Financial Crimes Enforcement Network; Withdrawal of the Notice of Proposed Rulemaking; Anti-Money Laundering Programs for Investment Advisers, 65568-65569 [E8-26205]
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Federal Register / Vol. 73, No. 214 / Tuesday, November 4, 2008 / Proposed Rules
Commodity trading advisors are
defined as financial institutions under
the BSA.3 In November 2002, FinCEN
temporarily exempted certain financial
institutions, including commodity
trading advisors, from the requirement
to establish and implement an antimoney laundering program.4
II. The 2003 Notice of Proposed
Rulemaking and Subsequent
Developments
A. The 2003 Notice of Proposed
Rulemaking
On May 5, 2003, FinCEN issued a
notice of proposed rulemaking, in
which it proposed requiring commodity
trading advisors to establish and
implement anti-money laundering
programs.5 FinCEN proposed to apply
the rule to commodity trading advisors
that are registered or required to be
registered with the Commodity Futures
Trading Commission and that direct
client commodity futures or options
accounts.
The comment period closed on July 7,
2003. FinCEN received three comment
letters in response to the notice of
proposed rulemaking. One of the
comment letters was submitted by a
registered futures association, another
was submitted by a futures industry
trade association, and the third was
submitted by a commodity trading
advisor. Comments focused on four
matters: (1) Relief from AML obligations
for certain commodity trading advisors;
(2) allocation of certain money
laundering obligations between
commodity trading advisors and futures
commission merchants; (3) liability
issues for commodity trading advisors
when outsourcing the performance of
AML functions; and (4) access by
federal examiners to the BSA records of
a commodity trading advisor.
dwashington3 on PRODPC61 with PROPOSALS
B. Subsequent Developments
In June 2007, FinCEN announced that
it would be taking a fresh look at BSA
regulation to ensure that it is being
applied efficiently and effectively across
the industries that FinCEN regulates and
the industries FinCEN has proposed to
regulate. As part of that initiative,
FinCEN is considering whether and to
what extent it should impose
requirements under the BSA on
commodity trading advisors and similar
entities.
3 31
U.S.C. 5312(c).
CFR 103.170. See also Anti-Money
Laundering Programs for Financial Institutions, 67
FR 67547 (Nov. 6, 2002).
5 Anti-Money Laundering Programs for
Commodity Trading Advisors, 68 FR 23640 (May 5,
2003).
4 31
VerDate Aug<31>2005
14:33 Nov 03, 2008
Jkt 217001
As it considers its approach to
commodity trading advisors, FinCEN
has determined that it will withdraw the
notice of proposed rulemaking that was
published in May 2003. Given the
passage of time, FinCEN has determined
that it will not proceed with an antimoney laundering program requirement
for commodity trading advisors without
publishing a new proposal. This will
give industry and other interested
parties an opportunity to provide
comment on the contents of any such
proposal, as it may be affected by any
developments since 2003 in industry
operations as well as functional and
BSA regulation.
Finally, since the time that the notice
of proposed rulemaking was published,
FinCEN has concluded the major
rulemakings required by the USA
PATRIOT Act for banks, broker-dealers,
and futures commission merchants.
Each of these institutions is subject to a
comprehensive set of requirements
under the BSA including, among other
things, the obligation to establish and
implement an anti-money laundering
program,6 the obligation to establish and
implement a customer identification
program,7 the obligation to establish and
implement a special due diligence
program for foreign correspondent
accounts and foreign private banking
accounts,8 the obligation to detect and
report suspicious activity,9 and the
obligation to file currency transaction
reports.10
Commodity trading advisors must
conduct financial transactions for their
clients through other financial
institutions that are subject to BSA
regulations. A client’s commodity
interests in particular must be carried
with a futures commission merchant.
Thus, as FinCEN continues to consider
the extent to which BSA requirements
should be imposed on commodity
trading advisors, their activity is not
entirely outside the current BSA
regulatory regime.
III. Withdrawal of the Notice of
Proposed Rulemaking
For the foregoing reasons, the notice
of proposed rulemaking, in which
FinCEN proposed requiring certain
commodity trading advisors to establish
and implement anti-money laundering
programs, as published in the Federal
Register on May 5, 2003 (68 FR 23640),
is hereby withdrawn.
6 31
CFR 103.120.
CFR 103.121–103.123.
8 31 CFR 103.176 and 103.178.
9 31 CFR 103.17–103.19.
10 31 CFR 103.22.
7 31
PO 00000
Frm 00002
Fmt 4702
Sfmt 4702
Dated: October 29, 2008.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement
Network.
[FR Doc. E8–26204 Filed 11–3–08; 8:45 am]
BILLING CODE 4810–02–P
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506–AA71
Financial Crimes Enforcement
Network; Withdrawal of the Notice of
Proposed Rulemaking; Anti-Money
Laundering Programs for Investment
Advisers
Financial Crimes Enforcement
Network, Treasury.
ACTION: Withdrawal of notice of
proposed rulemaking.
AGENCY:
SUMMARY: The Financial Crimes
Enforcement Network (‘‘FinCEN’’) is
withdrawing the notice of proposed
rulemaking, dated May 5, 2003, in
which FinCEN proposed imposing on
certain investment advisers a
requirement to establish and implement
an anti-money laundering program.
DATES: The withdrawal is effective
November 4, 2008.
FOR FURTHER INFORMATION CONTACT:
Regulatory Policy and Programs
Division, Financial Crimes Enforcement
Network, (800) 949–2732.
SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President
signed into law the Uniting and
Strengthening America by Providing
Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (the
‘‘USA PATRIOT Act’’), Public Law 107–
56. Title III of the USA PATRIOT Act
amended the anti-money laundering
provisions of the BSA, which is codified
at 12 U.S.C. 1829b, 12 U.S.C. 1951–
1959, and 31 U.S.C. 5311–5314, 5316–
5332. The amendments were designed
to promote the prevention, detection,
and prosecution of international money
laundering and terrorist financing.
Regulations implementing the Bank
Secrecy Act appear at 31 CFR Part 103.
The authority of the Secretary of the
Treasury (‘‘the Secretary’’) to administer
the Bank Secrecy Act and its
implementing regulations has been
delegated to the Director of the
Financial Crimes Enforcement
Network.1
1 Accordingly, references herein to the Secretary’s
authority apply equally to the Director of FinCEN.
E:\FR\FM\04NOP1.SGM
04NOP1
Federal Register / Vol. 73, No. 214 / Tuesday, November 4, 2008 / Proposed Rules
II. The 2003 Notice of Proposed
Rulemaking and Subsequent
Developments
dwashington3 on PRODPC61 with PROPOSALS
A. The 2003 Notice of Proposed
Rulemaking
Section 352 of the USA PATRIOT Act
amended section 5318(h) of the BSA.
Section 352 requires every financial
institution to establish an anti-money
laundering program that includes, at a
minimum, (1) The development of
internal policies, procedures, and
controls; (2) the designation of a
compliance officer; (3) an ongoing
employee training program; and (4) an
independent audit function to test
programs. Section 352 authorizes the
Secretary, after consulting with the
appropriate Federal functional
regulator,2 to prescribe minimum
standards for anti-money laundering
programs, and to exempt from the
application of those standards any
financial institution that is not subject
to rules implementing the BSA.
Although the BSA does not expressly
enumerate investment advisers among
the entities defined as financial
institutions under sections 5312(a)(2)
and (c)(1), section 5312(a)(2)(Y) of the
BSA authorizes the Secretary to include
additional types of entities within the
definition if he determines that they
engage in an activity ‘‘similar to, related
to, or a substitute for’’ an activity of an
enumerated entity. On May 5, 2003,
FinCEN observed that certain
investment advisers may offer services
to investors that are similar to, related
to, or a substitute for those of brokerdealers in securities and other
enumerated entities.3 FinCEN proposed
requiring these investment advisers to
establish and implement anti-money
laundering programs under section
5318(h)(1) of the BSA.4
2 In the case of investment advisers, the
appropriate Federal functional regulator is the
Securities and Exchange Commission (‘‘SEC’’).
3 Anti-Money Laundering Programs for
Investment Advisers, 68 FR 23646, 23647 (May 5,
2003). FinCEN noted that investment advisers that
manage clients’ assets work closely with other
institutions, for example by directing broker-dealers
to purchase or sell client securities or by directing
banks to transfer client funds, and found that
advisers’ services frequently are a substitute for
products offered by investment companies or
insurance companies, such as when advisers
manage client assets in pooled investment vehicles
or in separate accounts. Some investment advisers
offer asset management services that are similar to,
and that may even compete directly with, asset
management services provided by certain banks
through their trust departments. The
interrelationship between investment advisers and
other institutions (such as securities broker-dealers,
mutual funds, commodity trading advisors, and
commodity pool operators) is demonstrated in part
by dual registration.
4 The proposal would have applied generally to
SEC-registered investment advisers with assets
VerDate Aug<31>2005
14:33 Nov 03, 2008
Jkt 217001
The comment period closed on July 7,
2003. FinCEN received 26 comment
letters in response to the notice of
proposed rulemaking. Of the 26
comment letters received, six were
submitted by investment advisers, nine
were submitted by trade groups, five
were submitted by law firms, one was
submitted by a personal investment
entity, one by a depository institution,
and one by a federal agency.
Comments were received on all
aspects of the notice of proposed
rulemaking. Comments focused most
notably on the proposed definition of
‘‘investment adviser,’’ the proposed
requirement to develop and implement
an anti-money laundering program
reasonably designed to prevent the
investment adviser from being used by
its clients for money laundering or
terrorist financing purposes, the ability
of an investment adviser to outsource
BSA compliance to a third party, and
the proposed notice requirement for
unregistered investment advisers.5
B. Subsequent Developments
In June 2007, FinCEN announced that
it would be taking a fresh look at BSA
regulation to ensure that it is being
applied efficiently and effectively across
the industries that FinCEN regulates and
the industries FinCEN has proposed to
regulate. As part of that initiative,
FinCEN is considering whether and to
what extent it should impose
requirements under the BSA on
investment advisers and similar entities.
As it considers its approach to
investment advisers, FinCEN has
determined that it will withdraw the
notice of proposed rulemaking that was
published in May 2003. Given the
passage of time, FinCEN has determined
that it will not proceed with an antimoney laundering program requirement
for investment advisers without
publishing a new proposal. This will
give industry and other interested
parties an opportunity to provide
comment on the contents of any such
proposal, as it may be affected by any
developments since 2003 in industry
operations as well as functional and
BSA regulation.
Finally, in the time since the notice of
proposed rulemaking was published,
FinCEN has concluded major
rulemakings required by the USA
PATRIOT Act for banks, broker-dealers,
under management and to advisers with $30
million or more of assets under management and
that are exempt from registration under section
203(b)(3) of the Investment Advisers Act (15 U.S.C.
80b–3(b)(3)). Id. at 23648.
5 Comments are available at https://
www.fincen.gov/statutes_regs/frn/
reg_proposal_comments.html.
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
65569
and futures commission merchants.
Each of these institutions is subject to a
comprehensive set of requirements
under the BSA including, among other
things, the obligation to establish and
implement an anti-money laundering
program,6 the obligation to establish and
implement a customer identification
program,7 the obligation to establish and
implement a special due diligence
program for foreign correspondent
accounts and foreign private banking
accounts,8 the obligation to detect and
report suspicious activity,9 and the
obligation to file currency transaction
reports.10
Investment advisers must conduct
financial transactions for their clients
through other financial institutions that
are subject to BSA requirements, and
their clients’ assets must be carried at
these other financial institutions. Thus,
as FinCEN continues to consider the
extent to which BSA requirements
should be imposed on investment
advisors, their activity is not entirely
outside the current BSA regulatory
regime.
III. Withdrawal of the Notice of
Proposed Rulemaking
For the foregoing reasons, the notice
of proposed rulemaking, in which
FinCEN proposed requiring certain
investment advisers to establish and
implement anti-money laundering
programs, as published in the Federal
Register on May 5, 2003 (68 FR 23646),
is hereby withdrawn.
Dated: October 29, 2008.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement
Network.
[FR Doc. E8–26205 Filed 11–3–08; 8:45 am]
BILLING CODE 4810–02–P
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506–AA77
Financial Crimes Enforcement
Network; Withdrawal of the Notice of
Proposed Rulemaking; Anti-Money
Laundering Programs for Unregistered
Investment Companies
Financial Crimes Enforcement
Network, Treasury.
ACTION: Withdrawal of notice of
proposed rulemaking.
AGENCY:
6 31
CFR 103.120.
CFR 103.121–103.123.
8 31 CFR 103.176 and 103.178.
9 31 CFR 103.17–103.19.
10 31 CFR 103.22.
7 31
E:\FR\FM\04NOP1.SGM
04NOP1
]]>Agencies
[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Proposed Rules]
[Pages 65568-65569]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26205]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA71
Financial Crimes Enforcement Network; Withdrawal of the Notice of
Proposed Rulemaking; Anti-Money Laundering Programs for Investment
Advisers
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Withdrawal of notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
withdrawing the notice of proposed rulemaking, dated May 5, 2003, in
which FinCEN proposed imposing on certain investment advisers a
requirement to establish and implement an anti-money laundering
program.
DATES: The withdrawal is effective November 4, 2008.
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division, Financial Crimes Enforcement Network, (800) 949-2732.
SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''),
Public Law 107-56. Title III of the USA PATRIOT Act amended the anti-
money laundering provisions of the BSA, which is codified at 12 U.S.C.
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-5332. The
amendments were designed to promote the prevention, detection, and
prosecution of international money laundering and terrorist financing.
Regulations implementing the Bank Secrecy Act appear at 31 CFR Part
103. The authority of the Secretary of the Treasury (``the Secretary'')
to administer the Bank Secrecy Act and its implementing regulations has
been delegated to the Director of the Financial Crimes Enforcement
Network.\1\
---------------------------------------------------------------------------
\1\ Accordingly, references herein to the Secretary's authority
apply equally to the Director of FinCEN.
---------------------------------------------------------------------------
[[Page 65569]]
II. The 2003 Notice of Proposed Rulemaking and Subsequent Developments
A. The 2003 Notice of Proposed Rulemaking
Section 352 of the USA PATRIOT Act amended section 5318(h) of the
BSA. Section 352 requires every financial institution to establish an
anti-money laundering program that includes, at a minimum, (1) The
development of internal policies, procedures, and controls; (2) the
designation of a compliance officer; (3) an ongoing employee training
program; and (4) an independent audit function to test programs.
Section 352 authorizes the Secretary, after consulting with the
appropriate Federal functional regulator,\2\ to prescribe minimum
standards for anti-money laundering programs, and to exempt from the
application of those standards any financial institution that is not
subject to rules implementing the BSA.
---------------------------------------------------------------------------
\2\ In the case of investment advisers, the appropriate Federal
functional regulator is the Securities and Exchange Commission
(``SEC'').
---------------------------------------------------------------------------
Although the BSA does not expressly enumerate investment advisers
among the entities defined as financial institutions under sections
5312(a)(2) and (c)(1), section 5312(a)(2)(Y) of the BSA authorizes the
Secretary to include additional types of entities within the definition
if he determines that they engage in an activity ``similar to, related
to, or a substitute for'' an activity of an enumerated entity. On May
5, 2003, FinCEN observed that certain investment advisers may offer
services to investors that are similar to, related to, or a substitute
for those of broker-dealers in securities and other enumerated
entities.\3\ FinCEN proposed requiring these investment advisers to
establish and implement anti-money laundering programs under section
5318(h)(1) of the BSA.\4\
---------------------------------------------------------------------------
\3\ Anti-Money Laundering Programs for Investment Advisers, 68
FR 23646, 23647 (May 5, 2003). FinCEN noted that investment advisers
that manage clients' assets work closely with other institutions,
for example by directing broker-dealers to purchase or sell client
securities or by directing banks to transfer client funds, and found
that advisers' services frequently are a substitute for products
offered by investment companies or insurance companies, such as when
advisers manage client assets in pooled investment vehicles or in
separate accounts. Some investment advisers offer asset management
services that are similar to, and that may even compete directly
with, asset management services provided by certain banks through
their trust departments. The interrelationship between investment
advisers and other institutions (such as securities broker-dealers,
mutual funds, commodity trading advisors, and commodity pool
operators) is demonstrated in part by dual registration.
\4\ The proposal would have applied generally to SEC-registered
investment advisers with assets under management and to advisers
with $30 million or more of assets under management and that are
exempt from registration under section 203(b)(3) of the Investment
Advisers Act (15 U.S.C. 80b-3(b)(3)). Id. at 23648.
---------------------------------------------------------------------------
The comment period closed on July 7, 2003. FinCEN received 26
comment letters in response to the notice of proposed rulemaking. Of
the 26 comment letters received, six were submitted by investment
advisers, nine were submitted by trade groups, five were submitted by
law firms, one was submitted by a personal investment entity, one by a
depository institution, and one by a federal agency.
Comments were received on all aspects of the notice of proposed
rulemaking. Comments focused most notably on the proposed definition of
``investment adviser,'' the proposed requirement to develop and
implement an anti-money laundering program reasonably designed to
prevent the investment adviser from being used by its clients for money
laundering or terrorist financing purposes, the ability of an
investment adviser to outsource BSA compliance to a third party, and
the proposed notice requirement for unregistered investment
advisers.\5\
---------------------------------------------------------------------------
\5\ Comments are available at https://www.fincen.gov/statutes_
regs/frn/reg_proposal_comments.html.
---------------------------------------------------------------------------
B. Subsequent Developments
In June 2007, FinCEN announced that it would be taking a fresh look
at BSA regulation to ensure that it is being applied efficiently and
effectively across the industries that FinCEN regulates and the
industries FinCEN has proposed to regulate. As part of that initiative,
FinCEN is considering whether and to what extent it should impose
requirements under the BSA on investment advisers and similar entities.
As it considers its approach to investment advisers, FinCEN has
determined that it will withdraw the notice of proposed rulemaking that
was published in May 2003. Given the passage of time, FinCEN has
determined that it will not proceed with an anti-money laundering
program requirement for investment advisers without publishing a new
proposal. This will give industry and other interested parties an
opportunity to provide comment on the contents of any such proposal, as
it may be affected by any developments since 2003 in industry
operations as well as functional and BSA regulation.
Finally, in the time since the notice of proposed rulemaking was
published, FinCEN has concluded major rulemakings required by the USA
PATRIOT Act for banks, broker-dealers, and futures commission
merchants. Each of these institutions is subject to a comprehensive set
of requirements under the BSA including, among other things, the
obligation to establish and implement an anti-money laundering
program,\6\ the obligation to establish and implement a customer
identification program,\7\ the obligation to establish and implement a
special due diligence program for foreign correspondent accounts and
foreign private banking accounts,\8\ the obligation to detect and
report suspicious activity,\9\ and the obligation to file currency
transaction reports.\10\
---------------------------------------------------------------------------
\6\ 31 CFR 103.120.
\7\ 31 CFR 103.121-103.123.
\8\ 31 CFR 103.176 and 103.178.
\9\ 31 CFR 103.17-103.19.
\10\ 31 CFR 103.22.
---------------------------------------------------------------------------
Investment advisers must conduct financial transactions for their
clients through other financial institutions that are subject to BSA
requirements, and their clients' assets must be carried at these other
financial institutions. Thus, as FinCEN continues to consider the
extent to which BSA requirements should be imposed on investment
advisors, their activity is not entirely outside the current BSA
regulatory regime.
III. Withdrawal of the Notice of Proposed Rulemaking
For the foregoing reasons, the notice of proposed rulemaking, in
which FinCEN proposed requiring certain investment advisers to
establish and implement anti-money laundering programs, as published in
the Federal Register on May 5, 2003 (68 FR 23646), is hereby withdrawn.
Dated: October 29, 2008.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. E8-26205 Filed 11-3-08; 8:45 am]
BILLING CODE 4810-02-P
