 

Office of Foreign Assets Control (OFAC) 

designated KOMID pursuant to 

Executive Order 13687 in January 2015 

for being North Korea’s primary arms 

dealer and its main exporter of goods 

and equipment related to ballistic 

missiles and conventional weapons. 

FinCEN is concerned that Bank of 

Dandong uses the U.S. financial system 

to facilitate financial activity for Korea 

Kwangson Banking Corporation (KKBC) 

and KOMID, as well as other entities 

connected to North Korea’s WMD and 

ballistic missile programs. KKBC is a 

U.S.- and UN-designated North Korean 

bank that has provided financial 

services in support of WMD 

proliferators. For example, based on 

FinCEN’s analysis of financial 

transactional data provided to FinCEN 

by U.S. financial institutions pursuant 

to the BSA as well as other information 

available to the agency, FinCEN assesses 

that at least 17 percent of Bank of 

Dandong customer transactions 

conducted through the Bank of 

Dandong’s U.S. correspondent accounts 

from May 2012 to May 2015 were 

conducted by companies that have 

transacted with, or on behalf of, U.S.- 

and UN-sanctioned North Korean 

entities, including designated North 

Korean financial institutions and WMD 

proliferators. In addition, U.S. banks 

have identified a substantial amount of 

suspicious activity processed by Bank of 

Dandong, including: (i) Transactions 

that have no apparent economic, lawful, 

or business purpose and may be tied to 

sanctions evasion; (ii) transactions that 

have a possible North Korean nexus and 

include activity between unidentified 

companies and individuals and 

behavior indicative of shell company 

activity; and (iii) transactions that 

include transfers from offshore accounts 

with apparent shell companies that are 

domiciled in jurisdictions known for 

their financial secrecy and banking in 

another country. 

FinCEN is also concerned that, until 

recently, an entity designated by OFAC 

for its ties to North Korea’s WMD 

proliferation maintained an ownership 

stake in Bank of Dandong. Specifically, 

this entity, Dandong Hongxiang 

Industrial Development Co. Ltd. (DHID), 

maintained a minority ownership 

interest in Bank of Dandong until 

December 2016. The United States 

designated DHID in 2016 for acting for, 

or on behalf of, KKBC. KKBC 

maintained a direct relationship with 

Bank of Dandong since approximately 

2013. FinCEN believes that DHID’s 

ownership stake in Bank of Dandong 

allowed DHID to access the U.S. 

financial system through the bank. 

Based on FinCEN’s analysis of financial 

transactional data provided to FinCEN 

by U.S. financial institutions pursuant 

to the BSA, Bank of Dandong processed 

approximately $56 million through U.S. 

banks for DHID between October 2012 

and December 2014. Even though DHID 

may no longer maintain an ownership 

stake in Bank of Dandong, FinCEN is 

concerned that the close relationship 

between the two entities helped 

establish Bank of Dandong as a prime 

conduit for North Korean activity. 

B. Notice of Proposed Rulemaking 

In the NPRM, FinCEN (1) proposed to 

prohibit covered financial institutions 

from opening or maintaining a 

correspondent account in the United 

States for, or on behalf of, Bank of 

Dandong; (2) proposed to prohibit 

covered financial institutions from 

processing a transaction involving Bank 

of Dandong through the United States 

correspondent account of a foreign 

banking institution; and (3) proposed a 

requirement for covered financial 

institutions to apply special due 

diligence to their foreign correspondent 

accounts that is reasonably designed to 

guard against their use to process 

transactions involving Bank of 

Dandong.5 The comment period for the 

NPRM closed on September 5, 2017. 

As further described below, FinCEN is 

adopting the proposal, with one minor 

definitional change, as a final rule. In so 

doing, FinCEN has considered public 

comments and the relevant statutory 

factors, and has engaged in the required 

consultations prescribed by 31 U.S.C. 

5318A. 

C. Subsequent Developments 

FinCEN is not aware of any steps 

taken by Bank of Dandong or its relevant 

banking regulators to address the money 

laundering issues of concern at Bank of 

Dandong that were noted in the NPRM. 


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6Throughout the rulemaking process, including 

in the issuance of this final rule, FinCEN has 

consulted with relevant departments and agencies 

in accordance with 31 U.S.C. 5318A. 

D. Consideration of Comments 

Following the issuance of the NPRM 

on July 7, 2017, FinCEN opened a 

comment period that closed on 

September 5, 2017. FinCEN received 

two substantive comments; they are 

described below, along with FinCEN’s 

response. 

1. Comment Purporting To Be From 

Bank of Dandong 

In response to the NPRM, FinCEN 

received a comment from an anonymous 

submitter that was signed ‘‘Bank of 

Dandong.’’ Because no further 

information was provided, FinCEN is 

unable to confirm whether the comment 

was, in fact, submitted by Bank of 

Dandong. The submitter disagreed with 

FinCEN’s determination in the NPRM 

and stated ‘‘we do not believe that Bank 

of Dandong is being used to facilitate or 

promote money laundering, including 

by entities involved in the proliferation 

of weapons of mass destruction or 

missiles.’’ The submitter claimed to take 

FinCEN’s ‘‘allegations very seriously,’’ 

and further stated that ‘‘we immediately 

began to research the relevant facts 

surrounding the allegations made in the 

NPRM.’’ The submitter stated that it had 

found, ‘‘during our preliminary review 

that certain key aspects of the 

allegations do not match the reality of 

the situation.’’ For these reasons, the 

submitter requested that FinCEN hold 

this matter ‘‘in abeyance and not act on 

the NPRM’’ until the ‘‘misunderstanding 

about our bank and our business have 

been corrected.’’ 

Regardless of the true identity of the 

commenter, the comment does not allay 

FinCEN’s concerns about Bank of 

Dandong. As outlined in the NPRM, 

FinCEN has a reasonable basis for its 

concern that Bank of Dandong is being 

used for money laundering and 

proliferation financing. Although the 

submitter has claimed to have 

conducted a preliminary review that 

differs from FinCEN’s findings in 

certain key aspects, the submitter has 

not provided any specific information or 

documentation regarding the review, or 

even identified any of the key aspects 

that it claims to have found to be 

contrary to the NPRM. 

2. Comment From SIFMA 

The Securities and Financial Markets 

Association (SIFMA) submitted a 

comment that requested several 

clarifications and modifications to the 

proposed rulemaking with respect to 

Bank of Dandong. In particular, SIFMA 

requested that FinCEN: (1) Identify all 

known subsidiaries, branches, and 

offices of Bank of Dandong; (2) modify 

the proposed rule text to explicitly 

provide that the reasonable, risk-based 

procedures apply to identifying 

branches, offices, and subsidiaries of 

Bank of Dandong; (3) eliminate the 

notice provision of the special due 

diligence requirement; and (4) eliminate 

a reference to ‘‘agent’’ from the 

definition of ‘‘Bank of Dandong.’’ 

SIFMA requested that FinCEN amend 

the proposed regulatory text to 

explicitly provide that the reasonable, 

risk-based procedures apply to 

identifying branches, offices, and 

subsidiaries of Bank of Dandong. 

FinCEN believes that the current 

regulatory text is sufficient, as the 

definition of Bank of Dandong includes 

the branches, offices, and subsidiaries of 

Bank of Dandong. While FinCEN does 

not believe that it is necessary to amend 

the text of the rule, FinCEN agrees that 

covered financial institutions should 

use reasonable, risk-based procedures in 

identifying branches, offices, and 

subsidiaries of Bank of Dandong. 

SIFMA has requested that FinCEN 

eliminate the requirement to provide 

notice to foreign correspondent 

accounts, arguing that compliance with 

the requirement would require 

substantial time and expense involved 

in providing notice to foreign banks. 

While providing the required notice 

does impose a cost on U.S. financial 

institutions, FinCEN assesses this 

burden at one hour per institution. 

Additionally, FinCEN notes that the 

requirement applies only to those 

covered financial institutions that know 

or have reason to believe that their 

foreign correspondents are transacting 

with Bank of Dandong. FinCEN does not 

consider this to be an undue burden. In 

the NPRM, FinCEN addressed the 

burden associated with the rule and 

determined that providing the notice to 

foreign institutions would not impose a 

significant additional economic burden 

upon small U.S. financial institutions. 

FinCEN believes that the compliance 

burden associated with the rule is 

justified by the threat Bank of Dandong 

poses to the U.S. financial system. 

Lastly, SIFMA argues that FinCEN has 

not previously identified ‘‘agents’’ in a 

special measure currently in effect 

against a financial institution, and that 

‘‘agent’’ is a legal term with different 

meanings, and its intended use in the 

context of Bank of Dandong is unclear. 

Additionally, SIFMA argues that it is 

unclear how financial institutions 

should interpret this definition, or how 

an agent would be identified. 

In connection with finalizing this 

rulemaking, and in light of the robust 

U.S. and international sanctions 

targeting illicit North Korean activity, 

FinCEN believes that the prohibitions 

set forth in the final rule are sufficient 

to protect the U.S. financial system from 

the threat posed by Bank of Dandong. In 

addition, the U.S. Department of the 

Treasury retains the ability to target any 

financial institution or others that might 

aid Bank of Dandong in evading the 

prohibitions set forth in the final rule. 

As such, in this final rule, FinCEN has 

removed ‘‘agents’’ from the definition of 

‘‘Bank of Dandong.’’ Therefore, it is not 

necessary for FinCEN to address the 

points that SIFMA has raised with 

regard to the use of this term. Regarding 

SIFMA’s request that FinCEN provide a 

list of known subsidiaries, branches, 

and offices of Bank of Dandong, FinCEN 

notes that commercially available 

information listing the known 

subsidiaries, branches, and offices of 

Bank of Dandong was provided and 

posted along with the NPRM for public 

consideration during the comment 

period. This information appears as 

Exhibits 2 and 41 posted on 

www.regulations.gov concerning the 

Bank of Dandong NPRM. 

E. Summary of FinCEN’s Ongoing 

Concerns Regarding Bank of Dandong 

After considering comments received 

from the public, as well as other 

information available to the agency, 

including both public and non-public 

information, FinCEN is issuing this rule 

imposing a prohibition on U.S. financial 

institutions from opening or 

maintaining a correspondent account 

for, or on behalf of, Bank of Dandong. 

The information available to FinCEN 

provides reason to conclude that the 

money laundering risks posed by Bank 

of Dandong have not been mitigated, 

and that Bank of Dandong has not 

addressed FinCEN’s concerns as 

described in the NPRM. FinCEN thus 

finds that Bank of Dandong continues to 

be a financial institution of primary 

money laundering concern. 

IV. Imposition of a Special Measure 

Against Bank of Dandong as a 

Financial Institution of Primary Money 

Laundering Concern 

Based upon this finding, FinCEN is 

authorized to impose one or more 

special measures. Following the 

required consultations and the 

consideration of all relevant factors 

discussed in the NPRM, FinCEN 

proposed a prohibition under the fifth 

special measure.6

After the comment period closed, 

FinCEN considered all of the special 


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7See United Nations Security Council Resolution 

(‘‘UNSCR’’) 1718 (http://www.un.org/en/ga/search/ 

view_doc.asp?symbol=S/RES/1718(2006)). 

8See UNSCR 1874 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/1874(2009)). 

9See UNSCR 2087 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/2087(2013)). 

10See UNSCR 2094 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/2094(2013)). 

11See UNSCR 2270 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/2270(2016)). 

12See UNSCR 2321 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/2321(2016)). 

13See UNSCR 2371 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/2371(2017)). 

14See UNSCR 2375 (http://www.un.org/en/ga/ 

search/view_doc.asp?symbol=S/RES/2375(2017)). 

15See UNSCR 2270. 

16See UNSCR 2321. 

17See UNSCR 2371. 

18See UNSCR 2375. 

measures, as well as measures short of 

a prohibition, and has concluded that a 

prohibition under the fifth special 

measure is still the appropriate choice. 

Consistent with the finding that Bank of 

Dandong is a financial institution of 

primary money laundering concern, and 

in consideration of additional relevant 

factors, this final rule imposes a 

prohibition on the opening or 

maintaining of correspondent accounts 

by covered financial institutions for, or 

on behalf of, Bank of Dandong. This 

prohibition will help guard against the 

money laundering and WMD 

proliferation finance risks to the U.S. 

financial system posed by Bank of 

Dandong, as identified in the NPRM and 

this final rule. 

A. Discussion of Section 311 Factors 

In determining which special measure 

to implement to address the finding that 

Bank of Dandong is of primary money 

laundering concern described in the 

NPRM, FinCEN considered the 

following factors: 

1. Whether Similar Action Has Been or 

Will Be Taken by Other Nations or 

Multilateral Groups Against Bank of 

Dandong 

Subsequent to FinCEN’s finding on 

July 7, 2017, the Government of Japan 

designated Bank of Dandong on July 28, 

2017. Additionally, the Government of 

South Korea issued an advisory on 

August 28, 2017, warning South Korean 

firms about the dangers of doing 

business with Bank of Dandong, and 

that conducting business with the bank 

may restrict their access to the U.S. 

financial system. 

Furthermore, FinCEN’s action is 

consistent with steps taken by the 

international community to address 

illicit financial activity tied to North 

Korea. Between 2006 and 2017, the 

United Nations Security Council has 

adopted multiple resolutions, 1718,7

1874,8 2087,9 2094,10 2270,11 2321,12

2371,13 and 2375 14 which generally 

restrict North Korea’s financial and 

operational activities related to its 

nuclear and missile programs and 

conventional arms sales. In particular, 

UNSCR 2270, which imposes additional 

sanctions on North Korea in response to 

a January 6, 2016 nuclear test and 

February 7, 2016 launch using ballistic 

missile technology, contains provisions 

that generally require nations to: (1) 

Prohibit North Korean banks from 

opening branches in their territory or 

engaging in certain correspondent 

relationships with these banks; (2) 

terminate existing representative offices 

or subsidiaries, branches, and 

correspondent accounts with North 

Korean banks; (3) prohibit their 

financial institutions from opening new 

representative offices or subsidiaries, 

branches, or bank accounts in North 

Korea; and (4) close existing 

representative offices or subsidiaries, 

branches, or bank accounts in North 

Korea if reasonable grounds exist to 

believe such financial services could 

contribute to North Korea’s nuclear or 

missile programs, or UNSCR 

violations.15 Additionally, UNSCR 

2321, unanimously adopted by the 

UNSC in November 2016, requires, 

among other things, nations to close 

existing representative offices or 

subsidiaries, branches, or bank accounts 

in North Korea within 90 days, and 

expel individuals working on behalf of, 

or at the direction of, a North Korean 

bank or financial institution.16 UNSCR 

2371, unanimously adopted by the 

UNSC in August 2017, requires, among 

other things, nations to prohibit the 

clearing of funds on behalf of North 

Korea through their territories.17

UNSCR 2375, unanimously adopted by 

the UNSC in September 2017, prohibits, 

among other things, the opening, 

maintenance, and operation of all joint 

ventures or cooperative entities, new 

and existing, with DPRK entities.18

Similarly, the Financial Action Task 

Force (FATF) has emphasized its 

concerns regarding the threat posed by 

North Korea’s illicit activities related to 

the proliferation of WMDs and related 

financing. Reiterating the UNSCR 

requirements, the FATF called upon its 

members and urged all jurisdictions to 

take the necessary measures to close 

existing branches, subsidiaries, and 

representative offices of North Korean 

banks within their territories and 

terminate correspondent relationships 

with North Korean banks, where 

required by relevant UNSCRs. 

Despite these actions, North Korea 

continues to access the U.S. and 

international financial systems through 

front companies and other surreptitious 

means. It is necessary to protect the U.S. 

financial system, directly and indirectly, 

from banks like Bank of Dandong that 

facilitate such access. Moreover, given 

the interconnectedness of the global 

financial system, the potential for Bank 

of Dandong to access the U.S. financial 

system indirectly, including through the 

use of nested correspondent accounts, 

exposes the U.S. financial system to the 

risks associated with conducting 

transactions with entities operating for, 

or on behalf of, North Korea. 

2. Whether the Imposition of the Fifth 

Special Measure Would Create a 

Significant Competitive Disadvantage, 

Including Any Undue Cost or Burden 

Associated With Compliance, for 

Financial Institutions Organized or 

Licensed in the United States 

A prohibition under the fifth special 

measure should not cause a significant 

competitive disadvantage or place an 

undue cost or burden on U.S. financial 

institutions. Pursuant to sanctions 

administered by OFAC, U.S. financial 

institutions are currently subject to a 

range of prohibitions related to financial 

activity involving North Korea. 

Accordingly, a prohibition on covered 

financial institutions from opening or 

maintaining correspondent accounts for, 

or on behalf of, a bank that facilitates 

North Korean financial activity should 

not create any competitive disadvantage 

for U.S. financial institutions. 

Similarly, the final rule’s due 

diligence obligations should not create 

any undue costs or burden on U.S. 

financial institutions. U.S. financial 

institutions already generally have 

systems in place to screen transactions 

in order to identify and report 

suspicious activity and comply with the 

sanctions programs administered by 

OFAC. Institutions can modify these 

systems to detect transactions involving 

Bank of Dandong. While there may be 

some additional burden in conducting 

due diligence on foreign correspondent 

account holders and notifying them of 

the prohibition (as described below), 

any such burden will likely be minimal, 

and certainly not undue, given the 

national security threat posed by Bank 

of Dandong’s facilitation of activity for 

front companies associated with North 

Korea, some of which are involved in 

activities that support the proliferation 

of WMD or missiles. 


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19See 31 CFR 1010.605(c)(2)(i). 

3. The Extent to Which the Action or 

Timing of the Action Will Have a 

Significant Adverse Systemic Impact on 

the International Payment, Clearance, 

and Settlement System, or on Legitimate 

Business Activities of Bank of Dandong 

Bank of Dandong is a relatively small 

financial institution in China’s banking 

sector, is not a major participant in the 

international payment system, and is 

not relied upon by the international 

banking community for clearance or 

settlement services. Therefore, a 

prohibition under the fifth special 

measure with respect to Bank of 

Dandong will not have an adverse 

systemic impact on the international 

payment, clearance, and settlement 

system. 

FinCEN also considered the extent to 

which this action could have an impact 

on the legitimate business activities of 

Bank of Dandong and has concluded 

that the need to protect the U.S. 

financial system from banks that 

facilitate North Korea’s illicit financial 

activity strongly outweighs any such 

impact. Financial transactional data 

provided to FinCEN by U.S. financial 

institutions pursuant to the BSA 

indicates that Bank of Dandong’s 

financial activity conducted through its 

U.S. correspondent accounts has 

consisted largely of letters of credit 

satisfaction, invoice payments, currency 

exchange activity, and transfers between 

individuals, which could be indicative 

of legitimate business activity. 

Nonetheless, FinCEN assesses that this 

financial activity also includes 

transactions conducted by companies 

that have transacted with, or on behalf 

of, entities that threaten the national 

security of the United States. 

The NPRM stated that Bank of 

Dandong maintained euro, Japanese 

yen, Hong Kong dollar, pound sterling, 

and Australian dollar correspondent 

accounts. Subsequent to the publication 

of the NPRM, commercially available 

databases indicate that Bank of Dandong 

may no longer have correspondent 

accounts in any currency. While these 

accounts may no longer continue to 

exist, the fifth special measure would 

not prevent Bank of Dandong from 

conducting legitimate business activities 

in foreign currencies so long as such 

activity does not involve a 

correspondent account maintained in 

the United States. 

4. The Effect of the Action on United 

States National Security and Foreign 

Policy 

Excluding from the U.S. financial 

system foreign banks that serve as 

conduits for significant money 

laundering activity, for the financing of 

WMDs or their delivery systems, and for 

other financial crimes, enhances 

national security by making it more 

difficult for proliferators and money 

launderers to access the U.S. financial 

system. North Korea is a top national 

security concern, and Bank of Dandong 

has been used to facilitate financial 

activity related to North Korean entities 

designated by the United States and 

United Nations for their involvement in 

WMD proliferation. Imposing this rule 

serves as an additional measure to 

prevent North Korea from accessing the 

U.S. financial system and will both 

support and uphold U.S. national 

security and foreign policy goals. A 

prohibition under the fifth special 

measure will also complement the U.S. 

Government’s worldwide efforts to 

expose and disrupt international money 

laundering. 

B. Consideration of Alternative Special 

Measures 

Under Section 311, special measures 

one through four enable FinCEN to 

impose additional recordkeeping, 

information collection, and information 

reporting requirements on covered 

financial institutions. The fifth special 

measure enables FinCEN to impose 

conditions as an alternative to a 

prohibition on the opening or 

maintaining of correspondent accounts. 

FinCEN considered these alternatives to 

a prohibition under the fifth special 

measure, but FinCEN believes that a 

prohibition under the fifth special 

measure will most effectively safeguard 

the U.S. financial system from the illicit 

finance risks posed by Bank of Dandong. 

North Korea is subject to numerous 

U.S. and UN sanctions, and it has also 

been consistently identified by the 

Financial Action Task Force for its antimoney laundering deficiencies. 

Furthermore, FinCEN has issued 

multiple advisories since 2005 detailing 

its concerns surrounding the deceptive 

financial practices used by North Korea 

and North Korean entities and calling 

on U.S. financial institutions to take 

appropriate risk mitigation measures. 

Despite these measures, North Korea 

continues to access the international 

financial system to support its WMD 

and conventional weapons programs 

through its use of aliases, agents, foreign 

individuals in multiple jurisdictions, 

and a long-standing network of front 

companies. Given Bank of Dandong’s 

apparent disregard for numerous 

international calls to prevent North 

Korean illicit financial activity, FinCEN 

does not believe that any condition, 

additional recordkeeping requirement, 

or reporting requirement would be an 

effective measure to safeguard the U.S. 

financial system. Such measures will 

not prevent Bank of Dandong from 

accessing, directly or indirectly, the 

correspondent accounts of U.S. financial 

institutions, thus leaving the U.S. 

financial system vulnerable to 

processing illicit transfers that pose a 

national security risk. In addition, no 

recordkeeping requirement or 

conditions on correspondent accounts 

would be sufficient to guard against the 

risks posed by a bank that processes 

transactions that are designed to obscure 

the involvement of North Korea, and are 

ultimately for the benefit of sanctioned 

entities. Therefore, a prohibition under 

the fifth special measure is the only 

special measure that can adequately 

protect the U.S. financial system from 

the illicit finance risks posed by Bank of 

Dandong. 

V. Section-by-Section Analysis for 

Imposition of a Prohibition Under the 

Fifth Special Measure 

1010.660(a)—Definitions 

1. Bank of Dandong 

The final rule defines ‘‘Bank of 

Dandong’’ to mean all subsidiaries, 

branches, and offices of Bank of 

Dandong Co., Ltd. operating in any 

jurisdiction. 

2. Correspondent Account 

The final rule defines ‘‘Correspondent 

account’’ to have the same meaning as 

the definition contained in 31 CFR 

1010.605(c)(1)(ii). In the case of a U.S. 

depository institution, this broad 

definition includes most types of 

banking relationships between a U.S. 

depository institution and a foreign 

bank that are established to provide 

regular services, dealings, and other 

financial transactions, including a 

demand deposit, savings deposit, or 

other transaction or asset account, and 

a credit account or other extension of 

credit. FinCEN is using the same 

definition of ‘‘account’’ for purposes of 

this final rule as was established for 

depository institutions in the final rule 

implementing the provisions of Section 

312 of the USA PATRIOT Act requiring 

enhanced due diligence for 

correspondent accounts maintained for 

certain foreign banks.19 Under this 

definition, ‘‘payable through accounts’’ 

are a type of correspondent account. 

In the case of securities brokerdealers, futures commission merchants, 

introducing brokers-commodities, and 

investment companies that are open-end 

companies (‘‘mutual funds’’), FinCEN is 

also using the same definition of 


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Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Rules and Regulations 51763 

20See 31 CFR 1010.605(c)(2)(ii)–(iv). 

21Table of Small Business Size Standards 

Matched to North American Industry Classification 

System Codes, Small Business Administration Size 

Continued 

‘‘account’’ for purposes of this final rule 

as was established for these entities in 

the final rule implementing the 

provisions of Section 312 of the USA 

PATRIOT Act requiring enhanced due 

diligence for correspondent accounts 

maintained for certain foreign banks.20

3. Covered Financial Institution 

The final rule defines ‘‘covered 

financial institution’’ with the same 

definition used in the final rule 

implementing the provisions of Section 

312 of the USA PATRIOT Act, which in 

general includes the following: 

• An insured bank (as defined in 

section 3(h) of the Federal Deposit 

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

• a commercial bank; 

• an agency or branch of a foreign 

bank in the United States; 

• a Federally insured credit union; 

• a savings association; 

• a corporation acting under section 

25A of the Federal Reserve Act (12 

U.S.C. 611); 

• a trust bank or trust company; 

• a broker or dealer in securities; 

• a futures commission merchant or 

an introducing broker-commodities; and 

• a mutual fund. 

4. Foreign Banking Institution 

The final rule defines ‘‘foreign 

banking institution’’ to mean a bank 

organized under foreign law, or an 

agency, branch, or office located outside 

the United States of a bank. The term 

does not include an agent, agency, 

branch, or office within the United 

States of a bank organized under foreign 

law. This is consistent with the 

definition of ‘‘foreign bank’’ under 31 

CFR 1010.100(u). 

5. Subsidiary 

The final rule defines ‘‘subsidiary’’ to 

mean a company of which more than 50 

percent of the voting stock or analogous 

equity interest is owned by another 

company. 

1010.660(b)—Prohibition on Accounts 

and Due Diligence Requirements for 

Covered Financial Institutions 

1. Prohibition on Opening or 

Maintaining Correspondent Accounts 

Section 1010.660(b)(1) and (2) of this 

final rule prohibits covered financial 

institutions from opening or 

maintaining in the United States a 

correspondent account for, or on behalf 

of, Bank of Dandong. It also requires 

covered financial institutions to take 

reasonable steps not to process a 

transaction for the correspondent 

account of a foreign banking institution 

in the United States if such a transaction 

involves Bank of Dandong. Such 

reasonable steps are described in 

§ 1010.660(b)(3), which sets forth the 

special due diligence requirements a 

covered financial institution will be 

required to take when it knows or has 

reason to believe that a transaction 

involves Bank of Dandong. 

2. Special Due Diligence for 

Correspondent Accounts 

As a corollary to the prohibition set 

forth in § 1010.660(b)(1) and (2), 

§ 1010.660(b)(3) of the final rule 

requires covered financial institutions to 

apply special due diligence to all of 

their foreign correspondent accounts 

that is reasonably designed to guard 

against such accounts being used to 

process transactions involving Bank of 

Dandong. As part of that special due 

diligence, covered financial institutions 

are required to notify those foreign 

correspondent account holders that the 

covered financial institutions know or 

have reason to believe provide services 

to Bank of Dandong that such 

correspondents may not provide Bank of 

Dandong with access to the 

correspondent account maintained at 

the covered financial institution. A 

covered financial institution may satisfy 

this notification requirement using the 

following notice: 

Notice: Pursuant to U.S. regulations issued 

under Section 311 of the USA PATRIOT Act, 

see 31 CFR 1010.660, we are prohibited from 

opening or maintaining in the United States 

a correspondent account for, or on behalf of, 

Bank of Dandong. The regulations also 

require us to notify you that you may not 

provide Bank of Dandong, including any of 

its subsidiaries, branches, and offices with 

access to the correspondent account you hold 

at our financial institution. If we become 

aware that the correspondent account you 

hold at our financial institution has 

processed any transactions involving Bank of 

Dandong, including any of its subsidiaries, 

branches, and offices we will be required to 

take appropriate steps to prevent such access, 

including terminating your account. 

The purpose of the notice requirement 

is to aid cooperation with correspondent 

account holders in preventing 

transactions involving Bank of Dandong 

from accessing the U.S. financial 

system. FinCEN does not require or 

expect a covered financial institution to 

obtain a certification from any of its 

correspondent account holders that 

access will not be provided to comply 

with this notice requirement. 

Methods of compliance with the 

notice requirement could include, for 

example, transmitting a notice by mail, 

fax, or email. The notice should be 

transmitted whenever a covered 

financial institution knows or has 

reason to believe that a foreign 

correspondent account holder provides 

services to Bank of Dandong. 

Special due diligence also includes 

implementing risk-based procedures 

designed to identify any use of 

correspondent accounts to process 

transactions involving Bank of Dandong. 

A covered financial institution is 

expected to apply an appropriate 

screening mechanism to identify a funds 

transfer order that on its face listed Bank 

of Dandong as the financial institution 

of the originator or beneficiary, or 

otherwise referenced Bank of Dandong 

in a manner detectable under the 

financial institution’s normal screening 

mechanisms. An appropriate screening 

mechanism could be the mechanisms 

used by a covered financial institution 

to comply with various legal 

requirements, such as the commercially 

available software programs used to 

comply with the economic sanctions 

programs administered by OFAC. 

3. Recordkeeping and Reporting 

Section 1010.660(b)(4) of the final 

rule clarifies that the rule does not 

impose any reporting requirement upon 

any covered financial institution that is 

not otherwise required by applicable 

law or regulation. A covered financial 

institution must, however, document its 

compliance with the notification 

requirement described above. 

VI. Regulatory Flexibility Act 

When an agency issues a final rule, 

the Regulatory Flexibility Act (‘‘RFA’’) 

requires the agency to ‘‘prepare and 

make available for public comment an 

initial regulatory flexibility analysis’’ 

that will ‘‘describe the impact of the 

final rule on small entities.’’ (5 U.S.C. 

603(a)). Section 605 of the RFA allows 

an agency to certify a rule, in lieu of 

preparing an analysis, if the final rule is 

not expected to have a significant 

economic impact on a substantial 

number of small entities. 

A. Prohibition on Covered Financial 

Institutions From Opening or 

Maintaining Correspondent Accounts 

With Certain Foreign Banks Under the 

Fifth Special Measure 

1. Estimate of the Number of Small 

Entities to Whom the Fifth Special 

Measure Will Apply 

For purposes of the RFA, both banks 

and credit unions are considered small 

entities if they have less than 

$550,000,000 in assets.21 Of the 


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51764 Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Rules and Regulations 

Standards (SBA Feb. 26, 2016) [hereinafter ‘‘SBA 

Size Standards’’]. (https://www.sba.gov/sites/ 

default/files/files/Size_Standards_Table.pdf). 22Federal Deposit Insurance Corporation, Find an 

Institution, http://www5.fdic.gov/idasp/ 

advSearchLanding.asp;select Status Dates 

Financials: Total Assets, type Equal or less than $: 

‘‘550000,000’’ and select Find. 23National Credit Union Administration, Credit 

Union Data, http://webapps.ncua.gov/ 

customquery/; select Search Fields: Total Assets, 

select Operator: Less than or equal to, type Field 

Values: ‘‘550000000’’ and select Go. 

24 17 CFR 240.0–10(c). 

25 76 FR 37572, 37602 (June 27, 2011) (the SEC 

estimates 871 small broker-dealers of the 5,063 total 

registered broker-dealers). 

26 47 FR 18618, 18619 (Apr. 30, 1982). 

27SBA Size Standards at 28. 

28 17 CFR 270.0–10. 

29 78 FR 23637, 23658 (April 19, 2013). 

estimated 5,787 banks, 99 percent of 

institutions have less than $550,000,000 

in assets and are considered small 

entities.22 Of the estimated 5,696 credit 

unions, 91 percent have less than 

$550,000,000 in assets.23

Broker-dealers are defined in 31 CFR 

1010.100(h) as those broker-dealers 

required to register with the Securities 

and Exchange Commission (SEC). For 

the purposes of the RFA, FinCEN relies 

on the SEC’s definition of small 

business as previously submitted to the 

Small Business Administration (SBA). 

The SEC has defined the term small 

entity to mean a broker or dealer that: 

(1) Had total capital (net worth plus 

subordinated liabilities) of less than 

$500,000 on the date in the prior fiscal 

year as of which its audited financial 

statements were prepared pursuant to 

Rule 17a–5(d) or, if not required to file 

such statements, a broker or dealer that 

had total capital (net worth plus 

subordinated debt) of less than $500,000 

on the last business day of the preceding 

fiscal year (or in the time that it has 

been in business if shorter); and (2) is 

not affiliated with any person (other 

than a natural person) that is not a small 

business or small organization as 

defined in this release.24 Based on SEC 

estimates, 17 percent of broker-dealers 

are classified as small entities for 

purposes of the RFA.25

Futures commission merchants 

(FCMs) are defined in 31 CFR 

1010.100(x) as those FCMs that are 

registered or required to be registered as 

a FCM with the Commodity Futures 

Trading Commission (CFTC) under the 

Commodity Exchange Act (CEA), except 

persons who register pursuant to section 

4f(a)(2) of the CEA, 7 U.S.C. 6f(a)(2). 

Because FinCEN and the CFTC regulate 

substantially the same population, for 

the purposes of the RFA, FinCEN relies 

on the CFTC’s definition of small 

business as previously submitted to the 

SBA. In the CFTC’s ‘‘Policy Statement 

and Establishment of Definitions of 

‘Small Entities’ for Purposes of the 

Regulatory Flexibility Act,’’ the CFTC 

concluded that registered FCMs should 

not be considered to be small entities for 

purposes of the RFA.26 The CFTC’s 

determination in this regard was based, 

in part, upon the obligation of registered 

FCMs to meet the capital requirements 

established by the CFTC. 

For purposes of the RFA, an 

introducing broker-commodities dealer 

is considered small if it has less than 

$35,500,000 in gross receipts 

annually.27 Based on information 

provided by the National Futures 

Association, 95 percent of introducing 

brokers-commodities dealers have less 

than $35.5 million in adjusted net 

capital and are considered to be small 

entities. 

Mutual funds are defined in 31 CFR 

1010.100(gg) as those investment 

companies that are open-end investment 

companies that are registered or are 

required to register with the SEC. For 

the purposes of the RFA, FinCEN relies 

on the SEC’s definition of small 

business as previously submitted to the 

SBA. The SEC has defined the term 

‘‘small entity’’ under the Investment 

Company Act to mean ‘‘an investment 

company that, together with other 

investment companies in the same 

group of related investment companies, 

has net assets of $50 million or less as 

of the end of its most recent fiscal 

year.’’ 28 Based on SEC estimates, seven 

percent of mutual funds are classified as 

‘‘small entities’’ for purposes of the RFA 

under this definition.29

As noted above, 99 percent of banks, 

91 percent of credit unions, 17 percent 

of broker-dealers, 95 percent of 

introducing broker-commodities 

dealers, no FCMs, and seven percent of 

mutual funds are small entities. 

2. Description of the Projected Reporting 

and Recordkeeping Requirements of the 

Fifth Special Measure 

The prohibition under the fifth 

special measure could require covered 

financial institutions to provide a 

notification intended to aid cooperation 

from foreign correspondent account 

holders in preventing transactions 

involving Bank of Dandong from being 

processed by the U.S. financial system. 

FinCEN estimates that the burden on 

institutions providing this notice is one 

hour. 

Covered financial institutions are also 

required to take reasonable measures to 

detect use of their correspondent 

accounts to process transactions 

involving Bank of Dandong. All U.S. 

persons, including U.S. financial 

institutions, currently must comply 

with OFAC sanctions, and U.S. financial 

institutions have suspicious activity 

reporting requirements. The systems 

that U.S. financial institutions have in 

place to comply with these 

requirements can easily be modified to 

adapt to this final rule. Thus, the special 

due diligence that is required under the 

final rule—i.e., preventing the 

processing of transactions involving 

Bank of Dandong and the transmittal of 

notice to certain correspondent account 

holders—does not impose a significant 

additional economic burden upon small 

U.S. financial institutions. 

B. Certification 

For these reasons, FinCEN certifies 

that this final rulemaking should not 

have a significant impact on a 

substantial number of small businesses. 

VII. Paperwork Reduction Act 

The collection of information 

contained in this rule is being submitted 

to the Office of Management and Budget 

(OMB) for review in accordance with 

the Paperwork Reduction Act of 1995 

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

assigned OMB Control Number 1506– 

0072. 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 OMB control 

number. 

A. Information Collection Under the 

Fifth Special Measure 

The notification requirement in 

§ 1010.660(b)(3)(i)(A) is intended to aid 

cooperation from correspondent account 

holders in denying Bank of Dandong 

access to the U.S. financial system. The 

information required to be maintained 

by § 1010.660(b)(4)(i) will be used by 

federal agencies and certain selfregulatory organizations to verify 

compliance by covered financial 

institutions with the provisions of 31 

CFR 1010.660. The collection of 

information is mandatory. 

Description of Affected Financial 

Institutions: Banks, broker-dealers in 

securities, futures commission 

merchants and introducing brokerscommodities, money services 

businesses, and mutual funds. 

Estimated Number of Affected 

Financial Institutions: 5,787. 

Estimated Average Annual Burden in 

Hours per Affected Financial 

Institution: The estimated average 

burden associated with the collection of 

information in this rule is one hour per 

affected financial institution. 

Estimated Total Annual Burden: 

5,787 hours. 


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Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Rules and Regulations 51765 

VIII. Executive Order 12866 

Executive Orders 12866 and 13563 

direct agencies to assess costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. It has been 

determined that this rule is not a 

‘‘significant regulatory action’’ for 

purposes of Executive Order 12866. 

List of Subjects in 31 CFR Part 1010 

Administrative practice and 

procedure, Banks and banking, Brokers, 

Counter-money laundering, Counterterrorism, Foreign banking. 

Authority and Issuance 

For the reasons set forth in the 

preamble, part 1010, chapter X of title 

31 of the Code of Federal Regulations, 

is amended as follows: 

PART 1010—GENERAL PROVISIONS 

■ 1. The authority citation for part 1010 

is revised 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; sec. 

701, Pub. L. 114–74, 129 Stat. 599. 

■ 2. Add § 1010.660 to read as follows: 

§ 1010.660 Special measures against Bank 

of Dandong. 

(a) Definitions. For purposes of this 

section: 

(1) Bank of Dandong means all 

subsidiaries, branches, and offices of 

Bank of Dandong Co., Ltd. operating in 

any jurisdiction. 

(2) Correspondent account has the 

same meaning as provided in 

§ 1010.605(c)(1)(ii). 

(3) Covered financial institution has 

the same meaning as provided in 

§ 1010.605(e)(1). 

(4) Foreign banking institution means 

a bank organized under foreign law, or 

an agency, branch, or office located 

outside the United States of a bank. The 

term does not include an agent, agency, 

branch, or office within the United 

States of a bank organized under foreign 

law. 

(5) Subsidiary means a company of 

which more than 50 percent of the 

voting stock or analogous equity interest 

is owned by another company. 

(b) Prohibition on accounts and due 

diligence requirements for covered 

financial institutions—(1) Opening or 

maintaining correspondent accounts for 

Bank of Dandong. A covered financial 

institution shall not open or maintain in 

the United States a correspondent 

account for, or on behalf of, Bank of 

Dandong. 

(2) Prohibition on use of 

correspondent accounts involving Bank 

of Dandong. A covered financial 

institution shall take reasonable steps 

not to process a transaction for the 

correspondent account of a foreign 

banking institution in the United States 

if such a transaction involves Bank of 

Dandong. 

(3) Special due diligence of 

correspondent accounts to prohibit use. 

(i) A covered financial institution shall 

apply special due diligence to its foreign 

correspondent accounts that is 

reasonably designed to guard against 

their use to process transactions 

involving Bank of Dandong. At a 

minimum, that special due diligence 

must include: 

(A) Notifying those foreign 

correspondent account holders that the 

covered financial institution knows or 

has reason to believe provide services to 

Bank of Dandong that such 

correspondents may not provide Bank of 

Dandong with access to the 

correspondent account maintained at 

the covered financial institution; and 

(B) Taking reasonable steps to identify 

any use of its foreign correspondent 

accounts by Bank of Dandong, to the 

extent that such use can be determined 

from transactional records maintained 

in the covered financial institution’s 

normal course of business. 

(ii) A covered financial institution 

shall take a risk-based approach when 

deciding what, if any, other due 

diligence measures it reasonably must 

adopt to guard against the use of its 

foreign correspondent accounts to 

process transactions involving Bank of 

Dandong. 

(iii) A covered financial institution 

that knows or has reason to believe that 

a foreign bank’s correspondent account 

has been or is being used to process 

transactions involving Bank of Dandong 

shall take all appropriate steps to further 

investigate and prevent such access, 

including the notification of its 

correspondent account holder under 

paragraph (b)(3)(i)(A) of this section 

and, where necessary, termination of the 

correspondent account. 

(4) Recordkeeping and reporting. (i) A 

covered financial institution is required 

to document its compliance with the 

notice requirement set forth in 

paragraph (b)(3)(i)(A) of this section. 

(ii) Nothing in this paragraph (b) shall 

require a covered financial institution to 

report any information not otherwise 

required to be reported by law or 

regulation. 

Dated: November 2, 2017. 

Jamal El-Hindi, 

Acting Director, Financial Crimes 

Enforcement Network. 

[FR Doc. 2017–24238 Filed 11–7–17; 8:45 am] 

BILLING CODE 4810–02–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket No. USCG–2017–0972] 

Special Local Regulations; Key West 

World Championship, Atlantic Ocean, 

Key West, FL 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of enforcement of 

regulation. 

SUMMARY: The Coast Guard will enforce 

the Key West World Championship 

Special Local Regulation from 9:30 a.m. 

until 4:30 p.m. on November 8, 10, and 

12, 2017. This action is necessary to 

ensure safety of life on navigable waters 

of the United States and to protect race 

participants, participant vessels, 

spectators, and the general public from 

the hazards associated with high-speed 

boat races. During the enforcement 

period, and in accordance with 

previously issued special local 

regulations, no person or vessel may 

enter, transit through, anchor in, or 

remain within the regulated area 

without permission from the Captain of 

the Port Key West or a designated 

representative. 

DATES: The regulations in 33 CFR 

100.701 will be enforced for the location 

listed in item (c)(9) in the Table to 33 

CFR 100.701 from 9:30 a.m. until 4:30 

p.m. on November 8, 10, and 12, 2017. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this notice of 

enforcement, call or email Lieutenant 

Scott Ledee, Sector Key West 

Waterways Management Department, 

Coast Guard; telephone (305) 292–8768, 

email Scott.G.Ledee@uscg.mil. 

SUPPLEMENTARY INFORMATION: On 

November 8, 10, and 12, 2017, Super 

Boat International Productions, Inc. is 

hosting the Key West World 

Championship, a series of high-speed 

boat races. The Coast Guard will enforce 

the special local regulation for the 

annual Key West World Championship 

Super Boat Race in 33 CFR 100.701, 


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