67460 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

1Treasury issued the interim guidance after

consultation with the Department of Justice, the

Office of the Comptroller of the Currency, the Office

of Thrift Supervision, the staff of the Board of

Governors of the Federal Reserve System, the

Federal Deposit Insurance Corporation, the

Commodity Futures Trading Commission, and the

Securities and Exchange Commission. Treasury also

consulted with these agencies in preparing this

proposed rule.

DEPARTMENT OF THE TREASURY

31 CFR Part 104

RIN 1505–AA87

Departmental Offices; Counter Money

Laundering Requirements—

Correspondent Accounts for Foreign

Shell Banks; Recordkeeping and

Termination of Correspondent

Accounts for Foreign Banks

AGENCY: Departmental Offices,

Department of the Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Department of the

Treasury (Treasury) is issuing a

proposed rule to implement new

provisions of the Bank Secrecy Act that:

Prohibit certain financial institutions

from providing correspondent accounts

to foreign shell banks; require such

financial institutions to take reasonable

steps to ensure that correspondent

accounts provided to foreign banks are

not being used to indirectly provide

banking services to foreign shell banks;

require certain financial institutions that

provide correspondent accounts to

foreign banks to maintain records of the

ownership of such foreign banks and

their agents in the United States

designated for service of legal process

for records regarding the correspondent

account; and require the termination of

correspondent accounts of foreign banks

that fail to turn over their account

records in response to a lawful request

of the Secretary of the Treasury

(Secretary) or the Attorney General of

the United States (Attorney General).

DATES: Written comments on the

proposed rule may be submitted to the

Treasury Department on or before

February 11, 2002.

ADDRESSES: Submit comments

(preferably an original and three copies)

to Office of the Assistant General

Counsel (Enforcement), Attention:

Official Comment Record, Room 2000,

Department of the Treasury, 1500

Pennsylvania Ave., NW., Washington,

DC 20220. Comments will be available

for public inspection by appointment

only at the Reading Room of the

Treasury Library by advance

arrangement. To make appointments,

call (202) 622–0990 (not a toll-free

number).

FOR FURTHER INFORMATION CONTACT: Gary

W. Sutton, Senior Banking Counsel,

Office of the Assistant General Counsel

(Banking & Finance), (202) 622–1976, or

William Langford, Attorney-Advisor,

Office of the Assistant General Counsel

(Enforcement), (202) 622–1932 (not tollfree numbers).

SUPPLEMENTARY INFORMATION:

I. Background

On October 26, 2001, the President

signed into law the Uniting and

Strengthening America by Providing

Appropriate Tools Required to Intercept

and Obstruct Terrorism (USA PATRIOT)

Act of 2001 (Public Law 107–56) (the

Act). Title III of the Act makes a number

of amendments to the anti-money

laundering provisions of the Bank

Secrecy Act (BSA), which is codified in

subchapter II of chapter 53 of title 31,

United States Code. These amendments

are intended to make it easier to

prevent, detect, and prosecute

international money laundering and the

financing of terrorism. Two of these

provisions become effective on

December 26, 2001.

First, section 313(a) of the Act adds a

new subsection (j) to 31 U.S.C. 5318 that

prohibits a ‘‘covered financial

institution’’ from providing

‘‘correspondent accounts’’ in the United

States to foreign banks without a

physical presence in any country (shell

banks) and requires those financial

institutions to take reasonable steps to

ensure that correspondent accounts

provided to foreign banks are not being

used to indirectly provide banking

services to foreign shell banks. The

Department of the Treasury expects that

covered financial institutions, as

required by 31 U.S.C. 5318(j), will

immediately terminate all

correspondent accounts with any

foreign bank that it knows to be a shell

bank that is not a regulated affiliate as

defined in the proposed rule, and will

terminate any correspondent account

with a foreign bank that it knows is

being used to indirectly provide banking

services to a foreign shell bank.

Second, section 319(b) of the Act adds

a new subsection (k) to 31 U.S.C. 5318

that requires any covered financial

institution that provides a

correspondent account to a foreign bank

to maintain records of the foreign bank’s

owners and agent in the United States

designated to accept service of legal

process for records regarding the

correspondent account. Subsection (k)

also authorizes the Secretary and the

Attorney General to issue a summons or

subpoena to any foreign bank that

maintains a correspondent account in

the United States and to request records

relating to such account, including

records maintained outside the United

States relating to the deposit of funds

into the foreign bank. If a foreign bank

fails to comply with or contest the

summons or subpoena, any covered

financial institution with which the

foreign bank maintains a correspondent

account must terminate the account

upon notice from the Secretary or the

Attorney General.

Under the Act, Treasury is authorized

to interpret and administer these

provisions. On November 20, 2001,

Treasury issued Interim Guidance to

banks, savings associations, and other

depository institutions to assist them in

meeting their compliance obligations

under sections 5318(j) and (k).1 The

Interim Guidance, published in the

Federal Register on November 27, 2001

(66 FR 59342), included definitions of

key terms in sections 5318(j) and (k) and

a model certification that depository

institutions may use as an interim

means to assist them in meeting their

obligations related to dealing with

foreign shell banks under section 5318(j)

and recordkeeping under section

5318(k). In issuing the Interim

Guidance, Treasury stated that it may be

relied upon by financial institutions

until superseded by regulations or a

subsequent notice. Treasury now is

proposing to codify the Interim

Guidance, with some modifications, as

regulatory standards, and proposing

standards applicable to securities

brokers and dealers.

When issuing the Interim Guidance,

Treasury deferred addressing the

compliance obligations of securities

brokers and dealers with respect to the

requirements of sections 5318(j) and (k),

because the Act requires Treasury to

define by regulation, after consultation

with the Securities and Exchange

Commission (SEC), the types of

accounts maintained by brokers and

dealers for foreign banks that are similar

to correspondent accounts that

depository institutions maintain for

foreign banks. As further discussed

below, Treasury is proposing to apply

the requirements of sections 5318(j) and

(k)(3)(B)(i) to brokers and dealers in the

same manner that they apply to other

covered financial institutions.

The proposed rule also carries

forward from the Interim Guidance,

with some modifications, the model

certification that covered financial

institutions may use to assist them in

meeting the requirements of sections

5318(j) and (k). Use of the model

certification (Appendix A to part 104)

will provide a covered financial

institution with a safe harbor for

Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules 67461

2 12 CFR 204.2(e).

purposes of compliance with those

sections. Treasury is proposing that

covered financial institutions must

verify the information provided by a

foreign bank, or otherwise relied upon

for purposes of sections 5318(j) and (k),

every two years or at any time a covered

financial institution has reason to

believe that the previously provided

information is no longer accurate. The

proposed rule also includes a model

recertification (Appendix B to part 104),

which also will provide a covered

financial institution with a safe harbor

in connection with the verification of

previously provided information.

Proposed section 104.40(f) provides

special rules and safe harbors for a

covered financial institution that,

consistent with the Interim Guidance or

this notice of proposed rulemaking,

requests information from a foreign

bank before the effective date of the

final rule and receives such information

not later than the date that is 90 days

after the publication of the final rule.

Such information will be deemed to

satisfy the covered financial

institution’s obligations for purposes of

the final rule until such time as the

information must be verified.

As an administrative matter, the

proposed rule also establishes a new

part 104 of title 31 of the Code of

Federal Regulations. Part 104 eventually

will include other regulations

implementing the anti-money

laundering provisions of the Act for

which Treasury is authorized or

required to issue regulations. At this

point, most of part 104 has been

reserved for these future regulations.

II. Description of the Proposed Rule

A. Limitations on Correspondent

Accounts for Foreign Shell Banks

Section 5318(j) provides that a

‘‘covered financial institution’’ shall not

establish, maintain, administer, or

manage a ‘‘correspondent account’’ in

the United States for, or on behalf of, a

shell bank that is not a regulated

affiliate (as described below). In

addition, a covered financial institution

must take reasonable steps to ensure

that any correspondent account

established, maintained, administered,

or managed by the covered financial

institution in the United States for a

foreign bank is not being used by that

foreign bank to indirectly provide

banking services to a foreign shell bank

that is not a regulated affiliate.

1. What Is a Covered Financial

Institution?

For purposes of section 5318(j), the

term ‘‘covered financial institution’’ is

defined as: (1) Any insured bank (as

defined in section 3(h) of the Federal

Deposit Insurance Act (12 U.S.C.

1813(h))); (2) a commercial bank or trust

company; (3) a private banker; (4) an

agency or branch of a foreign bank in

the United States; (4) a credit union; (5)

a thrift institution; or (6) a broker or

dealer registered with the SEC under the

Securities Exchange Act of 1934 (15

U.S.C. 78a et seq.). See 31 U.S.C.

5318(j)(1), 5312(a)(2). The proposed rule

incorporates this statutory definition.

Covered financial institutions include

insured banks organized in U.S.

territories, Puerto Rico, Guam,

American Samoa, and the Virgin

Islands, and corporations organized

under section 25A of the Federal

Reserve Act (12 U.S.C. 611 et seq.).

2. What Is a Correspondent Account?

Section 5318(j) applies to any

‘‘correspondent account’’ established,

maintained, administered, or managed

by the covered financial institution in

the United States for a foreign bank. For

purposes of section 5318(j),

‘‘correspondent account’’ is defined

with respect to banking institutions as

‘‘an account established to receive

deposits from, make payments on behalf

of a foreign financial institution, or

handle other financial transactions

related to such institution.’’ See 31

U.S.C. 5318A(e)(1)(B). The Act also

defines the term ‘‘account’’ as ‘‘a formal

banking or business relationship

established to provide regular services,

dealings, and other financial

transactions [and] includes a demand

deposit, savings deposit, or other

transaction or asset account and a credit

account or other extension of credit.’’

See 31 U.S.C. 5318A(e)(1)(A).

Treasury, after consultation with the

SEC, is required under the Act to define

the types of accounts that come within

the definition of ‘‘correspondent

account’’ for purposes of securities

brokers’ and dealers’ compliance with

section 5318(j). See 31 U.S.C.

5318A(e)(2). In addition, Treasury may

further define the terms ‘‘correspondent

account’’ and ‘‘account’’ as the Secretary

deems appropriate. See 31 U.S.C.

5318A(e)(4). Treasury intends to

maintain parity in treatment between

accounts provided to foreign banks by

banks and broker-dealers, and to treat

functionally equivalent accounts,

whether maintained by banks or brokerdealers, in the same manner.

The statutory definition of

‘‘correspondent account’’ is broadly

worded; it is not limited to any

particular type of account. The

proposed rule incorporates the statutory

definition of ‘‘correspondent account.’’

It includes, for example, any account

that falls within the definition of

‘‘transaction account’’ under Regulation

D of the Board of Governors of the

Federal Reserve System (Federal

Reserve).2 It also includes clearing and

settlement accounts (which may also

fall within the definition of ‘‘transaction

account’’). Such accounts are typically

used by foreign banks for remittance of

funds in settlement of U.S. dollar

transactions with parties other than the

U.S. bank at which the account is

maintained. In addition, foreign banks

maintain fiduciary accounts with U.S.

banks for the benefit of such foreign

banks or their customers, including

custody and escrow accounts. U.S.

banks also establish time deposit

accounts for foreign banks that are used

by foreign banks primarily as funding

mechanisms, as well as money market

deposit accounts (‘‘MMDAs’’) that share

limited use for transactions processing.

In addition, U.S. banks engage in

transactions with foreign banks in

securities, derivatives, repurchase

agreements, foreign exchange, and other

instruments. To the extent that these

transactions involve an account, they

would be covered by the definition of

‘‘correspondent account.’’

In light of the broad statutory

definitions of ‘‘correspondent account’’

and ‘‘account’’ for banking institutions,

Treasury is proposing to apply the same

definition for purposes of the types of

broker-dealer accounts that are covered

by section 5318(j). Thus, under the

proposed rule, brokers and dealers must

comply with section 5318(j) with

respect to any account they provide in

the U.S. to a foreign bank that permits

the foreign bank to engage in securities

transactions, funds transfers, or other

financial transactions through that

account. Such accounts would include,

for example, the following: (1) Accounts

to purchase, sell, lend or otherwise hold

securities, either in a proprietary

account or an omnibus account for

trading on behalf of the foreign bank’s

customers on a fully disclosed or nondisclosed basis; (2) prime brokerage

accounts that consolidate trading done

at a number of firms; (3) accounts for

trading foreign currency; (4) various

forms of custody accounts for the

foreign bank and its customers; (5) overthe-counter derivatives accounts; and

(6) futures accounts to purchase futures,

which would be maintained primarily

by broker-dealers that are dually

registered as futures commission

merchants.

Treasury requests comments on the

breadth of the definition of

67462 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

‘‘correspondent account’’ as applied to

accounts maintained by depository

institutions and brokers and dealers for

foreign banks. Comments are requested

on the extent to which different types of

accounts may be used to provide

financial services directly or indirectly

to foreign shell banks. Comments are

requested on the extent to which

different types of accounts may be used

to facilitate money laundering, terrorist

financing, or other criminal

transactions, including the extent to

which different types of accounts may

be used to disguise the nature, location,

source, ownership, or control of the

proceeds of unlawful activity. Treasury

also seeks comments on whether

particular types of accounts pose so

little vulnerability to criminal

transactions as to merit exclusion from

the broad definition of ‘‘correspondent

account,’’ together with the reasons

therefor. Comments also are requested

on the adverse business implications for

covered financial institutions, if any, of

adopting a broad definition of

‘‘correspondent account’’ for purposes

of section 5318(j).

Covered financial institutions may

through their foreign branches establish,

maintain, administer, or manage

correspondent accounts for foreign

banks. Because these foreign branches

legally are part of covered financial

institutions, Treasury considers these

correspondent accounts to be

maintained in the United States for

purposes of section 5318(j). In addition,

Treasury has broad authority under the

Act to establish anti-money laundering

standards for U.S. financial institutions

and their foreign branches. See 31

U.S.C. 5318(h). Therefore, the proposed

rule applies to any correspondent

accounts provided by a foreign branch

of a covered financial institution to a

foreign bank. Treasury requests

comments on the extent to which such

accounts are in fact established,

maintained, administered or managed in

the United States, as well as whether

imposing this requirement on foreign

branches of covered financial

institutions is commensurate with the

size, location, and activities of such

institutions.

3. What Is a Foreign Bank?

The Act does not define ‘‘foreign

bank.’’ For purposes of the proposed

rule, ‘‘foreign bank’’ is any organization

that (1) Is organized under the laws of

a foreign country, (2) engages in the

business of banking, (3) is recognized as

a bank by the bank supervisory or

monetary authority of the country of its

organization or principal banking

operations, (4) and receives deposits in

the regular course of its business. A

‘‘foreign bank’’ also includes a branch of

a foreign bank located in a territory of

the United States, Puerto Rico, Guam,

American Samoa, or the Virgin Islands.

A ‘‘foreign bank’’ does not include an

agency or branch of a foreign bank

located in the United States or an

insured bank organized in a territory of

the United States, Puerto Rico, Guam,

American Samoa, or the Virgin Islands.

Those entities are ‘‘covered financial

institutions’’ under the statute. In

addition, a foreign central bank or

foreign monetary authority that

functions as a central bank is not a

‘‘foreign bank.’’ Comments are requested

on whether the term ‘‘foreign bank’’

should be defined more specifically.

4. What Is a Foreign Shell Bank?

For purposes of section 5318(j), a

foreign shell bank is a foreign bank

without a physical presence in any

country. See 31 U.S.C. 5318(j)(1).

‘‘Physical presence’’ means a place of

business that is maintained by a foreign

bank and is located at a fixed address,

other than solely a post office box or an

electronic address, in a country in

which the foreign bank is authorized to

conduct banking activities, at which

location the foreign bank: (1) Employs

one or more individuals on a full-time

basis; (2) maintains operating records

related to its banking activities; and (3)

is subject to inspection by the banking

authority that licensed the foreign bank

to conduct banking activities. See 31

U.S.C. 5318(j)(4)(B).

5. What Is a Regulated Affiliate?

The limitations on the direct and

indirect provision of correspondent

accounts to foreign shell banks do not

apply to a foreign shell bank that is a

‘‘regulated affiliate.’’ A regulated

affiliate is a foreign shell bank that: (1)

Is an affiliate of a depository institution,

credit union, or foreign bank that

maintains a physical presence in the

United States or a foreign country, as

applicable; and (2) is subject to

supervision by a banking authority in

the country regulating such affiliated

depository institution, credit union, or

foreign bank. An affiliate is a foreign

bank that is controlled by or is under

common control with a depository

institution, credit union, or foreign

bank. See 31 U.S.C. 5318(j)(3).

6. What Steps Must a Covered Financial

Institution Take To Comply With

Section 5318(j)?

In order to comply with the

limitations on the direct and indirect

provision of correspondent accounts to

foreign shell banks, a covered financial

institution must ensure that each foreign

bank to which it provides a

correspondent account is not a shell

bank, and take reasonable steps to

ensure that correspondent accounts

provided to such foreign banks are not

being used to indirectly provide banking

services to foreign shell banks. Although

the proposed rule does not prescribe the

manner in which a covered financial

institution must satisfy its obligations

under section 5318(j), it does provide a

safe harbor if a covered financial

institution uses the model certifications

in Appendix A and Appendix B for

these purposes. A covered financial

institution that does not obtain, from a

foreign bank or otherwise, the

information necessary to fulfill its

obligations under section 5318(j) within

the prescribed time periods must

terminate its correspondent account

relationship with the concerned foreign

bank.

The Department of the Treasury

expects that covered financial

institutions, as required by 31 U.S.C.

5318(j), will immediately terminate all

correspondent accounts with any

foreign bank that it knows to be a shell

bank that is not a regulated affiliate, and

will terminate any correspondent

account with a foreign bank that it

knows is being used to indirectly

provide banking services to a foreign

shell bank. Because some correspondent

accounts, at the time of termination,

may contain open securities or futures

positions, a covered financial institution

may exercise its commercially

reasonable discretion in liquidating

such open positions (including, but not

limited to, following its ordinary

practices upon the default of a client).

However, a covered financial institution

must take reasonable steps to ensure

that an account that is in the process of

being terminated is not permitted to

establish new positions.

B. Recordkeeping and Termination

Requirements for Correspondent

Accounts of Foreign Banks

Under 31 U.S.C. 5318(k), as added by

section 319(b) of the Act, any covered

financial institution that maintains a

correspondent account in the United

States for a foreign bank shall maintain

records in the United States identifying:

(1) the owner(s) of such foreign bank;

and (2) the name and address of a

person (as defined in 31 CFR 103.11(z))

who resides in the United States and is

authorized to accept service of legal

process for records regarding the

correspondent account.

Section 5318(k) authorizes the

Secretary and the Attorney General to

issue a summons or subpoena to any

Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules 67463

3The same family means parents, spouses,

children, siblings, uncles, aunts, grandparents,

grandchildren, first cousins, second cousins,

stepchildren, stepsiblings, parents-in-law and

spouses of any of the foregoing.

foreign bank that maintains a

correspondent account in the United

States and request records related to

such correspondent account, including

records maintained outside of the

United States relating to the deposit of

funds into the foreign bank. The

summons or subpoena may be served on

the foreign bank in the United States if

the foreign bank has a representative in

the United States, or in a foreign

country pursuant to any mutual legal

assistance treaty, multilateral

agreement, or other request for

international law enforcement

assistance.

A covered financial institution must

terminate any correspondent

relationship with a foreign bank not

later than 10 business days after receipt

of written notice from the Secretary or

the Attorney General (in each case, after

consultation with the other) that the

foreign bank has failed either: (1) to

comply with the summons or subpoena

issued; or (2) to initiate proceedings in

a United States court contesting such

summons or subpoena. See 31 U.S.C.

5318(k)(3)(C).

If a covered financial institution fails

to terminate the correspondent

relationship upon receiving notice from

the Secretary or the Attorney General, it

is subject to a civil penalty of up to

$10,000 per day until the correspondent

relationship is so terminated. A covered

financial institution is not liable to any

person in any court or arbitration

proceeding for terminating a

correspondent relationship in

accordance with section 5318(k).

1. What Is a Covered Financial

Institution?

There is no statutory definition of

‘‘covered financial institution’’ for

purposes of section 5318(k). For the

following reasons, Treasury believes

that ‘‘covered financial institution’’ in

section 5318(k) should be read to have

the same meaning as the identical term

in section 5318(j), which includes

brokers and dealers.

Both sections 5318(j) and (k) deal

with anti-money laundering efforts

related to correspondent relationships

between U.S. financial institutions and

foreign banks. Congress expressly

included brokers and dealers in the

category of ‘‘covered financial

institutions’’ under section 5318(j) and

required Treasury to identify the types

of accounts that brokers and dealers

maintain for foreign banks that are

similar to correspondent accounts. In

addition, Congress provided that the

same definition of ‘‘correspondent

account’’ applies in both sections

5318(j) and (k).

Excluding brokers and dealers from

the category of ‘‘covered financial

institutions’’ subject to the

recordkeeping requirements and

account termination safeguards under

section 5318(k) would be inconsistent

with the statutory scheme and would

not reflect a comprehensive approach to

implementing the Act’s anti-money

laundering requirements. In addition,

Treasury has broad authority under the

Act to establish anti-money laundering

standards for securities brokers and

dealers. See 31 U.S.C. 5318(h).

Consequently, under the proposed rule,

brokers and dealers are covered

financial institutions subject to section

5318(k).

2. What Accounts Are Covered?

Section 5318(k) applies to

‘‘correspondent accounts,’’ which has

the same meaning as in section 5318(j),

i.e., an account established to receive

deposits from, make payments on behalf

of a foreign financial institution, or

handle other financial transactions

related to such institution. In light of the

Act’s use of the same definition of

correspondent account in both sections

5318(j) and (k), Treasury believes that

both sections should be read as

coextensive in the types of accounts to

which they apply.

3. Who Is an Owner of a Foreign Bank?

Section 5318(k) does not define

‘‘owner’’ for purposes of the

requirement that a covered financial

institution maintain records of the

owners of foreign banks to which it

provides correspondent accounts.

Treasury is proposing to define an

‘‘owner’’ as any person who is a ‘‘large

direct owner,’’ an ‘‘indirect owner,’’ and

a ‘‘reportable small direct owner.’’ The

proposed definition of each of these

terms is discussed below. For purposes

of these definitions, ‘‘person’’ means

any individual, bank, corporation,

partnership, limited liability company,

or any other legal entity, except that

members of the same family 3 shall be

considered one person, and each family

member who has an ownership interest

in the foreign bank must be identified.

‘‘Voting shares or other voting interests’’

means shares or other interests that

entitle the holder to vote for or select

directors (or individuals exercising

similar functions).

The definition of ‘‘owner’’ applies

only with respect to the provisions of

section 5318(k), which are designed to

facilitate the service of legal process. No

inference may be drawn as to the

applicability of this definition to other

provisions of the Act, including the

enhanced due diligence requirements of

31 U.S.C. 5318(i) (as added by section

312 of the Act), which sets forth

different standards for reporting

ownership information.

Foreign banks that maintain U.S.

branches or agencies are required by the

Federal Reserve to file an Annual Report

(FR Y–7), which lists the foreign bank’s

agent for service of process in the U.S.

and information on the ownership of the

foreign bank. The current FR Y–7

generally requires the reporting of

persons who own, directly or indirectly,

5 percent or more of any class of the

voting shares of a foreign bank. A U.S.

branch or agency of a foreign bank or

other covered financial institution may

use the relevant portions of a current FR

Y–7 filed by the foreign bank to meet its

recordkeeping obligations under section

5318(k) with respect to a correspondent

account the U.S. branch or agency or

other covered financial institution

maintains for the foreign bank.

The definition of ‘‘owner’’ in the

proposed rule is intended to minimize

reporting burdens by focusing on those

persons who are likely to have the

ability to exert influence over the

operations of a foreign bank. The

proposed definition necessarily reflects

the complexity of ownership

relationships, including those that can

be used or structured to obscure

controlling or influential owners of a

foreign bank. The Department

recognizes that the reporting regime of

FR Y–7 is significantly simpler that the

proposed definition, but believes that it

would be more burdensome for foreign

banks. Comments are specifically

requested concerning whether the

Treasury should use the ownership

criteria of FR Y–7 in lieu of the

definition of ‘‘owner’’ in the proposed

rule.

a. Who Is a Small Direct Owner of a

Foreign Bank?

A ‘‘small direct owner’’ of a foreign

bank is a person who owns, controls, or

has power to vote less than 25 percent

of the voting shares or other voting

interests of the foreign bank. The

identity of a small direct owner is not

subject to reporting unless such person

is a ‘‘reportable small direct owner.’’

A ‘‘reportable small direct owner’’ is:

(1) Each of two or more small direct

owners that in the aggregate own 25

percent or more of any class of the

voting shares or other voting interests of

the foreign bank and are majority-owned

by the same person, or by a chain of

67464 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

majority-owned persons; or (2) each of

any one or more small direct owners

that are majority-owned by another

small direct owner and in the aggregate

all such small direct owners own 25

percent or more of the voting shares or

other voting interests of the foreign

bank. In determining who is a

‘‘reportable small direct owner,’’ a small

direct owner that owns or controls less

than 5 percent of the voting shares or

other voting interests of the foreign bank

need not be taken into account.

b. Who Is a Large Direct Owner of a

Foreign Bank?

A ‘‘large direct owner’’ of a foreign

bank is a person who: (1) Owns,

controls, or has power to vote 25

percent or more of any class of voting

shares or other voting interests of the

foreign bank; or (2) controls in any

manner the election of a majority of the

directors (or individuals exercising

similar functions) of the foreign bank. A

covered financial institution must

obtain the identity of each large direct

owner of a foreign bank.

c. Who Is an Indirect Owner of a Foreign

Bank?

An indirect owner is any person in

the ownership chain of any large direct

owner or a reportable small direct

owner who is not majority-owned by

another person. In determining who is

an ‘‘indirect owner,’’ a small direct

owner that owns or controls less than 5

percent of the voting shares or other

voting interests of the foreign bank need

not be taken into account. A covered

financial institution must obtain the

identity of each indirect owner of a

foreign bank.

For example, if any two or more small

direct owners of a foreign bank (1) in the

aggregate own, control, or have power to

vote 25 percent or more of any class of

voting securities or other voting

interests of the foreign bank, and (2) are

majority-owned by the same person, or

by the same chain of majority-owned

persons, the ‘‘indirect owner’’ is any

person in the ownership chain of those

small direct owners who is not majorityowned by another person.

Similarly, if one or more small direct

owners of a foreign bank is majorityowned by another small direct owner

and in the aggregate all such small

direct owners own, control, or have

power to vote 25 percent or more of any

class of voting shares or other voting

interests of the foreign bank, the

‘‘indirect owner’’ is (1) the small direct

owner that is the majority-owner of the

other small direct owner(s), or (2) any

person in the ownership chain of the

small direct owner that is the majorityowner of the other small direct owner(s)

that is not majority-owned by another

person.

Examples of reportable owners.

Example 1. FB–1 is a foreign bank. Voting

securities of FB–1 are owned by Person C (15

percent), Person D (35 percent), Person E (10

percent), Person F (20 percent), and Person

G (20 percent).

Persons C and G are both majority-owned

by Person X, which is majority-owned by

Person Y, which is majority-owned by Person

Z, which is not majority-owned by another

person.

Person D is majority-owned by Person V,

which is majority-owned by Person W, which

is not majority-owned by another person.

Persons E and F are not owned by another

person.

Persons C, E, F, and G are small direct

owners because each owns less than 25

percent of the voting securities of FB–1. The

identities of Persons C and G are reportable

small direct owners because: (1) In the

aggregate they own more than 25 percent of

the voting securities of FB–1; and (2) they are

majority-owned by the same indirect owner

Z. The identities of Persons E and F are not

subject to reporting.

Person D is a large direct owner because it

owns 25 percent or more of the voting

securities of FB–1. The identity of Person D

is subject to reporting.

Person W is an indirect owner because it

is a majority-owner of Person V, which is a

majority-owner of Person D. The identity of

Person W is subject to reporting. The identity

of Person V is not subject to reporting.

Person Z is an indirect owner because it is

a majority-owner of Person Y, which is a

majority-owner of Person X, which is a

majority-owner of Persons C and G, which

are small direct owners that in the aggregate

own 25 percent or more of the voting

securities of FB–1. The identity of Person Z

is subject to reporting. The identities of

Persons Y and X are not subject to reporting.

Example 2. FB–2 is a foreign bank. Voting

securities of FB–2 are owned by Person K (20

percent) and Person L (10 percent). Person K

is majority-owned by Person L. Person L is

not majority-owned by another person.

Persons K and L are small direct owners.

However, Person L is also an indirect owner

subject to reporting because: (1) Person L is

a majority-owner of Person K; and (2) in the

aggregate Persons K and L own more than 25

percent of the voting securities of FB–2.

Person K is a reportable small direct owner

for the same reason.

Example 3. Same facts as in Example 2,

except that Person L is majority-owned by

Person M, who is majority-owned by Person

N, who is not majority-owned by another

person. In this example, Person N is an

indirect owner subject to reporting because

Person N is the person in the ownership

chain of small direct owner Person L and is

not majority-owned by another person.

Persons K and L are reportable small direct

owners. The identity of Person M is not

subject to reporting.

Example 4. FB–3 is a foreign bank. 30

percent of the voting securities of FB–2 are

owned by 6 members of the same family (as

defined in the proposed rule) in amounts

ranging from 2 percent to 10 percent. The 6

family members are considered to be one

person who is a large direct owner of the

bank. The identity of each of the 6 family

members is subject to reporting. Other family

members who do not own voting securities

in FB–3 are not subject to reporting.

4. What Steps Must a Covered Financial

Institution Take To Comply With

Section 5318(k)(3)(B)(i)?

Although the proposed rule does not

prescribe the manner in which a

covered financial institution must

obtain information concerning the

identity of owners of foreign banks and

their agents in the U.S. authorized to

receive service of legal process, it does

provide a safe harbor if a covered

financial institution uses the model

certifications in Appendix A and

Appendix B for these purposes. A

covered financial institution that does

not obtain, from a foreign bank or

otherwise, the information necessary to

fulfill its obligations under section

5318(k)(3)(B)(i) must terminate its

correspondent account relationship

with the concerned foreign bank.

III. Submission of Comments

All comments will be available for

public inspection and copying, and no

material in any comments, including the

name of any person submitting

comments, will be recognized as

confidential. Material not intended to be

disclosed to the public should not be

submitted.

IV. Regulatory Flexibility Act

It is hereby certified that this

proposed rule is not likely to have a

significant economic impact on a

substantial number of small entities.

Covered financial institutions that are

subject to the recordkeeping

requirements in the statute and the

proposed rule tend to be large

institutions. Moreover, any economic

consequences that might result from the

prohibition on dealings with foreign

shell banks, or from the failure of a

foreign bank to provide the information

necessary for a covered financial

institution to fulfill its recordkeeping

obligations, flow directly from the

underlying statute. Accordingly, the

analysis provisions of the Regulatory

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

not apply.

V. Executive Order 12866

This proposed rule is not a

‘‘significant regulatory action’’ as

defined in Executive Order 12866.

Accordingly, a regulatory assessment is

not required.

Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules 67465

VI. Paperwork Reduction Act

The collections of information

contained in Appendix A to proposed

31 CFR part 104 rulemaking have been

previously reviewed and approved by

the Office of Management and Budget

(OMB) in accordance with the

requirements of the Paperwork

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

and assigned OMB Control Number

1505–0184.

The collection of information

contained in Appendix B to proposed

31 CFR part 104 and the recordkeeping

requirement in proposed 31 CFR

104.40(e) have been submitted to OMB

for review in accordance with the

requirements of the Paperwork

Reduction Act. An agency may not

conduct or sponsor, and a person is not

required to respond to, a collection of

information unless it displays a

currently valid OMB control number.

Comments concerning the collection

of information should be directed to

OMB, Attention: Desk Officer for the

Department of the Treasury, Office of

Information and Regulatory Affairs,

New Executive Office Building,

Washington, DC 20503, and to the

Department of the Treasury at the

address previously specified in the

ADDRESSES portion of this preamble.

Any such comments should be

submitted not later than February 26,

2002.

Comments are specifically requested

concerning:

Whether the collection of information

is necessary for the proper performance

of the functions of the Department of the

Treasury, including whether the

information will have practical utility;

The accuracy of the estimated burden

associated with the collection of

information (see below), which was

developed in part on the basis of

discussions with industry

representatives. The Department is

particularly interested in comments

concerning the number of covered

financial institutions and the number of

foreign banks for which correspondent

accounts are maintained.

How to enhance the quality, utility,

and clarity of the information to be

collected;

How to minimize the burden of

complying with the collection of

information, including the application

of automated collection techniques or

other forms of information technology;

and

Estimates of capital or start-up costs

and costs of operation, maintenance,

and purchase of services to provide

information.

This information will enable financial

institutions to comply with the

requirements of sections 31 U.S.C.

5318(j) and (k), and will be used by

Federal agencies to verify compliance

by covered financial institutions with

these provisions. The respondents are

foreign banks that establish or maintain

correspondent accounts with U.S.

financial institutions. The reporting of

this information by foreign banking

institutions is voluntary; however

failure to provide the information may

preclude the establishment or the

continuation of correspondent accounts

with U.S. financial institutions. The

recordkeepers are covered financial

institutions. The recordkeeping

requirement concerning owners and

agents of foreign banks is required by

statute.

Estimated total annual reporting

burden for Appendix B: 45,000 hours.

Estimated number of respondents

(foreign banks): 9,000.

Estimated average annual reporting

burden per respondent: 5 hours.

Estimated frequency of responses:

Once every 2 years.

Estimated total annual recordkeeping

burden: 18,000 hours.

Estimated number of recordkeepers

(covered financial institutions): 2000.

Estimated average annual

recordkeeping burden per recordkeeper:

9 hours.

List of Subjects in 31 CFR Part 104

Banks, banking, Brokers, Counter

money laundering, Counter-terrorism,

Currency, Foreign banking, Reporting

and recordkeeping requirements.

Dated: December 19, 2001.

David D. Aufhauser,

General Counsel.

Authority and Issuance

For the reasons set forth in the

preamble, the Treasury is proposing to

amend 31 CFR subtitle B, chapter I by

adding part 104 to read as follows:

PART 104—COUNTER MONEY

LAUNDERING REQUIREMENTS

Subpart A—Definitions

Sec.

104.10 Definitions.

Subpart B—Anti Money Laundering

Programs [Reserved]

Subpart C—Special Due Diligence for

Correspondent Accounts and Private

Banking Accounts

104.40 Records concerning owners of

foreign banks and agents designated to

receive service of legal process;

prohibition on correspondent accounts

for foreign shell banks.

104.50 [Reserved]

Subpart D—Law Enforcement Access to

Foreign Bank Records

104.60 Summons or subpoena of foreign

bank records.

104.70 Termination of correspondent

relationship.

Subpart E—Cooperative Efforts to Deter

Money Laundering [Reserved]

Appendix A to Part 104—Certification

Regarding Correspondent Accounts

Appendix B to Part 104—Recertification

Regarding Correspondent Accounts

Authority: 31 U.S.C. 5318, 5318A; title III,

secs 311, 313, 319, 352, Pub. L. 107–56, 115

Stat. 298, 306, 311, 322.

Subpart A—Definitions

§ 104.10 Definitions.

For purposes of subparts C and D of

this part:

(a) Attorney General means the

Attorney General of the United States.

(b) Correspondent account means an

account established to receive deposits

from, make payments on behalf of a

foreign bank, or handle other financial

transactions related to such bank.

(c) Covered financial institution

means:

(1) An insured bank (as defined in

section 3(h) of the Federal Deposit

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

any foreign branch of an insured bank;

(2) A commercial bank or trust

company;

(3) A private banker;

(4) An agency or branch of a foreign

bank in the United States;

(5) A credit union;

(6) A thrift institution;

(7) A corporation organized under

section 25A of the Federal Reserve Act

(12 U.S.C. 611 et seq.); and

(8) A broker or dealer registered with

the Securities and Exchange

Commission under the Securities

Exchange Act of 1934 (15 U.S.C. 78a et

seq.).

(d) Foreign bank. (1) The term foreign

bank means any organization that:

(i) Is organized under the laws of a

foreign country;

(ii) Engages in the business of

banking;

(iii) Is recognized as a bank by the

bank supervisory or monetary authority

of the country of its organization or

principal banking operations; and

(iv) Receives deposits in the regular

course of its business.

(2) For purposes of this definition:

(i) The term foreign bank includes a

branch of a foreign bank in a territory

of the United States, Puerto Rico, Guam,

American Samoa, or the Virgin Islands.

(ii) The term foreign bank does not

include:

(A) A U.S. agency or branch of a

foreign bank;

67466 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

(B) An insured bank organized under

the laws of a territory of the United

States, Puerto Rico, Guam, American

Samoa, or the Virgin Islands;

(C) A foreign central bank or foreign

monetary authority that functions as a

central bank; and

(D) The African Development Bank,

Asian Development Bank, Bank for

International Settlements, European

Bank for Reconstruction and

Development, Inter-American

Development Bank, International Bank

for Reconstruction and Development

(the World Bank), International Finance

Corporation, International Monetary

Fund, North American Development

Bank, African Development Bank,

International Development Association,

Multilateral Investment Guarantee

Agency, and similar international

financial institutions of which the

United States is a member or as

otherwise designated by the Secretary.

(e) Foreign shell bank means a foreign

bank without a physical presence in any

country.

(f) Majority-owned means a person

who is owned 50 percent or more by

another person.

(g) Owner means any large direct

owner, indirect owner, and reportable

small direct owner. For purposes of this

definition:

(1) Large direct owner means a person

who:

(i) Owns, controls, or has power to

vote 25 percent or more of any class of

voting shares or other voting interests of

the foreign bank; or

(ii) Controls in any manner the

election of a majority of the directors (or

individuals exercising similar functions)

of the foreign bank.

(2) Small direct owner means a person

who owns, controls, or has power to

vote less than 25 percent of any class of

voting shares or other voting interests of

the foreign bank.

(3) Reportable small direct owner. (i)

Subject to paragraph (g)(3)(ii) of this

section, the term reportable small direct

owner means:

(A) Each of two or more small direct

owners who in the aggregate own 25

percent or more of any class of voting

shares or other voting interests of the

foreign bank and are majority-owned by

the same person, or by the same chain

of majority-owned persons; and

(B) Each of one or more small direct

owners who are majority-owned by

another small direct owner and in the

aggregate all such small direct owners

own 25 percent or more of any class of

voting shares or other voting interests of

the foreign bank.

(ii) In determining who is a reportable

small direct owner for purposes of

paragraph (g)(3)(i) of this section, a

small direct owner who owns or

controls less than 5 percent of the voting

shares or other voting interests of the

foreign bank need not be taken into

account.

(4) Indirect owner. (i) The term

indirect owner means:

(A) Any person in the ownership

chain of any large direct owner who is

not majority-owned by another person.

(B) Any person, including a small

direct owner who is a majority-owner as

described in paragraph (g)(3)(i)(B) of

this section, in the ownership chain of

any reportable small direct owner who

is not majority-owned by another

person.

(ii) A person who is a reportable small

direct owner as defined in paragraph

(g)(3) of this section need not also be

reported as an indirect owner under this

paragraph (g)(4).

(5) Person means any individual,

bank, corporation, partnership, limited

liability company, or any other legal

entity. For purposes of this definition:

(i) Members of the same family shall

be considered to be one person.

(ii) The term same family means

parents, spouses, children, siblings,

uncles, aunts, grandparents,

grandchildren, first cousins, second

cousins, stepchildren, stepsiblings,

parents-in-law and spouses of any of the

foregoing.

(iii) Each member of the same family

who has an ownership interest in a

foreign bank must be identified if the

family is an owner because of the

aggregate ownership interests of the

members of the family. In determining

the ownership interests of the same

family, any voting interest of any family

member shall be taken into account.

(6) Voting shares or other voting

interests means shares or other interests

that entitle the holder to vote for or

select directors (or individuals

exercising similar functions).

(h) Person. Except with respect to

paragraph (g) of this section, the term

person shall have the same meaning as

provided in § 103.11(z) of this chapter.

(i) Physical presence means a place of

business that:

(1) Is maintained by a foreign bank;

(2) Is located at a fixed address (other

than solely an electronic address or a

post-office box) in a country in which

the foreign bank is authorized to

conduct banking activities, at which

location the foreign bank:

(i) Employs 1 or more individuals on

a full-time basis; and

(ii) Maintains operating records

related to its banking activities; and

(3) Is subject to inspection by the

banking authority that licensed the

foreign bank to conduct banking

activities.

(j) Regulated affiliate. (1) The term

regulated affiliate means a foreign shell

bank that:

(i) Is an affiliate of a depository

institution, credit union, or foreign bank

that maintains a physical presence in

the United States or a foreign country,

as applicable; and

(ii) Is subject to supervision by a

banking authority in the country

regulating such affiliated depository

institution, credit union, or foreign

bank.

(2) For purposes of this definition:

(i) Affiliate means any company that

controls, is controlled by, or is under

common control with another company.

(ii) Control means:

(A) Ownership, control, or power to

vote 25 percent or more of any class of

voting shares or other voting interests of

another company; or

(B) Control in any manner the election

of a majority of the directors (or

individuals exercising similar functions)

of another company.

(k) Secretary means the Secretary of

the Treasury.

Subpart B—Anti Money Laundering

Programs [Reserved]

Subpart C—Special Due Diligence for

Correspondent Accounts and Private

Banking Accounts

§ 104.40 Records concerning owners of

foreign banks and agents designated to

receive service of legal process; prohibition

on correspondent accounts for foreign shell

banks.

(a) Requirements for covered financial

institutions—(1) Records of owners and

agents. A covered financial institution

that maintains a correspondent account

in the United States for a foreign bank

shall maintain records in the United

States identifying the owners of each

such foreign bank and the name and

address of a person who resides in the

United States and is authorized, and has

agreed to be an agent to accept service

of legal process for records regarding

each such account. For purposes of this

section, any correspondent account

maintained by a foreign branch of a

covered financial institution for a

foreign bank shall be deemed to be

maintained in the United States.

(2) Prohibition on correspondent

accounts for foreign shell banks. (i) A

covered financial institution shall not

establish, maintain, administer, or

manage a correspondent account in the

United States for, or on behalf of, a

foreign shell bank.

(ii) A covered financial institution

shall take reasonable steps to ensure

Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules 67467

1The November 20, 2001 Interim Guidance may

be found on the Treasury Internet site at http://

www.treas.gov/press/releases/po813.htm.

that any correspondent account

established, maintained, administered,

or managed by that covered financial

institution in the United States for a

foreign bank is not being used by that

foreign bank to indirectly provide

banking services to a foreign shell bank.

(iii) Nothing in this paragraph (a)(2)

prohibits a covered financial institution

from providing a correspondent account

or banking services to a regulated

affiliate.

(iv) For purposes of this paragraph

(a)(2), any correspondent account

established, maintained, administered,

or managed by a foreign branch of a

covered financial institution shall be

deemed to be established, maintained,

administered, or managed in the United

States.

(b) Safe harbor. Subject to paragraph

(d) of this section, a covered financial

institution will be deemed to be in

compliance with the requirements of

paragraph (a) of this section with

respect to a foreign bank if the covered

financial institution obtains from the

foreign bank the certification described

in Appendix A to this part (including all

annexes thereto).

(c) Verification requirements—(1)

Biennial verification. At least once every

2 years, a covered financial institution

shall verify the information previously

provided by each foreign bank for which

it maintains a correspondent account, or

otherwise relied upon by the covered

financial institution for purposes of this

section.

(2) Interim verification. If at any time

a covered financial institution has

reason to believe that any information

provided by a foreign bank or otherwise

relied upon by the covered financial

institution for purposes of this section is

no longer correct, the covered financial

institution shall request that the foreign

bank verify such information.

(3) Safe harbor. Subject to paragraph

(d) of this section, a covered financial

institution will be deemed to continue

to be in compliance with the

requirements of this paragraph (c) and

paragraph (a) of this section if the

covered financial institution obtains

from the foreign bank:

(i) A revised Appendix A certification

(including all annexes thereto); or

(ii) The recertification described in

Appendix B to this part.

(d) Closure of correspondent

accounts—(1) Accounts existing on [the

date that is 30 days after the date of

publication of the final rule in the

Federal Register]. In the case of a

foreign bank with respect to which a

covered financial institution maintains a

correspondent account that was in

existence on [the date that is 30 days

after the date of publication of the final

rule in the Federal Register], the

covered financial institution shall close

all correspondent accounts with such

foreign bank not later than [the date that

is 90 days after the date of publication

of the final rule in the Federal Register]

if the covered financial institution has

not obtained, from the foreign bank or

otherwise, the information described in

Appendix A to this part (including all

annexes thereto).

(2) Accounts established after [the

date that is 30 days after the date of

publication of the final rule in the

Federal Register]. In the case of a

foreign bank with respect to which a

covered financial institution establishes

a correspondent account after [the date

that is 30 days after the date of

publication of the final rule in the

Federal Register], the covered financial

institution shall close such account if

the covered financial institution has not

obtained, from the foreign bank or

otherwise, the information described in

Appendix A to this part (including all

annexes thereto), or the information

described in Appendix B to this part,

not later than the date that is:

(i) In the case of an account

established before January 1, 2003, 60

calendar days after the date the account

is established; or

(ii) In the case of an account

established after December 31, 2002, 30

calendar days after the date the account

is established.

(3) Verification of previously provided

information. In the case of a foreign

bank from which a covered financial

institution requests a verification of

information or with respect to which the

covered financial institution otherwise

undertakes to verify information

pursuant to paragraph (c)(1) or (2) of

this section, the covered financial

institution shall close all correspondent

accounts with such foreign bank if the

covered financial institution has not

obtained, from the foreign bank or

otherwise, the information described in

Appendix A to this part (including all

annexes thereto) or the information

described in Appendix B to this part,

not later than the date that is:

(i) In the case of a verification

initiated before January 1, 2003, 90

calendar days after the date of the

request or otherwise undertaking the

verification; or

(ii) In the case of a verification

initiated after December 31, 2002, 60

calendar days after the date of the

request or otherwise undertaking the

verification.

(4) Reestablishment of closed

accounts and establishment of new

accounts. A covered financial

institution shall not reestablish any

account closed pursuant to this

paragraph, and shall not establish any

other correspondent account with the

concerned foreign bank, until it obtains,

from the foreign bank or otherwise, the

information described in Appendix A to

this part (including all annexes thereto)

or the information described in

Appendix B to this part, as appropriate.

(5) Limitation on liability. A covered

financial institution shall not be liable

to any person in any court or arbitration

proceeding for terminating a

correspondent relationship in

accordance with this paragraph (d).

(e) Recordkeeping requirement. A

covered financial institution shall retain

the original of any document provided

by a foreign bank, and the original or a

copy of any document otherwise relied

upon by the covered financial

institution, for purposes of this section,

for at least 5 years after the date that the

covered financial institution no longer

maintains any account for such foreign

bank. A covered financial institution

shall retain such records with respect to

any foreign bank for such longer period

as the Secretary may direct.

(f) Special rules concerning

information requested prior to (the date

that is 30 days after the date of

publication of the final rule in the

Federal Register)—(1) Definition. For

purposes of this paragraph (f) the term

‘‘Interim Guidance’’ means:

(i) The Interim Guidance of the

Department of the Treasury dated

November 20, 2001 1 and published in

the Federal Register on November 27,

2001; or

(ii) The provisions of this part as

published in the Federal Register on

December 28, 2001.

(2) Safe harbors. (i) For purposes of

paragraph (b) of this section, a covered

financial institution that requested a

foreign bank to provide the information

described in the Interim Guidance prior

to [the date that is 30 days after the date

of publication of the final rule in the

Federal Register] will be deemed to be

in compliance with the requirements of

paragraph (a) of this section with

respect to such foreign bank if the

foreign bank provides such information

to the covered financial institution on or

before [the date that is 90 days after the

date of publication of the final rule in

the Federal Register].

(ii) Nothing in this section shall be

construed to cause any information

obtained pursuant to the Interim

Guidance to be considered incorrect for

67468 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

purposes of paragraph (c)(2) of this

section if such information was

obtained pursuant to a request to a

foreign bank made prior to [the date that

is 30 days after the date of publication

of the final rule in the Federal Register]

and received on or before [the date that

is 90 days after the date of publication

of the final rule].

(iii) For purposes of paragraph (d)(1)

of this section, the reference in

paragraph (d)(1) of this section to ‘‘the

information described in Appendix A to

this part (including all annexes

thereto)’’ shall be deemed to refer to

such information as described in the

Interim Guidance if such information

was obtained pursuant to a request to a

foreign bank made prior to [the date that

is 30 days after the date of publication

of the final rule in the Federal Register]

and received on or before [the date that

is 90 days after the date of publication

of the final rule].

(3) Verification of information. For

purposes of paragraph (c)(1) of this

section, information obtained pursuant

to a request to a foreign bank made prior

to [the date that is 30 days after the date

of publication of the final rule in the

Federal Register] and received on or

before [the date that is 90 days after the

date of publication of the final rule]

shall be verified in accordance with the

definitions and requirements of this

section.

(4) Recordkeeping requirement.

Paragraph (e) of this section shall apply

to any document provided by a foreign

bank, or otherwise relied upon by a

covered financial institution, for

purposes of the Interim Guidance.

§ 104.50 [Reserved]

Subpart D—Law Enforcement Access

to Foreign Bank Records

§ 104.60 Summons or subpoena of foreign

bank records.

(a) Issuance to foreign banks. The

Secretary or the Attorney General may

issue a summons or subpoena to any

foreign bank that maintains a

correspondent account in the United

States and request records related to

such correspondent account, including

records maintained outside of the

United States relating to the deposit of

funds into the foreign bank. The

summons or subpoena may be served on

the foreign bank in the United States if

the foreign bank has a representative in

the United States, or in a foreign

country pursuant to any mutual legal

assistance treaty, multilateral

agreement, or other request for

international law enforcement

assistance.

(b) Issuance to covered financial

institutions. Upon receipt of a written

request from a Federal law enforcement

officer for information required to be

maintained by a covered financial

institution under § 104.40, the covered

financial institution shall provide the

information to the requesting officer not

later than 7 days after receipt of the

request.

§ 104.70 Termination of correspondent

relationship.

(a) Termination upon receipt of

notice. A covered financial institution

shall terminate any correspondent

relationship with a foreign bank not

later than 10 business days after receipt

of written notice from the Secretary or

the Attorney General (in each case, after

consultation with the other) that the

foreign bank has failed:

(1) To comply with a summons or

subpoena issued under § 104.60(a); or

(2) To initiate proceedings in a United

States court contesting such summons

or subpoena.

(b) Limitation on liability. A covered

financial institution shall not be liable

to any person in any court or arbitration

proceeding for terminating a

correspondent relationship in

accordance with paragraph (a) of this

section.

(c) Failure to terminate relationship.

Failure to terminate a correspondent

relationship in accordance with this

section shall render the covered

financial institution liable for a civil

penalty of up to $10,000 per day until

the correspondent relationship is so

terminated.

Subpart E—Cooperative Efforts To

Deter Money Laundering [Reserved]

Appendix A to Part 104—Certification

Regarding Correspondent Accounts

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[FR Doc. 01–31849 Filed 12–27–01; 8:45 am]

BILLING CODE 4810–25–C