[Federal Register Volume 79, Number 140 (Tuesday, July 22, 2014)]
[Proposed Rules]
[Pages 42486-42491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17172]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB27
Imposition of Special Measure Against FBME Bank Ltd., Formerly
Known as Federal Bank of the Middle East, Ltd., as a Financial
Institution of Primary Money Laundering Concern
AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In a finding, notice of which is published elsewhere in this
issue of the Federal Register (``Notice of Finding''), the Director of
FinCEN found that FBME Bank Ltd. (``FBME''), formerly known as Federal
Bank of the Middle East, Ltd., is a financial institution operating
outside of the United States that is of primary money laundering
concern. FinCEN is issuing this notice of proposed rulemaking
(``NPRM'') to propose the imposition of a special measure against FBME.
DATES: Written comments on this NPRM must be submitted on or before
September 22, 2014.
ADDRESSES: You may submit comments, identified by 1506-AB27, by any of
the following methods:
[[Page 42487]]
Federal E-rulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. Include 1506-AB27 in
the submission.
Mail: The Financial Crimes Enforcement Network, P.O. Box
39, Vienna, VA 22183. Include 1506-AB27 in the body of the text. Please
submit comments by one method only.
Comments submitted in response to this NPRM will become a
matter of public record. Therefore, you should submit only information
that you wish to make publicly available.
Inspection of comments: Public comments received electronically or
through the U.S. Postal Service sent in response to a notice and
request for comment will be made available for public review on http://www.regulations.gov. Comments received may be physically inspected in
the FinCEN reading room located in Vienna, Virginia. Reading room
appointments are available weekdays (excluding holidays) between 10
a.m. and 3 p.m., by calling the Disclosure Officer at (703) 905-5034
(not a toll-free call).
FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center at (800)
767-2825.
SUPPLEMENTARY INFORMATION:
I. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''),
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-
5332, to promote the prevention, detection, and prosecution of
international money laundering and the financing of terrorism.
Regulations implementing the BSA appear at 31 CFR Chapter X. The
authority of the Secretary of the Treasury (the ``Secretary'') to
administer the BSA and its implementing regulations has been delegated
to the Director of FinCEN.
Section 311 of the USA PATRIOT Act (``Section 311''), codified at
31 U.S.C. 5318A, grants the Director of FinCEN the authority, upon
finding that reasonable grounds exist for concluding that a foreign
jurisdiction, institution, class of transaction, or type of account is
of ``primary money laundering concern,'' to require domestic financial
institutions and financial agencies to take certain ``special
measures'' to address the primary money laundering concern.
II. Imposition of a Special Measure Against FBME as a Financial
Institution of Primary Money Laundering Concern
A. Special Measure
As noticed elsewhere in this issue of the Federal Register, on July
15, 2014, the Director of FinCEN found that FBME is a financial
institution operating outside the United States that is of primary
money laundering concern (``Finding''). Based upon that Finding, the
Director of FinCEN is authorized to impose one or more special
measures. Following the consideration of all factors relevant to the
Finding and to selecting the special measure proposed in this NPRM, the
Director of FinCEN proposes to impose the special measure authorized by
section 5318A(b)(5) (the ``fifth special measure''). In connection with
this action, FinCEN consulted with representatives of the Federal
functional regulators, the Department of Justice, and the Department of
State, among others.
B. Discussion of Section 311 Factors
In determining which special measures to implement to address the
primary money laundering concern, FinCEN considered the following
factors.
1. Whether Similar Action Has Been or Will Be Taken by Other Nations or
Multilateral Groups Against FBME
Other countries or multilateral groups have not yet taken action
similar to those proposed in this rulemaking that would: (1) prohibit
domestic financial institutions and agencies from opening or
maintaining a correspondent account for or on behalf of FBME; and (2)
require certain covered financial institutions to screen their
correspondent accounts in a manner that is reasonably designed to guard
against processing transactions involving FBME. FinCEN encourages other
countries to take similar action based on the information contained in
this NPRM and the Notice of Finding.
2. Whether the Imposition of the Fifth Special Measure Would Create a
Significant Competitive Disadvantage, Including Any Undue Cost or
Burden Associated with Compliance, for Financial Institutions Organized
or Licensed in the United States
The fifth special measure proposed by this rulemaking would
prohibit covered financial institutions from opening or maintaining
correspondent accounts for or on behalf of FBME after the effective
date of the final rule implementing the fifth special measure.
Currently, only one U.S. covered financial institution maintains an
account for FBME; therefore FinCEN believes this action will not
present an undue regulatory burden. As a corollary to this measure,
covered financial institutions also would be required to take
reasonable steps to apply special due diligence, as set forth below, to
all of their correspondent accounts to help ensure that no such account
is being used to provide services to FBME. For direct correspondent
relationships, this would involve a minimal burden in transmitting a
one-time notice to certain foreign correspondent account holders
concerning the prohibition on processing transactions involving FBME
through the U.S. correspondent account. U.S. financial institutions
generally apply some level of screening and, when required, conduct
some level of reporting of their transactions and accounts, often
through the use of commercially-available software such as that used
for compliance with the economic sanctions programs administered by the
Office of Foreign Assets Control (``OFAC'') of the Department of the
Treasury and to detect potential suspicious activity. To ensure that
U.S. financial institutions are not being used unwittingly to process
payments for or on behalf of FBME, directly or indirectly, some
additional burden will be incurred by U.S. financial institutions to be
vigilant in their suspicious activity monitoring procedures. As
explained in more detail in the section-by-section analysis below,
financial institutions should be able to leverage these current
screening and reporting procedures to detect transactions involving
FBME.
3. The Extent to Which the Proposed Action or Timing of the Action
Would Have a Significant Adverse Systemic Impact on the International
Payment, Clearance, and Settlement System, or on Legitimate Business
Activities of FBME
The requirements proposed in this NPRM would target FBME
specifically; they would not target a class of financial transactions
(such as wire transfers) or a particular jurisdiction. FBME has
approximately $2 billion in assets. While FBME is presently
headquartered in Tanzania, FBME transacts over 90% of its global
banking business and holds over 90% of its assets in its Cyprus branch.
FBME is not a major participant in the international payment system and
is not relied upon by the international banking community for clearance
or settlement services. Thus, the imposition of the fifth special
measure against FBME would not have a significant adverse systemic
impact on
[[Page 42488]]
the international payment, clearance, and settlement system.
4. The Effect of the Proposed Action on United States National Security
and Foreign Policy
The exclusion of FBME from the U.S. financial system as proposed in
this NPRM would enhance national security by making it more difficult
for money launderers, transnational organized crime, other criminals,
sanctions evaders, and terrorists to access the U.S. financial system.
More generally, the imposition of the fifth special measure would
complement the U.S. Government's worldwide efforts to expose and
disrupt international money laundering and terrorist financing.
Therefore, pursuant to the Finding that FBME is a financial
institution operating outside of the United States of primary money
laundering concern, and after conducting the required consultations and
weighing the relevant factors, the Director of FinCEN proposes to
impose the fifth special measure.
III. Section-by-Section Analysis for Imposition of the Fifth Special
Measure
A. 1010.661(a)--Definitions
1. FBME Bank Ltd.
Section 1010.661(a)(1) of the proposed rule would define FBME to
include all domestic and international branches, offices, and
subsidiaries of FBME operating in Tanzania, Cyprus, or in any other
jurisdiction.
Covered financial institutions should take commercially reasonable
measures to determine whether a customer is a branch, office, or
subsidiary of FBME.
2. Correspondent Account
Section 1010.661(a)(2) of the proposed rule would define the term
``correspondent account'' by reference to the definition contained in
31 CFR 1010.605(c)(1)(ii). Section 1010.605(c)(1)(ii) defines a
correspondent account to mean an account established to receive
deposits from, or make payments or other disbursements on behalf of, a
foreign bank, or to handle other financial transactions related to the
foreign bank. Under this definition, ``payable through accounts'' are a
type of correspondent account.
In the case of a U.S. depository institution, this broad definition
includes most types of banking relationships between a U.S. depository
institution and a foreign bank that are established to provide regular
services, dealings, and other financial transactions, including a
demand deposit, savings deposit, or other transaction or asset account,
and a credit account or other extension of credit. FinCEN is using the
same definition of ``account'' for purposes of this rule as was
established for depository institutions in the final rule implementing
the provisions of section 312 of the USA PATRIOT Act requiring enhanced
due diligence for correspondent accounts maintained for certain foreign
banks.\1\
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\1\ See 31 CFR 1010.605(c)(2)(i).
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In the case of securities broker-dealers, futures commission
merchants, introducing brokers-commodities, and investment companies
that are open-end companies (``mutual funds''), FinCEN is also using
the same definition of ``account'' for purposes of this rule as was
established for these entities in the final rule implementing the
provisions of section 312 of the USA PATRIOT Act requiring enhanced due
diligence for correspondent accounts maintained for certain foreign
banks.\2\
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\2\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
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3. Covered Financial Institution
Section 1010.661(a)(3) of the proposed rule would define ``covered
financial institution'' with the same definition used in the final rule
implementing the provisions of section 312 of the USA PATRIOT Act,\3\
which in general includes the following:
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\3\ See 31 CFR 1010.605(e)(1).
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An insured bank (as defined in section 3(h) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(h));
a commercial bank;
an agency or branch of a foreign bank in the United
States;
a Federally insured credit union;
a savings association;
a corporation acting under section 25A of the Federal
Reserve Act (12 U.S.C. 611);
a trust bank or trust company;
a broker or dealer in securities;
a futures commission merchant or an introducing broker--
commodities; and
a mutual fund.
4. Subsidiary
Section 1010.661(a)(4) of the proposed rule would define
``subsidiary'' as a company of which more than 50 percent of the voting
stock or analogous equity interest is owned by FBME.
B. 1010.661(b)--Prohibition on Accounts and Due Diligence Requirements
for Covered Financial Institutions
1. Prohibition on Opening or Maintaining Correspondent Accounts
Section 1010.661(b)(1) of the proposed rule imposing the fifth
special measure would prohibit covered financial institutions from
establishing, maintaining, administering, or managing in the United
States any correspondent account for or on behalf of FBME.
2. Special Due Diligence for Correspondent Accounts To Prohibit Use
As a corollary to the prohibition on maintaining correspondent
accounts for or on behalf of FBME, section 1010.661(b)(2) of the
proposed rule would require a covered financial institution to apply
special due diligence to all of its foreign correspondent accounts that
is reasonably designed to guard against processing transactions
involving FBME. As part of that special due diligence, covered
financial institutions must notify those foreign correspondent account
holders that the covered financial institutions know or has reason to
know provide services to FBME that such correspondents may not provide
FBME with access to the correspondent account maintained at the covered
financial institution. Covered financial institutions should implement
appropriate risk-based procedures to identify transactions involving
FBME.
A covered financial institution may satisfy the notification
requirement by transmitting the following notice to its foreign
correspondent account holders that it knows or has reason to know
provide services to FBME:
Notice: Pursuant to U.S. regulations issued under Section 311 of
the USA PATRIOT Act, see 31 CFR 1010.661, we are prohibited from
establishing, maintaining, administering, or managing a
correspondent account for or on behalf of FBME Bank Ltd. The
regulations also require us to notify you that you may not provide
FBME Bank Ltd. or any of its subsidiaries with access to the
correspondent account you hold at our financial institution. If we
become aware that the correspondent account you hold at our
financial institution has processed any transactions involving FBME
Bank Ltd. or any of its subsidiaries, we will be required to take
appropriate steps to prevent such access, including terminating your
account.
A covered financial institution may, for example, have knowledge
through transaction screening software that a correspondent processes
transactions for
[[Page 42489]]
FBME. The purpose of the notice requirement is to aid cooperation with
correspondent account holders in preventing transactions involving FBME
from accessing the U.S. financial system. However, FinCEN would not
require or expect a covered financial institution to obtain a
certification from any of its correspondent account holders that access
will not be provided to comply with this notice requirement. Methods of
compliance with the notice requirement could include, for example,
transmitting a one-time notice by mail, fax, or email. FinCEN
specifically solicits comments on the form and scope of the notice that
would be required under the rule.
The special due diligence would also include implementing risk-
based procedures designed to identify any use of correspondent accounts
to process transactions involving FBME. A covered financial institution
would be expected to apply an appropriate screening mechanism to
identify a funds transfer order that on its face listed FBME as the
financial institution of the originator or beneficiary, or otherwise
referenced FBME in a manner detectable under the financial
institution's normal screening mechanisms. An appropriate screening
mechanism could be the mechanism used by a covered financial
institution to comply with various legal requirements, such as the
commercially available software programs used to comply with the
economic sanctions programs administered by OFAC.
A covered financial institution would also be required to implement
risk-based procedures to identify indirect use of its correspondent
accounts, including through methods used to hide the beneficial owner
of a transaction. Specifically, FinCEN is concerned that FBME may
attempt to disguise its transactions by relying on types of payments
and accounts that would not explicitly identify FBME as an involved
party. A financial institution may develop a suspicion of such misuse
based on other information in its possession, patterns of transactions,
or any other method available to it based on its existing systems.
Under the proposed rule, a covered financial institution that suspects
or has reason to suspect use of a correspondent account to process
transactions involving FBME must take all appropriate steps to attempt
to verify and prevent such use, including a notification to its
correspondent account holder per section 1010.661(b)(2)(i)(A)
requesting further information regarding a transaction, requesting
corrective action to address the perceived risk and, where necessary,
terminating the correspondent account. A covered financial institution
may re-establish an account closed under the rule if it determines that
the account will not be used to process transactions involving FBME.
FinCEN specifically solicits comments on the requirement under the
proposed rule that covered financial institutions take reasonable steps
to prevent any processing of transactions involving FBME.
3. Recordkeeping and Reporting
Section 1010.661(b)(3) of the proposed rule would clarify that
subsection (b) of the rule does not impose any reporting requirement
upon any covered financial institution that is not otherwise required
by applicable law or regulation. A covered financial institution must,
however, document its compliance with the requirement that it notify
those correspondent account holders that the covered financial
institution knows or has reason to know provide services to FBME that
such correspondents may not process any transaction involving FBME
through the correspondent account maintained at the covered financial
institution.
IV. Request for Comments
FinCEN invites comments on all aspects of the proposal to impose
the fifth special measure against FBME and specifically invites
comments on the following matters:
1. The impact of the proposed special measure upon legitimate
transactions utilizing FBME involving, in particular, U.S. persons and
entities; foreign persons, entities, and governments; and multilateral
organizations doing legitimate business.
2. The form and scope of the notice to certain correspondent
account holders that would be required under the rule;
3. The appropriate scope of the proposed requirement for a covered
financial institution to take reasonable steps to identify any use of
its correspondent accounts to process transactions involving FBME; and
4. The appropriate steps a covered financial institution should
take once it identifies use of one of its correspondent accounts to
process transactions involving FBME.
V. Regulatory Flexibility Act
When an agency issues a rulemaking proposal, the Regulatory
Flexibility Act (``RFA'') requires the agency to ``prepare and make
available for public comment an initial regulatory flexibility
analysis'' that will ``describe the impact of the proposed rule on
small entities.'' (5 U.S.C. 603(a)). Section 605 of the RFA allows an
agency to certify a rule, in lieu of preparing an analysis, if the
proposed rulemaking is not expected to have a significant economic
impact on a substantial number of small entities.
A. Proposal To Prohibit Covered Financial Institutions From Opening or
Maintaining Correspondent Accounts With Certain Foreign Banks Under the
Fifth Special Measure
1. Estimate of the Number of Small Entities to Whom the Proposed Fifth
Special Measure Will Apply
For purposes of the RFA, both banks and credit unions are
considered small entities if they have less than $500,000,000 in
assets.\4\ Of the estimated 7,000 banks, 80 percent have less than
$500,000,000 in assets and are considered small entities.\5\ Of the
estimated 7,000 credit unions, 94 percent have less than $500,000,000
in assets.\6\
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\4\ Table of Small Business Size Standards Matched to North
American Industry Classification System Codes, Small Business
Administration Size Standards (SBA Jan. 22, 2014) [hereinafter SBA
Size Standards].
\5\ Federal Deposit Insurance Corporation, Find an Institution,
http://www2.fdic.gov/idasp/main.asp; select Size or Performance:
Total Assets, type Equal or less than $: ``500000'' and select Find.
\6\ National Credit Union Administration, Credit Union Data,
http://webapps.ncua.gov/customquery\select Search Fields: Total
Assets, select Operator: Less than or equal to, type Field Values:
``500000000'' and select Go.
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Broker-dealers are defined in 31 CFR 1010.100(h) as those broker-
dealers required to register with the Securities and Exchange
Commission (``SEC''). Because FinCEN and the SEC regulate substantially
the same population, for the purposes of the RFA, FinCEN relies on the
SEC's definition of small business as previously submitted to the Small
Business Administration (``SBA''). The SEC has defined the term ``small
entity'' to mean a broker or dealer that: ``(1) had total capital (net
worth plus subordinated liabilities) of less than $500,000 on the date
in the prior fiscal year as of which its audited financial statements,
were prepared pursuant to Rule 17a-5(d) or, if not required to file
such statements, a broker or dealer that had total capital (net worth
plus subordinated debt) of less than $500,000 on the last business day
of the preceding fiscal year (or in the time that it has been in
business if shorter); and (2) is not affiliated with any person (other
than a natural person) that is not a small business or small
organization as defined in this release.'' \7\ Based on SEC estimates,
17 percent of broker-dealers are classified
[[Page 42490]]
as ``small'' entities for purposes of the RFA.\8\
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\7\ 17 CFR 240.0-10(c).
\8\ 76 FR 37572, 37602 (June 27, 2011) (the SEC estimates 871
small broker-dealers of the 5,063 total registered broker-dealers).
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Futures commission merchants (``FCMs'') are defined in 31 CFR
1010.100(x) as those FCMs that are registered or required to be
registered as a FCM with the Commodity Futures Trading Commission
(``CFTC'') under the Commodity Exchange Act (``CEA''), except persons
who register pursuant to section 4f(a)(2) of the CEA, 7 U.S.C.
6f(a)(2). Because FinCEN and the CFTC regulate substantially the same
population, for the purposes of the RFA, FinCEN relies on the CFTC's
definition of small business as previously submitted to the SBA. In the
CFTC's ``Policy Statement and Establishment of Definitions of `Small
Entities' for Purposes of the Regulatory Flexibility Act,'' the CFTC
concluded that registered FCMs should not be considered to be small
entities for purposes of the RFA.\9\ The CFTC's determination in this
regard was based, in part, upon the obligation of registered FCMs to
meet the capital requirements established by the CFTC.
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\9\ 47 FR 18618, 18619 (Apr. 30, 1982).
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For purposes of the RFA, an introducing broker-commodities dealer
is considered small if it has less than $35,500,000 in gross receipts
annually.\10\ Based on information provided by the National Futures
Association (``NFA''), 95 percent of introducing brokers-commodities
dealers have less than $35.5 million in Adjusted Net Capital and are
considered to be small entities.
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\10\ SBA Size Standards at 28.
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Mutual funds are defined in 31 CFR 1010.100(gg) as those investment
companies that are open-end investment companies that are registered or
are required to register with the SEC. Because FinCEN and the SEC
regulate substantially the same population, for the purposes of the
RFA, FinCEN relies on the SEC's definition of small business as
previously submitted to the SBA. The SEC has defined the term ``small
entity'' under the Investment Company Act to mean ``an investment
company that, together with other investment companies in the same
group of related investment companies, has net assets of $50 million or
less as of the end of its most recent fiscal year.'' \11\ Based on SEC
estimates, 7 percent of mutual funds are classified as ``small
entities'' for purposes of the RFA under this definition.\12\
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\11\ 17 CFR 270.0-10.
\12\ 78 FR 23637, 23658 (April 19, 2013).
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As noted above, 80 percent of banks, 94 percent of credit unions,
17 percent of broker-dealers, 95 percent of introducing brokers-
commodities, zero FCMs, and 7 percent of mutual funds are small
entities. The limited number of foreign banking institutions with which
FBME maintains or will maintain accounts will likely limit the number
of affected covered financial institutions to the largest U.S. banks,
which actively engage in international transactions. Thus, the
prohibition on maintaining correspondent accounts for foreign banking
institutions that engage in transactions involving FBME under the fifth
special measure would not impact a substantial number of small
entities.
2. Description of the Projected Reporting and Recordkeeping
Requirements of the Fifth Special Measure
The proposed fifth special measure would require covered financial
institutions to provide a notification intended to aid cooperation from
foreign correspondent account holders in preventing transactions
involving FBME from accessing the U.S. financial system. FinCEN
estimates that the burden on institutions providing this notice is one
hour. Covered financial institutions would also be required to take
reasonable measures to detect use of their correspondent accounts to
process transactions involving FBME. All U.S. persons, including U.S.
financial institutions, currently must exercise some degree of due
diligence to comply with OFAC sanctions and suspicious activity
reporting requirements. The tools used for such purposes, including
commercially available software used to comply with the economic
sanctions programs administered by OFAC, can easily be modified to
identify correspondent accounts with foreign banks that involve FBME.
Thus, the special due diligence that would be required by the
imposition of the fifth special measure--i.e., the one-time transmittal
of notice to certain correspondent account holders, the screening of
transactions to identify any use of correspondent accounts, and the
implementation of risk-based measures to detect use of correspondent
accounts--would not impose a significant additional economic burden
upon small U.S. financial institutions.
B. Certification
For these reasons, FinCEN certifies that the proposals contained in
this rulemaking would have a significant impact on a substantial number
of small businesses.
FinCEN invites comments from members of the public who believe
there would be a significant economic impact on small entities from the
imposition of the fifth special measure regarding FBME.
VI. Paperwork Reduction Act
The collection of information contained in this proposed rule is
being submitted to the Office of Management and Budget for review in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)). Comments on the collection of information should be sent to
the Desk Officer for the Department of Treasury, Office of Information
and Regulatory Affairs, Office of Management and Budget, Paperwork
Reduction Project (1506), Washington, DC 20503 (or by email to oira
[email protected]) with a copy to FinCEN by mail or email at the
addresses previously specified. Comments should be submitted by one
method only. Comments on the collection of information should be
received by September 22, 2014. In accordance with the requirements of
the Paperwork Reduction Act and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information as required by 31 CFR 1010.661 is presented to assist those
persons wishing to comment on the information collection.
A. Proposed Information Collection Under the Fifth Special Measure
The notification requirement in section 1010.661(b)(2)(i) is
intended to aid cooperation from correspondent account holders in
denying FBME access to the U.S. financial system. The information
required to be maintained by section 1010.661(b)(3)(i) would be used by
federal agencies and certain self-regulatory organizations to verify
compliance by covered financial institutions with the provisions of 31
CFR 1010.661. The collection of information would be mandatory.
Description of Affected Financial Institutions: Banks, broker-
dealers in securities, futures commission merchants and introducing
brokers-commodities, and mutual funds.
Estimated Number of Affected Financial Institutions: 5,000.
Estimated Average Annual Burden in Hours Per Affected Financial
Institution: The estimated average burden associated with the
collection of information in this proposed rule is one hour per
affected financial institution.
Estimated Total Annual Burden: 5,000 hours.
FinCEN specifically invites comments on: (a) whether the proposed
collection
[[Page 42491]]
of information is necessary for the proper performance of the mission
of FinCEN, including whether the information would have practical
utility; (b) the accuracy of FinCEN's estimate of the burden of the
proposed collection of information; (c) ways to enhance the quality,
utility, and clarity of the information required to be maintained; (d)
ways to minimize the burden of the required collection of information,
including through the use of automated collection techniques or other
forms of information technology; and (e) estimates of capital or start-
up costs and costs of operation, maintenance, and purchase of services
to report the information.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
OMB control number.
VII. Executive Order 12866
Executive Orders 12866 and 13563 direct agencies to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility. It
has been determined that the proposed rule is not a ``significant
regulatory action'' for purposes of Executive Order 12866.
List of Subjects in 31 CFR Part 1010
Administrative practice and procedure, banks and banking, brokers,
counter-money laundering, counter-terrorism, foreign banking.
Authority and Issuance
For the reasons set forth in the preamble, part 1010, chapter X of
title 31 of the Code of Federal Regulations, is proposed to be amended
as follows:
1. The authority citation for part 1010 is revised to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314,
5316-5332 Title III, secs. 311, 312, 313, 314, 319, 326, 352, Pub.
L. 107-56, 115 Stat. 307.
0
2. Add Sec. 1010.661 to read as follows:
Sec. 1010.661 Special measures against FBME Bank Ltd.
(a) Definitions. For purposes of this section:
(1) FBME Bank Ltd. means all branches, offices, and subsidiaries of
FBME Bank Ltd. operating in any jurisdiction.
(2) Correspondent account has the same meaning as provided in Sec.
1010.605(c)(1)(ii).
(3) Covered financial institution has the same meaning as provided
in Sec. 1010.605(e)(1).
(4) Subsidiary means a company of which more than 50 percent of the
voting stock or analogous equity interest is owned by another company.
(b) Prohibition on accounts and due diligence requirements for
covered financial institutions--(1) Prohibition on use of correspondent
accounts. A covered financial institution shall terminate any
correspondent account that is established, maintained, administered, or
managed in the United States for, or on behalf of, FBME Bank Ltd.
(2) Special due diligence of correspondent accounts to prohibit
use. (i) A covered financial institution shall apply special due
diligence to its foreign correspondent accounts that is reasonably
designed to guard against their use to process transactions involving
FBME Bank Ltd. At a minimum, that special due diligence must include:
(A) Notifying those foreign correspondent account holders that the
covered financial institution knows or has reason to know provide
services to FBME Bank Ltd. that such correspondents may not provide
FBME Bank Ltd. with access to the correspondent account maintained at
the covered financial institution; and
(B) Taking reasonable steps to identify any use of its foreign
correspondent accounts by FBME Bank Ltd., to the extent that such use
can be determined from transactional records maintained in the covered
financial institution's normal course of business.
(ii) A covered financial institution shall take a risk-based
approach when deciding what, if any, other due diligence measures it
reasonably must adopt to guard against the use of its foreign
correspondent accounts to process transactions involving FBME Bank Ltd.
(iii) A covered financial institution that obtains knowledge that a
foreign correspondent account may be being used to process transactions
involving FBME Bank Ltd. shall take all appropriate steps to further
investigate and prevent such access, including the notification of its
correspondent account holder under paragraph (b)(2)(i)(A) and, where
necessary, termination of the correspondent account.
(3) Recordkeeping and reporting. (i) A covered financial
institution is required to document its compliance with the notice
requirement set forth in paragraph (b)(2)(i)(A) of this section.
(ii) Nothing in this paragraph (b) shall require a covered
financial institution to report any information not otherwise required
to be reported by law or regulation.
Dated: July 15, 2014.
Jennifer Shasky Calvery,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2014-17172 Filed 7-21-14; 8:45 am]
BILLING CODE 4810-02-P