Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Housing Government Sponsored Enterprises, 69204-69214 [2011-28820]

Download as PDF mstockstill on DSK4VPTVN1PROD with PROPOSALS 69204 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules (9) Proceed southwesterly on State Route 729 for approximately 2.8 miles to the State Route 729 bridge at North Fork Creek; then (10) Proceed southeasterly (downstream) along the meandering North Fork Creek for approximately 4 miles to the confluence of North Fork Creek with Goose Creek; then (11) Proceed southwesterly (upstream) along the meandering Goose Creek for approximately 5.6 miles to State Route 734 at Carters Bridge; then (12) Proceed southeasterly on State Route 734 for approximately 2.4 miles, crossing onto the Middleburg map, to State Route 629; then (13) Proceed southerly on State Route 629 for approximately 1 mile to the road’s intersection with U.S. Route 50 at BM 341 at Dover, then continue in a straight line due south for approximately 150 feet to the Little River; then (14) Proceed southwesterly (upstream) along the meandering Little River for approximately 8 miles to the State Route 626 bridge at Halfway; then (15) Proceed northwesterly on State Route 626 for approximately 0.3 mile to State Route 706, and then continue northwesterly on State Route 706 for approximately 1.6 miles, crossing onto the Rectortown map, to Burnt Mill Run; then (16) Proceed west-southwesterly (upstream) along Burnt Mill Run for approximately 0.4 mile to State Route 705; then (17) Proceed south-southwesterly on State Route 705 for approximately 0.5 mile to State Route 715; then (18) Proceed west-northwesterly on State Route 715 for approximately 0.4 mile to State Route 709 at Zulla; then (19) Proceed south-southwesterly on State Route 709 for approximately 4.6 miles, crossing onto the Marshall map, to Interstate Highway 66 (0.6 mile south of Brookes Corner); then (20) Proceed west-northwesterly on Interstate Highway 66 for approximately 4.0 miles, crossing onto the Orlean map, to State Route 732 (locally known as Ramey Road); then (21) Proceed westerly on State Route 732 approximately 2 miles to State Route 731 (locally known as Ashville Road) near Ashville; then (22) From the intersection of State Routes 732 and 731, proceed northwesterly in a straight line, crossing onto the Upperville map, to the marked 1,304-foot peak on Little Cobbler Mountain, then northerly in a straight line to the marked 1,117-foot peak on Little Cobbler Mountain, and then continue northerly in a straight line to the marked 771-foot peak near the VerDate Mar<15>2010 16:54 Nov 07, 2011 Jkt 226001 northern end of Little Cobbler Mountain; then (23) Proceed west in a straight line for approximately 2.7 miles to the 595-foot elevation point on State Route 724, southeast of Markham, and continue west in a straight line for approximately 3.1 miles, crossing onto the Linden map, to the point where the line meets the intersection of State Route 726 and an unnamed side road (near a cemetery), approximately 0.7 mile southwest of the intersection of State Route 726 and State Route 55 (near Belle Meade); then (24) Proceed northeasterly along State Route 726 for approximately 0.7 mile to State Route 55; then (25) Proceed east-northeast in a straight line for approximately 1.7 miles to the point where the line meets State Route 688 at BM 629 in Wildcat Hollow; then (26) Proceed northerly and then northeasterly on State Route 688 for approximately 5.5 miles, crossing over and back between the Linden and Upperville maps and then continuing on the Upperville map, to the road’s intersection with U.S. Route 17; then (27) Proceed northerly on U.S. Route 17 for approximately 2.0 miles, crossing onto the Ashby Gap map, to U.S. Route 50 (just east of Paris); then (28) Proceed east-northeasterly in a straight line for approximately 1.5 miles to the marked 797-foot elevation point located along State Route 618 at a fork in the road approximately 0.65 miles north of U.S. Route 50; then (29) Proceed southeasterly in a straight line for approximately 0.9 mile to U.S. Route 50 at BM 625, which is located at a bridge over an unnamed branch of Panther Skin Creek; then (30) Proceed south-southeasterly in a straight line for approximately 2.9 miles, crossing onto the Upperville map, to the intersection of State Routes 712 and 710 at Kerfoot; then (31) Proceed southeasterly on State Route 710 for approximately 2.5 miles, crossing onto the Rectortown map, to the State Route 710 bridge over Goose Creek; then (32) Proceed northeasterly (downstream) along the meandering Goose Creek for approximately 10.9 miles to State Route 626 at Bentons Bridge; then (33) Proceed northwesterly on State Route 626 for approximately 4.0 miles, crossing onto the Bluemont map, to State Route 630 at Unison; then (34) Proceed northeasterly on State Route 630 for approximately 0.75 mile to Dog Branch; then (35) Proceed northwesterly along Dog Branch for approximately 1.75 miles to State Route 719; then PO 00000 Frm 00064 Fmt 4702 Sfmt 4702 (36) Proceed north-northeasterly on State Route 719 for approximately 2 miles to State Route 734 at Airmont; then (37) Proceed east-southeasterly on State Route 734 for approximately 0.7 mile to State Route 735; then (38) Proceed northeasterly on State Route 735 for approximately 2 miles to State Route 725; then (39) Proceed north-northeasterly in a straight line for approximately 4.4 miles, crossing over the northwest corner of the Lincoln map and then onto the Purcellville map, to the intersection of State Routes 711 and 690, (northwest of Purcellville); then (40) Proceed north-northeasterly on State Route 690 for approximately 3.1 miles to State Route 9, then proceed east on State Route 9 for approximately 0.2 mile to the continuation of State Route 690, then proceed northerly on State Route 690 for approximately 5.3 miles, crossing onto the Harpers Ferry map, to the road’s intersection with the 600-foot elevation line immediately south of the road’s marked 592-foot elevation point (located 0.75 mile east-northeast of the radio facilities at the 1,424-foot peak of Short Hill Mountain); then (41) Proceed northerly along the 600foot elevation line for approximately 4 miles to the intersection of the 600-foot elevation line with the Harpers Ferry National Historical Park south boundary, approximately 0.2 mile south of the point where the Washington and Frederick Counties, Maryland, boundary line intersects with the south bank of the Potomac River; then (42) Proceed east and north approximately 0.75 mile along the Harpers Ferry National Historical Park boundary line, returning to the south bank of the Potomac River and the beginning point. Dated: November 3, 2011. John J. Manfreda, Administrator. [FR Doc. 2011–28930 Filed 11–7–11; 8:45 am] BILLING CODE 4810–31–P DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network 31 CFR Parts 1010 and 1030 RIN 1506–AB14 Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Housing Government Sponsored Enterprises Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. AGENCY: E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules ACTION: Notice of proposed rulemaking. FinCEN, a bureau of the Department of the Treasury (‘‘Treasury’’), is issuing proposed rules defining certain housing government sponsored enterprises as financial institutions for the purpose of requiring them to establish anti-money laundering programs and report suspicious activities pursuant to the Bank Secrecy Act. The proposal to require these organizations to establish anti-money laundering programs and report suspicious activities is intended to help prevent fraud and other financial crimes. DATES: Written comments on this notice of proposed rulemaking (‘‘NPRM’’) must be submitted on or before January 9, 2012. ADDRESSES: You may submit comments, identified by Regulatory Identification Number (RIN) 1506–AB14, by any of the following methods: • Federal E-rulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. Include 1506–AB14 in the submission. Refer to Docket Number FINCEN–2011– 0004. • Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include 1506–AB14 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 as soon as possible on https://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 regulatory helpline at (800) 949–2732 and select Option 6. SUPPLEMENTARY INFORMATION: mstockstill on DSK4VPTVN1PROD with PROPOSALS SUMMARY: I. Background A. Statutory and Regulatory Provisions The Bank Secrecy Act (‘‘BSA’’) 1 authorizes the Secretary of the Treasury 1 ‘‘Bank Secrecy Act’’ is the name that has come to be applied to the Currency and Foreign Transactions Reporting Act (Titles I and II of Pub. VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 (the ‘‘Secretary’’) to issue regulations requiring financial institutions to keep records and file reports that the Secretary determines ‘‘have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism.’’ 2 In addition, the Secretary is authorized to impose anti-money laundering (‘‘AML’’) program requirements on financial institutions.3 The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN.4 The BSA defines the term ‘‘financial institution.’’ 5 The term includes, in part, ‘‘any business or agency which engages in any activity which the Secretary of the Treasury determines, by regulation, to be an activity which is similar to, related to, or a substitute for any activity in which any business described in [31 U.S.C. 5312(a)(2)(A)– (X)] is authorized to engage.’’ 6 With the enactment of 31 U.S.C. 5318(g) in 1992,7 Congress authorized the Secretary to require financial institutions to report suspicious transactions. As amended by the USA PATRIOT Act,8 subsection (g)(1) states: The Secretary may require any financial institution, and any director, officer, employee, or agent of any financial institution, to report any suspicious transaction relevant to a possible violation of law or regulation.9 As amended by the USA PATRIOT Act, the BSA requires financial institutions to establish AML programs that include, at a minimum: (1) The development of internal policies, procedures, and controls; (2) the L. 91–508), its amendments, and the other statutes referring to the subject matter of that Act. These statutes are codified at 12 U.S.C. 1829b, 12 U.S.C. 1951–1959, and 31 U.S.C. 5311–5314 and 5316– 5332, and notes thereto. 2 31 U.S.C. 5311. 3 31 U.S.C. 5318(h). 4 See Treasury Order 180–01 (Sept. 26, 2002). 5 31 U.S.C. 5312(a)(2). 6 31 U.S.C. 5312(a)(2)(Y). 7 31 U.S.C. 5318(g) was added to the BSA by section 1517 of the Annunzio-Wylie Anti-Money Laundering Act, Title XV of the Housing and Community Development Act of 1992, Public Law 102–550; it was expanded by section 403 of the Money Laundering Suppression Act of 1994 (the Money Laundering Suppression Act), Title IV of the Riegle Community Development and Regulatory Improvement Act of 1994, Public Law 103–325, to require designation of a single government recipient for reports of suspicious transactions. 8 Public Law 107–56 sec. 352(c), 115 Stat. 322, codified at 31 U.S.C. 5318 note. Public Law 107– 56 is the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (‘‘USA PATRIOT Act’’). 9 31 U.S.C. 5318(g)(1). PO 00000 Frm 00065 Fmt 4702 Sfmt 4702 69205 designation of a compliance officer; (3) an ongoing employee training program; and (4) an independent audit function to test programs.10 When prescribing minimum standards for AML programs, FinCEN must ‘‘consider the extent to which the requirements imposed under [the AML program requirement] are commensurate with the size, location, and activities of the financial institutions to which such regulations apply.’’ 11 FinCEN has promulgated AML program and Suspicious Activity Report (‘‘SAR’’) regulations for a number of financial institutions. These financial institutions include banks, brokers or dealers in securities, mutual funds, insurance companies, futures commission merchants and introducing brokers in commodities, money services businesses, and casinos.12 B. FinCEN’s Anti-Mortgage Fraud Initiatives FinCEN has placed efforts to combat mortgage fraud and related criminal activity as one of its highest priorities in recent years. FinCEN’s efforts have included the analysis of SARs and other data reported to FinCEN, often together with other data sets and information available to the Government, to support and inform regulatory and law enforcement investigations, proceedings and prosecutions at the Federal, State and local levels. Since 2006, FinCEN has published a broad range of information focused on mortgage fraud in order to advise on trends and patterns, and to provide indicators to help the financial industry protect itself against fraud and other financial crime.13 Criminal activity can arise at 10 31 U.S.C. 5318(h). PATRIOT Act, Public Law 107–56 sec. 352(c), 115 Stat. 322, codified at 31 U.S.C. 5318 note. 12 See 31 CFR 1020.210, 1020.320, 1021.210, 1021.320, 1022.210, 1022.320, 1023.210, 1023.320, 1024.210, 1024.320, 1025.210, 1025.320, 1026.210, and 1026.320. 13 See Mortgage Loan Fraud Update (SARs Jan. 1– Mar. 31, 2011), June 2011, https://www.fincen.gov/ news_room/rp/files/ MLF_Update_1st_Qtly_11_FINAL_508.pdf; Mortgage Loan Fraud Update (SARs Jan. 1–Dec. 31, 2010), Mar. 2011, https://www.fincen.gov/ news_room/rp/files/ MLF_Update_4th_Qtly_10_FINAL_508.pdf; Mortgage Loan Fraud Update (SARs July 1–Sept. 30, 2010), Jan. 2011, https://www.fincen.gov/ news_room/rp/files/ MLF_Update_3rd_Qtly_10_FINAL.pdf; Mortgage Loan Fraud Update (SARs Apr. 1–June 30, 2010), Dec. 2010, https://www.fincen.gov/news_room/rp/ files/MLF_Update_2nd_Qtly_10_FINAL.pdf; Mortgage Loan Fraud Update: SAR Filings Jan. 1– Mar. 31, 2010, https://www.fincen.gov/news_room/ rp/files/MLF_Update_1st_Qtly_10_FINAL.pdf; Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Home Equity 11 USA E:\FR\FM\08NOP1.SGM Continued 08NOP1 69206 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS different times in the product cycle of residential mortgage related transactions, affecting a range of persons in the primary and secondary markets. In the traditional money laundering sense, criminals may attempt to invest the proceeds of illegal activity in a range of assets, including real estate, such as through direct purchase or in paying down loans.14 The purpose of fraud, regardless of whether in conjunction with a mortgage or other real estate related transaction, is overwhelmingly for criminal profit, and the proceeds of such fraud often are laundered through one or more transactions involving financial intermediaries. The victim of mortgage fraud might be an individual losing equity in a home, or a defrauded lender or investor. Fraud may have an impact on the securitization of mortgages, potentially affecting the availability of mortgages and the cost to borrowers. Fraud in the residential mortgage markets may occur in a variety of situations, affecting a variety of actors. Fraud may occur at the loan origination stage, involving material misrepresentations or omissions, false statements, straw buyers, false appraisals, identity theft, etc.15 Fraud may occur in the context of loan modifications, including when unscrupulous actors seek to take advantage of homeowners struggling to meet their mortgage payments.16 Fraud may occur in home equity conversion Conversion Mortgage Fraud Schemes, Apr. 2010, https://www.fincen.gov/statutes_regs/guidance/pdf/ fin-2010-a006.pdf; Filing Trends in Mortgage Loan Fraud, Feb. 2009, https://www.fincen.gov/ news_room/nr/pdf/20090225a.pdf; Mortgage Loan Fraud: an Update of Trends Based upon Analysis of Suspicious Activity Reports, Apr. 2008, https:// www.fincen.gov/news_room/rp/files/ MortgageLoanFraudSARAssessment.pdf; Suspected Money Laundering in the Residential Real Estate Industry, Apr. 2008, https://www.fincen.gov/ news_room/rp/files/ MLR_Real_Estate_Industry_SAR_web.pdf; Money Laundering in the Commercial Real Estate Industry, Dec. 2006, https://www.fincen.gov/news_room/rp/ reports/pdf/CREassessment.pdf; Mortgage Loan Fraud: An Industry Assessment Based Upon Suspicious Activity Report Analysis, Nov. 2006, https://www.fincen.gov/news_room/rp/reports/pdf/ mortgage_fraud112006.pdf. 14 See Suspected Money Laundering in the Residential Real Estate Industry, Apr. 2008, https://www.fincen.gov/news_room/rp/files/ MLR_Real_Estate_Industry_SAR_web.pdf; Money Laundering in the Commercial Real Estate Industry, Dec. 2006, https://www.fincen.gov/news_room/rp/ reports/pdf/CREassessment.pdf. 15 For a description of commonly reported fraud related to loan origination, see, e.g., Mortgage Loan Fraud: An Industry Assessment Based Upon Suspicious Activity Report Analysis, Nov. 2006, https://www.fincen.gov/news_room/rp/reports/pdf/ MortgageLoanFraud.pdf. 16 See Mortgage Loan Fraud: Loan Modification and Foreclosure Rescue Scams, May 2010, https:// www.fincen.gov/news_room/rp/files/ MLFLoanMODForeclosure.pdf. VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 loans (‘‘HECMs’’), commonly known as reverse mortgages.17 FinCEN analysis and many law enforcement investigations have revealed mortgage related fraud to be part of organized criminal activity involving multiple properties and various types of criminal activity including the foregoing.18 Often, mortgage fraud may only be discovered after default or in the context of foreclosure proceedings, repurchase demands, collateral reviews, audits, examinations or insurance investigations.19 FinCEN has determined, as a result of individual investigations and through its broader analyses, that criminal activity and actors in the residential mortgage market may be connected with a range of other organized criminal activity affecting a range of financial institutions.20 FinCEN continues to support broader Administration efforts to combat mortgage fraud and mitigate vulnerabilities to abuse. On April 6, 2009, Treasury Secretary Geithner, together with the Attorney General, Housing and Urban Development Secretary and others, announced a multi-agency crackdown targeting loan modification fraud and foreclosure rescue scams; this included a new FinCEN-led effort to ‘‘marshal information about possible fraudulent actors, drawing upon a variety of data available to law enforcement, regulatory agencies, and the consumer protection community, for the purpose of identifying and proactively referring potential criminal targets to participating law enforcement authorities.’’ 21 17 See FinCEN Advisory FIN–2010–005, Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Home Equity Conversion Mortgage Fraud Schemes, April 27, 2010, https://www.fincen.gov/statutes_regs/ guidance/pdf/fin-2010-a005.pdf. 18 See, e.g., Department of Justice, Press Release, Financial Fraud Enforcement Task Force Announces Results of Broadest Mortgage Fraud Sweep in History (June 17, 2010), https:// www.justice.gov/opa/pr/2010/June/10-opa708.html; and speech of Attorney General Eric Holder at the Operation Stolen Dreams Press Conference (June 17, 2010) (noting participation of FinCEN), https://www.justice.gov/ag/speeches/2010/ ag-speech-100617.html. 19 See, e.g., Mortgage Loan Fraud Update: Suspicious Activity Report Filings from July 1– September 30, 2009 (February 2010), https:// www.fincen.gov/news_room/rp/files/ MLF_Update.pdf. 20 See Mortgage Loan Fraud Connections with Other Financial Crime: An Evaluation of Suspicious Activity Reports Filed by Money Services Businesses, Securities and Futures Firms, Insurance Companies and Casinos, Mar. 2009, https:// www.fincen.gov/news_room/nr/pdf/20090316.pdf. 21 See https://www.treasury.gov/press-center/ press-releases/Pages/tg83.aspx; see also Treasury Department Press Release, Federal, State Partners PO 00000 Frm 00066 Fmt 4702 Sfmt 4702 In November 2009, President Obama established the Financial Fraud Enforcement Task Force (‘‘FFETF’’) to hold accountable those who helped bring about the last financial crisis, and to prevent another crisis from happening.22 The Treasury Department and FinCEN are among the members of the Task Force.23 FinCEN has actively participated in the FFETF’s Mortgage Fraud Working Group (‘‘MFWG’’), including in the MFWG’s Mortgage Fraud Summits around the country.24 The foregoing experiences have affirmed the importance of SARs filed by depository institutions in efforts to combat mortgage fraud. By this NPRM, FinCEN proposes AML program and SAR requirements for the Federal National Mortgage Association (‘‘Fannie Mae’’), the Federal Home Loan Mortgage Corporation (‘‘Freddie Mac’’), and the Federal Home Loan Banks (‘‘Banks’’) (collectively, the ‘‘Housing Government Sponsored Enterprises’’ or ‘‘Housing GSEs’’). FinCEN believes that the proposed regulations would augment FinCEN’s initiatives in this area.25 The Housing GSEs are involved in providing financing to the residential mortgage market and thus may be exposed to the risk of fraud, particularly when investing in whole mortgage loans. Although the respective elements of the businesses of the Banks and Fannie Mae and Freddie Mac may differ, all of them are involved in providing financing to the residential mortgage market and thus may be exposed to fraud risks. While purchasing mortgage loans, extending loans secured by mortgages and other real estate related collateral, and engaging in a variety of related financial Convene to Discuss Ongoing Anti-Fraud Efforts in Housing Markets (September 17, 2009), https:// www.treasury.gov/press-center/press-releases/ Pages/tg291.aspx. 22 See Executive Order 13519 (November 17, 2009). 23 See remarks of Timothy Geithner, Secretary, U.S. Department of the Treasury, on ‘‘The Financial Fraud Enforcement Task Force’’, Nov. 17, 2009, https://www.treasury.gov/press-center/pressreleases/Pages/tg408.aspx. 24 See https://www.fincen.gov/ fraudenftaskforce.html; https://www.justice.gov/opa/ pr/2010/February/10-opa-192.html; https:// www.justice.gov/opa/pr/2010/March/10-opa316.html; and https://www.stopfraud.gov/news/ news-04232010.html. 25 FinCEN recently proposed regulations that would require non-bank residential mortgage lenders and originators to establish AML programs and file SARs. If adopted, that rule would apply regulatory requirements to mortgage companies and brokers analogous to those currently applicable to banks and other financial institutions. See AntiMoney Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators, Notice of Proposed Rulemaking, 75 FR 76677 (December 9, 2010). E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules activities, the Housing GSEs have access to information on suspected mortgage fraud and money laundering that has proven valuable to law enforcement and regulators in the investigation and prosecution of mortgage fraud and other financial crimes.26 While current fraud reporting obligations on the Housing GSEs, discussed below, have value in combating fraud, the usefulness could be increased by including the Housing GSEs within FinCEN’s framework to support broader regulatory and law enforcement efforts to combat mortgage fraud and related financial crimes, consistent with the purposes of the BSA. mstockstill on DSK4VPTVN1PROD with PROPOSALS C. Establishment and Authority of the Federal Housing Finance Agency and the Housing GSEs The Federal Housing Finance Regulatory Reform Act of 2008 (the ‘‘Reform Act’’) 27 created the Federal Housing Finance Agency (‘‘FHFA’’) as an independent agency of the Federal Government. FHFA was established on the date of enactment of the Reform Act —July 30, 2008. The Reform Act provided for the abolishment of the Office of Federal Housing Enterprise Oversight (‘‘OFHEO’’) and the Federal Housing Finance Board (‘‘FHFB’’) one year after the date of enactment. These agencies, together with the Housing and Urban Development Government Sponsored Enterprise Mission Teams, were combined to establish FHFA.28 FHFA has regulatory authority over Fannie Mae, Freddie Mac and the Banks (collectively referred to in FHFA regulations as the ‘‘regulated entities’’), and over the Office of Finance of the Federal Home Loan Bank System.29 FHFA is responsible for ensuring that the Housing GSEs operate in a safe and sound manner, including being 26 See Section II.B., infra, for a review of current fraud detection and reporting by the Housing GSEs. 27 Division A of the Housing and Economic Recovery Act of 2008 (‘‘HERA’’), Public Law 110– 289, 122 Stat. 2654 (2008). 28 The authorities, powers and responsibilities of FHFA are contained in the Federal Home Loan Bank Act, 12 U.S.C. 1421 et seq., as amended by Division A of HERA. and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), 12 U.S.C. 4501 et seq., as amended by Division A of HERA. See Notice of Establishment, 73 FR 52356 (Sept. 9, 2008). https://www.fhfa.gov/webfiles/160/ FHFA_%20Notice_of_Establishment__73_FR_52356_(Sept_9%2c_2008).pdf. 29 The Housing GSEs are defined as FHFA regulated entities in Safety and Soundness Act, as amended, 12 U.S.C. 4501 et seq. The definition of ‘‘regulated entity’’ provides ‘‘[t]he term ‘regulated entity’ means—(A) the Federal National Mortgage Association and any affiliate thereof; (B) the Federal Home Loan Mortgage Corporation and any affiliate thereof; and (C) any Federal Home Loan Bank.’’ (12 U.S.C. 4502(20)). VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 capitalized adequately and maintaining internal controls, that they carry out their public policy missions, and that their activities foster liquid, efficient, competitive, and resilient national housing finance markets. Where FHFA has not acted with superseding regulations, the Housing GSEs continue to operate under regulations promulgated by OFHEO and FHFB.30 Fannie Mae and Freddie Mac were chartered by Congress primarily to establish secondary market facilities for residential mortgages.31 Specifically, Congress established Fannie Mae and Freddie Mac to provide stability in the secondary market for residential mortgages, respond appropriately to the private capital market, provide ongoing assistance to the secondary market for residential mortgages (including activities relating to mortgages on housing for low- and moderate-income families involving a reasonable economic return that may provide less of a return than Fannie Mae’s and Freddie Mac’s other activities), and promote access to mortgage credit throughout the nation. The Federal Home Loan Banks were organized under the Federal Home Loan Bank Act (‘‘Bank Act’’).32 The Banks are financial cooperatives; only members of a Bank may purchase the capital stock of a Bank, and only members or certain eligible housing associates (such as State housing finance agencies) may obtain access to secured loans, known as advances, or other products provided by a Bank.33 Each Bank is managed by its own board of directors and serves the public interest by enhancing the availability of residential mortgage and community lending credit through its member institutions.34 Any eligible institution (generally a federally-insured depository institution or State-regulated insurance company) may become a member of a Bank if it satisfies certain criteria and purchases a specified amount of the Bank’s capital stock.35 The Bank Act also requires each Bank to establish an affordable housing program (known as ‘‘AHP’’) and contribute a specified portion of its previous year’s net income to support that program.36 30 On September 6, 2008, FHFA appointed itself conservator of Fannie Mae and Freddie Mac, pursuant to 12 U.S.C. 4617. https://www.fhfa.gov/ webfiles/1858/ NoticeregardingconservatorFNMA.pdf; https:// www.fhfa.gov/webfiles/1857/ NoticeregardingconservatorFHLMC.pdf. 31 See 12 U.S.C. 1451, 1716. 32 12 U.S.C. 1423, 1432(a). 33 12 U.S.C. 1426(a)(4), 1430(a), 1430b. 34 12 U.S.C. 1427. 35 12 U.S.C. 1424; 12 CFR part 1263. 36 12 U.S.C. 1430(j). PO 00000 Frm 00067 Fmt 4702 Sfmt 4702 69207 II. Notice of Proposed Rulemaking—In General This NPRM would define financial institution for certain purposes of the BSA to include the Housing GSEs. Specifically, this NPRM proposes SAR requirements and AML program requirements. A. Housing GSEs Proposed To Be Defined as Financial Institutions The BSA does not expressly enumerate any of the Housing GSEs among the entities defined as ‘‘financial institutions’’ under the BSA.37 Nevertheless, the BSA definition of financial institution is broad, listing numerous types of businesses, including commercial banks and other depository institutions. The BSA also authorizes the Secretary to include additional types of businesses within the BSA definition if the Secretary determines that they engage in any activity ‘‘similar to, related to, or a substitute for’’ any activity of any of the listed businesses.38 The Housing GSEs work closely with other BSA-defined financial institutions—in fact the majority of their members or servicers are commercial banks, thrifts, credit unions and insurance companies. Many of the products and services offered by the Housing GSEs can be viewed as substitutes for or related to products and services offered by commercial banks and nonbank financial institutions included in the statutory definition under 31 U.S.C. 5312(a)(2). The main role of the Housing GSEs is to support the primary mortgage market and affordable housing programs through the purchase, guarantee and securitization of mortgage loans, and the extension of loans (known as ‘‘advances’’ in the Federal Home Loan Bank System) secured primarily by mortgage loans and real estate related assets. Typically, a significant portion of these mortgage loans are made by 37 31 U.S.C. 5312(a)(2) and (c)(1). The BSA definition includes institutions that are already subject to federal regulation such as banks, savings associations, credit unions, securities brokerdealers, and futures commission merchants. Money services businesses (such as money transmitters and currency exchanges) are also defined as financial institutions under the BSA, and, like the former categories, under FinCEN’s implementing regulations. The BSA definition also includes dealers in precious metals, stones, or jewels; pawnbrokers; loan or finance companies; private bankers; insurance companies; travel agencies; telegraph companies; sellers of vehicles, including automobiles, airplanes, and boats; persons engaged in real estate closings and settlements; investment bankers; investment companies; and commodity pool operators and commodity trading advisors that are registered or required to register under the Commodity Exchange Act (7 U.S.C. 1 et seq.). 38 31 U.S.C. 5312(a)(2)(Y). E:\FR\FM\08NOP1.SGM 08NOP1 mstockstill on DSK4VPTVN1PROD with PROPOSALS 69208 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules commercial banks, credit unions and thrifts, which are already financial institutions under the BSA and subject to FinCEN’s regulations.39 The Housing GSEs also establish and manage affordable housing programs, similar to affordable housing and community reinvestment programs of commercial banks and thrifts in underserved markets. Some of the Banks also have acquired member asset programs, known as ‘‘AMA,’’ whereby they acquire fixed-rate, single-family mortgage loans from participating member institutions, which are also generally commercial banks or other depository institutions already included within the BSA’s definition of financial institutions. In summary, the Housing GSEs provide liquidity, through loan purchases and collateralized advances, that permit banks and other customers to offer a broad range of credit products and related services. FinCEN believes, as discussed above, that the Housing GSEs engage in activities that are ‘‘similar to, related to, or a substitute for’’ financial services that are provided by other BSA-defined financial institutions. For this reason, FinCEN is proposing to exercise its authority under 31 U.S.C. 5312(a)(2)(Y) to define these entities as financial institutions. As explained more fully below, this rulemaking would define Housing GSEs as financial institutions for the purpose of requiring them to establish AML programs and file SARs. This NPRM is supported by the FHFA, their primary regulator. While this NPRM proposes to define the Housing GSEs as ‘‘financial institutions’’ under our BSA authority, the Housing GSEs will not be considered ‘‘Financial Institutions’’ within the regulatory meaning of the term under FinCEN’s regulations at 31 CFR 1010.100(t). Placement within the regulatory definition of ‘‘Financial Institution’’ would trigger other recordkeeping and reporting requirements that FinCEN does not consider appropriate for the Housing GSEs at this time. The term Housing Government Sponsored Enterprise is proposed to be added as a new defined term at 31 CFR 1010.100(lll). In light of FinCEN’s efforts to combat mortgage fraud, money laundering and terrorist financing, and the anticipated value of adding information to FinCEN’s database to support law enforcement, FinCEN requests comment about whether there are other types of mortgage related businesses and professions that might encounter similar risks and vulnerabilities to those 39 31 U.S.C. 5312(a)(2). VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 presented by the Housing GSEs. Specifically, FinCEN requests comment on whether there are other entities that engage in mortgage related activities that are ‘‘similar to, related to, or a substitute for’’ financial services that are provided by BSA-defined financial institutions that should be defined as financial institutions under the BSA in subsequent rulemakings; for example: Private mortgage insurers and reinsurers, mortgage servicers, and other types of businesses in the primary and secondary mortgage markets. FinCEN also requests comments about whether it would be appropriate to include in a Final Rule any provisions that account for the differences in the business, operation and mission of the Banks and Fannie Mae and Freddie Mac. B. Suspicious Activity Reporting and AML Program Requirements Under the rules proposed by this NPRM, the Housing GSEs would be required to file SAR forms directly with FinCEN, as do other financial institutions subject to SAR filing regulations. FinCEN expects that the transition to compliance with FinCEN’s regulation will not be difficult or costly, because the Housing GSEs already have policies, procedures and training programs in place to comply with the FHFA’s current fraud reporting regulation, which is very similar to the proposed SAR reporting regulation. As part of a final rule adopted on January 27, 2010, FHFA issued new fraud reporting regulations, codified at 12 CFR part 1233, ‘‘Reporting of Fraudulent Financial Instruments.’’ 40 That regulation requires each Housing GSE to submit a timely report to FHFA upon discovery that it has purchased or sold a fraudulent loan or financial instrument, or suspects a possible fraud relating to the purchase or sale of any loan or financial instrument. In addition, each Housing GSE must establish and maintain internal controls, policies, procedures, and operational training programs to discover such transactions. The regulation applies to all programs and products of the Housing GSEs.41 Accordingly, FinCEN believes that most, if not all, of the Housing GSEs should already have anti-fraud programs in place that would satisfy most of 40 75 FR 4255 (Jan. 27, 2010). FR 4255, 4258–4259. Should FinCEN issue a final rule imposing AML and SAR requirements on the Housing GSEs, FHFA may amend these regulations to avoid any conflicts or duplicative requirements with FinCEN’s regulations, consistent with the requirements of the Safety and Soundness Act, as amended. 41 75 PO 00000 Frm 00068 Fmt 4702 Sfmt 4702 FinCEN’s AML program and SAR regulatory requirements. The only additional actions that may be required to comply with the proposed regulations (in addition to reporting a wider range of suspected financial crime than is currently required) would be minor modifications to existing policies and procedures to formalize and implement two of FinCEN’s regulatory requirements that are not expressly required under the FHFA’s regulations; specifically: (1) The appointment of a compliance officer to monitor for compliance with FinCEN’s regulations, and (2) periodic independent testing to monitor for compliance. Housing GSEs that anticipate the need to submit a relatively low number of SAR forms may establish procedures to submit individual forms via FinCEN’s established systems, so that the Housing GSE likely may be able to file SARs without reliance on, or changes to, their existing systems. FinCEN will issue guidance, if necessary, to clarify FinCEN’s regulations and assist the Housing GSEs with compliance related matters. Upon the designation of the Housing GSEs as ‘‘financial institutions’’ under the BSA, the Housing GSEs, as well as their directors, officers, and employees, and agents will become subject to the BSA’s liability safe harbor for financial institutions that file SARs at 31 U.S.C. 5318(g)(3). This safe harbor is intended to encourage financial institutions to report suspicious activities, even if, as here, the proposed SAR regulation will likely require reporting of a wider range of suspected fraud, money laundering and financial crimes related to the products and services offered by the Housing GSEs than those entities are currently accustomed to report. FinCEN further requests comment about whether there are other types of entities that engage in mortgage related activities that should be defined as financial institutions or loan or finance companies under the BSA in subsequent rulemakings, as part of FinCEN’s incremental approach, discussed in more detail in the proposed rulemaking Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators,42 to address vulnerabilities in the mortgage finance sector. 42 See 75 FR 76677, December 9, 2010. https:// edocket.access.gpo.gov/2010/pdf/2010-30765.pdf. E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules III. Section-by-Section Analysis A. Definition of Housing Government Sponsored Enterprises Section 1010.100(lll) defines the key terms used in the proposed rules. The definitions reflect FinCEN’s determination that AML program and SAR requirements should be applied to the Housing GSEs, which are defined as Regulated Entities under 12 U.S.C. 4502(20) subject to the general supervision and regulation of the FHFA. The definition of Housing Government Sponsored Enterprise includes: (1) The Federal National Mortgage Association; (2) the Federal Home Loan Mortgage Corporation; and (3) each Federal Home Loan Bank. The proposed definition does not include any entity-affiliated party 43 of Fannie Mae, Freddie Mac, or any Bank, including the Office of Finance of the Federal Home Loan Bank System. mstockstill on DSK4VPTVN1PROD with PROPOSALS B. Compliance and Enforcement Section 1010.810(b)(10) delegates authority to examine the Housing GSEs for compliance with the requirements of these regulations to the FHFA. FHFA is the general regulator for the Housing GSEs and enforces its own statutes and regulations regarding safety and soundness. FHFA will be FinCEN’s delegate for examination for compliance with these proposed regulations, and FinCEN will work with FHFA to coordinate and direct such delegated compliance examination activities. FinCEN will continue to retain enforcement authority under the BSA, including for the imposition of civil penalties for violations of the BSA and these regulations. C. Anti-Money Laundering Program Section 1030.210(a) requires that each Housing GSE develop and implement an anti-money laundering program reasonably designed to prevent the Housing GSE from being used to facilitate money laundering or the financing of terrorist activities, and other financial crimes, including mortgage fraud. The program must be in writing and must be approved by senior management. A Housing GSE’s written program also must be made available to FinCEN upon request. Section 1030.210(b) sets forth the minimum requirements of a Housing GSE’s AML program. Beyond these minimum requirements, however, the proposed rule is intended to give Housing GSEs the flexibility to design their programs to mitigate their own enterprise-specific risks. Section 43 See 12 U.S.C. 4502(11). VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 1030.210(b)(1) requires the AML program to incorporate policies, procedures, and internal controls based upon the Housing GSE’s assessment of the risks of money laundering, terrorism finance and other financial crimes associated with its products, customers, distribution channels, and geographic locations. As explained above, a Housing GSE’s assessment of customerrelated information is a key component to an effective AML program. Thus, a Housing GSE’s AML program must ensure that the Housing GSE obtains all the information necessary to make its AML program effective. Such information includes, but is not limited to, relevant customer information on individual borrowers and the retail financial institutions who are the Housing GSEs customers. The specific means to obtain such information is left to the discretion of the Housing GSE, although FinCEN anticipates that the Housing GSE may need to amend existing agreements to ensure that the Housing GSE receives necessary customer information. We do not anticipate that this requirement will entail obtaining information not already received in the ordinary course of business by the Housing GSEs, particularly with regard to information on individual borrowers. For purposes of making the required risk assessment, a Housing GSE must consider all relevant information, including whether the retail financial institutions who are its customers are subject to AML program requirements under the BSA. Policies, procedures, and internal controls also must be reasonably designed to ensure compliance with BSA requirements. Housing GSEs may conduct some of their operations through third parties. Some elements of the compliance program may best be performed by personnel of these entities, in which case it is permissible for a Housing GSE to delegate contractually the implementation and operation of those aspects of its AML program to such an entity and to rely on the compliance program of such third parties that are subject to an independent AML program requirement under the BSA. Any Housing GSE that delegates responsibility for aspects of its AML program to a third party, however, remains fully responsible for the effectiveness of the program, as well as ensuring that compliance examiners are able to obtain information and records relating to the AML program. Section 1030.210(b)(2) requires that a Housing GSE designate a compliance officer to be responsible for administering the AML program. The person should be competent and PO 00000 Frm 00069 Fmt 4702 Sfmt 4702 69209 knowledgeable regarding BSA requirements and money laundering and fraud issues and risks, and should be empowered with full responsibility and authority to develop and enforce appropriate policies and procedures. The role of the compliance officer is to ensure that (1) The program is implemented effectively; (2) the program is updated as necessary; and (3) appropriate persons are trained and educated in accordance with § 1030.210(b)(3). Section 1030.210(b)(3) requires that a Housing GSE provide for education and training of appropriate persons. Employee training is an integral part of any AML program. In order to carry out their responsibilities effectively, employees of a Housing GSE (and of any third party not already receiving training as part of another AML program requirement) with responsibility under the program must be trained in the requirements of the rule and money laundering and fraud risks generally so that red flags associated with existing or potential customers can be identified. Such training may be conducted by outside or in-house seminars, and may include computer-based training. The nature, scope, and frequency of the education and training program of the Housing GSE will depend upon the employee functions performed. However, those with obligations under the AML program must be sufficiently trained to carry out their responsibilities effectively. Moreover, these employees should receive periodic updates and refreshers regarding the AML program. Section 1030.210(b)(4) requires that a Housing GSE provide for independent testing of the program on a periodic basis to ensure that it complies with the requirements of the rule and that the program functions as designed. An outside consultant or accountant need not perform the testing and review. The review may be conducted by an officer, employee or group of employees, so long as the reviewer is not the designated compliance officer and does not report directly to the compliance officer. The frequency of the independent testing will depend upon the Housing GSE’s assessment of risks posed by its operations. Any recommendations resulting from such testing should be implemented promptly or reviewed by senior management. A Housing GSE may rely on the testing performed by third parties that are subject to an independent AML program requirement. Section 1030.210(c) states that compliance with the AML program requirements will be determined by E:\FR\FM\08NOP1.SGM 08NOP1 69210 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS FinCEN or its delegates, under the terms of the BSA. D. Reports of Suspicious Transactions Section 1030.320(a) contains the rules setting forth the obligation of Housing GSEs to report suspicious transactions that are conducted or attempted by, at, or through a Housing GSE and involve or aggregate at least $5,000 in funds or other assets. It is important to recognize that transactions are reportable under this rule and 31 U.S.C. 5318(g) regardless of whether they involve currency. The $5,000 minimum amount is consistent with existing SAR filing requirements for other financial institutions. Section 1030.320(a)(1) contains the general statement of the obligation to file reports of suspicious transactions. The obligation extends to transactions conducted or attempted by, at, or through a Housing GSE. The proposed rule also contains a provision in § 1030.320(a)(1) designed to encourage the reporting of transactions that appear relevant to violations of law or regulation, even in cases in which the rule does not explicitly so require; for example, in the case of a transaction falling below the $5,000 threshold in the proposed rule. Section 1030.320(a)(2) specifically describes the four categories of transactions that require reporting. A Housing GSE is required to report a transaction if it knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part): (i) Involves funds derived from illegal activity or is intended or conducted to hide or disguise funds or assets derived from illegal activity; (ii) is designed, whether through structuring or other means, to evade the requirements of the BSA; (iii) has no business or apparent lawful purpose, and the Housing GSE knows of no reasonable explanation for the transaction after examining the available facts; or (iv) involves the use of the Housing GSE to facilitate criminal activity.44 A determination as to whether a report is required must be based on all the facts and circumstances relating to the transaction and customer of the Housing GSE in question. Different fact patterns will require different judgments. Some examples of red flags 44 The fourth reporting category has been added to the suspicious activity reporting rules promulgated since the passage of the USA PATRIOT Act to make it clear that the requirement to report suspicious activity encompasses the reporting of transactions involving fraud and those in which legally derived funds are used for criminal activity, such as the financing of terrorism. VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 associated with existing or potential customers are referenced in previous FinCEN reports on mortgage fraud.45 However, the means of commerce and the techniques of money laundering are continually evolving, and there is no way to provide an exhaustive list of suspicious transactions.46 Section 1030.320(a)(3) provides that the obligation to identify and to report a suspicious transaction rests with the Housing GSE involved in the transaction. However, where more than one Housing GSE, or another financial institution with a separate suspicious activity reporting obligation, is involved in the same transaction, only one report is required to be filed, provided it contains all relevant facts and each institution maintains a copy of the report and any supporting documentation. The proposed rule is intended to require that a Housing GSE evaluate customer activity and relationships for fraud, money laundering and other financial crime risks, and design a suspicious transaction monitoring program that is appropriate for the particular Housing GSE in light of such risks. Section 1030.320(b) sets forth the filing procedures to be followed by Housing GSEs making reports of suspicious transactions. Within 30 days after a Housing GSE becomes aware of a suspicious transaction (or within 60 days if no suspect has been identified), it must report the transaction by completing a SAR and filing it with FinCEN. Supporting documentation relating to each SAR is to be collected and maintained separately by the Housing GSE and made available upon request by FinCEN or any Federal, State, or local law enforcement agency, or any Federal regulatory authority that examines the Housing GSE for compliance with the BSA. Because FinCEN’s SAR regulations provide that supporting documentation is deemed to be filed with the SAR, the regulatory authorities referenced in the previous sentence are consistent with those regulatory authorities to whom a SAR may be disclosed, as discussed in the rules of construction below. For situations requiring immediate attention, Housing GSEs are to telephone the appropriate law enforcement authority in addition to filing a SAR. Section 1030.320(c) provides that filing Housing GSEs must maintain copies of SARs and the underlying related documentation for a period of five years from the date of filing. As indicated above, supporting documentation is to be made available to FinCEN and the specified law enforcement and regulatory authorities, upon request. Section 1030.320(d)(1) reinforces the statutory prohibition against the disclosure by a financial institution of a SAR (regardless of whether the report would be required by the proposed rule or is filed voluntarily).47 Thus, the section requires that a SAR and information that would reveal the existence of that SAR (‘‘SAR information’’) be kept confidential and not be disclosed, except as authorized within the rules of construction. The proposed rule includes rules of construction that identify actions an institution may take that are not precluded by the confidentiality provision. These actions include the disclosure of SAR information to FinCEN, or Federal, State, or local law enforcement agencies, or a Federal regulatory authority that examines the Housing GSE for compliance with the BSA. This confidentiality provision also does not prohibit the disclosure of the underlying facts, transactions, and documents upon which a SAR is based, or the sharing of SAR information within the Housing GSE’s corporate organizational structure for purposes consistent with Title II of the BSA as determined by FinCEN in regulation or in guidance.48 Section 1030.320(d)(2) incorporates the statutory prohibition against disclosure of SAR information, other than in fulfillment of their official duties consistent with the BSA, by government users of SAR data. The section also clarifies that official duties do not include the disclosure of SAR information in response to a request for non-public information49 or for use in a 47 See 45 See note 13, supra. 46 FinCEN will continue to pursue a regulatory approach that involves a combination of guidance, training programs, and government-industry information exchange so that implementation of any new AML program and SAR reporting regulations can be accomplished in the most flexible and cost efficient way as possible, while protecting the primary and secondary mortgage markets and the financial system as a whole from fraud, money laundering and other financial crimes. PO 00000 Frm 00070 Fmt 4702 Sfmt 4702 31 U.S.C. 5318(g)(2). November 23, 2010, FinCEN issued updated guidance for the banking, securities, and futures industries authorizing the sharing of SAR information with parent companies, head offices, and, under certain conditions, domestic affiliates. 75 FR 75607 (Dec. 3, 2010). No such guidance has been issued for the Housing GSEs. 49 For purposes of this rulemaking, ‘‘non-public information’’ refers to information that is exempt from disclosure under the Freedom of Information Act. 48 On E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules private legal proceeding, including a request under 31 CFR 1.11.50 Section 1030.320(e) provides protection from liability for making reports of suspicious transactions, and for failures to disclose the fact of such reporting to the full extent provided by 31 U.S.C. 5318(g)(3). The protection afforded the GSEs in title 12 by FHFA explicitly requires ‘‘good faith,’’ 51 unlike 31 U.S.C. 5318(g)(3) which contains no such requirement. Legal authority weighs heavily in favor of the proposition that this safe harbor is not subject to a ‘‘good faith’’ limitation.52 Section 1030.320(f) notes that compliance with the obligation to report suspicious transactions will be examined by FinCEN or its delegates, and provides that failure to comply with the rule may constitute a violation of the BSA and the BSA regulations. Section 1030.320(g) provides that the new SAR requirement is effective when an anti-money laundering program required by the regulations is required to be implemented. E. Special Information Procedures To Deter Money Laundering and Terrorist Activity mstockstill on DSK4VPTVN1PROD with PROPOSALS Section 1030.500 states generally that the Housing GSEs are covered by the special information procedures to detect money laundering and terrorist activity requirements set forth and cross referenced in sections 1030.520 (crossreferencing to 31 CFR 1010.520) and 1030.540 (cross-referencing to 31 CFR 1010.540). Sections 1010.520 and 101.540 implement sections 314(a) and 314(b) 53 of the USA PATRIOT Act, 50 31 CFR 1.11 is the Department of the Treasury’s information disclosure regulation. Generally, these regulations are known as ‘‘Touhy regulations,’’ after the Supreme Court’s decision in United States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). In that case, the Supreme Court held that an agency employee could not be held in contempt for refusing to disclose agency records or information when following the instructions of his or her supervisor regarding the disclosure. An agency’s Touhy regulations are the instructions agency employees must follow when those employees receive requests or demands to testify or otherwise disclose agency records or information. 51 12 CFR 1233.5. 52 See Stoutt v. Banco Popular de Puerto Rico, 320 F.3d 26, 31 (1st Cir. 2003) (no good faith requirement), Lee v. Bankers Trust, 166 F.3d 540, 544 (2d Cir. 1999) (same), Henry v. Bank of America, 2010 U.S. Dist. LEXIS 14561 *11–13 (N.D.Cal., Feb. 2, 2010) (same), Eyo v. United States, 2007 U.S. Dist. LEXIS 88088 *15–16 (D.N.J., Nov. 29, 2007) (same), Nieman v. Firstar Bank, 2005 U.S. Dist. LEXIS 38959 *18 (N.D. Iowa, Sept. 26, 2005) (same); but see Lopez v. First Union National Bank, 129 F.3d 1186, 1992 (11th Cir. 1997) (good faith requirement). 53 In addition to falling within the definition of ‘‘financial institution’’ found at 31 U.S.C. 5312(a)(2), participants in the 314(b) program also must be ‘‘required * * * to establish and maintain VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 respectively, and generally apply to any financial institution listed in 31 U.S.C. 5312(a)(2).54 For the sake of clarity, the Final Rule adds subpart E to Part 1030 to confirm that the section 314 rules will continue to apply to the Housing GSEs. IV. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation’s impact on small entities. Such an analysis need not be undertaken if the agency has certified that the regulation will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). In this case, a final regulation would apply only to the Housing GSEs, none of which are small entities for purposes of this requirement. Accordingly, FinCEN hereby certifies that a final regulation is not likely to have a significant economic impact on a substantial number of small business entities for purposes of the Regulatory Flexibility Act. Therefore, the provisions of the Regulatory Flexibility Act do not apply. See 5 U.S.C. 601(2) and 603(a). V. Paperwork Reduction Act The proposed regulation pertains to the Housing GSEs. As a result, the proposed regulation does not contain any information collection requirement that requires the approval of the Office of Management and Budget under the Paperwork Reduction Act See 44 U.S.C. 3501 et seq. VI. Executive Order 13563 and 12866 Executive Orders 13563 and 12866 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 final rule is designated a ‘‘significant regulatory action’’ although not economically an anti-money laundering program. * * *’’ 1010.540(a)(1). 54 This proposed rule would define the Housing GSEs as financial institutions under section 5312(a)(2)(Y). PO 00000 Frm 00071 Fmt 4702 Sfmt 4702 69211 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 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 the 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 202 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. Taking into account the factors noted above and using conservative estimates of average labor costs in evaluating the cost of the burden imposed by the proposed regulation, FinCEN has determined that it is not required to prepare a written statement under section 202. List of Subjects in 31 CFR Parts 1010 and 1030 Administrative practice and procedure, Banks, Banking, Brokers, Currency, Federal home loan banks, Foreign banking, Foreign currencies, Gambling, Investigations, Mortgages, Penalties, Reporting and recordkeeping requirements, Securities, Terrorism. Authority and Issuance For the reasons set forth in the preamble, Chapter X of title 31 of the Code of Federal Regulations is proposed to be amended as follows: PART 1010—GENERAL PROVISIONS 1. The authority citation for part 1010 continues to read as follows: Authority: 12 U.S.C. 1829b and 1951– 1959; 31 U.S.C. 5311–5314 and 5316–5332; title III, sec. 314 Pub. L. 107–56, 115 Stat. 307. 2. Amend § 1010.100 by adding new paragraph (lll) to read as follows: § 1010.100 General definitions. * * * * * (lll) Housing government sponsored enterprise. (1) A ‘‘housing government sponsored enterprise’’ is one of the following ‘‘Regulated Entities’’ under 12 U.S.C. 4502(20) subject to the general supervision and regulation of the Federal Housing Finance Agency (FHFA): (i) The Federal National Mortgage Association; E:\FR\FM\08NOP1.SGM 08NOP1 69212 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules (ii) The Federal Home Loan Mortgage Corporation; or (iii) Each Federal Home Loan Bank. (2) The term ‘‘housing government sponsored enterprise’’ does not include any ‘‘Entity-Affiliated Party,’’ as defined in 12 U.S.C. 4502(11). 3. Amend § 1010.810 by adding new paragraph (b)(10) to read as follows: § 1010.810 Enforcement. * * * * * (b) * * * (10) To the Federal Housing Finance Agency with respect to the housing government sponsored enterprises, as defined in § 1010.100(lll) of this part. * * * * * 4. New part 1030 added to read as follows: PART 1030—RULES FOR HOUSING GOVERNMENT SPONSORED ENTERPRISES Subpart A—Definitions Sec. 1030.100 Definitions. Subpart B—Programs 1030.200 General. 1030.210 Anti-money laundering programs for housing government sponsored enterprises. Subpart C—Reports Required To Be Made By Housing Government Sponsored Enterprises 1030.300 General. 1030.310–1030.315 [Reserved] 1030.320 Reports by housing government sponsored enterprises of suspicious transactions. 1030.330 [Reserved] Subpart D—Records Required To Be Maintained By Housing Government Sponsored Enterprises. 1030.400 General. mstockstill on DSK4VPTVN1PROD with PROPOSALS Subpart E—Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity 1030.500 General. 1030.520 Special information sharing procedures to deter money laundering and terrorist activity for housing government sponsored enterprises. 1030.530 [Reserved] 1030.540 Voluntary information sharing among financial institutions. Subpart F—Special Standards of Diligence; Prohibitions, and Special Measures for Housing Government Sponsored Enterprises 1030.600–1030.670 [Reserved] Authority: 12 U.S.C. 1829b and 1951– 1959; 31 U.S.C. 5311–5314 and 5316–5332; title III, sec. 314 Pub. L. 107–56, 115 Stat. 307. VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 Subpart A—Definitions § 1030.100 Definitions. Refer to § 1010.100 of this chapter for general definitions not noted herein. Subpart B—Programs § 1030.200 General. Housing government sponsored enterprises are subject to the program requirements set forth and cross referenced in this subpart. Housing government sponsored enterprises should also refer to subpart B of part 1010 of this Chapter for program requirements contained in that subpart that apply to housing government sponsored enterprises. § 1030.210 Anti-money laundering programs for housing government sponsored enterprises. (a) Anti-money laundering program requirements for housing government sponsored enterprises. Each housing government sponsored enterprise shall develop and implement a written antimoney laundering program that is reasonably designed to prevent the housing government sponsored enterprise from being used to facilitate money laundering or the financing of terrorist activities. The program must be approved by senior management. A housing government sponsored enterprise shall make a copy of its antimoney laundering program available to the Financial Crimes Enforcement Network or its designee upon request. (b) Minimum requirements. At a minimum, the anti-money laundering program shall: (1) Incorporate policies, procedures, and internal controls based upon the housing government sponsored enterprise’s assessment of the money laundering and terrorist financing risks associated with its products and services. Policies, procedures, and internal controls developed and implemented by a housing government sponsored enterprise under this section shall include provisions for complying with the applicable requirements of subchapter II of chapter 53 of title 31, United States Code and this part, and obtaining all relevant customer-related information necessary for an effective anti-money laundering program. (2) Designate a compliance officer who will be responsible for ensuring that: (i) The anti-money laundering program is implemented effectively; (ii) The anti-money laundering program is updated as necessary; and (iii) Appropriate persons are educated and trained in accordance with paragraph (b)(3) of this section. PO 00000 Frm 00072 Fmt 4702 Sfmt 4702 (3) Provide for on-going training of appropriate persons concerning their responsibilities under the program. A housing government sponsored enterprise may satisfy this requirement by training such persons or verifying that such persons have received training by a competent third party with respect to the products and services offered by the housing government sponsored enterprise. (4) Provide for independent testing to monitor and maintain an adequate program. The scope and frequency of the testing shall be commensurate with the risks posed by the housing government sponsored enterprise’s products and services. Such testing may be conducted by a third party or by any officer or employee of the housing government sponsored enterprise, other than the person designated in paragraph (b)(2) of this section. (c) Compliance. Compliance with this section shall be examined by FinCEN or its delegates, under the terms of the Bank Secrecy Act. Failure to comply with the requirements of this section may constitute a violation of the Bank Secrecy Act and of this chapter. (d) Compliance date. A housing government sponsored enterprise must develop and implement an anti-money laundering program that complies with the requirements of this section on or before one month from the effective date of this section. Subpart C—Reports Required To Be Made by Housing Government Sponsored Enterprises § 1030.300 General. Housing government sponsored enterprises are subject to the reporting requirements set forth and cross referenced in this subpart. Housing government sponsored enterprises should also refer to subpart C of part 1010 of this Chapter for reporting requirements contained in that subpart that apply to housing government sponsored enterprises. § 1030.310–1030.315 [Reserved] § 1030.320 Reports by housing government sponsored enterprises of suspicious transactions. (a) General—(1) Every housing government sponsored enterprise shall file with FinCEN, to the extent and in the manner required by this section, a report of any suspicious transaction relevant to a possible violation of law or regulation. A housing government sponsored enterprise may also file with FinCEN a report of any suspicious transaction that it believes is relevant to the possible violation of any law or E:\FR\FM\08NOP1.SGM 08NOP1 mstockstill on DSK4VPTVN1PROD with PROPOSALS Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules regulation, but whose reporting is not required by this section. (2) A transaction requires reporting under this section if it is conducted or attempted by, at, or through a housing government sponsored enterprise, it involves or aggregates funds or other assets of at least $5,000, and the housing government sponsored enterprise knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part): (i) Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation; (ii) Is designed, whether through structuring or other means, to evade any requirements of this chapter or any other regulations promulgated under the Bank Secrecy Act; (iii) Has no business or apparent lawful purpose or is not the sort in which the particular housing government sponsored enterprise customer would normally be expected to engage, and the housing government sponsored enterprise knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or (iv) Involves use of the housing government sponsored enterprise to facilitate criminal activity. (3) More than one housing government sponsored enterprise may have an obligation to report the same transaction under this section, and financial institutions involved in that same transaction may have separate obligations to report suspicious activity with respect to that transaction pursuant to other provisions of this chapter. In those instances, no more than one report is required to be filed by the housing government sponsored enterprise(s) and any financial institution(s) involved in the transaction, provided that the report filed contains all relevant facts, including the name of each housing government sponsored enterprise or financial institution involved in the transaction, the report complies with all instructions applicable to joint filings, and each institution maintains a copy of the report filed, along with any supporting documentation. (b) Filing and notification procedures—(1) What to file. A suspicious transaction shall be reported VerDate Mar<15>2010 16:17 Nov 07, 2011 Jkt 226001 by completing a Suspicious Activity Report (‘‘SAR’’), and collecting and maintaining supporting documentation as required by paragraph (c) of this section. (2) Where to file. The SAR shall be filed with FinCEN in accordance with the instructions to the SAR. (3) When to file. A SAR shall be filed no later than 30 calendar days after the date of the initial detection by the reporting housing government sponsored enterprise of facts that may constitute a basis for filing a SAR under this section. If no suspect is identified on the date of such initial detection, a housing government sponsored enterprise may delay filing a SAR for an additional 30 calendar days to identify a suspect, but in no case shall reporting be delayed more than 60 calendar days after the date of such initial detection. (4) Mandatory notification to law enforcement. In situations involving violations that require immediate attention, such as suspected terrorist financing or ongoing money laundering schemes, a housing government sponsored enterprise shall immediately notify by telephone an appropriate law enforcement authority in addition to filing timely a SAR. (5) Voluntary notification to FinCEN. Any housing government sponsored enterprise wishing voluntarily to report suspicious transactions that may relate to terrorist activity may call FinCEN’s Financial Institutions Hotline in addition to filing timely a SAR if required by this section. (c) Retention of records. A housing government sponsored enterprise shall maintain a copy of any SAR filed by the housing government sponsored enterprise or on its behalf (including joint reports), and the original (or business record equivalent) of any supporting documentation concerning any SAR that it files (or is filed on its behalf), for a period of five years from the date of filing the SAR. Supporting documentation shall be identified as such and maintained by the housing government sponsored enterprise, and shall be deemed to have been filed with the SAR. A housing government sponsored enterprise shall make all supporting documentation available to FinCEN or any Federal, State, or local law enforcement agency, or any Federal regulatory authority that examines the housing government sponsored enterprise for compliance with the Bank Secrecy Act, upon request. (d) Confidentiality of SARs. A SAR, and any information that would reveal the existence of a SAR, are confidential and shall not be disclosed except as authorized in this paragraph (d). For PO 00000 Frm 00073 Fmt 4702 Sfmt 4702 69213 purposes of this paragraph (d) only, a SAR shall include any suspicious activity report filed with FinCEN pursuant to any regulation in this chapter. (1) Prohibition on disclosures by housing government sponsored enterprises—(i) General rule. No housing government sponsored enterprise, and no director, officer, employee, or agent of any housing government sponsored enterprise, shall disclose a SAR or any information that would reveal the existence of a SAR. Any housing government sponsored enterprise, and any director, officer, employee, or agent of any housing government sponsored enterprise that is subpoenaed or otherwise requested to disclose a SAR or any information that would reveal the existence of a SAR, shall decline to produce the SAR or such information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any such request and the response thereto. (ii) Rules of construction. Provided that no person involved in any reported suspicious transaction is notified that the transaction has been reported, this paragraph (d)(1) shall not be construed as prohibiting: (A) The disclosure by a housing government sponsored enterprise, or any director, officer, employee, or agent of a housing government sponsored enterprise of: (1) A SAR, or any information that would reveal the existence of a SAR, to FinCEN or any Federal, State, or local law enforcement agency, or any Federal regulatory authority that examines the housing government sponsored enterprise for compliance with the Bank Secrecy Act; or (2) The underlying facts, transactions, and documents upon which a SAR is based, including but not limited to, disclosures to another housing government sponsored enterprise or a financial institution, or any director, officer, employee, or agent of a housing government sponsored enterprise or financial institution, for the preparation of a joint SAR; or (B) The sharing by a housing government sponsored enterprise, or any director, officer, employee, or agent of the housing government sponsored enterprise, of a SAR, or any information that would reveal the existence of a SAR, within the housing government sponsored enterprise’s corporate organizational structure for purposes consistent with Title II of the Bank Secrecy Act as determined by regulation or in guidance. (2) Prohibition on disclosures by government authorities. A Federal, E:\FR\FM\08NOP1.SGM 08NOP1 69214 Federal Register / Vol. 76, No. 216 / Tuesday, November 8, 2011 / Proposed Rules State, local, territorial, or tribal government authority, or any director, officer, employee, or agent of any of the foregoing, shall not disclose a SAR, or any information that would reveal the existence of a SAR, except as necessary to fulfill official duties consistent with Title II of the Bank Secrecy Act. For purposes of this section, ‘‘official duties’’ shall not include the disclosure of a SAR, or any information that would reveal the existence of a SAR, in response to a request for disclosure of non-public information or a request for use in a private legal proceeding, including a request pursuant to 31 CFR 1.11. (e) Limitation on liability. A housing government sponsored enterprise, and any director, officer, employee, or agent of any housing government sponsored enterprise, that makes a voluntary disclosure of any possible violation of law or regulation to a government agency or makes a disclosure pursuant to this section or any other authority, including a disclosure made jointly with another institution, shall be protected from liability for any such disclosure, or for failure to provide notice of such disclosure to any person identified in the disclosure, or both, to the full extent provided by 31 U.S.C. 5318(g)(3). (f) Compliance. Housing government sponsored enterprises shall be examined by FinCEN or its delegates for compliance with this section. Failure to satisfy the requirements of this section may be a violation of the Bank Secrecy Act and of this chapter. (g) Applicability date. This section is effective when an anti-money laundering program required by § 1030.210 of this part is required to be implemented. § 1030.330 Reports relating to currency in excess of $10,000 received in a trade or business. Refer to § 1010.330 of this Chapter for rules regarding the filing of reports relating to currency in excess of $10,000 received by housing government sponsored enterprises. mstockstill on DSK4VPTVN1PROD with PROPOSALS 16:17 Nov 07, 2011 Jkt 226001 General. Housing government sponsored enterprises are subject to special information sharing procedures to deter money laundering and terrorist activity requirements set forth and cross referenced in this subpart. Housing government sponsored enterprises should also refer to subpart E of part 1010 of this Chapter for special information sharing procedures to deter money laundering and terrorist activity contained in that subpart that apply to housing government sponsored enterprises. § 1030.520 Special information sharing procedures to deter money laundering and terrorist activity for housing government sponsored enterprises. (a) Refer to § 1010.520 of this Chapter. (b) [Reserved] § 1030.530 [Reserved] § 1030.540 Voluntary information sharing among financial institutions. (a) Refer to § 1010.540 of this Chapter. (b) [Reserved] Subpart F—Special Standards of Diligence; Prohibitions, and Special Measures for Housing Government Sponsored Enterprises § 1030.600–1030.670 [Reserved] Dated: November 2, 2011. James H. Freis, Jr., Director, Financial Crimes Enforcement Network. [FR Doc. 2011–28820 Filed 11–7–11; 8:45 am] BILLING CODE 4802–10–P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA–R03–OAR–2011–0730; FRL–9487–5] Environmental Protection Agency (EPA). ACTION: Proposed rule. AGENCY: General. Housing government sponsored enterprises are subject to the recordkeeping requirements set forth and cross referenced in this subpart. Housing government sponsored enterprises should also refer to subpart D of part 1010 of this Chapter for recordkeeping requirements contained in that subpart that apply to housing government sponsored enterprises. VerDate Mar<15>2010 § 1030.500 Approval and Promulgation of Air Quality Implementation Plans; Virginia; Consumer and Commercial Products Subpart D—Records Required To Be Maintained by Housing Government Sponsored Enterprises § 1030.400 Subpart E—Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity EPA is proposing to approve a State Implementation Plan (SIP) revision submitted by the Commonwealth of Virginia. The SIP revision adds a new chapter (9VAC5– 45—Consumer and Commercial Products) in order to control volatile organic compounds (VOC) from portable SUMMARY: PO 00000 Frm 00074 Fmt 4702 Sfmt 4702 fuel containers, consumer products, architectural and industrial (AIM) coatings, adhesives and sealants, and asphalt paving operations within the Northern Virginia and Fredericksburg VOC Emissions Control Areas. The SIP revision also includes new and revised documents incorporated by reference into the Virginia regulations (9VAC5– 20–21—Documents Incorporated by Reference) in order to support the new and revised regulations. This action is being taken under the Clean Air Act (CAA). DATES: Written comments must be received on or before December 8, 2011. ADDRESSES: Submit your comments, identified by Docket ID Number EPA– R03–OAR–2011–0730 by one of the following methods: A. www.regulations.gov. Follow the on-line instructions for submitting comments. B. Email: fernandez.cristina@epa.gov. C. Mail: EPA–R03–OAR–2011–0730, Cristina Fernandez, Associate Director, Office of Air Program Planning, Mailcode 3AP30, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. D. Hand Delivery: At the previouslylisted EPA Region III address. Such deliveries are only accepted during the Docket’s normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions: Direct your comments to Docket ID Number EPA–R03–OAR– 2011–0730. EPA’s policy is that all comments received will be included in the public docket without change, and may be made available online at www.regulations.gov, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or email. The www.regulations.gov Web site is an ‘‘anonymous access’’ system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an email comment directly to EPA without going through www.regulations.gov, your email address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your E:\FR\FM\08NOP1.SGM 08NOP1

Agencies

[Federal Register Volume 76, Number 216 (Tuesday, November 8, 2011)]
[Proposed Rules]
[Pages 69204-69214]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28820]

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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Parts 1010 and 1030

RIN 1506-AB14

Anti-Money Laundering Program and Suspicious Activity Reporting
Requirements for Housing Government Sponsored Enterprises

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

[[Page 69205]]

ACTION: Notice of proposed rulemaking.

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SUMMARY: FinCEN, a bureau of the Department of the Treasury
(``Treasury''), is issuing proposed rules defining certain housing
government sponsored enterprises as financial institutions for the
purpose of requiring them to establish anti-money laundering programs
and report suspicious activities pursuant to the Bank Secrecy Act. The
proposal to require these organizations to establish anti-money
laundering programs and report suspicious activities is intended to
help prevent fraud and other financial crimes.

DATES: Written comments on this notice of proposed rulemaking
(``NPRM'') must be submitted on or before January 9, 2012.

ADDRESSES: You may submit comments, identified by Regulatory
Identification Number (RIN) 1506-AB14, by any of the following methods:
Federal E-rulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Include 1506-AB14 in
the submission. Refer to Docket Number FINCEN-2011-0004.
Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include 1506-
AB14 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 as soon as
possible on https://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 regulatory helpline at
(800) 949-2732 and select Option 6.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory and Regulatory Provisions

The Bank Secrecy Act (``BSA'') \1\ authorizes the Secretary of the
Treasury (the ``Secretary'') to issue regulations requiring financial
institutions to keep records and file reports that the Secretary
determines ``have a high degree of usefulness in criminal, tax, or
regulatory investigations or proceedings, or in the conduct of
intelligence or counterintelligence activities, including analysis, to
protect against international terrorism.'' \2\ In addition, the
Secretary is authorized to impose anti-money laundering (``AML'')
program requirements on financial institutions.\3\ The authority of the
Secretary to administer the BSA has been delegated to the Director of
FinCEN.\4\
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\1\ ``Bank Secrecy Act'' is the name that has come to be applied
to the Currency and Foreign Transactions Reporting Act (Titles I and
II of Pub. L. 91-508), its amendments, and the other statutes
referring to the subject matter of that Act. These statutes are
codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C.
5311-5314 and 5316-5332, and notes thereto.
\2\ 31 U.S.C. 5311.
\3\ 31 U.S.C. 5318(h).
\4\ See Treasury Order 180-01 (Sept. 26, 2002).
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The BSA defines the term ``financial institution.'' \5\ The term
includes, in part, ``any business or agency which engages in any
activity which the Secretary of the Treasury determines, by regulation,
to be an activity which is similar to, related to, or a substitute for
any activity in which any business described in [31 U.S.C.
5312(a)(2)(A)-(X)] is authorized to engage.'' \6\
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\5\ 31 U.S.C. 5312(a)(2).
\6\ 31 U.S.C. 5312(a)(2)(Y).
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With the enactment of 31 U.S.C. 5318(g) in 1992,\7\ Congress
authorized the Secretary to require financial institutions to report
suspicious transactions. As amended by the USA PATRIOT Act,\8\
subsection (g)(1) states:
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\7\ 31 U.S.C. 5318(g) was added to the BSA by section 1517 of
the Annunzio-Wylie Anti-Money Laundering Act, Title XV of the
Housing and Community Development Act of 1992, Public Law 102-550;
it was expanded by section 403 of the Money Laundering Suppression
Act of 1994 (the Money Laundering Suppression Act), Title IV of the
Riegle Community Development and Regulatory Improvement Act of 1994,
Public Law 103-325, to require designation of a single government
recipient for reports of suspicious transactions.
\8\ Public Law 107-56 sec. 352(c), 115 Stat. 322, codified at 31
U.S.C. 5318 note. Public Law 107-56 is the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (``USA PATRIOT Act'').

The Secretary may require any financial institution, and any
director, officer, employee, or agent of any financial institution,
to report any suspicious transaction relevant to a possible
violation of law or regulation.\9\
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\9\ 31 U.S.C. 5318(g)(1).

As amended by the USA PATRIOT Act, the BSA requires financial
institutions to establish AML programs that include, 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.\10\
When prescribing minimum standards for AML programs, FinCEN must
``consider the extent to which the requirements imposed under [the AML
program requirement] are commensurate with the size, location, and
activities of the financial institutions to which such regulations
apply.'' \11\
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\10\ 31 U.S.C. 5318(h).
\11\ USA PATRIOT Act, Public Law 107-56 sec. 352(c), 115 Stat.
322, codified at 31 U.S.C. 5318 note.
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FinCEN has promulgated AML program and Suspicious Activity Report
(``SAR'') regulations for a number of financial institutions. These
financial institutions include banks, brokers or dealers in securities,
mutual funds, insurance companies, futures commission merchants and
introducing brokers in commodities, money services businesses, and
casinos.\12\
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\12\ See 31 CFR 1020.210, 1020.320, 1021.210, 1021.320,
1022.210, 1022.320, 1023.210, 1023.320, 1024.210, 1024.320,
1025.210, 1025.320, 1026.210, and 1026.320.
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B. FinCEN's Anti-Mortgage Fraud Initiatives

FinCEN has placed efforts to combat mortgage fraud and related
criminal activity as one of its highest priorities in recent years.
FinCEN's efforts have included the analysis of SARs and other data
reported to FinCEN, often together with other data sets and information
available to the Government, to support and inform regulatory and law
enforcement investigations, proceedings and prosecutions at the
Federal, State and local levels. Since 2006, FinCEN has published a
broad range of information focused on mortgage fraud in order to advise
on trends and patterns, and to provide indicators to help the financial
industry protect itself against fraud and other financial crime.\13\
Criminal activity can arise at

[[Page 69206]]

different times in the product cycle of residential mortgage related
transactions, affecting a range of persons in the primary and secondary
markets. In the traditional money laundering sense, criminals may
attempt to invest the proceeds of illegal activity in a range of
assets, including real estate, such as through direct purchase or in
paying down loans.\14\ The purpose of fraud, regardless of whether in
conjunction with a mortgage or other real estate related transaction,
is overwhelmingly for criminal profit, and the proceeds of such fraud
often are laundered through one or more transactions involving
financial intermediaries. The victim of mortgage fraud might be an
individual losing equity in a home, or a defrauded lender or investor.
Fraud may have an impact on the securitization of mortgages,
potentially affecting the availability of mortgages and the cost to
borrowers.
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\13\ See Mortgage Loan Fraud Update (SARs Jan. 1-Mar. 31, 2011),
June 2011, https://www.fincen.gov/news_room/rp/files/MLF_Update_1st_Qtly_11_FINAL_508.pdf; Mortgage Loan Fraud Update (SARs Jan.
1-Dec. 31, 2010), Mar. 2011, https://www.fincen.gov/news_room/rp/files/MLF_Update_4th_Qtly_10_FINAL_508.pdf; Mortgage Loan
Fraud Update (SARs July 1-Sept. 30, 2010), Jan. 2011, https://www.fincen.gov/news_room/rp/files/MLF_Update_3rd_Qtly_10_FINAL.pdf; Mortgage Loan Fraud Update (SARs Apr. 1-June 30, 2010),
Dec. 2010, https://www.fincen.gov/news_room/rp/files/MLF_Update_2nd_Qtly_10_FINAL.pdf; Mortgage Loan Fraud Update: SAR Filings
Jan. 1-Mar. 31, 2010, https://www.fincen.gov/news_room/rp/files/MLF_Update_1st_Qtly_10_FINAL.pdf; Advisory to Financial
Institutions on Filing Suspicious Activity Reports Regarding Home
Equity Conversion Mortgage Fraud Schemes, Apr. 2010, https://www.fincen.gov/statutes_regs/guidance/pdf/fin-2010-a006.pdf; Filing
Trends in Mortgage Loan Fraud, Feb. 2009, https://www.fincen.gov/news_room/nr/pdf/20090225a.pdf; Mortgage Loan Fraud: an Update of
Trends Based upon Analysis of Suspicious Activity Reports, Apr.
2008, https://www.fincen.gov/news_room/rp/files/MortgageLoanFraudSARAssessment.pdf; Suspected Money Laundering in
the Residential Real Estate Industry, Apr. 2008, https://www.fincen.gov/news_room/rp/files/MLR_Real_Estate_Industry_SAR_web.pdf; Money Laundering in the Commercial Real Estate
Industry, Dec. 2006, https://www.fincen.gov/news_room/rp/reports/pdf/CREassessment.pdf; Mortgage Loan Fraud: An Industry Assessment
Based Upon Suspicious Activity Report Analysis, Nov. 2006, https://www.fincen.gov/news_room/rp/reports/pdf/mortgage_fraud112006.pdf.
\14\ See Suspected Money Laundering in the Residential Real
Estate Industry, Apr. 2008, https://www.fincen.gov/news_room/rp/files/MLR_Real_Estate_Industry_SAR_web.pdf; Money Laundering in
the Commercial Real Estate Industry, Dec. 2006, https://www.fincen.gov/news_room/rp/reports/pdf/CREassessment.pdf.
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Fraud in the residential mortgage markets may occur in a variety of
situations, affecting a variety of actors. Fraud may occur at the loan
origination stage, involving material misrepresentations or omissions,
false statements, straw buyers, false appraisals, identity theft,
etc.\15\ Fraud may occur in the context of loan modifications,
including when unscrupulous actors seek to take advantage of homeowners
struggling to meet their mortgage payments.\16\ Fraud may occur in home
equity conversion loans (``HECMs''), commonly known as reverse
mortgages.\17\ FinCEN analysis and many law enforcement investigations
have revealed mortgage related fraud to be part of organized criminal
activity involving multiple properties and various types of criminal
activity including the foregoing.\18\ Often, mortgage fraud may only be
discovered after default or in the context of foreclosure proceedings,
repurchase demands, collateral reviews, audits, examinations or
insurance investigations.\19\ FinCEN has determined, as a result of
individual investigations and through its broader analyses, that
criminal activity and actors in the residential mortgage market may be
connected with a range of other organized criminal activity affecting a
range of financial institutions.\20\
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\15\ For a description of commonly reported fraud related to
loan origination, see, e.g., Mortgage Loan Fraud: An Industry
Assessment Based Upon Suspicious Activity Report Analysis, Nov.
2006, https://www.fincen.gov/news_room/rp/reports/pdf/MortgageLoanFraud.pdf.
\16\ See Mortgage Loan Fraud: Loan Modification and Foreclosure
Rescue Scams, May 2010, https://www.fincen.gov/news_room/rp/files/MLFLoanMODForeclosure.pdf.
\17\ See FinCEN Advisory FIN-2010-005, Advisory to Financial
Institutions on Filing Suspicious Activity Reports Regarding Home
Equity Conversion Mortgage Fraud Schemes, April 27, 2010, https://www.fincen.gov/statutes_regs/guidance/pdf/fin-2010-a005.pdf.
\18\ See, e.g., Department of Justice, Press Release, Financial
Fraud Enforcement Task Force Announces Results of Broadest Mortgage
Fraud Sweep in History (June 17, 2010), https://www.justice.gov/opa/pr/2010/June/10-opa-708.html; and speech of Attorney General Eric
Holder at the Operation Stolen Dreams Press Conference (June 17,
2010) (noting participation of FinCEN), https://www.justice.gov/ag/speeches/2010/ag-speech-100617.html.
\19\ See, e.g., Mortgage Loan Fraud Update: Suspicious Activity
Report Filings from July 1-September 30, 2009 (February 2010),
https://www.fincen.gov/news_room/rp/files/MLF_Update.pdf.
\20\ See Mortgage Loan Fraud Connections with Other Financial
Crime: An Evaluation of Suspicious Activity Reports Filed by Money
Services Businesses, Securities and Futures Firms, Insurance
Companies and Casinos, Mar. 2009, https://www.fincen.gov/news_room/nr/pdf/20090316.pdf.
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FinCEN continues to support broader Administration efforts to
combat mortgage fraud and mitigate vulnerabilities to abuse. On April
6, 2009, Treasury Secretary Geithner, together with the Attorney
General, Housing and Urban Development Secretary and others, announced
a multi-agency crackdown targeting loan modification fraud and
foreclosure rescue scams; this included a new FinCEN-led effort to
``marshal information about possible fraudulent actors, drawing upon a
variety of data available to law enforcement, regulatory agencies, and
the consumer protection community, for the purpose of identifying and
proactively referring potential criminal targets to participating law
enforcement authorities.'' \21\
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\21\ See https://www.treasury.gov/press-center/press-releases/Pages/tg83.aspx; see also Treasury Department Press Release,
Federal, State Partners Convene to Discuss Ongoing Anti-Fraud
Efforts in Housing Markets (September 17, 2009), https://www.treasury.gov/press-center/press-releases/Pages/tg291.aspx.
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In November 2009, President Obama established the Financial Fraud
Enforcement Task Force (``FFETF'') to hold accountable those who helped
bring about the last financial crisis, and to prevent another crisis
from happening.\22\ The Treasury Department and FinCEN are among the
members of the Task Force.\23\ FinCEN has actively participated in the
FFETF's Mortgage Fraud Working Group (``MFWG''), including in the
MFWG's Mortgage Fraud Summits around the country.\24\ The foregoing
experiences have affirmed the importance of SARs filed by depository
institutions in efforts to combat mortgage fraud.
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\22\ See Executive Order 13519 (November 17, 2009).
\23\ See remarks of Timothy Geithner, Secretary, U.S. Department
of the Treasury, on ``The Financial Fraud Enforcement Task Force'',
Nov. 17, 2009, https://www.treasury.gov/press-center/press-releases/Pages/tg408.aspx.
\24\ See https://www.fincen.gov/fraudenftaskforce.html; https://www.justice.gov/opa/pr/2010/February/10-opa-192.html; https://www.justice.gov/opa/pr/2010/March/10-opa-316.html; and https://www.stopfraud.gov/news/news-04232010.html.
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By this NPRM, FinCEN proposes AML program and SAR requirements for
the Federal National Mortgage Association (``Fannie Mae''), the Federal
Home Loan Mortgage Corporation (``Freddie Mac''), and the Federal Home
Loan Banks (``Banks'') (collectively, the ``Housing Government
Sponsored Enterprises'' or ``Housing GSEs''). FinCEN believes that the
proposed regulations would augment FinCEN's initiatives in this
area.\25\ The Housing GSEs are involved in providing financing to the
residential mortgage market and thus may be exposed to the risk of
fraud, particularly when investing in whole mortgage loans. Although
the respective elements of the businesses of the Banks and Fannie Mae
and Freddie Mac may differ, all of them are involved in providing
financing to the residential mortgage market and thus may be exposed to
fraud risks. While purchasing mortgage loans, extending loans secured
by mortgages and other real estate related collateral, and engaging in
a variety of related financial

[[Page 69207]]

activities, the Housing GSEs have access to information on suspected
mortgage fraud and money laundering that has proven valuable to law
enforcement and regulators in the investigation and prosecution of
mortgage fraud and other financial crimes.\26\ While current fraud
reporting obligations on the Housing GSEs, discussed below, have value
in combating fraud, the usefulness could be increased by including the
Housing GSEs within FinCEN's framework to support broader regulatory
and law enforcement efforts to combat mortgage fraud and related
financial crimes, consistent with the purposes of the BSA.
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\25\ FinCEN recently proposed regulations that would require
non-bank residential mortgage lenders and originators to establish
AML programs and file SARs. If adopted, that rule would apply
regulatory requirements to mortgage companies and brokers analogous
to those currently applicable to banks and other financial
institutions. See Anti-Money Laundering Program and Suspicious
Activity Report Filing Requirements for Residential Mortgage Lenders
and Originators, Notice of Proposed Rulemaking, 75 FR 76677
(December 9, 2010).
\26\ See Section II.B., infra, for a review of current fraud
detection and reporting by the Housing GSEs.
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C. Establishment and Authority of the Federal Housing Finance Agency
and the Housing GSEs

The Federal Housing Finance Regulatory Reform Act of 2008 (the
``Reform Act'') \27\ created the Federal Housing Finance Agency
(``FHFA'') as an independent agency of the Federal Government. FHFA was
established on the date of enactment of the Reform Act --July 30, 2008.
The Reform Act provided for the abolishment of the Office of Federal
Housing Enterprise Oversight (``OFHEO'') and the Federal Housing
Finance Board (``FHFB'') one year after the date of enactment. These
agencies, together with the Housing and Urban Development Government
Sponsored Enterprise Mission Teams, were combined to establish
FHFA.\28\
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\27\ Division A of the Housing and Economic Recovery Act of 2008
(``HERA''), Public Law 110-289, 122 Stat. 2654 (2008).
\28\ The authorities, powers and responsibilities of FHFA are
contained in the Federal Home Loan Bank Act, 12 U.S.C. 1421 et seq.,
as amended by Division A of HERA. and the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (Safety and
Soundness Act), 12 U.S.C. 4501 et seq., as amended by Division A of
HERA. See Notice of Establishment, 73 FR 52356 (Sept. 9, 2008).
https://www.fhfa.gov/webfiles/160/FHFA_%20Notice_of_Establishment_-_73_FR_52356_(Sept--9%2c--2008).pdf.
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FHFA has regulatory authority over Fannie Mae, Freddie Mac and the
Banks (collectively referred to in FHFA regulations as the ``regulated
entities''), and over the Office of Finance of the Federal Home Loan
Bank System.\29\ FHFA is responsible for ensuring that the Housing GSEs
operate in a safe and sound manner, including being capitalized
adequately and maintaining internal controls, that they carry out their
public policy missions, and that their activities foster liquid,
efficient, competitive, and resilient national housing finance markets.
Where FHFA has not acted with superseding regulations, the Housing GSEs
continue to operate under regulations promulgated by OFHEO and
FHFB.\30\
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\29\ The Housing GSEs are defined as FHFA regulated entities in
Safety and Soundness Act, as amended, 12 U.S.C. 4501 et seq. The
definition of ``regulated entity'' provides ``[t]he term `regulated
entity' means--(A) the Federal National Mortgage Association and any
affiliate thereof; (B) the Federal Home Loan Mortgage Corporation
and any affiliate thereof; and (C) any Federal Home Loan Bank.'' (12
U.S.C. 4502(20)).
\30\ On September 6, 2008, FHFA appointed itself conservator of
Fannie Mae and Freddie Mac, pursuant to 12 U.S.C. 4617. https://www.fhfa.gov/webfiles/1858/NoticeregardingconservatorFNMA.pdf;
https://www.fhfa.gov/webfiles/1857/NoticeregardingconservatorFHLMC.pdf.
---------------------------------------------------------------------------

Fannie Mae and Freddie Mac were chartered by Congress primarily to
establish secondary market facilities for residential mortgages.\31\
Specifically, Congress established Fannie Mae and Freddie Mac to
provide stability in the secondary market for residential mortgages,
respond appropriately to the private capital market, provide ongoing
assistance to the secondary market for residential mortgages (including
activities relating to mortgages on housing for low- and moderate-
income families involving a reasonable economic return that may provide
less of a return than Fannie Mae's and Freddie Mac's other activities),
and promote access to mortgage credit throughout the nation.
---------------------------------------------------------------------------

\31\ See 12 U.S.C. 1451, 1716.
---------------------------------------------------------------------------

The Federal Home Loan Banks were organized under the Federal Home
Loan Bank Act (``Bank Act'').\32\ The Banks are financial cooperatives;
only members of a Bank may purchase the capital stock of a Bank, and
only members or certain eligible housing associates (such as State
housing finance agencies) may obtain access to secured loans, known as
advances, or other products provided by a Bank.\33\ Each Bank is
managed by its own board of directors and serves the public interest by
enhancing the availability of residential mortgage and community
lending credit through its member institutions.\34\ Any eligible
institution (generally a federally-insured depository institution or
State-regulated insurance company) may become a member of a Bank if it
satisfies certain criteria and purchases a specified amount of the
Bank's capital stock.\35\ The Bank Act also requires each Bank to
establish an affordable housing program (known as ``AHP'') and
contribute a specified portion of its previous year's net income to
support that program.\36\
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\32\ 12 U.S.C. 1423, 1432(a).
\33\ 12 U.S.C. 1426(a)(4), 1430(a), 1430b.
\34\ 12 U.S.C. 1427.
\35\ 12 U.S.C. 1424; 12 CFR part 1263.
\36\ 12 U.S.C. 1430(j).
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II. Notice of Proposed Rulemaking--In General

This NPRM would define financial institution for certain purposes
of the BSA to include the Housing GSEs. Specifically, this NPRM
proposes SAR requirements and AML program requirements.

A. Housing GSEs Proposed To Be Defined as Financial Institutions

The BSA does not expressly enumerate any of the Housing GSEs among
the entities defined as ``financial institutions'' under the BSA.\37\
Nevertheless, the BSA definition of financial institution is broad,
listing numerous types of businesses, including commercial banks and
other depository institutions. The BSA also authorizes the Secretary to
include additional types of businesses within the BSA definition if the
Secretary determines that they engage in any activity ``similar to,
related to, or a substitute for'' any activity of any of the listed
businesses.\38\
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\37\ 31 U.S.C. 5312(a)(2) and (c)(1). The BSA definition
includes institutions that are already subject to federal regulation
such as banks, savings associations, credit unions, securities
broker-dealers, and futures commission merchants. Money services
businesses (such as money transmitters and currency exchanges) are
also defined as financial institutions under the BSA, and, like the
former categories, under FinCEN's implementing regulations. The BSA
definition also includes dealers in precious metals, stones, or
jewels; pawnbrokers; loan or finance companies; private bankers;
insurance companies; travel agencies; telegraph companies; sellers
of vehicles, including automobiles, airplanes, and boats; persons
engaged in real estate closings and settlements; investment bankers;
investment companies; and commodity pool operators and commodity
trading advisors that are registered or required to register under
the Commodity Exchange Act (7 U.S.C. 1 et seq.).
\38\ 31 U.S.C. 5312(a)(2)(Y).
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The Housing GSEs work closely with other BSA-defined financial
institutions--in fact the majority of their members or servicers are
commercial banks, thrifts, credit unions and insurance companies. Many
of the products and services offered by the Housing GSEs can be viewed
as substitutes for or related to products and services offered by
commercial banks and nonbank financial institutions included in the
statutory definition under 31 U.S.C. 5312(a)(2).
The main role of the Housing GSEs is to support the primary
mortgage market and affordable housing programs through the purchase,
guarantee and securitization of mortgage loans, and the extension of
loans (known as ``advances'' in the Federal Home Loan Bank System)
secured primarily by mortgage loans and real estate related assets.
Typically, a significant portion of these mortgage loans are made by

[[Page 69208]]

commercial banks, credit unions and thrifts, which are already
financial institutions under the BSA and subject to FinCEN's
regulations.\39\ The Housing GSEs also establish and manage affordable
housing programs, similar to affordable housing and community
reinvestment programs of commercial banks and thrifts in underserved
markets. Some of the Banks also have acquired member asset programs,
known as ``AMA,'' whereby they acquire fixed-rate, single-family
mortgage loans from participating member institutions, which are also
generally commercial banks or other depository institutions already
included within the BSA's definition of financial institutions. In
summary, the Housing GSEs provide liquidity, through loan purchases and
collateralized advances, that permit banks and other customers to offer
a broad range of credit products and related services.
---------------------------------------------------------------------------

\39\ 31 U.S.C. 5312(a)(2).
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FinCEN believes, as discussed above, that the Housing GSEs engage
in activities that are ``similar to, related to, or a substitute for''
financial services that are provided by other BSA-defined financial
institutions. For this reason, FinCEN is proposing to exercise its
authority under 31 U.S.C. 5312(a)(2)(Y) to define these entities as
financial institutions. As explained more fully below, this rulemaking
would define Housing GSEs as financial institutions for the purpose of
requiring them to establish AML programs and file SARs. This NPRM is
supported by the FHFA, their primary regulator.
While this NPRM proposes to define the Housing GSEs as ``financial
institutions'' under our BSA authority, the Housing GSEs will not be
considered ``Financial Institutions'' within the regulatory meaning of
the term under FinCEN's regulations at 31 CFR 1010.100(t). Placement
within the regulatory definition of ``Financial Institution'' would
trigger other recordkeeping and reporting requirements that FinCEN does
not consider appropriate for the Housing GSEs at this time. The term
Housing Government Sponsored Enterprise is proposed to be added as a
new defined term at 31 CFR 1010.100(lll).
In light of FinCEN's efforts to combat mortgage fraud, money
laundering and terrorist financing, and the anticipated value of adding
information to FinCEN's database to support law enforcement, FinCEN
requests comment about whether there are other types of mortgage
related businesses and professions that might encounter similar risks
and vulnerabilities to those presented by the Housing GSEs.
Specifically, FinCEN requests comment on whether there are other
entities that engage in mortgage related activities that are ``similar
to, related to, or a substitute for'' financial services that are
provided by BSA-defined financial institutions that should be defined
as financial institutions under the BSA in subsequent rulemakings; for
example: Private mortgage insurers and reinsurers, mortgage servicers,
and other types of businesses in the primary and secondary mortgage
markets.
FinCEN also requests comments about whether it would be appropriate
to include in a Final Rule any provisions that account for the
differences in the business, operation and mission of the Banks and
Fannie Mae and Freddie Mac.

B. Suspicious Activity Reporting and AML Program Requirements

Under the rules proposed by this NPRM, the Housing GSEs would be
required to file SAR forms directly with FinCEN, as do other financial
institutions subject to SAR filing regulations. FinCEN expects that the
transition to compliance with FinCEN's regulation will not be difficult
or costly, because the Housing GSEs already have policies, procedures
and training programs in place to comply with the FHFA's current fraud
reporting regulation, which is very similar to the proposed SAR
reporting regulation.
As part of a final rule adopted on January 27, 2010, FHFA issued
new fraud reporting regulations, codified at 12 CFR part 1233,
``Reporting of Fraudulent Financial Instruments.'' \40\ That regulation
requires each Housing GSE to submit a timely report to FHFA upon
discovery that it has purchased or sold a fraudulent loan or financial
instrument, or suspects a possible fraud relating to the purchase or
sale of any loan or financial instrument. In addition, each Housing GSE
must establish and maintain internal controls, policies, procedures,
and operational training programs to discover such transactions. The
regulation applies to all programs and products of the Housing
GSEs.\41\
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\40\ 75 FR 4255 (Jan. 27, 2010).
\41\ 75 FR 4255, 4258-4259. Should FinCEN issue a final rule
imposing AML and SAR requirements on the Housing GSEs, FHFA may
amend these regulations to avoid any conflicts or duplicative
requirements with FinCEN's regulations, consistent with the
requirements of the Safety and Soundness Act, as amended.
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Accordingly, FinCEN believes that most, if not all, of the Housing
GSEs should already have anti-fraud programs in place that would
satisfy most of FinCEN's AML program and SAR regulatory requirements.
The only additional actions that may be required to comply with the
proposed regulations (in addition to reporting a wider range of
suspected financial crime than is currently required) would be minor
modifications to existing policies and procedures to formalize and
implement two of FinCEN's regulatory requirements that are not
expressly required under the FHFA's regulations; specifically: (1) The
appointment of a compliance officer to monitor for compliance with
FinCEN's regulations, and (2) periodic independent testing to monitor
for compliance. Housing GSEs that anticipate the need to submit a
relatively low number of SAR forms may establish procedures to submit
individual forms via FinCEN's established systems, so that the Housing
GSE likely may be able to file SARs without reliance on, or changes to,
their existing systems. FinCEN will issue guidance, if necessary, to
clarify FinCEN's regulations and assist the Housing GSEs with
compliance related matters.
Upon the designation of the Housing GSEs as ``financial
institutions'' under the BSA, the Housing GSEs, as well as their
directors, officers, and employees, and agents will become subject to
the BSA's liability safe harbor for financial institutions that file
SARs at 31 U.S.C. 5318(g)(3). This safe harbor is intended to encourage
financial institutions to report suspicious activities, even if, as
here, the proposed SAR regulation will likely require reporting of a
wider range of suspected fraud, money laundering and financial crimes
related to the products and services offered by the Housing GSEs than
those entities are currently accustomed to report.
FinCEN further requests comment about whether there are other types
of entities that engage in mortgage related activities that should be
defined as financial institutions or loan or finance companies under
the BSA in subsequent rulemakings, as part of FinCEN's incremental
approach, discussed in more detail in the proposed rulemaking Anti-
Money Laundering Program and Suspicious Activity Report Filing
Requirements for Residential Mortgage Lenders and Originators,\42\ to
address vulnerabilities in the mortgage finance sector.
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\42\ See 75 FR 76677, December 9, 2010. https://edocket.access.gpo.gov/2010/pdf/2010-30765.pdf.

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[[Page 69209]]

III. Section-by-Section Analysis

A. Definition of Housing Government Sponsored Enterprises

Section 1010.100(lll) defines the key terms used in the proposed
rules. The definitions reflect FinCEN's determination that AML program
and SAR requirements should be applied to the Housing GSEs, which are
defined as Regulated Entities under 12 U.S.C. 4502(20) subject to the
general supervision and regulation of the FHFA. The definition of
Housing Government Sponsored Enterprise includes: (1) The Federal
National Mortgage Association; (2) the Federal Home Loan Mortgage
Corporation; and (3) each Federal Home Loan Bank. The proposed
definition does not include any entity-affiliated party \43\ of Fannie
Mae, Freddie Mac, or any Bank, including the Office of Finance of the
Federal Home Loan Bank System.
---------------------------------------------------------------------------

\43\ See 12 U.S.C. 4502(11).
---------------------------------------------------------------------------

B. Compliance and Enforcement

Section 1010.810(b)(10) delegates authority to examine the Housing
GSEs for compliance with the requirements of these regulations to the
FHFA. FHFA is the general regulator for the Housing GSEs and enforces
its own statutes and regulations regarding safety and soundness. FHFA
will be FinCEN's delegate for examination for compliance with these
proposed regulations, and FinCEN will work with FHFA to coordinate and
direct such delegated compliance examination activities. FinCEN will
continue to retain enforcement authority under the BSA, including for
the imposition of civil penalties for violations of the BSA and these
regulations.

C. Anti-Money Laundering Program

Section 1030.210(a) requires that each Housing GSE develop and
implement an anti-money laundering program reasonably designed to
prevent the Housing GSE from being used to facilitate money laundering
or the financing of terrorist activities, and other financial crimes,
including mortgage fraud. The program must be in writing and must be
approved by senior management. A Housing GSE's written program also
must be made available to FinCEN upon request.
Section 1030.210(b) sets forth the minimum requirements of a
Housing GSE's AML program. Beyond these minimum requirements, however,
the proposed rule is intended to give Housing GSEs the flexibility to
design their programs to mitigate their own enterprise-specific risks.
Section 1030.210(b)(1) requires the AML program to incorporate
policies, procedures, and internal controls based upon the Housing
GSE's assessment of the risks of money laundering, terrorism finance
and other financial crimes associated with its products, customers,
distribution channels, and geographic locations. As explained above, a
Housing GSE's assessment of customer-related information is a key
component to an effective AML program. Thus, a Housing GSE's AML
program must ensure that the Housing GSE obtains all the information
necessary to make its AML program effective. Such information includes,
but is not limited to, relevant customer information on individual
borrowers and the retail financial institutions who are the Housing
GSEs customers. The specific means to obtain such information is left
to the discretion of the Housing GSE, although FinCEN anticipates that
the Housing GSE may need to amend existing agreements to ensure that
the Housing GSE receives necessary customer information. We do not
anticipate that this requirement will entail obtaining information not
already received in the ordinary course of business by the Housing
GSEs, particularly with regard to information on individual borrowers.
For purposes of making the required risk assessment, a Housing GSE must
consider all relevant information, including whether the retail
financial institutions who are its customers are subject to AML program
requirements under the BSA.
Policies, procedures, and internal controls also must be reasonably
designed to ensure compliance with BSA requirements. Housing GSEs may
conduct some of their operations through third parties. Some elements
of the compliance program may best be performed by personnel of these
entities, in which case it is permissible for a Housing GSE to delegate
contractually the implementation and operation of those aspects of its
AML program to such an entity and to rely on the compliance program of
such third parties that are subject to an independent AML program
requirement under the BSA. Any Housing GSE that delegates
responsibility for aspects of its AML program to a third party,
however, remains fully responsible for the effectiveness of the
program, as well as ensuring that compliance examiners are able to
obtain information and records relating to the AML program.
Section 1030.210(b)(2) requires that a Housing GSE designate a
compliance officer to be responsible for administering the AML program.
The person should be competent and knowledgeable regarding BSA
requirements and money laundering and fraud issues and risks, and
should be empowered with full responsibility and authority to develop
and enforce appropriate policies and procedures. The role of the
compliance officer is to ensure that (1) The program is implemented
effectively; (2) the program is updated as necessary; and (3)
appropriate persons are trained and educated in accordance with Sec.
1030.210(b)(3).
Section 1030.210(b)(3) requires that a Housing GSE provide for
education and training of appropriate persons. Employee training is an
integral part of any AML program. In order to carry out their
responsibilities effectively, employees of a Housing GSE (and of any
third party not already receiving training as part of another AML
program requirement) with responsibility under the program must be
trained in the requirements of the rule and money laundering and fraud
risks generally so that red flags associated with existing or potential
customers can be identified. Such training may be conducted by outside
or in-house seminars, and may include computer-based training. The
nature, scope, and frequency of the education and training program of
the Housing GSE will depend upon the employee functions performed.
However, those with obligations under the AML program must be
sufficiently trained to carry out their responsibilities effectively.
Moreover, these employees should receive periodic updates and
refreshers regarding the AML program.
Section 1030.210(b)(4) requires that a Housing GSE provide for
independent testing of the program on a periodic basis to ensure that
it complies with the requirements of the rule and that the program
functions as designed. An outside consultant or accountant need not
perform the testing and review. The review may be conducted by an
officer, employee or group of employees, so long as the reviewer is not
the designated compliance officer and does not report directly to the
compliance officer. The frequency of the independent testing will
depend upon the Housing GSE's assessment of risks posed by its
operations. Any recommendations resulting from such testing should be
implemented promptly or reviewed by senior management. A Housing GSE
may rely on the testing performed by third parties that are subject to
an independent AML program requirement.
Section 1030.210(c) states that compliance with the AML program
requirements will be determined by

[[Page 69210]]

FinCEN or its delegates, under the terms of the BSA.

D. Reports of Suspicious Transactions

Section 1030.320(a) contains the rules setting forth the obligation
of Housing GSEs to report suspicious transactions that are conducted or
attempted by, at, or through a Housing GSE and involve or aggregate at
least $5,000 in funds or other assets. It is important to recognize
that transactions are reportable under this rule and 31 U.S.C. 5318(g)
regardless of whether they involve currency. The $5,000 minimum amount
is consistent with existing SAR filing requirements for other financial
institutions.
Section 1030.320(a)(1) contains the general statement of the
obligation to file reports of suspicious transactions. The obligation
extends to transactions conducted or attempted by, at, or through a
Housing GSE. The proposed rule also contains a provision in Sec.
1030.320(a)(1) designed to encourage the reporting of transactions that
appear relevant to violations of law or regulation, even in cases in
which the rule does not explicitly so require; for example, in the case
of a transaction falling below the $5,000 threshold in the proposed
rule.
Section 1030.320(a)(2) specifically describes the four categories
of transactions that require reporting. A Housing GSE is required to
report a transaction if it knows, suspects, or has reason to suspect
that the transaction (or a pattern of transactions of which the
transaction is a part): (i) Involves funds derived from illegal
activity or is intended or conducted to hide or disguise funds or
assets derived from illegal activity; (ii) is designed, whether through
structuring or other means, to evade the requirements of the BSA; (iii)
has no business or apparent lawful purpose, and the Housing GSE knows
of no reasonable explanation for the transaction after examining the
available facts; or (iv) involves the use of the Housing GSE to
facilitate criminal activity.\44\
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\44\ The fourth reporting category has been added to the
suspicious activity reporting rules promulgated since the passage of
the USA PATRIOT Act to make it clear that the requirement to report
suspicious activity encompasses the reporting of transactions
involving fraud and those in which legally derived funds are used
for criminal activity, such as the financing of terrorism.
---------------------------------------------------------------------------

A determination as to whether a report is required must be based on
all the facts and circumstances relating to the transaction and
customer of the Housing GSE in question. Different fact patterns will
require different judgments. Some examples of red flags associated with
existing or potential customers are referenced in previous FinCEN
reports on mortgage fraud.\45\ However, the means of commerce and the
techniques of money laundering are continually evolving, and there is
no way to provide an exhaustive list of suspicious transactions.\46\
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\45\ See note 13, supra.
\46\ FinCEN will continue to pursue a regulatory approach that
involves a combination of guidance, training programs, and
government-industry information exchange so that implementation of
any new AML program and SAR reporting regulations can be
accomplished in the most flexible and cost efficient way as
possible, while protecting the primary and secondary mortgage
markets and the financial system as a whole from fraud, money
laundering and other financial crimes.
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Section 1030.320(a)(3) provides that the obligation to identify and
to report a suspicious transaction rests with the Housing GSE involved
in the transaction. However, where more than one Housing GSE, or
another financial institution with a separate suspicious activity
reporting obligation, is involved in the same transaction, only one
report is required to be filed, provided it contains all relevant facts
and each institution maintains a copy of the report and any supporting
documentation.
The proposed rule is intended to require that a Housing GSE
evaluate customer activity and relationships for fraud, money
laundering and other financial crime risks, and design a suspicious
transaction monitoring program that is appropriate for the particular
Housing GSE in light of such risks.
Section 1030.320(b) sets forth the filing procedures to be followed
by Housing GSEs making reports of suspicious transactions. Within 30
days after a Housing GSE becomes aware of a suspicious transaction (or
within 60 days if no suspect has been identified), it must report the
transaction by completing a SAR and filing it with FinCEN. Supporting
documentation relating to each SAR is to be collected and maintained
separately by the Housing GSE and made available upon request by FinCEN
or any Federal, State, or local law enforcement agency, or any Federal
regulatory authority that examines the Housing GSE for compliance with
the BSA. Because FinCEN's SAR regulations provide that supporting
documentation is deemed to be filed with the SAR, the regulatory
authorities referenced in the previous sentence are consistent with
those regulatory authorities to whom a SAR may be disclosed, as
discussed in the rules of construction below. For situations requiring
immediate attention, Housing GSEs are to telephone the appropriate law
enforcement authority in addition to filing a SAR.
Section 1030.320(c) provides that filing Housing GSEs must maintain
copies of SARs and the underlying related documentation for a period of
five years from the date of filing. As indicated above, supporting
documentation is to be made available to FinCEN and the specified law
enforcement and regulatory authorities, upon request.
Section 1030.320(d)(1) reinforces the statutory prohibition against
the disclosure by a financial institution of a SAR (regardless of
whether the report would be required by the proposed rule or is filed
voluntarily).\47\ Thus, the section requires that a SAR and information
that would reveal the existence of that SAR (``SAR information'') be
kept confidential and not be disclosed, except as authorized within the
rules of construction. The proposed rule includes rules of construction
that identify actions an institution may take that are not precluded by
the confidentiality provision. These actions include the disclosure of
SAR information to FinCEN, or Federal, State, or local law enforcement
agencies, or a Federal regulatory authority that examines the Housing
GSE for compliance with the BSA. This confidentiality provision also
does not prohibit the disclosure of the underlying facts, transactions,
and documents upon which a SAR is based, or the sharing of SAR
information within the Housing GSE's corporate organizational structure
for purposes consistent with Title II of the BSA as determined by
FinCEN in regulation or in guidance.\48\
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\47\ See 31 U.S.C. 5318(g)(2).
\48\ On November 23, 2010, FinCEN issued updated guidance for
the banking, securities, and futures industries authorizing the
sharing of SAR information with parent companies, head offices, and,
under certain conditions, domestic affiliates. 75 FR 75607 (Dec. 3,
2010). No such guidance has been issued for the Housing GSEs.
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Section 1030.320(d)(2) incorporates the statutory prohibition
against disclosure of SAR information, other than in fulfillment of
their official duties consistent with the BSA, by government users of
SAR data. The section also clarifies that official duties do not
include the disclosure of SAR information in response to a request for
non-public information\49\ or for use in a

[[Page 69211]]

private legal proceeding, including a request under 31 CFR 1.11.\50\
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\49\ For purposes of this rulemaking, ``non-public information''
refers to information that is exempt from disclosure under the
Freedom of Information Act.
\50\ 31 CFR 1.11 is the Department of the Treasury's information
disclosure regulation. Generally, these regulations are known as
``Touhy regulations,'' after the Supreme Court's decision in United
States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). In that case,
the Supreme Court held that an agency employee could not be held in
contempt for refusing to disclose agency records or information when
following the instructions of his or her supervisor regarding the
disclosure. An agency's Touhy regulations are the instructions
agency employees must follow when those employees receive requests
or demands to testify or otherwise disclose agency records or
information.
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Section 1030.320(e) provides protection from liability for making
reports of suspicious transactions, and for failures to disclose the
fact of such reporting to the full extent provided by 31 U.S.C.
5318(g)(3). The protection afforded the GSEs in title 12 by FHFA
explicitly requires ``good faith,'' \51\ unlike 31 U.S.C. 5318(g)(3)
which contains no such requirement. Legal authority weighs heavily in
favor of the proposition that this safe harbor is not subject to a
``good faith'' limitation.\52\
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\51\ 12 CFR 1233.5.
\52\ See Stoutt v. Banco Popular de Puerto Rico, 320 F.3d 26, 31
(1st Cir. 2003) (no good faith requirement), Lee v. Bankers Trust,
166 F.3d 540, 544 (2d Cir. 1999) (same), Henry v. Bank of America,
2010 U.S. Dist. LEXIS 14561 *11-13 (N.D.Cal., Feb. 2, 2010) (same),
Eyo v. United States, 2007 U.S. Dist. LEXIS 88088 *15-16 (D.N.J.,
Nov. 29, 2007) (same), Nieman v. Firstar Bank, 2005 U.S. Dist. LEXIS
38959 *18 (N.D. Iowa, Sept. 26, 2005) (same); but see Lopez v. First
Union National Bank, 129 F.3d 1186, 1992 (11th Cir. 1997) (good
faith requirement).
---------------------------------------------------------------------------

Section 1030.320(f) notes that compliance with the obligation to
report suspicious transactions will be examined by FinCEN or its
delegates, and provides that failure to comply with the rule may
constitute a violation of the BSA and the BSA regulations.
Section 1030.320(g) provides that the new SAR requirement is
effective when an anti-money laundering program required by the
regulations is required to be implemented.

E. Special Information Procedures To Deter Money Laundering and
Terrorist Activity

Section 1030.500 states generally that the Housing GSEs are covered
by the special information procedures to detect money laundering and
terrorist activity requirements set forth and cross referenced in
sections 1030.520 (cross-referencing to 31 CFR 1010.520) and 1030.540
(cross-referencing to 31 CFR 1010.540). Sections 1010.520 and 101.540
implement sections 314(a) and 314(b) \53\ of the USA PATRIOT Act,
respectively, and generally apply to any financial institution listed
in 31 U.S.C. 5312(a)(2).\54\ For the sake of clarity, the Final Rule
adds subpart E to Part 1030 to confirm that the section 314 rules will
continue to apply to the Housing GSEs.
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\53\ In addition to falling within the definition of ``financial
institution'' found at 31 U.S.C. 5312(a)(2), participants in the
314(b) program also must be ``required * * * to establish and
maintain an anti-money laundering program. * * *'' 1010.540(a)(1).
\54\ This proposed rule would define the Housing GSEs as
financial institutions under section 5312(a)(2)(Y).
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IV. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). In this case, a final regulation would apply
only to the Housing GSEs, none of which are small entities for purposes
of this requirement. Accordingly, FinCEN hereby certifies that a final
regulation is not likely to have a significant economic impact on a
substantial number of small business entities for purposes of the
Regulatory Flexibility Act. Therefore, the provisions of the Regulatory
Flexibility Act do not apply. See 5 U.S.C. 601(2) and 603(a).

V. Paperwork Reduction Act

The proposed regulation pertains to the Housing GSEs. As a result,
the proposed regulation does not contain any information collection
requirement that requires the approval of the Office of Management and
Budget under the Paperwork Reduction Act See 44 U.S.C. 3501 et seq.

VI. Executive Order 13563 and 12866

Executive Orders 13563 and 12866 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 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 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 the 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 202 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. Taking into account the
factors noted above and using conservative estimates of average labor
costs in evaluating the cost of the burden imposed by the proposed
regulation, FinCEN has determined that it is not required to prepare a
written statement under section 202.

List of Subjects in 31 CFR Parts 1010 and 1030

Administrative practice and procedure, Banks, Banking, Brokers,
Currency, Federal home loan banks, Foreign banking, Foreign currencies,
Gambling, Investigations, Mortgages, Penalties, Reporting and
recordkeeping requirements, Securities, Terrorism.

Authority and Issuance

For the reasons set forth in the preamble, Chapter X of title 31 of
the Code of Federal Regulations is proposed to be amended as follows:

PART 1010--GENERAL PROVISIONS

1. The authority citation for part 1010 continues to read as
follows:

Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314
and 5316-5332; title III, sec. 314 Pub. L. 107-56, 115 Stat. 307.

2. Amend Sec. 1010.100 by adding new paragraph (lll) to read as
follows:

Sec. 1010.100 General definitions.

* * * * *
(lll) Housing government sponsored enterprise. (1) A ``housing
government sponsored enterprise'' is one of the following ``Regulated
Entities'' under 12 U.S.C. 4502(20) subject to the general supervision
and regulation of the Federal Housing Finance Agency (FHFA):
(i) The Federal National Mortgage Association;

[[Page 69212]]

(ii) The Federal Home Loan Mortgage Corporation; or
(iii) Each Federal Home Loan Bank.
(2) The term ``housing government sponsored enterprise'' does not
include any ``Entity-Affiliated Party,'' as defined in 12 U.S.C.
4502(11).
3. Amend Sec. 1010.810 by adding new paragraph (b)(10) to read as
follows:

Sec. 1010.810 Enforcement.

* * * * *
(b) * * *
(10) To the Federal Housing Finance Agency with respect to the
housing government sponsored enterprises, as defined in Sec.
1010.100(lll) of this part.
* * * * *
4. New part 1030 added to read as follows:

PART 1030--RULES FOR HOUSING GOVERNMENT SPONSORED ENTERPRISES

Subpart A--Definitions
Sec.
1030.100 Definitions.
Subpart B--Programs
1030.200 General.
1030.210 Anti-money laundering programs for housing government
sponsored enterprises.
Subpart C--Reports Required To Be Made By Housing Government Sponsored
Enterprises
1030.300 General.
1030.310-1030.315 [Reserved]
1030.320 Reports by housing government sponsored enterprises of
suspicious transactions.
1030.330 [Reserved]
Subpart D--Records Required To Be Maintained By Housing Government
Sponsored Enterprises.
1030.400 General.
Subpart E--Special Information Sharing Procedures To Deter Money
Laundering and Terrorist Activity
1030.500 General.
1030.520 Special information sharing procedures to deter money
laundering and terrorist activity for housing government sponsored
enterprises.
1030.530 [Reserved]
1030.540 Voluntary information sharing among financial institutions.
Subpart F--Special Standards of Diligence; Prohibitions, and Special
Measures for Housing Government Sponsored Enterprises
1030.600-1030.670 [Reserved]

Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314
and 5316-5332; title III, sec. 314 Pub. L. 107-56, 115 Stat. 307.

Subpart A--Definitions

Sec. 1030.100 Definitions.

Refer to Sec. 1010.100 of this chapter for general definitions not
noted herein.

Subpart B--Programs

Sec. 1030.200 General.

Housing government sponsored enterprises are subject to the program
requirements set forth and cross referenced in this subpart. Housing
government sponsored enterprises should also refer to subpart B of part
1010 of this Chapter for program requirements contained in that subpart
that apply to housing government sponsored enterprises.

Sec. 1030.210 Anti-money laundering programs for housing government
sponsored enterprises.

(a) Anti-money laundering program requirements for housing
government sponsored enterprises. Each housing government sponsored
enterprise shall develop and implement a written anti-money laundering
program that is reasonably designed to prevent the housing government
sponsored enterprise from being used to facilitate money laundering or
the financing of terrorist activities. The program must be approved by
senior management. A housing government sponsored enterprise shall make
a copy of its anti-money laundering program available to the Financial
Crimes Enforcement Network or its designee upon request.
(b) Minimum requirements. At a minimum, the anti-money laundering
program shall:
(1) Incorporate policies, procedures, and

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