[Federal Register Volume 67, Number 42 (Monday, March 4, 2002)]
[Rules and Regulations]
[Pages 9874-9878]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 02-5006]



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Part III





Department of the Treasury





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31 CFR Part 103



Financial Crimes Enforcement Network; Special Information Sharing 
Procedures To Deter Money Laundering and Terrorist Activity; Final Rule 
and Proposed Rule

Federal Register / Vol. 67, No. 42 / Monday, March 4, 2002 / Rules 
and Regulations

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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA26


Financial Crimes Enforcement Network; Special Information Sharing 
Procedures to Deter Money Laundering and Terrorist Activity

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

ACTION: Interim rule.

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SUMMARY: FinCEN, a bureau of the Treasury Department, is issuing 
regulations to implement the provision in the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism (USA PATRIOT) Act of 2001 that encourages 
information sharing among financial institutions for purposes of 
identifying and reporting activities that may involve terrorist acts or 
money laundering activities.

DATES: This rule is effective March 4, 2002.

FOR FURTHER INFORMATION CONTACT: Judith R. Starr, Chief Counsel 
(FinCEN), (703) 905-3590; William Langford, Senior Counsel for 
Financial Crimes, Office of the Assistant General Counsel 
(Enforcement), (202) 622-1932; or Gary W. Sutton, Senior Banking 
Counsel, Office of the Assistant General Counsel (Banking & Finance), 
(202) 622-1976 (not toll-free numbers). Financial institutions with 
questions about their coverage or compliance obligations under this 
rule should contact their appropriate federal regulator.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 26, 2001, the President signed into law the USA PATRIOT 
Act of 2001 (Public Law 107-56) (the Act). Of the Act's many goals, the 
facilitation of information sharing among governmental entities and 
financial institutions for the purpose of combating terrorism and money 
laundering is of paramount importance. Section 314 of the Act furthers 
this goal by providing for the sharing of information between the 
government and financial institutions, and among financial institutions 
themselves. As with many other provisions of the Act, Congress has 
charged Treasury with developing regulations to implement these 
information-sharing provisions.
    Section 314(b) of the Act permits financial institutions, upon 
providing notice to Treasury, to share information with one another in 
order to better identify and report to the federal government 
concerning activities that may involve money laundering or terrorist 
activities. This interim rule implements section 314(b). The Congress 
authorized financial institutions to share information to assist in the 
identification of suspected terrorists and money launderers only after 
providing notice to Treasury. The notice provision outlined below--a 
yearly certification to FinCEN that information will be shared and 
protected from inappropriate disclosure--combined with the requirement 
that any money laundering or terrorist activities uncovered be reported 
to FinCEN or other law enforcement, will allow for the sharing of 
information while protecting the privacy interests of customers of 
financial institutions.
    Published elsewhere in this issue of the Federal Register is a 
notice of proposed rulemaking that solicits comments on proposed 
provisions that are identical to this interim rule, as well as proposed 
regulations to implement the provisions of section 314(a) the Act, 
which concerns enhanced cooperation between financial institutions and 
federal law enforcement agencies to detect terrorist and money 
laundering activities. Please refer to the notice of proposed 
rulemaking for instructions for submitting comments on the proposed 
provisions that are identical to this interim rule.

II. Analysis of the Interim Rule

A. General Definitions

Section 103.90--Definitions
    As noted above, section 314(b) of the Act permits financial 
institutions, upon providing notice to Treasury, to share information 
with one another in order to identify and report to the federal 
government activities that may involve money laundering or terrorist 
activity. Although section 314 does not define ``money laundering'' or 
``terrorist activity,'' each of these terms has well-established 
definitions. Accordingly, and consistent with the broad intent 
underlying section 314(b), section 103.90(a) defines ``money 
laundering'' to mean any activity described in section 1956 or 1957 of 
title 18, United States Code. Similarly, section 103.90(b) defines 
``terrorist activity'' to mean an act of domestic terrorism or 
international terrorism as defined in section 2331 of title 18, United 
States Code.

B. Information Sharing Among Financial Institutions

Section 103.110--Voluntary Information Sharing Among Financial 
Institutions
    The Act does not define the term ``financial institution'' for 
purposes of the information sharing provisions of 314(b). Under the 
Bank Secrecy Act (BSA), which is concerned with information reporting 
to detect and prevent financial crimes, the term ``financial 
institution'' is defined broadly.\1\ Unlike section 314(a), which 
involves financial institutions responding to requests for information 
from federal law enforcement agencies,\2\ section 314(b) involves the 
sharing of information among financial institutions and raises issues 
concerning information privacy.\3\ For these reasons, Treasury and 
FinCEN believe that it is appropriate to define the term ``financial 
institution'' for purposes of section 314(b) in a manner that is most 
likely to further the identification of terrorist and money laundering 
activities while minimizing the likelihood that information sharing 
will inappropriately intrude on the privacy interests of the customers 
of those institutions. Accordingly, section 103.110(a)(2) defines 
``financial institution'' for purposes of section 314(b) to mean (1) a 
financial institution that is subject to SAR reporting that is not a 
money services business, which includes banks, savings associations, 
and credit unions; (2) 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.); (3) an issuer of traveler's checks or 
money orders, (4) a registered money transmitter, or (5) an operator of 
a credit card system that is not a money services business. Treasury 
and FinCEN specifically request comment, in connection with the 
proposed rule published elsewhere in this issue of the Federal 
Register, concerning whether these entities should be included within 
the definition for purposes of section 314(b) of the Act and regulation 
section 103.110, and whether the definition should be expanded to 
include other categories of BSA financial institutions.
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    \1\ See 31 U.S.C. 5312(a)(2).
    \2\ Treasury and FinCEN are proposing to apply section 314(a) to 
all BSA financial institutions. See the proposed rule implementing 
section 314(a) published elsewhere in this issue of the Federal 
Register.
    \3\ See Act sections 314(b) and (c), which provide protections 
from federal and State prohibitions on the disclosure of information 
to financial institutions that engage in information sharing 
consistent with the requirements of section 314(b) and its 
implementing regulations.

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    Section 103.110(b) provides that upon providing the appropriate 
certification to Treasury, as described below, a financial institution 
may share information with other financial institutions regarding 
individuals, entities, organizations, and countries for purposes of 
detecting, identifying, or reporting activities that the financial 
institution or association suspects may involve money laundering or 
terrorist activity. Because associations of such financial institutions 
can enhance the sharing of information among its members, this section 
also permits these associations to participate in the information 
sharing process.
    Prior to engaging in information sharing, a financial institution 
or association of financial institutions must submit to FinCEN a 
certification described in new Appendix B to 31 CFR part 103, that 
confirms: the name of the financial institution or association of 
financial institutions; that the financial institution is a financial 
institution as defined in section 103.110(a), or in the case of an 
association, that the association's members that intend to engage in 
information sharing are financial institutions as defined in section 
103.110(a); that the institution or association will maintain adequate 
procedures to protect the security and confidentiality of such 
information; that the institution or association will not use any 
shared information for any purpose other than as authorized in section 
103.110; and the identity of a contact person at the financial 
institution or association for matters pertaining to information 
sharing.
    To streamline the certification process, FinCEN has established a 
special page on its existing Internet website, http://www.treas.gov/
fincen, where financial institutions can enter the appropriate 
information. If a financial institution or association does not have 
access to the Internet, the certification may be mailed to FinCEN at 
the address specified in the rule.
    By requiring notice to Treasury before information is shared among 
financial institutions, Congress has injected Treasury into what would 
otherwise be a purely private communication. The statute did not 
indicate clearly whether prior notice to Treasury was required before 
each individual communication or whether a general notice would be 
sufficient. After considering both the need for flexibility for 
financial institutions as well as the need to ensure that the right to 
share information under this section is not being used improperly, 
Treasury and FinCEN determined that the certification should be 
effective for a one-year period beginning on the date of the 
certification. A re-certification, provided to FinCEN in the same 
manner, is required if a financial institution or association intends 
to continue to share information. An annual certification will help 
Treasury determine which financial institutions are sharing 
information, and it will reinforce the need for financial institutions 
to protect information shared under this section. Treasury and FinCEN 
balanced the minimal burden associated with completing the brief 
electronic or paper certification against its role in protecting the 
privacy interests of customers of financial institutions.
    Section 103.110(c) requires each financial institution or 
association of financial institutions that engages in the sharing of 
information to maintain adequate procedures to protect the security and 
confidentiality of such information. This section also provides that 
information received by a financial institution or association of 
financial institutions pursuant to this section shall only be used for 
identifying and reporting on activities that may involve terrorist or 
money laundering activities, or determining whether to close or 
maintain an account, or to engage in a transaction. A financial 
institution that fails to comply with these restrictions on the use of 
shared information may have its certification revoked or suspended. See 
103.110(g).
    Section 103.110(d) provides that a financial institution or 
association of financial institutions that engages in the sharing of 
information and that complies with sections 103.110(b) and (c) shall 
not be liable to any person under any law or regulation of the United 
States, under any constitution, law, or regulation of any State or 
political subdivision thereof, or under any contract or other legally 
enforceable agreement (including any arbitration agreement), for such 
sharing, or for any failure to provide notice of such sharing, to an 
individual, entity, or organization that is the subject of such 
sharing.
    Section 103.110(e) provides a means for financial institutions to 
voluntarily report information to law enforcement concerning suspicious 
transactions that may relate to money laundering or terrorist activity 
that may come to the financial institution's attention as a result of 
discussions with other financial institutions, or otherwise. In order 
to accord the highest priority to suspected terrorist activity, a 
financial institution should report such information to FinCEN by 
calling the Financial Institutions Hotline (1-866-556-3974). The 
purpose of the Financial Institutions Hotline is to facilitate the 
immediate transmittal of this information to law enforcement. Financial 
institutions identifying other suspicious transactions should report 
such transactions by promptly filing a SAR in accordance with 
applicable regulations, even if they provide information over the 
Financial Institutions Hotline. The Financial Institutions Hotline is 
intended to provide to law enforcement and other authorized recipients 
of SAR information the essence of the suspicious activity in an 
expedited fashion. Use of the Financial Institutions Hotline is 
voluntary and does not affect an institution's responsibility to file a 
SAR in accordance with applicable regulations.
    Section 103.110(f) clarifies that voluntary reporting under section 
103.110 does not relieve a financial institution from any obligation it 
may have to file a Suspicious Activity Report pursuant to a regulatory 
requirement, or to otherwise directly contact a federal agency 
concerning individuals, entities, or organizations suspected of 
engaging in money laundering or terrorist activities.
    Section 103.110(g) provides that a federal regulator of a financial 
institution, or FinCEN in the case of a financial institution that does 
not have a federal regulator, may revoke or suspend a certification 
provided by a financial institution under this section if the regulator 
or FinCEN determines that the financial institution has failed to 
comply with the requirements of paragraph (c) of this section. Treasury 
and FinCEN believe this provision is necessary to preclude further 
participation in information sharing under the authority of section 
103.110 by a financial information that fails to accord confidentiality 
to shared information, or uses that information for purposes other than 
as permitted by section 103.110(c). A financial institution with 
respect to which a certification has been revoked or suspended may not 
engage in information sharing under this section during the period of 
such revocation or suspension.

III. Administrative Procedure Act

    In Executive Order 13224 (September 23, 2001), the President found 
that the continuing and immediate threat of further attacks on the 
United States constitutes an unusual and extraordinary threat to the 
national security, foreign policy, and economy of the United States. 
The interim rule implements statutory provisions intended to prevent 
terrorist activity by

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uncovering and disrupting the financing of terrorist acts. In light of 
the exigent circumstances described in Executive Order 13224, Treasury 
has determined, pursuant to 5 U.S.C. 553(b), that it would be contrary 
to the public interest to delay the publication of this rule in final 
form during the pendency of an opportunity for public comment. For the 
same reason, pursuant to 5 U.S.C. 553(d), it has been determined that 
there is good cause for the interim rule to become effective 
immediately upon publication.

IV. Regulatory Flexibility Act

    The provisions of the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., do not apply to this interim rule because a notice of proposed 
rulemaking is not required under 5 U.S.C. 553 or any other law.

V. Paperwork Reduction Act

    The requirement in section 103.110(b)(2), concerning notification 
to FinCEN that a financial institution that intends to engage in 
information sharing, and the accompanying certification in Appendix B 
to 31 CFR part 103, do not constitute a collection of information for 
purposes of the Paperwork Reduction Act. See 5 CFR 1320.3(h)(1).
    The collection of information contained in section 103.110(e), 
concerning reports to the federal government as a result of information 
sharing among financial institutions, will necessarily involve the 
reporting of a subset of information currently contained in a 
Suspicious Activity Report (SAR). SAR reporting has been previously 
reviewed and approved by the Office of Management and Budget (OMB) 
pursuant to the Paperwork Reduction Act and assigned OMB Control No. 
1506-0001. 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.

VI. Executive Order 12866

    This interim rule is not a ``significant regulatory action'' for 
purposes of Executive Order 12866. Accordingly, a regulatory assessment 
is not required.

List of Subjects in 31 CFR Part 103

    Authority delegations (Government agencies), Banks and banking, 
Currency, Investigations, Law enforcement, Reporting and recordkeeping 
requirements.

    Dated: February 26, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.

Authority and Issuance

    For the reasons set forth in the preamble, 31 CFR part 103 is 
amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FOREIGN TRANSACTIONS

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

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5331; 
title III, sec. 314, Pub. L. 107-56, 115 Stat. 307.


    2. Add new subpart H to part 103 to read as follows:
Subpart H--Special Information Sharing Procedures To Deter Money 
Laundering and Terrorist Activity
Sec.
103.90  Definitions.
103.100  Information sharing with federal law enforcement agencies. 
[Reserved]
103.110  Voluntary information sharing among financial institutions.

Subpart H--Special Information Sharing Procedures To Deter Money 
Laundering and Terrorist Activity


Sec. 103.90  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Money laundering means an activity described in 18 U.S.C. 1956 
or 1957.
    (b) Terrorist activity means an act of domestic terrorism or 
international terrorism as those terms are defined in 18 U.S.C. 2331.


Sec. 103.100  Information sharing with federal law enforcement 
agencies. [Reserved]


Sec. 103.110  Voluntary information sharing among financial 
institutions.

    (a) Definitions. For purposes of this section:
    (1) The definitions in Sec. 103.90 apply;
    (2) The term financial institution means any financial institution 
described in 31 U.S.C. 5312(a)(2) that:
    (i) Is subject to a suspicious activity reporting requirement of 
subpart B of this part and is not a money services business, as defined 
in Sec. 103.11(uu);
    (ii) Is a broker or dealer in securities, as defined in 
Sec. 103.11(f);
    (iii) Is an issuer of traveler's checks or money orders, as defined 
in Sec. 103.11(uu)(3);
    (iv) Is a money transmitter, as defined in Sec. 103.11(uu)(5), and 
is required to register as such pursuant to Sec. 103.41; or
    (v) Is an operator of a credit card system and is not a money 
services business, as defined in Sec. 103.11(uu); and
    (3) The term association of financial institutions means a group or 
organization the membership of which is comprised entirely of financial 
institutions as defined in paragraph (a)(2) of this section.
    (b) Information sharing among financial institutions--(1) In 
general. Subject to paragraphs (b)(2) and (g) of this section, a 
financial institution or an association of financial institutions may 
engage in the sharing of information with any other financial 
institution (as defined in paragraph (a)(2) of this section) or 
association of financial institutions (as defined in paragraph (a) (3) 
of this section) regarding individuals, entities, organizations, and 
countries for purposes of detecting, identifying, or reporting 
activities that the financial institution or association suspects may 
involve possible money laundering or terrorist activities.
    (2) Notice requirement--(i) Certification. A financial institution 
or association of financial institutions that intends to engage in the 
sharing of information as described in paragraph (b)(1) of this section 
shall submit to FinCEN a certification described in Appendix B of this 
part.
    (ii) Address. Completed certifications may be submitted to FinCEN:
    (A) By accessing FinCEN's Internet website, http://www.treas.gov/
fincen, and entering the appropriate information as directed; or
    (B) If a financial institution does not have Internet access, by 
mail to: FinCEN, PO Box 39, Mail Stop 100, Vienna, VA 22183.
    (iii) One year duration of certification. Each certification 
provided pursuant to paragraph (b)(2)(i) of this section shall be 
effective for the one year period beginning on the date of the 
certification. In order to continue to engage in the sharing of 
information after the end of the one year period, a financial 
institution or association of financial institutions must submit a new 
certification.
    (c) Security and confidentiality of information--(1) Procedures 
required. Each financial institution or association of financial 
institutions that engages in the sharing of information pursuant to 
this section shall maintain adequate procedures to protect the security 
and confidentiality of such information.
    (2) Use of information. Information received by a financial 
institution or association of financial institutions pursuant to this 
section shall not be used for any purpose other than:

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    (i) Detecting, identifying and reporting on activities that may 
involve terrorist or money laundering activities; or
    (ii) Determining whether to establish or maintain an account, or to 
engage in a transaction.
    (d) Safe harbor from certain liability--(1) In general. A financial 
institution or association of financial institutions that engages in 
the sharing of information pursuant to this section shall not be liable 
to any person under any law or regulation of the United States, under 
any constitution, law, or regulation of any State or political 
subdivision thereof, or under any contract or other legally enforceable 
agreement (including any arbitration agreement), for such sharing, or 
for any failure to provide notice of such sharing, to an individual, 
entity, or organization that is identified in of such sharing.
    (2) Limitation. Paragraph (d)(1) of this section shall not apply to 
a financial institution or association of financial institutions to the 
extent such institution or association fails to comply with paragraph 
(b) or (c) of this section.
    (e) Information sharing between financial institutions and the 
federal government--(1) Terrorist activity. If, as a result of 
information sharing pursuant to this section, a financial institution 
suspects that an individual, entity, or organization is involved in, or 
may be involved in terrorist activity, such information should be 
reported to FinCEN:
    (i) By calling the toll-free Financial Institutions Hotline (1-866-
556-3974); and
    (ii) If appropriate, by filing a Suspicious Activity Report 
pursuant to subpart B of this part or other applicable regulations.
    (2) Money laundering. If as a result of information sharing 
pursuant to this section, a financial institution suspects that an 
individual, entity, or organization is involved in, or may be involved 
in money laundering, such information should generally be reported by 
filing a Suspicious Activity Report in accordance with subpart B of 
this part or other applicable regulations. If circumstances indicate a 
need for the expedited reporting of this information, a financial 
institution may use the Financial Institutions Hotline (1-866-556-
3974).
    (f) No limitation on financial institution reporting obligations. 
Nothing in this subpart affects the obligation of a financial 
institution to file a Suspicious Activity Report pursuant to subpart B 
of this part or any other applicable regulations, or to otherwise 
directly contact a federal agency concerning individuals or entities 
suspected of engaging in money laundering or terrorist activities.
    (g) Revocation or suspension of certification--(1) Authority of 
federal regulator or FinCEN. Notwithstanding any other provision of 
this section, a federal regulator of a financial institution, or FinCEN 
in the case of a financial institution that does not have a federal 
regulator, may revoke or suspend a certification provided by a 
financial institution pursuant to paragraph (b)(2) of this section if 
the concerned federal regulator or FinCEN, as appropriate, determines 
that the financial institution has failed to comply with the 
requirements of paragraph (c) of this section. Nothing in this 
paragraph (g)(1) shall be construed to affect the authority of any 
federal regulator with respect to any financial institution.
    (2) Effect of revocation or suspension. A financial institution 
with respect to which a certification has been revoked or suspended may 
not engage in information sharing under the authority of this section 
during the period of such revocation or suspension.


    3. The Appendix to part 103 is redesignated as Appendix A to part 
103 and the heading is revised to read as follows:

Appendix A to Part 103--Administrative Rulings

* * * * *


    4. Appendix B is added to part 103 to read as follows:

Appendix B to Part 103--Certification for Purposes of Section 
314(b) of the USA Patriot Act and 31 CFR 103.110

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