[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Rules and Regulations]
[Pages 62607-62630]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26204]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1060
RIN 1506-AB12
Comprehensive Iran Sanctions, Accountability, and Divestment
Reporting Requirements
AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.
ACTION: Final rule.
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SUMMARY: FinCEN, to comply with the congressional mandate to prescribe
regulations under section 104(e) of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (``CISADA'') and consistent
with its statutory mission under 31 U.S.C. 310, is issuing this final
rule. The rule requires a U.S. bank that maintains a correspondent
account for a foreign bank to inquire of the foreign bank, and report
to FinCEN certain information with respect to transactions or other
financial services provided by that foreign bank. Under the rule, U.S.
banks will only be required to report this
[[Page 62608]]
information to FinCEN upon receiving a specific written request from
FinCEN. This final rule follows publication of a May 2, 2011 proposed
rule, takes into account the public comments received, and adopts the
provisions of the proposed rule with minor modifications described in
the preamble.
DATES: Effective Date: October 11, 2011.
FOR FURTHER INFORMATION CONTACT: The FinCEN regulatory helpline at
(800) 949-2732 and select Option 6.
SUPPLEMENTARY INFORMATION:
I. Statutory Provisions
On July 1, 2010, the President signed CISADA \1\ into law. Section
104(c) of CISADA requires the Secretary of the Treasury (``the
Secretary'') to prescribe regulations to prohibit, or impose strict
conditions on, the opening or maintaining in the United States of
correspondent accounts and payable-through accounts for foreign
financial institutions that the Secretary finds knowingly engage in
sanctionable activities described in section 104(c)(2) of CISADA. The
relevant statutory language reads as follows:
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\1\ Public Law No. 111-195, 124 Stat. 1312 (2010).
``(c) PROHIBITIONS AND CONDITIONS WITH RESPECT TO CERTAIN
ACCOUNTS HELD BY FOREIGN FINANCIAL INSTITUTIONS.--
(1) IN GENERAL.--Not later than 90 days after the date of the
enactment of this Act, the Secretary of the Treasury shall prescribe
regulations to prohibit, or impose strict conditions on, the opening
or maintaining in the United States of a correspondent account or a
payable-through account by a foreign financial institution that the
Secretary finds knowingly engages in an activity described in
paragraph (2).
(2) ACTIVITIES DESCRIBED.--A foreign financial institution
engages in an activity described in this paragraph if the foreign
financial institution--
(A) facilitates the efforts of the Government of Iran (including
efforts of Iran's Revolutionary Guard Corps or any of its agents or
affiliates)--
(i) to acquire or develop weapons of mass destruction or
delivery systems for weapons of mass destruction; or
(ii) to provide support for organizations designated as foreign
terrorist organizations under section 219(a) of the Immigration and
Nationality Act (8 U.S.C. 1189(a)) or support for acts of
international terrorism (as defined in section 14 of the Iran
Sanctions Act of 1996 (Public Law 104-172; 50 U.S.C. 1701 note));
(B) facilitates the activities of a person subject to financial
sanctions pursuant to United Nations Security Council Resolution
1737 (2006), 1747 (2007), 1803 (2008), or 1929 (2010), or any other
resolution that is agreed to by the Security Council and imposes
sanctions with respect to Iran;
(C) engages in money laundering to carry out an activity
described in subparagraph (A) or (B);
(D) facilitates efforts by the Central Bank of Iran or any other
Iranian financial institution to carry out an activity described in
subparagraph (A) or (B); or
(E) facilitates a significant transaction or transactions or
provides significant financial services for--
(i) Iran's Revolutionary Guard Corps or any of its agents or
affiliates whose property or interests in property are blocked
pursuant to the International Emergency Economic Powers Act (50
U.S.C. 1701 et seq.); or
(ii) a financial institution whose property or interests in
property are blocked pursuant to that Act in connection with--
(I) Iran's proliferation of weapons of mass destruction or
delivery systems for weapons of mass destruction; or
(II) Iran's support for international terrorism.
(3) PENALTIES.--The penalties provided for in subsections (b)
and (c) of section 206 of the International Emergency Economic
Powers Act (50 U.S.C. 1705) shall apply to a person that violates,
attempts to violate, conspires to violate, or causes a violation of
regulations prescribed under paragraph (1) of this subsection to the
same extent that such penalties apply to a person that commits an
unlawful act described in section 206(a) of that Act.''
On August 16, 2010, the Office of Foreign Assets Control (``OFAC')
published the Iranian Financial Sanctions Regulations, 31 CFR Part 561
(the ``IFSR''). Section 561.201 of the IFSR implements section 104(c)
of CISADA. It states that the Secretary will, consistent with
authorities under CISADA, prohibit or impose strict conditions on the
opening or maintaining in the United States of correspondent accounts
or payable-through accounts for a foreign financial institution that
the Secretary finds knowingly engages in one or more of the
sanctionable activities described in section 561.201(a) of the IFSR.
Section 104(e) of CISADA requires the Secretary to prescribe
regulations to establish one or more specific requirements for U.S.
financial institutions maintaining correspondent accounts for foreign
financial institutions, in connection with the sanctionable activities
described in section 104(c)(2) of CISADA. The relevant statutory
language reads as follows:
``(e) REQUIREMENTS FOR FINANCIAL INSTITUTIONS MAINTAINING
ACCOUNTS FOR FOREIGN FINANCIAL INSTITUTIONS.--
(1) IN GENERAL.--The Secretary of the Treasury shall prescribe
regulations to require a domestic financial institution maintaining
a correspondent account or payable-through account in the United
States for a foreign financial institution to do one or more of the
following:
(A) Perform an audit of activities described in subsection
(c)(2) that may be carried out by the foreign financial institution.
(B) Report to the Department of the Treasury with respect to
transactions or other financial services provided with respect to
any such activity.
(C) Certify, to the best of the knowledge of the domestic
financial institution, that the foreign financial institution is not
knowingly engaging in any such activity.
(D) Establish due diligence policies, procedures, and controls,
such as the due diligence policies, procedures, and controls
described in section 5318(i) of title 31, United States Code,
reasonably designed to detect whether the Secretary of the Treasury
has found the foreign financial institution to knowingly engage in
any such activity.
(2) PENALTIES.--The penalties provided for in sections 5321(a)
and 5322 of title 31, United States Code, shall apply to a person
that violates a regulation prescribed under paragraph (1) of this
subsection, in the same manner and to the same extent as such
penalties would apply to any person that is otherwise subject to
such section 5321(a) or 5322.''
In order to comply with the congressional mandate to prescribe
regulations under section 104(e) of CISADA, and consistent with its
statutory mission under 31 U.S.C. 310, FinCEN is implementing section
104(e)(1)(B) of CISADA. FinCEN considered implementing any one or more
of the options under section 104(e)(1) of CISADA, and determined that
implementing section 104(e)(1)(B) is the most useful vehicle for
effecting the intent of section 104(e) at this time. Section
104(e)(1)(B) of CISADA authorizes the Secretary to prescribe
regulations that require a domestic financial institution maintaining a
correspondent account in the United States for a foreign financial
institution to report to the Department of the Treasury with respect to
transactions or other financial services provided with respect to
sanctionable activities described in section 104(c)(2) of CISADA that
may be carried out by the foreign financial institution.
FinCEN believes that among the services included within the concept
of ``transactions or other financial services provided'' by a foreign
financial institution are correspondent accounts the foreign financial
institution maintains for other foreign financial institutions and
transfers of funds the foreign financial institution processes for or
on behalf of other foreign financial institutions, individuals, or
entities. A foreign financial institution's provision of correspondent
account services and transfer of funds services to a financial
institution designated by the U.S. Government in connection with Iran's
proliferation of weapons of mass
[[Page 62609]]
destruction or delivery systems for weapons of mass destruction, or in
connection with Iran's support for international terrorism, may be
relevant to the sanctionable activities described under section
104(c)(2) of CISADA. As a result, FinCEN is focusing this reporting
requirement on the provision of information relating to such
correspondent accounts and transfers of funds.\2\ In addition, because
a foreign financial institution's provision of transfer of funds
services to Iran's Islamic Revolutionary Guard Corps (``IRGC'') or any
of its agents or affiliates designated by the U.S. Government may also
be relevant to the sanctionable activities described under section
104(c)(2) of CISADA, FinCEN is also focusing this reporting requirement
on the provision of information relating to such transfers of funds.\3\
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\2\ See, e.g., CISADA subsection 104(c)(2)(E)(ii), which
includes focus on the provision by foreign financial institutions of
significant financial services to financial institutions that are of
concern under CISADA.
\3\ See, e.g., CISADA subsection 104(c)(2)(E)(i), which includes
focus on the provision by foreign financial institutions of
significant financial services to individuals or entities that are
of concern under CISADA.
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FinCEN is implementing section 104(e)(1)(B) of CISADA by issuing
regulations that require a bank, upon receiving a written request from
FinCEN, to inquire of a specified foreign bank for which it maintains a
correspondent account, and report to FinCEN, with respect to the
following: (1) Whether the foreign bank maintains a correspondent
account for an Iranian-linked financial institution designated under
the International Emergency Economic Powers Act (``IEEPA''); \4\ (2)
whether the foreign bank has processed one or more transfers of funds
within the preceding 90 calendar days for or on behalf of, directly or
indirectly,\5\ an Iranian-linked financial institution designated under
IEEPA, other than through a correspondent account; and (3) whether the
foreign bank has processed one or more transfers of funds within the
preceding 90 calendar days for or on behalf of, directly or indirectly,
an IRGC-linked person designated under IEEPA.\6\
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\4\ See below Section V. A. for the definition of Iranian-linked
financial institution designated under IEEPA.
\5\ See below Section IV. D. for the rationale for replacing the
terminology ``related to'' with ``for or on behalf of, directly or
indirectly.''
\6\ See below Section V. A. for the definition of IRGC-linked
person designated under IEEPA.
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In addition, the rule requires a bank to request, when making its
inquiry of a specified foreign bank, that the foreign bank agree to
notify the bank if the foreign bank subsequently establishes a new
correspondent account for an Iranian-linked financial institution
designated under IEEPA at any time within 365 calendar days from the
date of the foreign bank's initial response, and report such
information to FinCEN.
The rule also requires a bank to report to FinCEN instances in
which the bank does not maintain a correspondent account for a foreign
bank specified in a written request from FinCEN. This requirement will
only apply when FinCEN specifically requests in writing that the bank
report such information. To the extent possible and based on all
available information, FinCEN intends to send requests directly to
banks that FinCEN believes may maintain correspondent accounts for the
specified foreign bank(s). The number of banks that receive a request
may vary in each specific case, based on the availability of
information to FinCEN and other circumstances.
II. Background Information
A. 31 CFR Part 561 Iranian Financial Sanctions Regulations--Office of
Foreign Assets Control
On August 16, 2010, OFAC published the IFSR, 31 CFR part 561. As
noted above, section 561.201 of the IFSR implements section 104(c) of
CISADA. It states that the Secretary will, consistent with authorities
under CISADA, prohibit or impose strict conditions on the opening or
maintaining in the United States of correspondent accounts or payable-
through accounts for a foreign financial institution that the Secretary
finds knowingly engages in one or more of the sanctionable activities
described in section 561.201(a) of the IFSR. The names of foreign
financial institutions that are found by the Secretary to knowingly
engage in such sanctionable activities, and for which U.S. financial
institutions may not open or maintain correspondent accounts or
payable-through accounts in the United States, will be published in the
Federal Register and listed in appendix A to the IFSR. If the Secretary
decides to impose strict conditions on the opening or maintaining of a
correspondent account or a payable-through account for a foreign
financial institution, the actual condition(s) to be imposed will be
specified upon the identification of the foreign financial institution
in an order or regulation published in the Federal Register.
B. Use of CISADA Reports
The CISADA reports received as a result of this rulemaking will be
used primarily to provide FinCEN with potentially useful information
from U.S. banks regarding the nature of foreign bank activities that
may be relevant to CISADA. Based on the reports, immediate action may
be taken under section 104(c) of CISADA, or, among other things, there
may be consultation with those foreign banks that maintain
correspondent accounts for Iranian-linked financial institutions
designated under IEEPA, that have processed one or more transfers of
funds for or on behalf of, directly or indirectly, an Iranian-linked
financial institution or an IRGC-linked person designated under IEEPA,
or that have been unwilling to respond to inquiries from the banks at
which the foreign banks maintain correspondent accounts. An
investigation by OFAC into the activities of such foreign banks could
result in a finding by the Secretary under section 104(c) of CISADA and
section 561.201 of the IFSR. For example, when a bank reports that a
foreign bank maintains a correspondent account for an Iranian-linked
financial institution designated under IEEPA, or has processed one or
more transfers of funds for or on behalf of, directly or indirectly, an
Iranian-linked financial institution or an IRGC-linked person
designated under IEEPA, OFAC could use the information to corroborate
or supplement data derived from other sources and may request further
information from the foreign bank to clarify whether the foreign bank
is facilitating significant transactions or providing significant
financial services for an Iranian-linked financial institution or an
IRGC-linked person designated under IEEPA. Such transactions or
services can be the basis for prohibiting or imposing strict conditions
on the foreign bank's correspondent or payable-through accounts in the
United States under section 104(c) of CISADA and section 561.201 of the
IFSR.
III. Notice of Proposed Rulemaking
The final rule contained in this document is based on the Notice of
Proposed Rulemaking published in the Federal Register on May 2, 2011
(``Notice'').\7\ With the intent of implementing section 104(e) of
CISADA, the Notice proposed to require a U.S. bank that maintains a
correspondent account for a foreign bank to inquire of the foreign bank
and report to FinCEN certain information with respect to transactions
or other financial services provided by that foreign bank. The Notice
also proposed that banks would only be required to
[[Page 62610]]
report this information to FinCEN upon receiving a specific written
request from FinCEN.
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\7\ See 76 FR 24410 (May 2, 2011).
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IV. Comments on the Notice--Overview and General Issues
The comment period for the Notice ended on June 1, 2011. We
received a total of seven comment letters from 14 entities and
individuals.\8\ Of the seven comment letters, five were submitted by
trade groups or associations,\9\ one was submitted by a group of seven
U.S. Senators, and one was submitted by an advocacy group. The comments
were generally supportive of the Notice but sought additional
clarification on certain aspects of the Notice. Comments received
covered a broad and varied range of topics. Although most of these
comments are addressed directly below, a few others are covered in the
section-by-section analysis.
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\8\ All comments to the Notice are available for public viewing
at http://www.regulations.gov.
\9\ One comment letter was submitted on behalf of two trade
groups or associations.
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Comments on the Notice focused on the following general matters:
(A) The approach to implementing section 104(e) of CISADA; (B) the
ability of a foreign bank to respond to a CISADA request; (C) the
impact of the rule on foreign correspondent account relationships; (D)
the scope of information to be reported by a foreign bank; (E) the
timeframe for a foreign bank and a U.S. bank to respond to a CISADA
request; (F) clarification regarding the proposed model certification;
(G) clarification regarding certain definitions and terms; (H) record
retention and supporting documentation; (I) sharing information
regarding a CISADA request; and (J) estimate of burden.
A. The Approach to Implementing Section 104(e) of CISADA
One of the comments asserted that the Notice was not published in
the Federal Register until 10 months after the President signed CISADA,
which led the commenter to call into question the seriousness of
enforcing comprehensive sanctions against Iran. Two commenters urged
that the final rule should be implemented as soon as possible.
Conversely, another commenter asserted that allowing only a 30-day
comment period for the Notice was inadequate. In drafting the Notice,
we considered a number of different approaches before settling on the
one that we believe will produce the most useful information in the
most workable manner. The time it took to publish the Notice reflected
the need to craft a rule that would best achieve our policy aims, in a
complex and novel context. Because we were mindful of the need to
obtain this information expeditiously, we issued the Notice with a 30-
day comment period. The quality and scope of the comments convinces us
that 30 days was sufficient. We have drafted the final rule as promptly
as possible, while taking into consideration all of the comments
received and ensuring that we have established a rule that most
effectively implements section 104(e) of CISADA.
Section 104(e) of CISADA offers FinCEN four options for rulemaking.
One commenter requested clarification regarding how FinCEN determined
that implementing section 104(e)(1)(B) would be the most useful way to
implement section 104(e) of CISADA. As noted above, FinCEN considered a
number of different approaches to implementing section 104(e) of
CISADA. We believe that implementing section 104(e)(1)(B) will produce
the most useful information in the most workable manner and will best
achieve our policy aims. In fact, this belief is echoed in a number of
comments FinCEN received. One commenter asserted that section 104(e) of
CISADA allows FinCEN to implement any one or more of four requirements,
some of which the commenter believes are potentially very burdensome to
industry. The commenter believes the proposed requirements
appropriately balance the need of the U.S. government to isolate Iran
from the global financial system with the need to maintain an
effectively functioning correspondent banking system. Another commenter
asserted that FinCEN has taken elements of the four options Congress
outlined in the statute and incorporated them with existing
requirements to develop a rule that considers the costs to industry,
the ability of the industry to comply, appropriate use of limited
enforcement resources, and the need for information. Yet another
commenter asserted that banks providing correspondent relationships in
the U.S. are not in a position to speak to the overall activities of
their foreign counterparts. The commenter further asserted that as
such, if those activities are at issue under section 104(e) of CISADA,
it is more appropriate to ask the U.S.-based banks to transmit
inquiries to their foreign correspondents than to ask them to conduct
independent investigations for which they are ill-suited.
One commenter believes that the proposed rule treats section 104(e)
of CISADA as a discretionary provision in which banks will only have to
certify they are not doing business with relevant Iranian-linked
designated entities and individuals upon a written inquiry from FinCEN.
Another commenter suggested that the proposed rule would not meet the
requirements of the statute, as domestic financial institutions should
be required to provide information to FinCEN, not only when asked, but
as soon as they are aware that the foreign financial institution is
engaged in a ``prohibited activity.'' FinCEN does not interpret 104(e)
to be discretionary. To the contrary, we understand 104(e) to require
the Secretary to prescribe regulations mandating that domestic
financial institutions take one or more actions, one of which is to
provide requested reports to FinCEN, and we believe the final rule
reflects this understanding. We also note that the activities described
in section 104(c)(2) of CISADA are not ``prohibited activities.''
Instead they are activities that can be grounds for imposing the
sanctions described in section 104(c)(1) of CISADA.
FinCEN proposed to target this reporting requirement on those
foreign banks that there is some basis to suspect may be engaged in
activities that may be sanctionable under section 104(c) of CISADA. We
considered requiring every U.S. bank to provide periodic reports from
every foreign bank for which they maintain correspondent accounts, but
concluded that we would be better served by a rule that focused on
those foreign banks that are of interest for purposes of CISADA. By
requiring reports from those U.S. banks that maintain correspondent
accounts for the specific foreign banks that are of interest for
purposes of CISADA implementation, we believe that we will receive the
information needed without generating a multitude of unnecessary and
uninformative reports.
The reporting requirement in the final rule is scalable. Based on
the circumstances, it permits FinCEN to expand the number of U.S. banks
that would be required to file reports, as well as the number of
foreign banks from whom information would be sought. This means that
FinCEN may ask any number of U.S. banks about any number of foreign
banks as is necessary, based on the number of foreign banks there is
some basis to suspect may be engaged in activities that may be
sanctionable under section 104(c) of CISADA.
The targeted approach that FinCEN has proposed is supported by a
number of commenters. One commenter strongly recommended incorporating
the concept of targeted requests in the final rule. That same commenter
noted that it appreciated FinCEN's effort to craft a
[[Page 62611]]
regulation that focuses on developing meaningful and properly targeted
information. Another commenter expressed support for a request-driven
model as an appropriate means of focusing industry and governmental
resources on information of value. Yet another commenter asserted that
in proposing a reporting requirement that would be imposed only when
specifically requested, FinCEN has struck an appropriate balance
between the need of the U.S. government to isolate Iran from the global
financial system with the need to maintain an effectively functioning
correspondent banking system.
One commenter correctly noted that banks are only required to
request information from a foreign bank for which they maintain a
correspondent account upon receiving a written request from FinCEN
regarding that specific foreign bank. This rule does not require a bank
to proactively inquire of any one or more of the foreign banks for
which it maintains correspondent accounts.
One commenter suggested that under CISADA, a foreign financial
institution should be required to report if it has facilitated the
activities of a person subject to financial sanctions pursuant to
United Nations (``U.N.'') Security Council Resolutions with respect to
Iran. The commenter suggested that the proposed rule should be amended
to require this additional disclosure. We recognize that foreign banks'
transactions involving persons subject to financial sanctions pursuant
to U.N. Security Council Resolutions with respect to Iran are among the
sanctionable activities described in section 104(c)(2) of CISADA;
however, there are other avenues for obtaining information on such
transactions and FinCEN has determined that this specific reporting
mechanism is not the most efficacious means to obtain such information
at this time. However, as FinCEN collects and assesses the information
required under this rule, we will continue to consider whether
expanding the scope of this rule to include information pertaining to
whether a foreign bank has facilitated the activities of a person
subject to financial sanctions pursuant to U.N. Security Council
Resolutions with respect to Iran would provide additional useful
information as it relates to CISADA. If that is determined to be the
case, FinCEN will consider proposing an expansion of this reporting
requirement to include such information. At this time, FinCEN believes
that a focus on foreign banks' transactions involving Iranian-linked
financial institutions designated under IEEPA and IRGC-linked persons
designated under IEEPA will provide the most beneficial information for
purposes of implementing section 104(c) of CISADA.
One commenter suggested that alternative resources might better
serve the same purpose as the proposed rule. The commenter encouraged
FinCEN to place greater reliance on government-to-government requests
given the commenter's belief that such requests are likely to be far
more reliable when collecting information to identify sanctions
targets. The same commenter asserted that the benefit of an inter-
governmental approach is the opportunity to urge other countries to
adopt and implement similar sanctions. FinCEN clarifies that this rule
is one tool that is being utilized to collect information as it relates
to identifying potential sanctions targets under CISADA. As the
commenter correctly suggested, additional methods of information
collection are being utilized to identify sanctions targets. The
commenter also suggested that FinCEN utilize existing Bank Secrecy Act
(``BSA'') reporting tools as necessary to implement this reporting
requirement. FinCEN agrees, and will leverage existing BSA reporting
tools as appropriate.
B. The Ability of a Foreign Bank To Respond to a CISADA Request
Four commenters asserted that privacy legislation in certain
jurisdictions may prohibit foreign banks from providing the requested
information with respect to individual customer accounts and
transactions. Three of these same commenters asserted that under CISADA
banks have no legal authority to compel foreign banks to provide the
requested information. FinCEN acknowledges that some foreign banks may
choose not to respond or may not be able to respond due to their own
jurisdictions' privacy legislation. For this reason the rule
incorporates an option for U.S. banks to report to FinCEN instances in
which they have not received a response from a foreign bank.
Although foreign banks are not necessarily required to respond
under CISADA authority, those foreign banks may feel compelled to
respond in order to maintain good relationships with the U.S. banks
with which they maintain correspondent accounts. Even in instances in
which a foreign bank does not respond to a bank's inquiry, that
information is still valuable. As noted elsewhere in this rulemaking,
based on the reports received, immediate action may be taken under
section 104(c) of CISADA, or, among other things, there may be
consultation with foreign banks, including those that have been
unwilling to respond to inquiries. An investigation by OFAC into the
activities of such foreign banks could result in a finding by the
Secretary under section 104(c) of CISADA and section 561.201 of the
IFSR.
One commenter suggested that the proposed rule should clearly
outline the ramifications for foreign banks that fail to provide the
required information or provide incorrect information. The commenter
suggested that those ramifications should mirror the sanctions outlined
in section 104(c)(1) of CISADA. If a foreign bank fails to respond or
provides incorrect information an investigation may be conducted into
the activities of such foreign bank which could, in turn, result in a
finding under section 104(c) of CISADA.
One commenter contended that the proposed rule does not take into
account the fact that a foreign bank may conduct legitimate business
with an Iranian-linked financial institution designated under IEEPA,
through licensed transactions and clearing. The commenter further
asserted that for this reason, it would be possible for a U.S.
authority to impose a penalty under CISADA on a foreign bank for
undertaking transactions which had been licensed by its own competent
authority. If a foreign bank wishes to explain that a correspondent
account or transfer of funds identified in a certification was licensed
by a competent authority in the foreign bank's home jurisdiction, the
foreign bank may provide this explanatory information in the
certification form. Such explanatory information may be taken into
account when the foreign bank's certification is reviewed and it is
determined what further action, if any, is appropriate under section
104(c) of CISADA. The model certification has been revised to include
language that identifies this type of circumstance as an example of
information a foreign bank can include in its certification.
C. The Impact of the Rule on Foreign Correspondent Account
Relationships
One commenter requested that FinCEN clarify that a request for
information regarding a foreign bank or even a positive report from a
foreign bank is not a mandate to close or restrict an account. The
commenter asserted that one option under the rule is for a bank to
report that it cannot determine to its satisfaction that the foreign
bank does not maintain a relevant account or
[[Page 62612]]
has not processed relevant transfers of funds. The commenter requested
that FinCEN acknowledge in the final rule that this option meets
compliance expectations for the bank, and the bank is not expected to
take further action. Another commenter similarly suggested that the
rule should clarify that a bank that does not receive a response from a
foreign bank is merely required to report that and does not have to
take any other action, including closing the account.
As explained elsewhere in the rulemaking, this rule does not
require a bank to take any steps with respect to the foreign bank other
than those relating to the collection of information outlined in the
rule, regardless of the response received from the foreign bank. While
the rule does not preclude a bank from taking any other action based on
the bank's assessment of the facts and bank policy, including
restricting or terminating a correspondent account relationship with a
foreign bank or filing a suspicious activity report, a bank is not
required to take any additional action based solely upon the fact that
the bank: (i) Has received a request for information under this
regulation; (ii) has received a response from the foreign bank; or
(iii) has not received a response from the foreign bank.
If a foreign bank does not respond to an inquiry made by a bank
under this rule, the bank will be in compliance with these reporting
requirements so long as the bank timely reports to FinCEN that the
foreign bank did not respond to the bank's inquiry. In addition, if a
bank cannot determine that the foreign bank does not maintain a
relevant account or has not processed relevant transfers of funds, the
bank will be in compliance with these reporting requirements so long as
the bank timely reports such information to FinCEN, together with the
reason(s) for this, such as the failure of the foreign bank to respond
to the inquiry by or a request from the bank, the failure of the
foreign bank to certify its response, or if the bank has information
that is inconsistent with the certification.
FinCEN requested comment regarding the impact of this information
collection on banks' correspondent account relationships with foreign
banks. One commenter suggested that a barrage of requests from the
United States could create, over time, an unintended consequence of
alienating foreign correspondents. The commenter also asserted that
foreign banks might be driven to find alternate ways to direct
transactions to avoid dealing with the United States. The commenter
sees this as having a two-part negative impact: the immediate detriment
to the economy and the decreasing ability of the United States to
receive valuable information on international transactions. As stated
elsewhere in the rulemaking, FinCEN proposed to target this reporting
requirement on those foreign banks that there is some basis to suspect
may be engaged in activities that may be sanctionable under section
104(c) of CISADA. We considered requiring every U.S. bank to provide
periodic reports from every foreign bank for which they maintain
correspondent accounts, but concluded that we would be better served by
a rule that focused on those foreign banks that are of interest for
purposes of CISADA. We believe that by taking a targeted approach we
will avoid alienating foreign banks for which we have no concern
regarding sanctionable Iranian-related activities. For these reasons,
we believe the commenter's concerns are unfounded.
D. The Scope of Information To Be Reported by a Foreign Bank
FinCEN requested comment as to whether the terminology ``processed
one or more transfers of funds'' should be further clarified, and if
so, how and what terms should be used in the alternative. A few
commenters requested further clarification; however FinCEN did not
receive any suggestions regarding alternative terminology.
One commenter asserted that the broad definition of the term
``processed one or more transfers of funds'' appears problematic. The
commenter suggested that according to the definition, this term would
include each and every transaction, in particular those that do not
require using a correspondent account. Another commenter suggested that
it would need further clarity regarding the term ``processed one or
more transfers of funds'' to identify which transactions FinCEN intends
to reach. Another commenter questioned what is meant by the term
``other than through a correspondent account,'' in the context of a
request that a foreign bank certify whether it has processed one or
more transfers of funds within the preceding 90 calendar days related
to an Iranian-linked financial institution designated under IEEPA,
``other than through a correspondent account.''
As explained in the Notice, the terminology ``processed one or more
transfers of funds'' is meant to address circumstances through which
transfers of funds are made without requiring a correspondent account,
specifically including circumstances in which financial institutions
are part of a common payments or clearing mechanism that provides for
transfers of funds among participants without requiring bilateral
correspondent account relationships. If a foreign bank is reporting
that it maintains a correspondent account for a specific Iranian-linked
financial institution designated under IEEPA, the foreign bank does not
also have to report that it has processed transfers of funds for that
specific Iranian-linked financial institution, as that is assumed
within the context of the reported correspondent account.
Alternatively, for example, in instances in which a foreign bank is
part of a common payments or clearing mechanism that provides for
transfers of funds among participants without requiring bilateral
correspondent account relationships, those foreign banks should report
whether they have processed transfers of funds for an Iranian-linked
financial institution designated under IEEPA through such common
payments or clearing mechanisms. This type of example is the reason we
used the terminology processed one or more transfers of funds within
the preceding 90 calendar days related to an Iranian-linked financial
institution designated under IEEPA, ``other than through a
correspondent account.'' \10\
---------------------------------------------------------------------------
\10\ As it relates to the model certification, a foreign bank
should fill out each section of the model certification by selecting
one box in each section of the model certification. For example, if
a foreign bank has a correspondent account for an Iranian-linked
financial institution designated under IEEPA, the foreign bank will
select the second box under section B of the model certification:
``Foreign Bank hereby certifies that it does maintain a
correspondent account(s) for an Iranian-Linked Financial Institution
Designated Under IEEPA.'' The foreign bank will also fill out the
corresponding chart in section B of the model certification for each
applicable correspondent account. The language in the first box
under section C of the model certification states ``Foreign Bank
hereby certifies that to its knowledge it has not processed one or
more transfers of funds within the preceding 90 calendar days for or
on behalf of, directly or indirectly, an Iranian-Linked Financial
Institution Designated Under IEEPA, other than through a
correspondent account detailed above.'' The language ``other than
through a correspondent account detailed above'' is intended to
direct the foreign bank not to reenter the information that was
already entered in section B of the model certification in section C
of the model certification. However, regardless of which box the
foreign bank selects in section B of the model certification, the
foreign bank should also select one box from section C of the model
certification. If a foreign bank has not processed any transfers of
funds outside of a correspondent account relationship with an
Iranian-linked financial institution designated under IEEPA, the
foreign bank will select the first box under section C of the model
certification. If the foreign bank has processed transfers of funds
for or on behalf of, directly or indirectly, an Iranian-linked
financial institution designated under IEEPA outside of a
correspondent account relationship, the foreign bank will select the
second box under section C of the model certification: ``Foreign
Bank hereby certifies that it has processed one or more transfers of
funds within the preceding 90 calendar days for or on behalf of,
directly or indirectly, an Iranian-Linked Financial Institution
Designated Under IEEPA, other than through a correspondent account
detailed above.'' In this case the foreign bank also will fill out
the corresponding chart in section C of the model certification for
each applicable Iranian-linked financial institution designated
under IEEPA. Similarly, the foreign bank will also select one box
from section D of the model certification.
---------------------------------------------------------------------------
[[Page 62613]]
FinCEN also clarifies that in the context of a request that a
foreign bank certify whether it has processed one or more transfers of
funds within the preceding 90 calendar days related to an IRGC-linked
person designated under IEEPA, the foreign bank should report whether
it has processed any transfers of funds related to an IRGC-linked
person designated under IEEPA, regardless of whether the transfers of
funds were processed through a correspondent account or through some
other common payments or clearing mechanism.
One commenter noted that under section 1060.300(b), the foreign
bank is requested to certify that it has not ``processed one or more
transfers of funds within the preceding 90 calendar days related to an
Iranian-linked financial institution'' or ``related to an IRGC-linked
person.'' The commenter contended that this concept is broader than can
reasonably be expected. The commenter explained that while the foreign
bank could reasonably determine whether such relevant designated
entities and individuals were parties to a transaction, it has no
reliable way of ascertaining whether a transaction with a third party
has a relationship to such relevant designated entities and
individuals. The commenter provided the following example: if the head
office of a foreign bank processes a non-USD-denominated payment from
its customer in another country outside the United States to a Middle
Eastern trading company, it would have no way of knowing whether the
trading company may in turn be acting on behalf of a relevant
designated entity or individual. The commenter suggested that the
requested certification relate to payments ``to or from'' the relevant
designated entities or individuals as opposed to ``related to.''
Another commenter noted that it is conceivable that transactions
can be conducted that are settled through correspondent accounts held
for other credit institutions where the foreign bank does not or cannot
recognize that a relevant transaction is conducted on behalf of or in
the interest of an Iranian-linked financial institution designated
under IEEPA. The commenter suggested that the certification from the
foreign bank, therefore, must at least contain the qualification that
it is not aware of, or should not necessarily have been aware of, such
circumstance.
In the context of the request that a foreign bank certify whether
it has processed one or more transfers of funds within the preceding 90
calendar days ``related to'' an Iranian-linked financial institution
designated under IEEPA, other than through a correspondent account, and
whether it has processed one or more transfers of funds within the
preceding 90 calendar days ``related to'' an IRGC-linked person
designated under IEEPA, FinCEN has agreed to replace ``related to''
with ``for or on behalf of, directly or indirectly.'' The terminology
``for or on behalf of, directly or indirectly,'' is meant to include
situations where a foreign bank has knowledge that a transfer of funds
it is processing is for or on behalf of an Iranian-linked financial
institution designated under IEEPA, or an IRGC-linked person designated
under IEEPA, but where the designated entity or individual does not
appear on the face of the transaction. In other words, the phrase is
meant to include those situations in which the processing is being done
with knowledge based on a relationship that exists through a third
party such as a money exchange or trading house.
Consistent with the above mentioned revision and based on comments
received, FinCEN has also incorporated the phrase ``to its knowledge''
into the reporting requirement that upon receiving a written request
from FinCEN, a bank shall report to FinCEN, in such format and manner
as may be prescribed by FinCEN, the following information for any
specified foreign bank the name of any specified foreign bank, for
which the bank maintains a correspondent account, that certifies that
it does not maintain a correspondent account for an Iranian-linked
financial institution designated under IEEPA, that certifies that to
its knowledge it has not processed one or more transfers of funds
within the preceding 90 calendar days for or on behalf of, directly or
indirectly, an Iranian-linked financial institution designated under
IEEPA, other than through a correspondent account, and/or that
certifies that to its knowledge it has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an IRGC-linked person designated
under IEEPA.'' \11\ [Emphasis added.]
---------------------------------------------------------------------------
\11\ See section 1060.300(c)(1)(iv).
---------------------------------------------------------------------------
In order to be consistent with the revisions to the regulation
text, FinCEN has also incorporated the phrase ``to its knowledge'' into
the model certification in the following places: ``Foreign Bank hereby
certifies that to its knowledge it has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an Iranian-Linked Financial
Institution Designated Under IEEPA, other than through a correspondent
account detailed above;'' [emphasis added] and ``Foreign Bank hereby
certifies that to its knowledge it has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an IRGC-Linked Person Designated
Under IEEPA.'' [Emphasis added.]
One commenter noted that when inquiring of a foreign bank, the U.S.
bank would also be required to ask the foreign bank to agree to report
if it establishes a new correspondent account for an Iranian-linked
financial institution designated under IEEPA within 365 calendar days
after its initial response and that would in turn be reported to FinCEN
by the U.S. bank. The commenter believes this is the most difficult
element of the proposal. The commenter asserted that a request is based
on whether the United States has designated an entity under IEEPA. The
commenter further suggested that since IEEPA is a U.S. law, and the
IEEPA lists are constantly changing, any affected foreign bank would be
required to develop systems to monitor and track whether or not a
transaction might be covered. The commenter also suggested that foreign
banks would have to sort through the entire OFAC list as a first step
to identify which entities are covered and then apply it to its own
records. The commenter recommended that FinCEN or OFAC create a special
section/list for IEEPA designations that is easily accessed by foreign
banks around the world.
FinCEN clarifies that the rule does not call on a foreign bank to
report on new transfers of funds processed for a relevant designated
entity or individual following its initial response. The rule only
calls on a foreign bank to report any new correspondent accounts opened
for an Iranian-linked financial institution designated under IEEPA
within 365 calendar days after the foreign bank's initial response.
Also, as noted elsewhere in the rulemaking and in the model
certification, a list of financial institutions that meet the criteria
of Iranian-linked financial institutions designated under IEEPA ([IFSR]
tags) are included at the following link on OFAC's Web site: http://
www.treasury.gov/resource-
[[Page 62614]]
center/sanctions/Programs/Documents/irgc--ifsr.pdf. As of June 27,
2011, there were 22 financial institutions with IFSR tags, meaning 22
Iranian-linked financial institutions designated under IEEPA.\12\ The
foreign bank can go to the link to look for updates to the site when
they open a new correspondent account. In addition, as part of standard
practices, banks globally should perform some type of customer
identification or verification, customer due diligence, and/or ``know
your customer'' policy in opening new accounts. In light of the global
awareness of risks in conjunction with certain transactions related to
Iran, it does not appear to be unreasonable to expect that a foreign
bank that has received a request under this rulemaking could report on
new correspondent accounts within the succeeding 365 calendar days.
---------------------------------------------------------------------------
\12\ It is important to note that the list is dynamic and should
be referenced regularly to ensure the most up-to-date information.
---------------------------------------------------------------------------
The commenter also suggested that FinCEN call on a foreign bank to
respond to these requests within 30 calendar days after the foreign
bank identifies a new correspondent account with an Iranian-linked
financial institution designated under IEEPA. This comment is addressed
by text in the model certification, which provides as follows:
``Foreign Bank hereby agrees to notify in writing the Bank if Foreign
Bank establishes a new Correspondent Account for an Iranian-Linked
Financial Institution Designated Under IEEPA at any time within 365
calendar days from the date of this response. Foreign Bank agrees to
provide such notification within 30 calendar days of the establishment
of the new correspondent account.''
FinCEN requested comment regarding whether setting a minimum dollar
threshold for a foreign bank to report on transfers of funds processed
within the preceding 90 calendar days related to an Iranian-linked
financial institution designated under IEEPA or related to an IRGC-
linked person designated under IEEPA would lessen the reporting
obligations, while still providing useful information. FinCEN also
requested comment regarding what that minimum dollar threshold should
be.
Three commenters suggested that a threshold should be set. Two of
these commenters asserted that section 104 of CISADA applies to a
``significant transaction or transactions.'' For this reason, the
commenters suggested that a threshold should be set to require foreign
banks to only report on significant transactions. As it relates to
section 104(c) of CISADA, a determination of significance will be
decided on a case-by-case basis. Neither section 104 of CISADA nor the
IFSR defines a minimum dollar threshold for ``significant
transactions.'' \13\ Neither of these commenters suggested what the
minimum dollar threshold should be.
---------------------------------------------------------------------------
\13\ See 31 CFR 561.404 for interpretations of ``significant
transaction or transactions.''
---------------------------------------------------------------------------
Only one commenter proposed what that minimum dollar threshold
should be. The commenter suggested that FinCEN should apply the $3,000
threshold that exists in some other anti-money laundering rules because
monitoring transactions of lesser value can be overly burdensome with
little benefit. The commenter also suggested that a threshold for
minimum aggregate through-put in a correspondent account can also serve
to better focus resources on identifying the riskiest correspondent
accounts. However, the commenter further asserted that it is mindful
that parsing activity at the margins of the threshold can incur its own
compliance costs and therefore thresholds should always be applied
permissively and not as technical standards that generate compliance
complexities.
Considering the fact that a threshold of $3,000 is unlikely to
eliminate a substantial number of responses from foreign banks, and
considering the commenter's proposal that utilizing the minimum
threshold should be at the foreign bank's discretion due to the
potential burden of added compliance costs, FinCEN has determined that
it will not set a minimum threshold for reporting on transfers of
funds. In addition, for these same reasons, FinCEN will not set a
minimum threshold for reporting on correspondent accounts. This rule
calls for reports on all correspondent accounts with Iranian-linked
financial institutions designated under IEEPA regardless of the volume
of transactions conducted through the correspondent accounts.
E. The Timeframe for a Foreign Bank and a U.S. Bank To Respond to a
CISADA Request
In the Notice, FinCEN proposed that a bank would be required to
report the information required by this rule to FinCEN within 30
calendar days of the date of the written request from FinCEN. In
addition, FinCEN proposed that if a bank receives notification from a
foreign bank that the foreign bank has established a new correspondent
account for an Iranian-linked financial institution designated under
IEEPA, the bank is required to report the information required by this
rule within 10 calendar days of receiving that notification. FinCEN
requested comment as to whether these proposed timeframes were
appropriate.
Four commenters contended that 30 calendar days to report the
information required by this rule to FinCEN is not sufficient. Three of
these commenters proposed that the timeframe be extended to 90 calendar
days. Two of these commenters asserted that it will take a foreign bank
time to research whether it maintains a correspondent account or has
processed transfers of funds in the previous 90 calendar days for the
relevant designated entities and individuals. Two of these commenters
asserted that foreign banks' responses may be subject to legal review
by local regulators prior to submission to the bank. One of these
commenters suggested that a bank will have to do some level of due
diligence to ``certify'' that it does not know that the foreign bank's
certification is incorrect. Another one of these commenters asserted
that it would be unfortunate if a U.S. bank had to report to FinCEN
that a foreign bank has not replied in time, specifically in instances
in which the foreign bank is making efforts to do so, as this could
cast a bad and perhaps false light on the foreign bank. Another
commenter suggested that a 30-day timeframe to respond will likely
produce a significant number of ``no response'' reports to FinCEN.
FinCEN has taken these comments into consideration. For this
reason, FinCEN is revising the timeframe to respond to 45 calendar days
from the date of the written request from FinCEN. FinCEN acknowledges
the concerns raised by the commenters; however, these requests are
time-sensitive by nature and extending the timeframe for a response to
90 days is not feasible. In addition, as noted elsewhere in this
rulemaking, a U.S. bank is not expected to independently verify the
information provided by a foreign bank. This should lessen the amount
of time necessary for a U.S. bank to review a foreign bank's response
prior to submission to FinCEN.
FinCEN does recognize the possibility that there may be certain
situations in which additional time for a foreign bank to respond is
needed. For this reason, we are amending the final rule to require that
if a U.S. bank receives a certification from a foreign bank after the
45 calendar day deadline, the U.S. bank is required to report that
information to FinCEN within 10 calendar days of receiving that
certification. This additional obligation does not relieve the U.S.
bank of its obligation to report to FinCEN within 45
[[Page 62615]]
calendar days the results of the U.S. bank's inquiry, regardless of
whether the foreign bank has responded.
One commenter suggested that a bank should be given 30 days to
respond to FinCEN upon receiving a notification from a foreign bank
that it has opened a new account with an Iranian-linked financial
institution designated under IEEPA. As has been clarified elsewhere in
this rulemaking, a U.S. bank is not expected to independently verify
the information provided by a foreign bank. For this reason, FinCEN
believes that if a bank receives notification from a foreign bank that
the foreign bank has established a new correspondent account for an
Iranian-linked financial institution designated under IEEPA, the bank
will have sufficient time to report the information required by this
rule within 10 calendar days of receiving that notification.
F. Clarification Regarding the Proposed Model Certification
FinCEN requested comment as to the effectiveness of the proposed
model certification. One commenter noted that under the proposed rule,
the person signing on behalf of the U.S. bank would be required to
state that he has read and understood the foreign bank's certification,
that the statements made are complete and correct, and that the U.S.
bank does not know or suspect, or have reason to suspect that the
foreign bank's certification is incorrect. The commenter suggested that
a statement that the foreign bank's response is complete and correct
would require the certifying U.S. officer to have intimate knowledge of
the foreign bank's customers and activities, something that the U.S.
bank will never have. The commenter also suggested that the terminology
``know, suspect, and reason to suspect'' raises questions about the
level of due diligence a U.S. bank is expected to perform under the
proposed rule.
Another commenter noted that section 1060.300(c)(1)(v) requires
that the reporting U.S. bank identify any specified foreign bank for
which the inquiring U.S. bank ``has not been able to establish to its
satisfaction'' does not engage in the listed activities and, further,
certify to FinCEN that it does not ``know[], suspect[], or ha[ve]
reason to suspect'' that any certification provided by the foreign bank
is incorrect. With these few words, the commenter suggested, the
proposed rule would appear to shift the burden on the inquiring bank
from simply acting as a conduit for FinCEN's inquiries to independently
investigating and evaluating the truthfulness of the foreign bank's
response.
Another commenter noted that a U.S. bank has no ability to verify
the information reported by a foreign bank. The commenter recommended
that the final rule acknowledge that the only obligation of the U.S.
bank is to request the data and pass along the information it receives
as received. An additional commenter expressed similar concerns.
FinCEN clarifies that our expectation with regard to knowledge is
only knowledge a U.S. bank would have based on the monitoring it
already conducts to comply with OFAC requirements and BSA requirements
regarding due diligence over foreign correspondent accounts. We also
clarify that we do not expect a U.S. bank to independently verify the
information provided by a foreign bank. However, we do expect a bank to
report if it has information that is inconsistent with the foreign
bank's certification. An example of a situation in which information is
inconsistent with the certification might involve a scenario where a
U.S. bank's transaction monitoring software recently blocked a
transaction on behalf of a certain foreign bank, but that foreign bank
does not include such transaction in the report provided to the U.S.
bank.
To reflect these clarifications in the final rule more clearly,
FinCEN has decided to make revisions to section 1060.300(c)(1)(v) and
to the portion of the model certification to be completed by the bank.
These revisions directly address the recommendations offered by these
commenters.
FinCEN is revising the language in section 1060.300(c)(1)(v) of the
final rule to clarify our expectations with regard to the U.S. bank's
responsibilities as they relate to the information reported by a
foreign bank. Section 1060.300(c)(1)(v) proposed that a bank report to
FinCEN the following information regarding a specified foreign bank:
The name of any specified foreign bank, for which the bank maintains a
correspondent account, about which the bank has not been able to
establish to its satisfaction that the foreign bank does not maintain a
correspondent account for an Iranian-linked financial institution
designated under IEEPA, has not processed one or more transfers of
funds within the preceding 90 calendar days related to an Iranian-
linked financial institution designated under IEEPA, other than through
a correspondent account, and/or has not processed one or more transfers
of funds within the preceding 90 calendar days related to an IRGC-
linked person designated under IEEPA, together with the reason(s) for
this, such as the failure of the foreign bank to respond to the inquiry
by or a request from the bank, the failure of the foreign bank to
certify its response, or if the bank knows, suspects, or has reason to
suspect that the certification is incorrect.'' [Emphasis added.]
FinCEN is amending section 1060.300(c)(1)(v) by revising the phrase
``about which the bank has not been able to establish to its
satisfaction that the foreign bank'' to read as follows: ``that the
bank cannot determine;'' and revising the phrase ``or if the bank
knows, suspects, or has reason to suspect that the certification is
incorrect'' to read as follows: ``or if the bank has information that
is inconsistent with the certification.''
In addition, FinCEN is also revising the corresponding portion of
the model certification to be completed by the bank. The proposed
language in the model certification stated as follows: ``I, ----------
---------------------------------------- (name of signatory), have read
and understand this Certification; the statements made in this
Certification are complete and correct, to the best of the knowledge of
the Bank; and the Bank does not know, suspect, or have reason to
suspect that the Certification made by Foreign Bank is incorrect. I am
authorized to submit this document on behalf of the Bank.''
In the final rule, FinCEN is revising the portion of the model
certification to be completed by the bank to read as follows: ``I, ----
---------------------------------------------- (name of signatory),
have received and reviewed this Certification. To the best of its
knowledge, the Bank has no information that is inconsistent with the
Certification made by Foreign Bank. I am authorized to submit this
document on behalf of the Bank.''
This revision is consistent with the revisions made to section
1060.300(c)(1)(v). FinCEN believes that this revision to the model
certification, together with the amendments to section
1060.300(c)(1)(v) discussed above, will alleviate the concerns raised
by commenters and more accurately describe FinCEN's expectations with
regard to the U.S. bank's obligations as they relate to information
received from a foreign bank.
Furthermore, as requested by three commenters, FinCEN clarifies
that the individual signing the model certification is only signing on
behalf of the relevant bank in his capacity as a duly authorized
officer of the bank and not in his personal capacity. As noted in the
language in the model certification, the individual signing on behalf
of the bank is submitting the ``document on behalf of the Bank.''
[[Page 62616]]
Similarly, as requested by one commenter, FinCEN clarifies that the
individual signing the model certification is only signing on behalf of
the relevant foreign bank in his capacity as a duly authorized officer
of the foreign bank and not in his personal capacity. As noted in the
language in the model certification, the individual signing on behalf
of the foreign bank is ``authorized to execute this certification on
behalf of Foreign Bank.''
One commenter requested that FinCEN clarify how foreign banks
should convert foreign currency as it relates to the foreign banks'
reporting on the approximate value of transactions processed through a
correspondent account or transfer(s) of funds processed within the
preceding 90 calendar days. FinCEN will not prescribe any specific
method or reference rate for the conversion of foreign exchange, but
rather leaves it to the foreign bank to convert the sums using a
reasonable rate informed by good banking practices. The purpose of this
conversion is to help in assessing the significance of the
transaction(s) at issue. Examples of reasonable rates may include the
rate that the foreign bank would have applied to convert the respective
payment into U.S. dollars on the date of the transaction, or, in the
case of aggregation of multiple transactions over a time period, the
average exchange rate over the applicable time period.
One commenter asserted that while the proposed model certification
includes links to websites with information about relevant designated
entities and individuals, the commenter believes that the process of
responding would be simpler and produce better information if requests
to foreign banks also included a list of relevant designated entities
and individuals covered by that particular request. The model
certification includes a link to the list of relevant designated
entities and individuals exclusively applicable to this reporting
requirement. FinCEN believes that providing access to this link is
sufficient to assist foreign banks in clearly identifying the
designated entities and individuals relevant to a request.
As requested by one commenter, FinCEN will consider evaluating the
adequacy of the model certification in 12 to 18 months in order to
determine if revisions are necessary.
G. Clarification Regarding Certain Definitions and Terms
Refer to Section V.A., below, for clarification regarding the terms
bank, correspondent account, and foreign bank.
H. Record Retention and Supporting Documentation
One commenter requested clarification regarding a number of aspects
of the record retention requirement, including the record retention
period and supporting documentation to be maintained as part of the
record retention. The commenter requested that the record retention
period be reduced from five years. FinCEN clarifies that the record
retention period for this rulemaking will remain five years consistent
with FinCEN's other record retention requirements. FinCEN also
clarifies that this specific recordkeeping requirement does not serve
to change any other applicable recordkeeping requirements. The record
retention period will begin on the date the request from FinCEN is
issued. If the bank receives notification from a foreign bank that the
foreign bank has established a new correspondent account with an
Iranian-linked financial institution designated under IEEPA at any time
within 365 calendar days from the date of the foreign bank's initial
response, this will not affect the beginning of the record retention
period. The record retention period with regard to that specific
foreign bank will still begin on the date the request from FinCEN was
issued.
FinCEN clarifies that supporting documentation related to this
rulemaking includes any and all correspondence between the bank and
FinCEN, or between the bank and the foreign bank, regarding a request
for information under this rulemaking. For example, this would include
the initial request from FinCEN to the bank, the request from the bank
to the foreign bank, the response from the foreign bank to the bank,
the report to FinCEN from the bank, and any correspondence associated
with any one of these requests/reports. FinCEN also clarifies that
although we will maintain a copy of the report the bank submits to
FinCEN, the bank must also maintain a copy of that report in order to
confirm compliance with this regulation.
I. Sharing Information Regarding a CISADA Request
One of the commenters questioned in what instances it would be
appropriate for a bank to inform others internally or externally that
it has received a request from FinCEN regarding a specific foreign
bank. To the extent that FinCEN would require a request regarding a
specific foreign bank remain confidential, we will explicitly state the
requirement for confidentiality in the request sent to the bank.
J. Estimate of Burden
Refer to Section IX., below, for a summary of comments regarding
the burden estimates.
V. Section-by-Section Analysis
A. General (Sec. 1060.300(a))
As proposed, section 31 CFR 1060.300(a) requires that, upon
receiving a written request from FinCEN, a bank that maintains a
correspondent account for a specified foreign bank shall inquire of the
foreign bank, and report to FinCEN with respect to any correspondent
account maintained by such foreign bank for an Iranian-linked financial
institution designated under IEEPA, any transfer of funds for or on
behalf of, directly or indirectly, an Iranian-linked financial
institution designated under IEEPA processed by such foreign bank
within the preceding 90 calendar days, other than through a
correspondent account, and any transfer of funds for or on behalf of,
directly or indirectly, an IRGC-linked person designated under IEEPA
processed by such foreign bank within the preceding 90 calendar days.
The language in this section of the final rule is substantially the
same as proposed. However, for purposes of providing additional clarity
as requested by commenters, FinCEN modified the final rule language in
the following ways: the phrase ``to the best of the knowledge of the
bank'' was removed, consistent with revisions to section
1060.300(c)(1)(v); \14\ and ``for or on behalf of, directly or
indirectly,'' replaced ``related to.'' \15\
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\14\ See above Section IV. F. for the rationale for the
revisions to section 1060.300(c)(1)(v).
\15\ See above Section IV. D. for the rationale for replacing
the terminology ``related to'' with ``for or on behalf of, directly,
or indirectly.''
---------------------------------------------------------------------------
Definitions
Bank
For the purpose of this rule the term ``bank'' is defined in 31 CFR
1010.100(d). A bank includes each agent, agency, branch, or office
within the United States of persons doing business in one or more of
the following capacities: commercial banks or trust companies, private
banks, savings and loan associations, national banks, thrift
institutions, credit unions, other organizations chartered under
banking laws and supervised by banking supervisors of any State, and
banks organized under foreign law.
FinCEN proposed to limit the reporting requirement in this
rulemaking to banks, as opposed to all U.S. financial institutions that
could fall
[[Page 62617]]
within the scope of this rule. FinCEN requested comment as to whether
this rulemaking should be expanded to include other types of financial
institutions, such as those financial institutions included in FinCEN's
definition of ``covered financial institution.'' \16\
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\16\ See 31 CFR 1010.605(e) (defining a ``covered financial
institution'' as any one of a number of specific U.S. financial
institutions, including banks, broker-dealers, futures commission
merchants, and mutual funds).
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Two commenters requested clarification as to why FinCEN proposed to
limit this reporting requirement to banks instead of the broader
category of U.S. financial institutions as would be permissible under
CISADA. One of these commenters also requested clarification as to how
FinCEN would determine whether to expand the reporting requirement to
other domestic financial institutions.
As explained in the Notice, FinCEN determined that limiting the
reporting requirement in this rule to banks will provide useful
information as it relates to CISADA, while limiting the obligations of
the financial industry. Although there are other financial institutions
that could fall within the scope of this rule in light of the breadth
of the definition of financial institution in CISADA and the breadth of
the definition of correspondent account, this rule focuses on those
financial institutions deemed to provide the services most
traditionally associated with correspondent banking.
Two trade associations commented on this aspect of the rulemaking.
These commenters were in favor of limiting the rulemaking to banks, in
order to avoid redundancy and overlapping information. FinCEN did not
receive any comments that provided justification for expanding this
reporting requirement to include other domestic financial institutions.
Based on the comments received, and FinCEN's prior statements regarding
the scope of affected U.S. financial institutions, the reporting
requirements in the final rule will be limited to banks as proposed.
As FinCEN collects and assesses the information required under this
rule, we will continue to consider whether expanding the scope of this
rule to include other domestic financial institutions would provide
additional useful information as it relates to CISADA. If that is
determined to be the case, FinCEN will consider proposing an expansion
of this reporting requirement to include other domestic financial
institutions.
One commenter requested clarification that the rule will only apply
to depository institutions and not to non-depository institutions, even
if the two may be within the same bank holding company structure.
Another commenter requested clarification regarding whether this rule
would apply to U.S. branches of foreign banks. FinCEN clarifies that
this rule will only apply to banks as defined in 31 CFR 1010.100(d),
and will not apply to any other type of non-bank financial institution
that may fall within the same bank holding company structure. In
addition, U.S. branches of foreign banks are included within the
definition of ``bank'' in 31 CFR 1010.100(d).
Correspondent Account
For the purpose of this rule, the term ``correspondent account'' is
defined in 31 CFR 1010.605(c)(1)(ii) and means an account established
for a foreign bank to receive deposits from, or to make payments or
other disbursements on behalf of, the foreign bank, or to handle other
financial transactions related to such foreign bank.\17\ Although there
is a reference in section 104(e) of CISADA to payable-through accounts,
as FinCEN is incorporating this requirement into its regulations, such
payable-through accounts are subsumed within the definition of a
correspondent account at 31 CFR 1010.610(b)(1)(iii)(B).\18\ The
definition of correspondent account is being adopted in the final rule
as proposed.
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\17\ This definition of correspondent account is consistent with
the rule's focus on U.S. banks' correspondent account relationships
with foreign banks.
\18\ 31 CFR 1010.610(b)(1)(iii)(B) states ``* * * a payable-
through account means a correspondent account maintained by a
covered financial institution for a foreign bank by means of which
the foreign bank permits its customers to engage, either directly or
through a subaccount, in banking activities usual in connection with
the business of banking in the United States.''
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Three commenters requested clarification regarding the scope of
accounts that are included within the breadth of the definition of the
term correspondent account. The definition of correspondent account
that is included within this rule is the same definition of
correspondent account as in 31 CFR 1010.610--Due diligence programs for
correspondent accounts for foreign financial institutions. The same
scope of accounts included within the requirements of 31 CFR 1010.610
are included within the requirements of this rulemaking, except that
the term only applies to such accounts maintained by any bank for any
foreign bank.
Foreign Bank
For the purpose of this rulemaking the term ``foreign bank'' is
defined in 31 CFR 1010.100(u) and 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.
FinCEN proposed to limit the reporting requirement in this
rulemaking to information pertaining to the activities of foreign
banks, as opposed to the activities of all foreign financial
institutions that could fall within the scope of this rule. FinCEN
requested comment as to whether this rulemaking should be expanded to
include information pertaining to the activities of other types of
foreign financial institutions, such as those included in FinCEN's
definition of ``foreign financial institution,'' \19\ or OFAC's
definition of ``foreign financial institution'' \20\ in the IFSR.
---------------------------------------------------------------------------
\19\ See 31 CFR 1010.605(f).
\20\ See 31 CFR 561.308.
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As explained in the Notice, FinCEN has determined that limiting the
reporting requirement in this rule to information pertaining to the
activities of foreign banks will provide useful information as it
relates to CISADA, while limiting the obligations of the financial
industry. Although there are other foreign financial institutions that
maintain correspondent accounts with U.S. financial institutions that
could provide useful information with respect to CISADA-relevant
activities, this rule focuses on those foreign financial institutions
deemed to receive the services most traditionally associated with
correspondent banking.
Two trade associations commented on this aspect of the rule. The
commenters asserted that limiting the scope of the rule to inquiries
regarding foreign banks was appropriate. FinCEN did not receive any
comments that provided justification for expanding this reporting
requirement to include information pertaining to the activities of
other foreign financial institutions. Based on the comments received,
and FinCEN's prior statements regarding the scope of affected foreign
financial institutions, the reporting requirements in the final rule
will be limited to foreign banks as proposed.
As FinCEN collects and assesses the information required under this
rule, we will continue to consider whether expanding the scope of this
rule to include information pertaining to the activities of other
foreign financial institutions would provide additional useful
information as it relates to CISADA. If that is determined to be the
[[Page 62618]]
case, FinCEN will consider proposing an expansion of this reporting
requirement to include information pertaining to the activities of
other foreign financial institutions.
One commenter asked that FinCEN clarify that the definition of
foreign bank excludes U.S. representative offices of foreign banks. The
commenter also asked for clarification regarding whether subsidiaries
or branches of a single bank operating in different countries are one
foreign bank or separate foreign banks for the purpose of a CISADA
request. For purposes of this rulemaking, U.S. representative offices
are not included within our definition of foreign bank at 31 CFR
1010.100(u), which excludes offices within the United States of a bank
organized under foreign law. Although representative offices cannot
offer banking services in the United States, they nevertheless are
offices of banks organized under foreign law, and therefore are not
foreign banks for purposes of the BSA rules. FinCEN will only be
sending requests to banks that it knows or believes maintain a
correspondent account for the specific foreign bank, specific foreign
bank branch, or specific foreign bank subsidiary at issue. This means
that the extent of the inquiry will be specific to the correspondent
account about which a request is made. In the case of a foreign bank
subsidiary, FinCEN would only be requesting information regarding a
foreign bank subsidiary if that subsidiary is itself a foreign bank.
Iranian-Linked Financial Institution Designated Under IEEPA
For the purpose of this rule the term ``Iranian-linked financial
institution designated under IEEPA'' means a financial institution
designated by the United States Government pursuant to IEEPA (or listed
in an annex to an Executive order issued pursuant to such Act) in
connection with Iran's proliferation of weapons of mass destruction or
delivery systems for weapons of mass destruction, or in connection with
Iran's support for international terrorism.\21\ The definition of
``Iranian-linked financial institution designated under IEEPA'' is
being adopted in the final rule as proposed.
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\21\ See CISADA subsection 104(c)(2)(E)(ii).
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IRGC-Linked Person Designated Under IEEPA
For the purpose of this rule the term ``IRGC-linked person
designated under IEEPA'' means Iran's Islamic Revolutionary Guard Corps
or any of its agents or affiliates designated by the United States
Government pursuant to IEEPA (or listed in an annex to an Executive
order issued pursuant to such Act).\22\ The definition of ``IRGC-linked
person designated under IEEPA'' is being adopted in the final rule as
proposed.
---------------------------------------------------------------------------
\22\ See CISADA subsection 104(c)(2)(E)(i).
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The names of persons whose property and interests in property are
blocked pursuant to IEEPA are published on OFAC's Specially Designated
Nationals and Blocked Persons List (``SDN List''). Iranian-linked
financial institutions designated under IEEPA are those whose property
and interests in property are blocked pursuant to 31 CFR part 544 or 31
CFR part 594 in connection with Iran's proliferation of weapons of mass
destruction or delivery systems for weapons of mass destruction or
Iran's support for international terrorism and are identified by
``[IFSR]'' tags located at the end of their entries on the SDN List
(e.g., [NPWMD][IFSR] or [SDGT][IFSR]). IRGC-linked persons designated
under IEEPA are those whose property and interests in property are
blocked pursuant to one or more parts of 31 CFR Chapter V and are
identified by ``[IRGC]'' tags located at the end of their entries on
the SDN List (e.g., [NPWD][IRGC] or [SDGT][IRGC]). OFAC's electronic
SDN List can be found at the following URL: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx. The following
financial institutions meet the criteria of Iranian-linked financial
institutions designated under IEEPA ([IFSR] tags), and the following
persons meet the criteria of IRGC-linked persons designated under IEEPA
([IRGC] tags): http://www.treasury.gov/resource-center/sanctions/Programs/Documents/irgc_ifsr.pdf. These listings are part of the SDN
List, administered by OFAC. Please note that OFAC's SDN List is dynamic
and should be reviewed regularly for the most current information
regarding Iranian-linked financial institutions designated under IEEPA
and IRGC-linked persons designated under IEEPA.
B. Duty To Inquire (Sec. 1060.300(b))
This section describes a bank's duty to inquire of a specified
foreign bank for which the bank maintains a correspondent account, as
to whether such foreign bank maintains a correspondent account for an
Iranian-linked financial institution designated under IEEPA, and/or has
processed one or more transfers of funds within the preceding 90
calendar days for or on behalf of, directly or indirectly, an Iranian-
linked financial institution or an IRGC-linked person designated under
IEEPA. Upon receiving a written request from FinCEN, a bank that
maintains a correspondent account for a specified foreign bank shall
inquire of such foreign bank for the purpose of having such foreign
bank certify: (1) Whether it maintains a correspondent account for an
Iranian-linked financial institution designated under IEEPA; (2)
whether it has processed one or more transfers of funds within the
preceding 90 calendar days for or on behalf of, directly or indirectly,
an Iranian-linked financial institution designated under IEEPA, other
than through a correspondent account; and (3) whether it has processed
one or more transfers of funds within the preceding 90 calendar days
for or on behalf of, directly or indirectly, an IRGC-linked person
designated under IEEPA. In addition, when the bank makes its inquiry,
the bank shall request that the foreign bank agree to notify the bank
if the foreign bank subsequently establishes a new correspondent
account for an Iranian-linked financial institution designated under
IEEPA at any time within 365 calendar days from the date of the foreign
bank's initial response.
The language in this section of the final rule is substantially the
same as proposed. However, for purposes of providing additional clarity
as requested by commenters, FinCEN modified the final rule language in
the following way: ``for or on behalf of, directly or indirectly,''
replaced ``related to.'' \23\
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\23\ See above Section IV. D. for the rationale for replacing
the terminology ``related to'' with ``for or on behalf of, directly
or indirectly.''
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To assist a bank in obtaining the required information from a
specified foreign bank, FinCEN proposed a model certification format
for a bank to provide to a specified foreign bank when the bank makes
its inquiry regarding whether the specified foreign bank maintains a
correspondent account for an Iranian-linked financial institution
designated under IEEPA, and/or has processed one or more transfers of
funds within the preceding 90 calendar days for or on behalf of,
directly or indirectly, an Iranian-linked financial institution or an
IRGC-linked person designated under IEEPA. The model certification will
not appear in the Code of Federal Regulations (``CFR''); however, it is
included at Appendix A to this Federal Register notice. While the model
certification will not be included in the CFR, it is still subject to
the Paperwork Reduction Act (``PRA''), and therefore any material
changes made to the model certification will go through public notice
and comment as required under
[[Page 62619]]
the PRA. In addition, FinCEN will use its website to make the model
certification available to the public. FinCEN requested comment as to
the effectiveness of the proposed model certification.\24\
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\24\ See above Section IV. F. for a summary of comments
associated with the model certification, along with an explanation
of slight revisions to the language in the final model
certification.
---------------------------------------------------------------------------
As part of the model certification, the foreign bank is asked to
agree to notify, in writing, the bank at which it maintains a
correspondent account if the foreign bank establishes a new
correspondent account for an Iranian-linked financial institution
designated under IEEPA at any time within 365 calendar days from the
date of the foreign bank's response. The model certification sets forth
the expectation that the notification shall be due to the bank within
30 calendar days of the establishment of the new correspondent account.
If a bank does not utilize the model certification, the bank will need
to request separately that the foreign bank provide such information
with respect to the establishment of a new correspondent account for an
Iranian-linked financial institution designated under IEEPA.
C. Filing Procedures (Sec. 1060.300(c))
What To File (Sec. 1060.300(c)(1))
This section describes the filing procedures a bank shall follow to
report to FinCEN information required by this rule. Upon receiving a
written request from FinCEN, a bank is required to report to FinCEN, in
such format and manner as may be prescribed by FinCEN, the following
information for any specified foreign bank:
The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it maintains a
correspondent account for an Iranian-linked financial institution
designated under IEEPA, together with the name of the Iranian-linked
financial institution designated under IEEPA, the full name(s) on the
correspondent account and the correspondent account number(s),
applicable information regarding whether the correspondent account has
been blocked or otherwise restricted, other applicable identifying
information for the correspondent account, and the approximate value in
U.S. dollars (``USD'') of transactions processed through the
correspondent account within the preceding 90 calendar days;
The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it has processed
one or more transfers of funds within the preceding 90 calendar days
for or on behalf of, directly or indirectly, an Iranian-linked
financial institution designated under IEEPA, other than through a
correspondent account, together with the name of the Iranian-linked
financial institution designated under IEEPA, the identity of the
system or means by which such transfer(s) of funds was processed, the
full name on the account(s) and the account number(s), if applicable,
other applicable identifying information for such transfer(s) of funds,
and the approximate value in USD of such transfer(s) of funds processed
within the preceding 90 calendar days;
The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it has processed
one or more transfers of funds within the preceding 90 calendar days
for or on behalf of, directly or indirectly, an IRGC-linked person
designated under IEEPA, together with the name of the IRGC-linked
person designated under IEEPA, the identity of the system or means by
which such transfer(s) of funds was processed, the full name on the
account(s) and the account number(s), if applicable, other applicable
identifying information for such transfer(s) of funds, and the
approximate value in USD of such transfer(s) of funds processed within
the preceding 90 calendar days;
The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it does not
maintain a correspondent account for an Iranian-linked financial
institution designated under IEEPA, that certifies that to its
knowledge it has not processed one or more transfers of funds within
the preceding 90 calendar days for or on behalf of, directly or
indirectly, an Iranian-linked financial institution designated under
IEEPA, other than through a correspondent account, and/or that
certifies that to its knowledge it has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an IRGC-linked person designated
under IEEPA;
The name of any specified foreign bank, for which the bank
maintains a correspondent account, that the bank cannot determine does
not maintain a correspondent account for an Iranian-linked financial
institution designated under IEEPA, has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an Iranian-linked financial
institution designated under IEEPA, other than through a correspondent
account, and/or has not processed one or more transfers of funds within
the preceding 90 calendar days for or on behalf of, directly or
indirectly, an IRGC-linked person designated under IEEPA, together with
the reason(s) for this, such as the failure of the foreign bank to
respond to the inquiry by or a request from the bank, the failure of
the foreign bank to certify its response, or if the bank has
information that is inconsistent with the certification;
The name of any specified foreign bank, for which the bank
maintains a correspondent account, that notifies the bank that it has
established a new correspondent account for an Iranian-linked financial
institution designated under IEEPA at any time within 365 calendar days
from the date of the foreign bank's initial response, together with the
name of the Iranian-linked financial institution designated under
IEEPA, the full name(s) on the correspondent account and the
correspondent account number(s), applicable information regarding
whether the correspondent account has been blocked or otherwise
restricted, and other applicable identifying information for the
correspondent account;
If applicable, confirmation that the bank does not
maintain a correspondent account for the specified foreign bank(s), but
only in instances in which FinCEN specifically requests that the bank
report such information; and
If applicable, the name of any specified foreign bank, for
which the bank maintains a correspondent account, that provides a
certification to the bank after the 45 calendar day deadline, along
with all applicable related information associated with that
certification.
The language in this section of the final rule is substantially the
same as proposed. However, for purposes of providing additional clarity
as requested by commenters, FinCEN modified the final rule language in
the following ways: ``for or on behalf of, directly or indirectly,''
replaced ``related to;'' \25\ ``that the bank cannot determine''
replaced ``about which the bank has not been able to establish to its
satisfaction that the foreign bank;'' and '' if the bank has
information that is inconsistent with the certification'' replaced ``if
the bank knows, suspects, or has reason to suspect that the
certification is incorrect.'' \26\
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\25\ See above Section IV. D. for the rationale for replacing
the terminology ``related to'' with ``for or on behalf of, directly
or indirectly.''
\26\ See above Section IV. F. for the rationale for replacing
the terminology ``about which the bank has not been able to
establish to its satisfaction that the foreign bank'' with ``that
the bank cannot determine;'' and for the rationale for replacing the
terminology ``if the bank knows, suspects, or has reason to suspect
that the certification is incorrect'' with ``if the bank has
information that is inconsistent with the certification.''
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[[Page 62620]]
FinCEN also incorporated the phrase ``to its knowledge'' into the
reporting requirement that upon receiving a written request from
FinCEN, a bank shall report to FinCEN, in such format and manner as may
be prescribed by FinCEN, the following information for any specified
foreign bank the name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it does not
maintain a correspondent account for an Iranian-linked financial
institution designated under IEEPA, that certifies that to its
knowledge it has not processed one or more transfers of funds within
the preceding 90 calendar days for or on behalf of, directly or
indirectly, an Iranian-linked financial institution designated under
IEEPA, other than through a correspondent account, and/or that
certifies that to its knowledge it has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an IRGC-linked person designated
under IEEPA.'' \27\ [Emphasis added.]
---------------------------------------------------------------------------
\27\ See section 1060.300(c)(1)(iv). Also see above Section IV.
D. for the rationale for incorporating the phrase ``to its
knowledge'' into this reporting requirement.
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In addition, FinCEN added the following reporting requirement in
the final rule in order to provide additional clarity as requested by
commenters: Upon receiving a written request from FinCEN, a bank shall
report to FinCEN, in such format and manner as may be prescribed by
FinCEN, the following information for any specified foreign bank, if
applicable, the name of any specified foreign bank, for which the bank
maintains a correspondent account, that provides a certification to the
bank after the 45-calendar-day deadline, along with all applicable
related information associated with that certification.'' \28\
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\28\ See section 1060.300(c)(1)(viii). Also see above Section
IV. E. for the rationale for implementing this additional reporting
requirement.
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If a bank utilizes the model certification to inquire of a
specified foreign bank, the bank can submit the certification from the
specified foreign bank to FinCEN in order to comply with this reporting
requirement. If a bank does not utilize the model certification to
inquire of a specified foreign bank, the bank shall report to FinCEN,
in such format and manner as may be prescribed by FinCEN, the
information required by this rule.
If a specified foreign bank, for which the bank maintains a
correspondent account, does not adequately respond to the bank's
inquiry, the bank shall report to FinCEN, in such format and manner as
may be prescribed by FinCEN, the information required by this rule. If
a bank receives a notification from a specified foreign bank regarding
the establishment of a new correspondent account for an Iranian-linked
financial institution designated under IEEPA, the bank shall report to
FinCEN, in such format and manner as may be prescribed by FinCEN, the
information required by this rule. If a bank receives a certification
from a specified foreign bank after the 45-calendar-day deadline, the
bank shall report to FinCEN, in such format and manner as may be
prescribed by FinCEN, the information required by this rule.
If a bank receives a written request from FinCEN regarding a
specified foreign bank, for which the bank does not maintain a
correspondent account, and FinCEN has specifically requested that the
bank report instances in which the bank does not maintain a
correspondent account for such specified foreign bank, the bank shall
report this information to FinCEN, in such format and manner as may be
prescribed by FinCEN.
When To File (Sec. 1060.300(c)(2))
A bank is required to report the information required by this rule
to FinCEN within 45 calendar days of the date of the written request
from FinCEN. If a bank receives notification from a foreign bank that
the foreign bank has established a new correspondent account for an
Iranian-linked financial institution designated under IEEPA, the bank
is required to report the information required by this rule within 10
calendar days of receiving that notification. If a bank receives a
certification from a foreign bank after the 45-calendar-day deadline,
the bank is required to report the information required by this rule
within 10 calendar days of receiving that certification.
The language in this section of the final rule is substantially the
same as proposed. However, for purposes of providing relief as
requested by commenters, FinCEN modified the final rule language in the
following way: 45 calendar days replaced 30 calendar days.\29\
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\29\ See above Section IV. E. for the rationale for the
extension of time to comply with this reporting requirement.
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In addition, FinCEN added a 10-calendar-day deadline for a bank to
report if it receives a certification from a foreign bank after the 45-
calendar-day deadline. This corresponds with the following reporting
requirement added to the final rule: Upon receiving a written request
from FinCEN, a bank shall report to FinCEN, in such format and manner
as may be prescribed by FinCEN, the following information for any
specified foreign bank, if applicable, the name of any specified
foreign bank, for which the bank maintains a correspondent account,
that provides a certification to the bank after the 45-calendar-day
deadline, along with all applicable related information associated with
that certification.'' \30\
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\30\ See section 1060.300(c)(1)(viii). Also see above Section
IV. E. for the rationale for implementing this additional reporting
requirement, along with the rationale for the corresponding
timeframe for reporting.
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D. Record Retention (Sec. 1060.300(d))
This section describes the recordkeeping requirements applicable to
this rule. A bank shall maintain for a period of five years a copy of
any report filed and the original or any business record equivalent of
any supporting documentation for a report, including a foreign bank
certification or other responses to an inquiry under this rule. This
section of the final rule is being adopted as proposed.
E. No Other Action Required (Sec. 1060.300(e))
Paragraph (e) states that ``[n]othing in this section shall be
construed to require a bank to take any action, or to decline to take
any action, other than the requirements identified in this section,
with respect to an account established for, or a transaction engaged in
with, a foreign bank. However, nothing in this section relieves a bank
of any other applicable regulatory obligation.'' While this paragraph
clarifies that the section does not require a bank to take any steps
with respect to the foreign bank other than those relating to the
collection of information outlined in this section, it also clarifies
that this section does not preclude a bank from taking any other
action, including restricting or terminating a correspondent account
relationship with a foreign bank, or filing a suspicious activity
report, based on the bank's assessment of the facts and bank policy.
However, a bank is not required to restrict or terminate a
correspondent account relationship with a foreign bank, or to file a
suspicious activity report, based solely upon the fact that the bank:
(i) Has received a request for information under
[[Page 62621]]
this regulation; (ii) has received a response from the foreign bank; or
(iii) has not received a response from the foreign bank. This section
of the final rule is being adopted as proposed.
VI. Executive Order 12866
Executive Orders 13563 and 12866 direct agencies to assess all
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 the final rule is designated a
``significant regulatory action'' although not economically
significant, under section 3(f) of Executive Order 12866. Accordingly,
the rule has been reviewed by the Office of Management and Budget.
VII. Unfunded Mandates Reform Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an
agency prepare a budgetary impact statement before promulgating a rule
that may result in expenditure by State, local, and Tribal governments,
in the aggregate, or by the private sector, of $100 million or more in
any one year. If a budgetary impact statement is required, section 205
of the Unfunded Mandates Act also requires an agency to identify and
consider a reasonable number of regulatory alternatives before
promulgating a rule. FinCEN has determined that it is not required to
prepare a written statement under section 202.
VIII. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (``RFA'') (5 U.S.C. 601
et seq.), FinCEN certifies that this final rule will not have a
significant economic impact on a substantial number of small entities.
The final rule will apply to banks that maintain correspondent accounts
for foreign banks. As previously stated in our final rules implementing
sections 312,\31\ 313,\32\ and 319(b) \33\ of the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, most
banks that maintain correspondent accounts for foreign banks tend to be
large banks. We expect that small banks will be less likely to maintain
correspondent accounts for foreign banks. In most cases, small banks
utilize their domestic correspondent accounts with large banks to
conduct transactions with foreign banks.
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\31\ Anti-Money Laundering Programs; Special Due Diligence
Programs for Certain Foreign Accounts, 71 FR 496 (Jan. 4, 2006).
\32\ Anti-Money Laundering Requirements--Correspondent Accounts
for Foreign Shell Banks; Recordkeeping and Termination of
Correspondent Accounts for Foreign Banks, 67 FR 60562 (Sept. 26,
2002).
\33\ Id.
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FinCEN invited comment on the impact of this proposal on small
entities. One commenter suggested that FinCEN provided no data to
support the conclusion that the regulation would not have a significant
economic impact on a substantial number of small entities. However, no
other commenters expressed concern that this rule would have a
significant economic impact on a substantial number of small entities.
The rule applies to banks that maintain correspondent accounts for
foreign banks. As stated above, and in our previous rules regarding
foreign correspondent accounts, we believe most banks that maintain
correspondent accounts for foreign banks are large banks. In addition,
as noted elsewhere in this rulemaking, FinCEN estimates that
approximately 350 banks maintain correspondent accounts for foreign
banks. FinCEN further estimates that on average approximately five
percent of banks that maintain correspondent accounts for foreign banks
will have an account with any one specific foreign bank about which
FinCEN is requesting information. Furthermore, as noted elsewhere in
this rulemaking, a bank will only be required to comply with this
reporting requirement upon receiving a specific written request from
FinCEN. Therefore, a substantial number of small entities would not be
affected. Accordingly, a regulatory flexibility analysis is not
required.
IX. Paperwork Reduction Act
The collection of information contained in this rule has been
approved by the Office of Management and Budget in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control
number 1506-0066. Under the Paperwork Reduction Act, an agency may not
conduct or sponsor, and an individual is not required to respond to, a
collection of information unless it displays a valid OMB control
number.
Reporting Requirements Under Section 104(e) of CISADA
The collection of information in this rule is in 31 CFR 1060.300.
The information may be transmitted to one or more departments or
agencies of the United States of America for the purpose of fulfilling
such departments' and agencies' governmental functions. The collection
of information is mandatory. FinCEN is issuing this final rule that
will require a bank to report to FinCEN, upon request, certain
information regarding certain foreign banks specified by FinCEN.
Description of Affected Financial Institutions: Banks as defined in
31 CFR 1010.100(d).
Estimated Number of Affected Financial Institutions: 350 banks.
FinCEN estimates that approximately 350 banks maintain
correspondent accounts for foreign banks.\34\ However, FinCEN estimates
that on average around five percent of banks that maintain
correspondent accounts for foreign banks will have an account with any
one specific foreign bank about which FinCEN is requesting information.
This smaller proportion of actual affected financial institutions in
each case of a request is based on the fact that foreign banks
generally only hold a limited number of correspondent
[[Page 62622]]
account relationships with separate U.S. banks. For this reason, the
estimated number of financial institutions that may maintain a
correspondent account for any one specific foreign bank identified in
any one request from FinCEN will be in the range of 18 banks. In order
to further reduce the number of affected financial institutions, when
possible, FinCEN will rely on information available to help limit the
number of banks requested to provide information with respect to the
foreign banks that are the subject of specific requests. In turn,
FinCEN intends to send requests directly to banks that FinCEN, based on
all available information, believes maintain correspondent accounts for
the specified foreign bank(s). The number of banks that receive a
request may vary in each specific case, based on the availability of
information to FinCEN and other circumstances.
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\34\ 177 banks reported a balance due as of September 30, 2010
in either line item 3.a. or 3.b. of Schedule RC-A--Cash and Balances
Due From Depository Institutions on the Consolidated Reports of
Condition and Income for a Bank with Domestic and Foreign Offices--
FFIEC 031, or on the Consolidated Reports of Condition and Income
for a Bank with Domestic Offices Only--FFIEC 041. Line item 3.a.
represents balances due from foreign branches of other U.S. banks
and line item 3.b. represents balances due from other banks in
foreign countries and foreign central banks. As of September 30,
2010, 7,020 banks, regulated by either the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation,
or the Office of the Comptroller of the Currency, filed either FFIEC
031 or FFIEC 041. 177 of those 7,020 banks reported a balance due
for a correspondent account for a foreign bank. These numbers do not
include agents, agencies, branches, or offices within the U.S. of a
bank organized under foreign law, which are also included within the
definition of bank for purposes of this rulemaking. According to the
Federal Reserve Board Structure Data for U.S. Banking Offices of
Foreign Entities, there are approximately 214 U.S. Offices of
Foreign Banking Organizations, as of September 30, 2010. See http://www.federalreserve.gov/releases/iba/201009/bycntry.htm. Of those 214
U.S. Offices of Foreign Banking Organizations, approximately 43 only
operate in the U.S. as representative offices. See http://www.federalreserve.gov/releases/iba/201009/bytype.htm.
Representative offices do not maintain correspondent accounts. For
this reason, FinCEN is conservatively estimating that it is likely
the remaining 171 U.S. Offices of Foreign Banking Organizations do
maintain some form of correspondent account for a foreign bank. This
results in a total estimate of 348 U.S. banks and foreign banks
operating in the U.S. that maintain a correspondent account for a
foreign bank.
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Estimated Average Annual Burden Hours per Affected Financial
Institution: 31 hours per bank.
The scope of any request may be with respect to one foreign bank or
a number of foreign banks (for example, a number of foreign banks
operating in the same jurisdiction). FinCEN believes that regardless of
the number of requests transmitted, such requests will pertain to
approximately 50 foreign banks in any given year.
Financial Institutions That Maintain a Correspondent Account for a
Specified Foreign Bank
A bank will only be required to comply with the requirements of
this rule if the bank receives a written request from FinCEN. As noted
above, FinCEN estimates that on average approximately five percent of
the banks that maintain correspondent accounts for foreign banks, i.e.,
approximately 18 banks, will maintain correspondent accounts for any
one specific foreign bank about which FinCEN is requesting information.
If FinCEN makes requests with respect to approximately 50 foreign banks
per year and on average 18 banks are required to respond, per request,
with regard to a correspondent account they maintain for any one
specified foreign bank, there will be approximately 900 CISADA-related
reports per year.
Each time a bank receives a request from FinCEN regarding a
specific foreign bank for which it maintains a correspondent account,
it will incur a reporting burden associated with section 1060.300(b)
(inquiry); a reporting burden associated with section 1060.300(c)
(reporting); and a recordkeeping burden associated with section
1060.300(d) (record retention).
The estimated average reporting burden associated with section
1060.300(b) for one request from FinCEN is one hour per responding U.S.
bank with respect to each specific foreign bank about which FinCEN is
requesting information. The estimated average reporting burden
associated with section 1060.300(c) for one request from FinCEN is one
hour per bank. The estimated average recordkeeping burden associated
with section 1060.300(d) for one request from FinCEN is one hour per
bank. This results in a total estimated average burden of three hours
per bank with respect to each foreign bank about which FinCEN is
requesting information. In the unlikely scenario in which the same bank
were required to respond to FinCEN with respect to each foreign bank
about which FinCEN is seeking information in any given year, the
estimated annual burden hours would be 150. FinCEN believes that even
with respect to the banks that are most active in the provision of
correspondent accounts to foreign banks, they are likely to be required
to respond to FinCEN with respect to one fifth of the foreign banks
about which FinCEN is seeking information, which corresponds to roughly
30 burden hours per year based on the above calculations.
Financial Institutions That Do Not Maintain a Correspondent Account for
a Specified Foreign Bank
In certain instances FinCEN may request that if a bank receives a
written request from FinCEN regarding a specified foreign bank, and the
bank does not maintain a correspondent account for such specified
foreign bank, the bank report this information to FinCEN. As noted
above, FinCEN intends to send requests to banks that FinCEN is aware
have a correspondent account for a specified foreign bank as often as
possible. In instances in which FinCEN is not aware of which banks
maintain a correspondent account for a specified foreign bank, FinCEN
may send requests to those banks FinCEN believes might have a
correspondent account for a specified foreign bank.
In instances in which FinCEN is sending a request to a small number
of banks that FinCEN believes might maintain a correspondent account
for a specified foreign bank, FinCEN may request, in the written
request sent to those banks, that the banks that do not maintain a
correspondent account for the specified foreign bank report such
information to FinCEN. FinCEN believes that we will rarely be sending a
request to a large number of banks that we are not certain maintain a
correspondent account for the specified foreign bank for which we are
requesting information. In those rare cases, FinCEN would most likely
not ask those banks to report if they do not maintain a correspondent
account for such foreign bank. One commenter noted support for this
element of the proposal. The commenter asserted that barring
significant need, asking for a written negative confirmation should be
unnecessary because banks are subject to extensive supervision and the
banking agencies should be able to assess appropriate compliance.
FinCEN believes that the estimated average reporting burden for a
bank to report to FinCEN that it does not maintain a correspondent
account for the foreign bank specified in a request from FinCEN will be
approximately 30 minutes per request. FinCEN also estimates that across
the 50 requests FinCEN anticipates making annually, on average two to
five banks will receive a request from FinCEN regarding a foreign bank
for which they do not maintain a correspondent account, and for which
FinCEN requests that they report such information. This means that
approximately 250 banks will be required to report that they do not
maintain a correspondent account for a foreign bank specified in a
request from FinCEN in any given year. This also means that
approximately 125 estimated annual burden hours will be expended each
year. FinCEN also estimates that no single bank will receive a request
from FinCEN more than two times per year regarding a specified foreign
bank for which it does not maintain a correspondent account, and for
which FinCEN requests that it report such information. This corresponds
to roughly one estimated average annual burden hour per bank.
Estimated Total Annual Burden: 2825 total annual burden hours.
Approximately 900 CISADA-related reports anticipated each year
(provided by a varying number of banks) multiplied by three burden
hours per report. (2700 total annual burden hours). Approximately 250
reports from banks that do not maintain a correspondent account with a
specified foreign bank (provided by a varying number of banks)
multiplied by 30 minutes of burden per report. (125 total annual burden
hours).
In the Notice, FinCEN specifically requested comment concerning the
following:
(a) Whether the proposed collection of information is necessary for
the proper performance of the functions of FinCEN,
[[Page 62623]]
including whether the information will have practical utility.
FinCEN received no specific comments regarding this request.
(b) The accuracy of the estimated burden associated with the
proposed collection of information.
One commenter questioned the estimate that of the approximately 350
banks that maintain correspondent accounts for foreign banks, only five
percent are likely to have an account affected by any single written
request from FinCEN. The commenter contended that there is nothing
provided to support the five percent estimate. As noted above, in order
to reduce the number of affected financial institutions, when possible,
FinCEN will rely on information available to help limit the number of
banks requested to provide information with respect to the foreign
banks that are the subject of specific requests. The number of banks
that receive a request may vary in each specific case, based on the
availability of information to FinCEN and other circumstances. This
means that although FinCEN has the discretion to send a request to
every U.S. bank that maintains a correspondent account for a specific
foreign bank, in circumstances in which we feel it is appropriate, we
may choose to only send a request to some of the U.S. banks that
maintain a correspondent account for a specific foreign bank. For this
reason, we can reasonably estimate that on average approximately five
percent of banks that maintain correspondent accounts for foreign banks
will have an account with the any one specific foreign bank about which
FinCEN is requesting information.
The commenter also noted that FinCEN estimates the impact of a
request about a specific foreign bank will require no more than three
hours for a U.S. bank to comply. The commenter noted that although
there is no way to verify these estimates, it believes that this rule
has the potential to be burdensome and complex. In order to manage the
burden of this reporting requirement, FinCEN has proposed a model
certification for a bank to utilize in order to inquire of a foreign
bank. The model certification includes language identifying the purpose
for which the bank is requesting information from the foreign bank. In
addition, the model certification defines the key terms applicable to
this reporting request. The model certification clearly outlines the
information a foreign bank is requested to report and provides links to
the list of relevant designated entities and individuals on which a
foreign bank is requested to report. As suggested by the commenter,
FinCEN will track and consider reporting on the effectiveness of the
reporting mechanism.
The commenter also suggested that the regulatory burden estimates
are inadequate and do not seem to be a good faith effort to fulfill
requirements to assess adequately the regulatory burden. However the
commenter did not provide any alternative burden estimates. In
addition, FinCEN did not receive any other comments which raised
concerns regarding the adequacy of the burden estimates.
Based on two comments received, FinCEN clarifies that in evaluating
the effect of this rule on banks, we estimated that approximately 18
U.S. banks would be required to file reports with FinCEN for each
request regarding a single foreign bank. We reached this estimate based
on the following calculation: FinCEN estimates that 350 U.S. banks
maintain correspondent accounts for foreign banks, and approximately
five percent of the U.S. banks that maintain correspondent accounts for
foreign banks will have a correspondent account with any given foreign
bank about which FinCEN is requesting information. Five percent of 350
is 18 (rounded up). In any given request, the actual number of U.S.
banks that would be required to report will, of course, vary.
(c) How the quality, utility, and clarity of the information to be
collected may be enhanced.
FinCEN received various comments regarding clarification associated
with the collection of information. Those comments are addressed
throughout the preamble of this rulemaking.
(d) How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology.
One commenter requested that FinCEN utilize e-filing to collect the
required information from banks. At this time, FinCEN cannot utilize e-
filing for this collection of information. This is something we may
consider in the future. FinCEN will prescribe the format and manner in
which information will be collected from banks in the requests FinCEN
sends to those banks.
X. Effective Date
Publication of a substantive rule not less than 30 days before its
effective date is required by the Administrative Procedure Act except
as otherwise provided by the agency for good cause.\35\ In order to
comply with the congressional mandate to prescribe regulations under
section 104(e) of CISADA, which will work in tandem with the
regulations implementing section 104(c) of CISADA, FinCEN finds that
there is good cause for making this amendment effective on October 11,
2011. Regulations implementing section 104(c) of CISADA were required
to be prescribed within 90 days of the enactment of the Act on July 1,
2010. As noted above, on August 16, 2010, OFAC published the IFSR.
Section 561.201 of the IFSR implements section 104(c) of CISADA. The
reports received as a result of this regulation will assist in the
implementation of the IFSR.
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\35\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------
In finding good cause, FinCEN considered the possible effect of
providing less than 30 days notice to affected persons. FinCEN
determined that immediate implementation would not unfairly burden
these persons because, as explained above, U.S. banks will only be
required to report to FinCEN upon receiving a specific written request
from FinCEN. As also noted above, FinCEN will only request reports from
those U.S. banks that maintain correspondent accounts for the specific
foreign banks that are of interest for purposes of CISADA
implementation, and as a result we believe that we will receive the
information needed without generating a multitude of unnecessary and
uninformative reports.
List of Subjects in 31 CFR Part 1060
Banks, Banking, Counter-terrorism, Foreign banking, Reporting and
recordkeeping requirements, Terrorism.
Authority and Issuance
For the reasons set forth above, 31 CFR part 1060 is added to read
as follows:
PART 1060--PROVISIONS RELATING TO THE COMPREHENSIVE IRAN SANCTIONS,
ACCOUNTABILITY, AND DIVESTMENT ACT OF 2010
Sec.
1060.100 [Reserved]
1060.200 [Reserved]
1060.300 Reporting obligations on foreign bank relationships with
Iranian-linked financial institutions designated under IEEPA and
IRGC-linked persons designated under IEEPA.
1060.400 [Reserved]
1060.500 [Reserved]
1060.600 [Reserved]
1060.700 [Reserved]
1060.800 Penalties
Authority: Pub. L. 111-195, 124 Stat. 1312.
[[Page 62624]]
Sec. 1060.100 [Reserved]
Sec. 1060.200 [Reserved]
Sec. 1060.300 Reporting obligations on foreign bank relationships
with Iranian-linked financial institutions designated under IEEPA and
IRGC-linked persons designated under IEEPA.
(a) General.
(1) Upon receiving a written request from FinCEN, a bank (as
defined in 31 CFR 1010.100(d)) that maintains a correspondent account
(as defined in 31 CFR 1010.605(c)(1)(ii)) for a specified foreign bank
(as defined in 31 CFR 1010.100(u)) shall inquire of the foreign bank,
and report to FinCEN, with respect to any correspondent account
maintained by such foreign bank for an Iranian-linked financial
institution designated under IEEPA; any transfer of funds for or on
behalf of, directly or indirectly, an Iranian-linked financial
institution designated under IEEPA processed by such foreign bank
within the preceding 90 calendar days, other than through a
correspondent account; and any transfer of funds for or on behalf of,
directly or indirectly, an IRGC-linked person designated under IEEPA
processed by such foreign bank within the preceding 90 calendar days.
(2) For the purposes of this section, an ``Iranian-linked financial
institution designated under IEEPA'' means a financial institution
designated by the United States Government pursuant to the
International Emergency Economic Powers Act (or listed in an annex to
an Executive order issued pursuant to such Act) in connection with
Iran's proliferation of weapons of mass destruction or delivery systems
for weapons of mass destruction, or in connection with Iran's support
for international terrorism. For the purposes of this section, an
``IRGC-linked person designated under IEEPA'' means Iran's Islamic
Revolutionary Guard Corps or any of its agents or affiliates designated
by the United States Government pursuant to the International Emergency
Economic Powers Act (or listed in an annex to an Executive order issued
pursuant to such Act).
Note to paragraph (a)(2): Section 104(c) of the Comprehensive
Iran Sanctions, Accountability, and Divestment Act of 2010
(``CISADA''), Public Law 111-195, 124 Stat. 1312, provides the
Secretary of the Treasury with authority to prohibit, or impose
strict conditions on, the opening or maintaining in the United
States of a correspondent account or a payable-through account by a
foreign financial institution that the Secretary finds knowingly
engages in certain specified activities. Those specified activities
include facilitating a significant transaction or transactions or
providing significant financial services for a financial institution
whose property or interests in property are blocked pursuant to the
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.)
in connection with Iran's proliferation of weapons of mass
destruction or delivery systems for weapons of mass destruction, or
in connection with Iran's support for international terrorism, or
for Iran's Islamic Revolutionary Guard Corps or any of its agents or
affiliates whose property or interests in property are blocked
pursuant to that Act.
(b) Duty to inquire. Upon receiving a written request from FinCEN,
a bank that maintains a correspondent account for a specified foreign
bank shall inquire of such foreign bank for the purpose of having such
foreign bank certify: whether it maintains a correspondent account for
an Iranian-linked financial institution designated under IEEPA; whether
it has processed one or more transfers of funds within the preceding 90
calendar days for or on behalf of, directly or indirectly, an Iranian-
linked financial institution designated under IEEPA, other than through
a correspondent account; and whether it has processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an IRGC-linked person designated
under IEEPA. Upon such inquiry, a bank shall request that the foreign
bank agree to notify the bank if the foreign bank subsequently
establishes a new correspondent account for an Iranian-linked financial
institution designated under IEEPA at any time within 365 calendar days
from the date of the foreign bank's initial response.
(c) Filing Procedures.
(1) What to file. Upon receiving a written request from FinCEN, a
bank shall report to FinCEN, in such format and manner as may be
prescribed by FinCEN, the following information for any specified
foreign bank:
(i) The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it maintains a
correspondent account for an Iranian-linked financial institution
designated under IEEPA, and the following related information:
(A) The name of the Iranian-linked financial institution designated
under IEEPA;
(B) The full name(s) on the correspondent account and the
correspondent account number(s);
(C) Applicable information regarding whether the correspondent
account has been blocked or otherwise restricted;
(D) Other applicable identifying information for the correspondent
account; and
(E) The approximate value in U.S. dollars of transactions processed
through the correspondent account within the preceding 90 calendar
days;
(ii) The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it has processed
one or more transfers of funds within the preceding 90 calendar days
for or on behalf of, directly or indirectly, an Iranian-linked
financial institution designated under IEEPA, other than through a
correspondent account, and the following related information:
(A) The name of the Iranian-linked financial institution designated
under IEEPA;
(B) The identity of the system or means by which such transfer(s)
of funds was processed;
(C) The full name on the account(s) and the account number(s), if
applicable;
(D) Other applicable identifying information for such transfer(s)
of funds; and
(E) The approximate value in U.S. dollars of such transfer(s) of
funds processed within the preceding 90 calendar days;
(iii) The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it has processed
one or more transfers of funds within the preceding 90 calendar days
for or on behalf of, directly or indirectly, an IRGC-linked person
designated under IEEPA, and the following related information:
(A) The name of the IRGC-linked person designated under IEEPA;
(B) The identity of the system or means by which such transfer(s)
of funds was processed;
(C) The full name on the account(s) and the account number(s), if
applicable;
(D) Other applicable identifying information for such transfer(s)
of funds; and
(E) The approximate value in U.S. dollars of such transfer(s) of
funds processed within the preceding 90 calendar days;
(iv) The name of any specified foreign bank, for which the bank
maintains a correspondent account, that certifies that it does not
maintain a correspondent account for an Iranian-linked financial
institution designated under IEEPA, that certifies that to its
knowledge it has not processed one or more transfers of funds within
the preceding 90 calendar days for or on behalf of, directly or
indirectly, an Iranian-linked financial institution designated under
IEEPA, other than through a correspondent account, and/
[[Page 62625]]
or that certifies that to its knowledge it has not processed one or
more transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an IRGC-linked person designated
under IEEPA;
(v) The name of any specified foreign bank, for which the bank
maintains a correspondent account, that the bank cannot determine does
not maintain a correspondent account for an Iranian-linked financial
institution designated under IEEPA, has not processed one or more
transfers of funds within the preceding 90 calendar days for or on
behalf of, directly or indirectly, an Iranian-linked financial
institution designated under IEEPA, other than through a correspondent
account, and/or has not processed one or more transfers of funds within
the preceding 90 calendar days for or on behalf of, directly or
indirectly, an IRGC-linked person designated under IEEPA, together with
the reason(s) for this, such as the failure of the foreign bank to
respond to the inquiry by or a request from the bank, the failure of
the foreign bank to certify its response, or if the bank has
information that is inconsistent with the certification;
(vi) The name of any specified foreign bank, for which the bank
maintains a correspondent account, that notifies the bank that it has
established a new correspondent account for an Iranian-linked financial
institution designated under IEEPA at any time within 365 calendar days
from the date of the foreign bank's initial response, and the following
related information:
(A) The name of the Iranian-linked financial institution designated
under IEEPA;
(B) The full name(s) on the correspondent account and the
correspondent account number(s);
(C) Applicable information regarding whether the correspondent
account has been blocked or otherwise restricted; and
(D) Other applicable identifying information for the correspondent
account;
(vii) If applicable, confirmation that the bank does not maintain a
correspondent account for the specified foreign bank(s), but only in
instances in which FinCEN specifically requests that the bank report
such information; and
(viii) If applicable, the name of any specified foreign bank, for
which the bank maintains a correspondent account, that provides a
certification to the bank after the 45-calendar-day deadline, along
with all applicable related information associated with that
certification.
(2) When to file. (i) A bank shall report to FinCEN within 45-
calendar-days of the date of the request from FinCEN.
(ii) Reports based on subsequent notifications received from a
foreign bank regarding the establishment of a new correspondent account
for an Iranian-linked financial institution designated under IEEPA
shall be due within 10 calendar days of receipt of the notification.
(iii) Reports based on certifications received from a foreign bank
after the 45 calendar day deadline shall be due within 10 calendar days
of receipt of the certification.
(d) Retention of records. A bank shall maintain for a period of
five years a copy of any report filed and the original or any business
record equivalent of any supporting documentation for a report,
including a foreign bank certification or other responses to an inquiry
under this section.
(e) No other action required. Nothing in this section shall be
construed to require a bank to take any action, or to decline to take
any action, other than the requirements identified in this section,
with respect to an account established for, or a transaction engaged in
with, a foreign bank. However, nothing in this section relieves a bank
of any other applicable regulatory obligation.
Sec. 1060.400 [Reserved]
Sec. 1060.500 [Reserved]
Sec. 1060.600 [Reserved]
Sec. 1060.700 [Reserved]
Sec. 1060.800 Penalties.
A person violating any requirement under this part is subject to
the penalties provided for in sections 5321(a) and 5322 of title 31,
United States Code, in the same manner and to the same extent as such
penalties would apply to any person that is otherwise subject to such
section 5321(a) or 5322.
Dated: October 3, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[[Page 62626]]
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[[Page 62627]]
[GRAPHIC] [TIFF OMITTED] TR11OC11.009
[[Page 62628]]
[GRAPHIC] [TIFF OMITTED] TR11OC11.010
[[Page 62629]]
[GRAPHIC] [TIFF OMITTED] TR11OC11.011
[[Page 62630]]
[GRAPHIC] [TIFF OMITTED] TR11OC11.012
[FR Doc. 2011-26204 Filed 10-7-11; 8:45 am]
BILLING CODE 4810-02-P