Financial Crimes Enforcement Network; Amendment to the Bank Secrecy Act Regulations-Imposition of Special Measure Against the Islamic Republic of Iran as a Jurisdiction of Primary Money Laundering Concern, 72878-72885 [2011-30331]
Download as PDF
<![CDATA[
72878
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
individual also holds an interest in the
partnership that is not an interest in a
limited partnership as a limited partner
(as defined in paragraph (e)(3)(i) of this
section), such as a state-law general
partnership interest, at all times during
the entity’s taxable year ending with or
within the individual’s taxable year (or
the portion of the entity’s taxable year
during which the individual (directly or
indirectly) owns such interest in a
limited partnership as a limited
partner).
(4) Effective/applicability date. This
section applies to taxable years
beginning on or after the date of
publication of the Treasury decision
adopting these rules as a final regulation
in the Federal Register.
*
*
*
*
*
Par. 4. Section 1.469–5T paragraph (e)
is revised to read as follows:
§ 1.469–5T Material participation
(temporary).
*
*
*
*
*
(e) Treatment of Limited Partners.
[Reserved]. See § 1.469–5(e) for rules
relating to this paragraph (e).
*
*
*
*
*
Par. 5. Section 1.469–9 paragraph
(f)(1) is revised to read as follows:
§ 1.469–9 Rules for certain rental real
estate activities.
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
*
*
*
*
*
(f) Limited partnership interests in
rental real estate activities—(1) In
general. If a taxpayer elects under
paragraph (g) of this section to treat all
interests in rental real estate as a single
rental real estate activity, and at least
one interest in rental real estate is held
by the taxpayer as an interest in a
limited partnership as a limited partner
(within the meaning of § 1.469–5(e)(3)),
the combined rental real estate activity
of the taxpayer will be treated as an
interest in a limited partnership as a
limited partner for purposes of
determining material participation.
Accordingly, the taxpayer will not be
treated under this section as materially
participating in the combined rental real
estate activity unless the taxpayer
materially participates in the activity
under the tests listed in § 1.469–5(e)(2)
(dealing with the tests for determining
the material participation of a limited
partner).
*
*
*
*
*
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2011–30611 Filed 11–25–11; 8:45 am]
BILLING CODE 4830–01–P
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
DEPARTMENT OF THE TREASURY
SUPPLEMENTARY INFORMATION:
31 CFR Chapter X
I. Background
RIN 1506–AB16
A. Statutory Provisions
On October 26, 2001, the President
signed into law the Uniting and
Strengthening America by Providing
Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (the
‘‘USA PATRIOT Act’’), Public Law 107–
56. Title III of the USA PATRIOT Act
amends the anti-money laundering
provisions of the Bank Secrecy Act
(‘‘BSA’’), codified at 12 U.S.C. 1829b
and 1951–1959, and 31 U.S.C. 5311–
5314, and 5316–5332, to promote the
prevention, detection, and prosecution
of international money laundering and
the financing of terrorism. Regulations
implementing the BSA appear at 31 CFR
Chapter X. The authority of the
Secretary of the Treasury (the
‘‘Secretary’’) to administer the BSA and
its implementing regulations has been
delegated to the Director of FinCEN.1
Section 311 of the USA PATRIOT Act
(‘‘section 311’’) added section 5318A to
the BSA, granting the Secretary the
authority, upon finding that reasonable
grounds exist for concluding that a
foreign jurisdiction, institution, class of
transaction, or type of account is of
‘‘primary money laundering concern,’’
to require domestic financial
institutions and financial agencies to
take certain ‘‘special measures’’ against
the primary money laundering concern.
Section 311 identifies factors for the
Secretary to consider and Federal
agencies to consult before the Secretary
may conclude that a jurisdiction,
institution, class of transaction, or type
of account is of primary money
laundering concern. The statute also
provides similar procedures, i.e., factors
and consultation requirements, for
selecting the specific special measures
to be imposed against the primary
money laundering concern.
Taken as a whole, section 311
provides the Secretary with a range of
options that can be adapted to target
specific money laundering and terrorist
financing concerns most effectively.
These options give the Secretary the
authority to bring additional pressure on
those jurisdictions and institutions that
pose money laundering threats. Through
the imposition of various special
measures, the Secretary can gain more
information about the jurisdictions,
institutions, transactions, or accounts of
concern; can more effectively monitor
the respective jurisdictions, institutions,
Financial Crimes Enforcement
Network; Amendment to the Bank
Secrecy Act Regulations—Imposition
of Special Measure Against the Islamic
Republic of Iran as a Jurisdiction of
Primary Money Laundering Concern
Financial Crimes Enforcement
Network, Treasury (‘‘FinCEN’’),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:
In a notice of finding
published elsewhere in this issue of the
Federal Register, the Secretary of the
Treasury, through his delegate, the
Director of FinCEN, found that
reasonable grounds exist for concluding
that the Islamic Republic of Iran (‘‘Iran’’)
is a jurisdiction of primary money
laundering concern pursuant to 31
U.S.C. 5318A. FinCEN is issuing this
notice of proposed rulemaking to
impose a special measure against Iran.
DATES: Written comments on the notice
of proposed rulemaking must be
submitted on or before January 27, 2012.
ADDRESSES: You may submit comments,
identified by RIN 1506–AB16, by any of
the following methods:
• Federal E-rulemaking Portal:
http:/www.regulations.gov. Follow the
instructions for submitting comments.
Include 1506–AB16 in the submission.
Refer to Docket Number FINCEN–2011–
0008.
• Mail: The Financial Crimes
Enforcement Network, P.O. Box 39,
Vienna, VA 22183. Include RIN 1506–
AB16 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 FUTHER INFORMATION CONTACT: The
FinCEN regulatory helpline at (800)
949–2732 and select Option 6.
SUMMARY:
PO 00000
Frm 00026
Fmt 4702
Sfmt 4702
1 Therefore, references to the authority of the
Secretary of the Treasury under section 311 of the
USA PATRIOT Act apply equally to the Director of
FinCEN.
E:\FR\FM\28NOP1.SGM
28NOP1
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
transactions, or accounts; or can protect
U.S. financial institutions from
involvement with jurisdictions,
institutions, transactions, or accounts
that are of money laundering concern.
Before making a finding that
reasonable grounds exist for concluding
that a jurisdiction is of primary money
laundering concern, the Secretary is
required to consult with both the
Secretary of State and the Attorney
General. The Secretary is also required
by section 311, as amended,2 to
consider ‘‘such information as the
Secretary determines to be relevant,
including the following potentially
relevant factors,’’ which extend the
Secretary’s consideration beyond
traditional money laundering concerns
to issues involving, inter alia, terrorist
financing and weapons proliferation:
• Evidence that organized criminal
groups, international terrorists, or
entities involved in the proliferation of
weapons of mass destruction or
missiles, have transacted business in
that jurisdiction;
• The extent to which that
jurisdiction or financial institutions
operating in that jurisdiction offer bank
secrecy or special regulatory advantages
to nonresidents or nondomiciliaries of
that jurisdiction;
• The substance and quality of
administration of the bank supervisory
and counter-money laundering laws of
that jurisdiction;
• The relationship between the
volume of financial transactions
occurring in that jurisdiction and the
size of the economy of the jurisdiction;
• The extent to which that
jurisdiction is characterized as an
offshore banking or secrecy haven by
credible international organizations or
multilateral expert groups;
• Whether the United States has a
mutual legal assistance treaty with that
jurisdiction, and the experience of
United States law enforcement officials
and regulatory officials in obtaining
information about transactions
originating in or routed through or to
such jurisdiction; and
• The extent to which that
jurisdiction is characterized by high
levels of official or institutional
corruption.
If the Secretary determines that
reasonable grounds exist for concluding
that a jurisdiction is of primary money
laundering concern, the Secretary must
determine the appropriate special
measure(s) to address the specific
money laundering risks. Section 311
2 31 U.S.C. 5318A was amended by section 501
of the Iran Freedom Support Act of 2006, Public
Law 109–293.
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
provides a range of special measures
that can be imposed individually,
jointly, in any combination, and in any
sequence.3 The Secretary’s imposition
of special measures requires additional
consultations to be made and factors to
be considered. The statute requires the
Secretary to consult with appropriate
federal agencies and other interested
parties 4 and to consider the following
specific factors:
• Whether similar action has been or
is being taken by other nations or
multilateral groups;
• Whether the imposition of any
particular special measures would
create a significant competitive
disadvantage, including any undue cost
or burden associated with compliance,
for financial institutions organized or
licensed in the United States;
• The extent to which the action or
the timing of the action would have a
significant adverse systemic impact on
the international payment, clearance,
and settlement system, or on legitimate
business activities involving the
particular jurisdiction; and
• The effect of the action on United
States national security and foreign
policy.
B. Finding
Today, as detailed elsewhere in this
part,5 based upon a review and analysis
of the administrative record in this
matter, consultations with relevant
Federal agencies and departments, and
after consideration of the factors
enumerated in section 311, the Director
of FinCEN has determined that
reasonable grounds exist for concluding
that the Islamic Republic of Iran is a
3 Available
special measures include requiring:
(1) Recordkeeping and reporting of certain financial
transactions; (2) collection of information relating to
beneficial ownership; (3) collection of information
relating to certain payable-through accounts; (4)
collection of information relating to certain
correspondent accounts; and (5) prohibition or
conditions on the opening or maintaining of
correspondent or payable through accounts. 31
U.S.C. 5318A(b)(l)–(5). For a complete discussion of
the range of possible countermeasures, see 68 FR
18917 (April 17, 2003) (proposing special measures
against Nauru).
4 Section 5318A(a)(4)(A) requires the Secretary to
consult with the Chairman of the Board of
Governors of the Federal Reserve System, any other
appropriate Federal banking agency, the Secretary
of State, the Securities and Exchange Commission
(SEC), the Commodity Futures Trading Commission
(CFTC), the National Credit Union Administration
(NCUA), and, in the sole discretion of the Secretary,
‘‘such other agencies and interested parties as the
Secretary may find to be appropriate.’’ The
consultation process must also include the Attorney
General, if the Secretary is considering prohibiting
or imposing conditions on domestic financial
institutions opening or maintaining correspondent
account relationships with the designated
jurisdiction.
5 See the notice of this finding published
elsewhere today in the Federal Register.
PO 00000
Frm 00027
Fmt 4702
Sfmt 4702
72879
jurisdiction of primary money
laundering concern.6
II. Imposition of Special Measure
Against the Islamic Republic of Iran as
a Jurisdiction of Primary Money
Laundering Concern, Including the
Central Bank of Iran Within the
Definition of Iranian Banking
Institution
As a result of that finding, and based
upon the additional consultations and
the consideration of all relevant factors
discussed in the finding and in this
notice of proposed rulemaking, the
Director of FinCEN has determined that
reasonable grounds exist for the
imposition of the fifth special measure
authorized by section 5318A(b)(5).7
That special measure authorizes a
prohibition against the opening or
maintaining of correspondent accounts 8
by any domestic financial institution or
agency for or on behalf of a foreign
banking institution, if the correspondent
account involves the targeted
jurisdiction. A discussion of the section
311 factors relevant to imposing this
particular special measure follows.
1. Whether Similar Actions Have Been
or Will Be Taken by Other Nations or
Multilateral Groups Against Iran
The United Nations Security Council
has adopted multiple resolutions
imposing sanctions on Iran for its
refusal to comply with international
nuclear obligations and proliferation
sensitive activities, including United
Nations Security Council resolutions
(‘‘UNSCRs’’) 1696,9 1737,10 1747,11
6 Classified information used in support of a
section 311 finding and measure(s) may be
submitted by Treasury to a reviewing court ex parte
and in camera. See section 376 of the Intelligence
Authorization Act for fiscal year 2004, Public Law
108–177 (amending 31 U.S.C. 5318A by adding new
paragraph (f)).
7 In connection with this action, FinCEN
consulted with staffs of the Federal functional
regulators, the Department of Justice, and the
Department of State.
8 For purposes of the proposed rule, a
correspondent account is defined as an account
established to receive deposits from, or make
payments or other disbursements on behalf of, a
foreign bank, or handle other financial transactions
related to the foreign bank.
9 For a complete discussion of the sanctions
adopted by UNSCR 1696, see ‘‘Resolution 1696,’’
United Nations Security Council, July 31, 2006
(https://www.un.org/Docs/sc/unsc_
resolutions06.htm).
10 For a complete discussion of the sanctions
adopted by UNSCR 1737, see ‘‘Resolution 1737,’’
United Nations Security Council, December 23,
2006 (https://www.un.org/Docs/sc/unsc_
resolutions06.htm).
11 For a complete discussion of the sanctions
adopted by UNSCR 1747, see ‘‘Resolution 1747,’’
United Nations Security Council, March 24, 2007
(https://www.un.org/Docs/sc/unsc_
resolutions07.htm).
E:\FR\FM\28NOP1.SGM
28NOP1
72880
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
1803,12 and 1929.13 All resolutions were
reaffirmed in 2008, 2009, and 2010
through UNSCRs 1835,14 1887,15 and
1929,16 respectively.
Iran’s serious deficiencies with
respect to anti-money laundering/
countering the financing of terrorism
(‘‘AML/CFT’’) controls have long been
highlighted by numerous international
bodies and government agencies.
Starting in October 2007, the Financial
Action Task Force (‘‘FATF’’) has issued
a series of public statements expressing
its concern that Iran’s lack of a
comprehensive AML/CFT regime
represents a significant vulnerability
within the international financial
system. The statements further called
upon Iran to address those deficiencies
with urgency, and called upon FATFmember countries to advise their
institutions to conduct enhanced due
diligence with respect to the risks
associated with Iran’s deficiencies.17
The FATF has been particularly
concerned with Iran’s failure to address
the risk of terrorist financing, and
starting in February 2009, the FATF
called upon its members and urged all
12 For a complete discussion of the sanctions
adopted by UNSCR 1803, see ‘‘Resolution 1803,’’
United Nations Security Council, March 3, 2008
(https://www.un.org/Docs/sc/unsc_
resolutions08.htm).
13 For a complete discussion of the sanctions
adopted by UNSCR 1929, see ‘‘Resolution 1929,’’
United Nations Security Council, June 9, 2010
(https://www.un.org/Docs/sc/unsc_
resolutions10.htm).
14 See ‘‘Resolution 1835,’’ United Nations
Security Council, September 27, 2008 (https://www.
un.org/Docs/sc/unsc_resolutions08.htm).
15 See ‘‘Resolution 1887,’’ United Nations
Security Council, September 24, 2009 (https://www.
un.org/Docs/sc/unsc_resolutions09.htm).
16 See ‘‘Resolution 1929,’’ United Nations
Security Council, June 9, 2010 (https://www.un.org/
Docs/sc/unsc_resolutions10.htm).
17 In response to concerns raised by these FATF
and IMF reports, FinCEN issued an advisory on
October 16, 2007 to financial institutions regarding
the heightened risk of Iranian ‘‘money laundering,
terrorist financing, and weapons of mass
destruction proliferation financing.’’ The advisory
further cautioned institutions that there may be an
increased effort by Iranian entities to circumvent
international sanctions and related financial
community scrutiny through the use of deceptive
practices. See ‘‘Guidance to Financial Institutions
on the Increasing Money Laundering Threat
Involving Illicit Iranian Activity,’’ FinCEN, October
16, 2007 (https://www.fincen.gov/statutes_regs/
guidance/pdf/guidance_fi_increasing_mlt_
iranian.pdf). The FATF simultaneously published
guidance to assist countries with implementation of
UNSCRs 1737 and 1747. See ‘‘Guidance Regarding
the Implementation of Activity-Based Financial
Prohibitions of United Nations Security Council
Resolution 1737,’’ October 12, 2007 (https://www.
fatf-gafi.org/dataoecd/43/17/39494050.pdf) and
‘‘Guidance Regarding the Implementation of
Financial Provisions of the United Nations Security
Council Resolutions to Counter the Proliferation of
Weapons of Mass Destruction,’’ September 5, 2007
(https://www.fatf-gafi.org/dataoecd/23/16/
39318680.pdf).
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
jurisdictions to apply effective countermeasures to protect their financial
sectors from the terrorist financing risks
emanating from Iran.18 In addition, the
FATF advised jurisdictions to protect
correspondent relationships from being
used to bypass or evade countermeasures and risk mitigation practices,
and to take into account money
laundering and financing of terrorism
risks when considering requests by
Iranian financial institutions to open
branches and subsidiaries in their
jurisdictions.19 The FATF also called on
its members and other jurisdictions to
advise their financial institutions to give
special attention to business
relationships and transactions with Iran,
including Iranian companies and
financial institutions.20 Over the past
three years, the FATF has repeatedly
reiterated these concerns and reaffirmed
its call for FATF-member countries and
all jurisdictions to implement
countermeasures to protect the
international financial system from the
terrorist financing risk emanating from
Iran. In response, numerous countries,
including all G7 countries, have issued
advisories to their financial
institutions.21
The FATF’s most recent statement in
October 2011 reiterated, with a renewed
urgency, its concern regarding Iran’s
failure to address the risk of terrorist
financing and the serious threat this
poses to the integrity to the
international financial system.22 The
FATF reaffirmed its February 2009 call
to apply effective countermeasures to
protect their financial sectors from ML/
FT risks emanating from Iran, and
further called upon its members to
consider the steps already taken and
possible additional safeguards or
strengthen existing ones.23 In addition,
18 See ‘‘FATF Statement on Iran,’’ The Financial
Action Task Force, February 25, 2009 (https://www.
fatf-gafi.org/dataoecd/18/28/42242615.pdf).
19 Id.
20 Id.
21 See ‘‘Circular 13/2008 (GW)—Statement of the
FATF of 16 October 2008,’’ November 7, 2008
(https://www.bafin.de/cln_171/nn_721228/Shared
Docs/Veroeffentlichungen/EN/Service/Circulars/rs_
0813_gw.html?_nnn=true); ‘‘February 27, 2009
FINTRAC Advisory,’’ February 27, 2009 (https://
www.fintrac-canafe.gc.ca/publications/avs/200902-27-eng.asp); ‘‘HM Treasury warns businesses of
serious threats posed to the international financial
system,’’ March 11, 2009 (https://webarchive.nation
alarchives.gov.uk/+/https://www.hm-treasury.gov.
uk/press_26_09.htm); ‘‘Letter from French Minister
of Economy,’’ (https://www2.economie.gouv.fr/
directions_services/dgtpe/sanctions/sanctions
iran.php); and ‘‘Bank of Italy Circular,’’ (https://
www.dt.tesoro.it/it/prevenzione_reati_finanziari/).
22 See ‘‘FATF Public Statement,’’ The Financial
Action Task Force, October 28, 2011 (https://www.
fatf-gafi.org/document/55/0,3746,en_32250379_
32236992_48966519_1_1_1_1,00.html).
23 Id.
PO 00000
Frm 00028
Fmt 4702
Sfmt 4702
the FATF stated that, if Iran fails to take
concrete steps to improve its AML/CFT
regime, the FATF will consider calling
on its members and urging all
jurisdictions to strengthen
countermeasures in February 2012.24
The numerous calls by the FATF for
Iran to urgently address its terrorist
financing vulnerability, coupled with
the extensive record of Iranian entities
using the financial system to finance
terrorism, proliferation activities, and
other illicit activity,25 raises significant
concern over the willingness or ability
of Iran to establish adequate controls to
counter terrorist financing.
Although none of these actions to
sanction Iran prohibit domestic
financial institutions and agencies from
opening or maintaining a correspondent
account for or on behalf of any financial
institution in Iran, or require the type of
special due diligence outlined in this
proposed rulemaking, FinCEN
encourages other countries or
multilateral groups to take similar
action based on the findings contained
in this rulemaking.
2. Whether the Imposition of the Fifth
Special Measure Would Create a
Significant Competitive Disadvantage,
Including Any Undue Cost or Burden
Associated With Compliance, for
Financial Institutions Organized or
Licensed in the United States
The fifth special measure sought to be
imposed by this rulemaking would
prohibit covered financial institutions
from opening and maintaining
correspondent accounts for, or on behalf
of, Iranian banking institutions. As a
corollary to this measure, covered
financial institutions also would be
required to take reasonable steps to
apply special due diligence, as set forth
below, to all of their correspondent
accounts to help ensure that no such
account is being used indirectly to
provide services to an Iranian banking
institution. FinCEN does not expect the
burden associated with these
requirements to be significant given that
U.S. financial institutions have long
been subject to sanctions regulations
prohibiting the provision of
correspondent account services for
banking institutions in Iran. There is a
minimal burden involved in
transmitting a one-time notice to certain
correspondent account holders
concerning the prohibition on indirectly
providing services to Iranian banking
institutions. In addition, U.S. financial
24 Id.
25 ‘‘Update on the Continuing Illicit Finance
Threat Emanating From Iran,’’ FinCEN, June 22,
2010 (https://www.fincen.gov/statutes_regs/
guidance/html/fin-2010-a008.html).
E:\FR\FM\28NOP1.SGM
28NOP1
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
institutions generally apply some degree
of due diligence in screening their
transactions and accounts, often through
the use of commercially available
software such as that used for
compliance with the economic
sanctions programs administered by the
Office of Foreign Assets Control (OFAC)
of the Department of the Treasury. As
explained in more detail in the sectionby-section analysis below, financial
institutions should, if necessary, be able
to easily adapt their current screening
procedures to comply with this special
measure. Thus, the special due
diligence that would be required by this
rulemaking is not expected to impose a
significant additional burden upon U.S.
financial institutions.
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
3. The Extent To Which the Proposed
Action or Timing of the Action Will
Have a Significant Adverse Systemic
Impact on the International Payment,
Clearance, and Settlement System, or on
Legitimate Business Activities of Iran
Banking institutions in Iran generally
are not major participants in the
international payment system and are
not relied upon by the international
banking community for clearance or
settlement services. Additionally, given
the preexisting OFAC and international
sanctions on Iran and certain Iranian
banking institutions, it is unlikely that
these new measures or the timing of the
new measures will have a significant
impact on the international payment,
clearance, and settlement system.
Financial transactions between the
United States and Iran pertaining to
licensed agricultural and medical
exports to Iran, as well as other licensed
transactions or transactions exempted or
not prohibited from the scope of OFAC
sanctions, may continue under the rule
as proposed.26 Legitimate pre-existing
personal investments held by Iranian
residents in the United States that do
not involve Iranian banking institutions
will be unaffected. Consequently, in
light of the reasons for imposing this
special measure, FinCEN does not
believe that it will impose an undue
burden on legitimate business activities.
4. The Effect of the Proposed Action on
United States National Security and
Foreign Policy
The exclusion from the U.S. financial
system of jurisdictions that serve as
conduits for significant money
laundering activity, for the financing of
terrorism or weapons of mass
destruction or their delivery systems,
26 For a more complete discussion of prohibited
and non-prohibited transactions, see https://
www.treas.gov/ofac.
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
and for other financial crimes enhances
U.S. national security by making it more
difficult for terrorists and money
launderers to access the substantial
resources of the U.S. financial system.
To the extent that this action serves as
an additional tool in preventing Iran
from accessing the U.S. financial
system, the proposed action supports
and upholds U.S. national security and
foreign policy goals. More generally, the
imposition of the fifth special measure
would complement the U.S.
Government’s worldwide efforts to
expose and disrupt international money
laundering and terrorist financing.
Therefore, pursuant to the finding of
the Director of FinCEN that Iran is a
jurisdiction of primary money
laundering concern, and after
conducting the required consultations
and weighing the relevant factors,
FinCEN has determined that reasonable
grounds exist for imposing the fifth
special measure authorized by 31 U.S.C.
5318A(b)(5) against Iran.
III. Section-by-Section Analysis
The proposed rule would prohibit
covered financial institutions from
establishing, maintaining, or managing
in the United States any correspondent
account for, or on behalf of, banking
institutions in Iran. As a corollary to
this prohibition, covered financial
institutions would be required to apply
special due diligence to their
correspondent accounts to guard against
their improper indirect use by Iranian
banking institutions. At a minimum,
that special due diligence must include
two elements. First, a covered financial
institution must notify those
correspondent account holders that the
covered financial institution knows or
has reason to know provide services to
Iranian banking institutions, that such
correspondents may not provide Iranian
banking institutions with access to the
correspondent account maintained at
the covered financial institution.
Second, a covered financial institution
must take reasonable steps to identify
any indirect use of its correspondent
accounts by Iranian banking
institutions, to the extent that such
indirect use can be determined from
transactional records maintained by the
covered financial institution in the
normal course of business. A covered
financial institution should take a riskbased approach when deciding what, if
any, additional due diligence measures
it should adopt to guard against the
improper indirect use of its
correspondent accounts by Iranian
banking institutions, based on risk
factors such as the type of services it
PO 00000
Frm 00029
Fmt 4702
Sfmt 4702
72881
offers and the geographic locations of its
correspondents.
A. 1010.657(a)—Definitions
1. Correspondent Account
Section 1010.657(a)(1) defines the
term ‘‘correspondent account’’ by
reference to the definition contained in
31 CFR 1010.605(c)(1)(ii). Section
1010.605(c)(1)(ii) defines a
correspondent account to mean:
• An account established to receive
deposits from, or make payments or other
disbursements on behalf of, a foreign bank,
or handle other financial transactions related
to the foreign bank.
In the case of a U.S. depository
institution, this broad definition
includes most types of banking
relationships between a U.S. depository
institution and a foreign bank that are
established to provide regular services,
dealings, and other financial
transactions including demand deposit,
savings deposit, or other transaction or
asset accounts, and credit accounts or
other extensions of credit.27
In the case of securities brokerdealers, futures commission merchants,
introducing brokers in commodities,
and investment companies that are
open-end companies (mutual funds), we
are using the same definition of
‘‘account’’ for purposes of this rule as
was established in the final rule
implementing section 312 of the USA
PATRIOT Act.28
2. Covered Financial Institution
Section 1010.657(a)(2) of the
proposed rule defines ‘‘covered
financial institution’’ with the same
definition used in the final rule
implementing section 312 of the USA
PATRIOT Act,29 which in general
includes the following:
• An insured bank (as defined in
section 3(h) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(h));
• A commercial bank;
• An agency or branch of a foreign
bank in the United States;
• A federally insured credit union;
• A credit union;
• A savings association;
• A corporation acting under section
25A of the Federal Reserve Act (12
U.S.C. 611);
• A trust bank or trust company that
is federally regulated and is subject to
an anti-money laundering program
requirements;
• A broker or dealer in securities
registered, or required to be registered,
27 See
31 CFR 1010.605(c)(2)(i)(A)–(B).
31 CFR 1010.605(c)(2)(ii)–(iv).
29 See 31 CFR 1010.605(f)(1)–(2).
28 See
E:\FR\FM\28NOP1.SGM
28NOP1
72882
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
with the Securities and Exchange
Commission under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.), except persons who register
pursuant to section 15(b)(11) of the
Securities Exchange Act of 1934;
• A futures commission merchant or
an introducing broker registered, or
required to be registered, with the
Commodity Futures Trading
Commission under the Commodity
Exchange Act (7 U.S.C. 1 et seq.), except
persons who register pursuant to section
4(f)(a)(2) of the Commodity Exchange
Act;
• A private banker; and
• A mutual fund.
3. Iranian Banking Institution
Section 1010.657(a)(3) of the
proposed rule defines a foreign bank as
that term is defined in 1010.100(u). An
Iranian banking institution shall mean
any foreign bank chartered by Iran,
including any branches, offices, or
subsidiaries of such bank operating in
any jurisdiction, and any branch or
office within Iran of any foreign bank
licensed by Iran. In addition, the Central
Bank of Iran (Bank Markazi Iran),30 as
well as any foreign bank of which more
than 50 percent of the voting stock or
analogous interest is owned by two or
more foreign banks chartered by Iran,
shall be considered an Iranian banking
institution. For purposes of this rule, a
subsidiary shall mean a company of
which more than 50 percent of the
voting stock or analogous interest is
directly or indirectly owned by another
company.
A covered financial institution should
take commercially reasonable measures
to determine whether it maintains a
correspondent account for an Iranian
banking institution, including a branch,
office, or subsidiary of an Iranian
banking institution.
B. 1010.657(b)—Requirements for
Covered Financial Institutions
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
For purposes of complying with the
proposed rule’s prohibition on the
opening or maintaining of
correspondent accounts for, or on behalf
of, Iranian banking institutions, FinCEN
expects that a covered financial
30 Prior regulations that have applied Section 311
special measures to jurisdictions of primary money
laundering concern have not included the
jurisdiction’s central bank within the scope of the
regulation. However, in the case of the Islamic
Republic of Iran, this inclusion is justified due to
the deceptive practices the Central Bank of Iran
engages in and encourages among Iranian stateowned banks. This behavior is discussed in the
notice of finding that the Islamic Republic of Iran
is a jurisdiction of primary money laundering
concern published elsewhere today in the Federal
Register. See footnote 5, supra.
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
institution will take such steps that a
reasonable and prudent financial
institution would take to protect itself
from loan fraud or other fraud or loss
based on misidentification of a person’s
status.
1. Prohibition on Direct Use of
Correspondent Accounts
Section 1010.657(b)(1) of the
proposed rule requires all covered
financial institutions to terminate any
correspondent account that is
established, maintained, administered,
or managed in the United States for, or
on behalf of, Iranian banking
institutions, provided that the account
is not blocked under any Executive
Order issued pursuant to the
International Emergency Economic
Powers Act (50 U.S.C. 1701 et seq.)
(IEEPA) or under 31 CFR Chapter V. The
prohibition would require all covered
financial institutions to review their
account records to ensure that they
maintain no accounts directly for, or on
behalf of, an Iranian banking institution.
2. Special Due Diligence of
Correspondent Accounts To Prohibit
Improper Indirect Use
As a corollary to the prohibition on
maintaining correspondent accounts
directly for Iranian banking institutions,
proposed section 1010.657(b)(2)
requires a covered financial institution
to apply special due diligence to its
correspondent accounts 31 that is
reasonably designed to guard against
their improper indirect use by Iranian
banking institutions. At a minimum,
that special due diligence must include
notifying those correspondent account
holders that the covered financial
institution knows or has reason to know
provide services to Iranian banking
institutions, that such correspondents
generally may not provide Iranian
banking institutions with access to the
correspondent account maintained at
the covered financial institution. A
covered financial institution would, for
example, have knowledge that the
correspondents provide such access to
Iranian banking institutions through
transaction screening software or
through the processing of Iranian
transactions under OFAC licenses. A
covered financial institution may satisfy
this requirement by transmitting the
following notice to its correspondent
account holders that it knows or has
31 Again, for purposes of the proposed rule, a
correspondent account is defined as an account
established to receive deposits from, or make
payments or other disbursements on behalf of, a
foreign bank, or handle other financial transactions
related to the foreign bank.
PO 00000
Frm 00030
Fmt 4702
Sfmt 4702
reason to know provide services to
Iranian banking institutions:
Notice: Pursuant to U.S. regulations issued
under section 311 of the USA PATRIOT Act,
31 CFR 1010.657, we are prohibited from
establishing, maintaining, administering or
managing a correspondent account for, or on
behalf of, an Iranian banking institution or
any of its subsidiaries. The regulations also
require us to notify you that you may not
provide an Iranian banking institution or any
of its subsidiaries with access to the
correspondent account you hold at our
financial institution other than for the
purpose of processing transactions that are
authorized, exempt, or not prohibited
pursuant to any Executive Order issued
under the International Emergency Economic
Powers Act (50 U.S.C. 1701 et seq.) or 31
C.F.R. Chapter V. If we become aware that an
Iranian banking institution or any of its
subsidiaries is indirectly using the
correspondent account you hold at our
financial institution for transactions other
than those specified above, we will be
required to take appropriate steps to prevent
such access, including terminating your
account.
The purpose of the notice requirement
is to help ensure cooperation from
correspondent account holders in
denying Iranian banking institutions
access to the U.S. financial system.
However, FinCEN does not require or
expect a covered financial institution to
obtain a certification from any of its
correspondent account holders that
indirect access will not be provided in
order to comply with this notice
requirement. Instead, methods of
compliance with the notice requirement
could include, for example, transmitting
a one-time notice by mail, fax, or email
to certain of the covered financial
institution’s correspondent account
customers, informing them that they
may not provide Iranian banking
institutions with access to the covered
financial institution’s correspondent
account, or including such information
in the next regularly occurring
transmittal from the covered financial
institution to those correspondent
account holders. FinCEN specifically
solicits comments on the form and
scope of the notice that would be
required under the rule. FinCEN also
requests comment as to whether a onetime notice will be sufficient to ensure
cooperation from correspondent account
holders in denying Iranian banking
institutions access to the financial
system, as well as the incremental costs
that financial institutions would incur if
this rule required an annual notice.
A covered financial institution also
would be required under this
rulemaking to take reasonable steps to
identify any indirect use of its
correspondent accounts by Iranian
E:\FR\FM\28NOP1.SGM
28NOP1
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
banking institutions, to the extent that
such indirect use can be determined
from transactional records maintained
by the covered financial institution in
the normal course of business. For
example, a covered financial institution
would be expected to apply an
appropriate screening mechanism to be
able to identify a funds transfer order
that on its face listed an Iranian banking
institution as the originator’s or
beneficiary’s financial institution, or
otherwise referenced an Iranian banking
institution in a manner detectable under
the financial institution’s normal
screening processes. An appropriate
screening mechanism could be the
mechanism used by a covered financial
institution to comply with various legal
requirements, such as the commercially
available software programs used to
comply with the economic sanctions
programs administered by OFAC.
FinCEN specifically solicits comments
on the requirement under the proposed
rule that covered financial institutions
take reasonable steps to screen their
correspondent accounts in order to
identify any indirect use of such
accounts by Iranian banking
institutions.
Notifying certain correspondent
account holders and taking reasonable
steps to identify any indirect use of its
correspondent accounts by Iranian
banking institutions in the manner
discussed above are the minimum due
diligence requirements under the
proposed rule. Beyond these minimum
steps, a covered financial institution
should adopt a risk-based approach for
determining what, if any, additional due
diligence measures it should implement
to guard against the improper indirect
use of its correspondent accounts by
Iranian banking institutions, based on
risk factors such as the type of services
it offers and the geographic locations of
its correspondent account holders.
A covered financial institution that
obtains knowledge that a correspondent
account is being used by a foreign bank
to provide indirect access to an Iranian
banking institution must take all
appropriate steps to prevent such
indirect access, including the
notification of its correspondent account
holder per section 1010.657(b)(2)(i)(A)
and, where necessary, terminating the
correspondent account. However, this
provision does not require financial
institutions to prevent indirect access to
correspondent accounts when such
access is necessary to conduct
transactions involving Iranian banking
institutions that are: (1) Authorized
pursuant to Executive Orders issued
under IEEPA or pursuant to 31 CFR
Chapter V, including transactions
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
authorized by the Office of Foreign
Assets Control; (2), exempted from the
prohibitions of such authority; or (3) not
prohibited by such authority.
A covered financial institution may
afford the foreign bank a reasonable
opportunity to take corrective action
prior to terminating the correspondent
account. Should the foreign bank refuse
to comply, or if the covered financial
institution cannot obtain adequate
assurances that Iranian banking
institutions will no longer be able to
improperly access the correspondent
account, the covered financial
institution must terminate the account
within a commercially reasonable time.
This means that the covered financial
institution should not permit the foreign
bank to establish any new positions or
execute any transactions through the
account, other than those necessary to
close the account. A covered financial
institution may reestablish an account
closed under the proposed rule if it
determines that the account will not be
used to provide improper indirect
access to an Iranian banking institution.
FinCEN specifically solicits comments
on the requirement under the proposed
rule that covered financial institutions
prevent improper indirect access to
Iranian banking institutions, once such
indirect access is identified.
3. Reporting Not Required
Section 1010.657(b)(3) of the
proposed rule clarifies that the rule does
not impose any reporting requirement
upon any covered financial institution
that is not otherwise required by
applicable law or regulation. A covered
financial institution must, however,
document its compliance with the
requirement that it notify those
correspondent account holders that the
covered financial institution knows or
has reason to know provide services to
Iranian banking institutions, that such
correspondents may not provide Iranian
banking institutions with improper
access to the correspondent account
maintained at the covered financial
institution.
IV. Request for Comments
FinCEN invites comments on all
aspects of the proposal to prohibit the
opening or maintaining of
correspondent accounts for or on behalf
of Iranian banking institutions, and
specifically invites comments on the
following matters:
1. The form and scope of the notice
to certain correspondent account
holders that would be required under
the rule and whether a one-time notice
will be sufficient to ensure cooperation
from correspondent account holders in
PO 00000
Frm 00031
Fmt 4702
Sfmt 4702
72883
denying Iranian banking institutions
access to the financial system, and the
incremental costs that financial
institutions would incur if this rule
required an annual notice;
2. The appropriate scope of the
proposed requirement for a covered
financial institution to take reasonable
steps to identify any indirect use of its
correspondent accounts by Iranian
banking institutions;
3. The appropriate steps a covered
financial institution should take once it
identifies an indirect use of one of its
correspondent accounts by an Iranian
banking institution; and
4. The impact of the proposed special
measure upon legitimate transactions
with Iran involving, in particular, U.S.
persons and entities; foreign persons,
entities, and governments; and
multilateral organizations doing
legitimate business with persons or
entities operating in Iran.
V. Regulatory Flexibility Act
It is hereby certified that this
proposed rule will not have a significant
economic impact on a substantial
number of small entities. Given that
U.S. financial institutions have long
been subject to sanctions regulations
prohibiting the provision of
correspondent account services for
banking institutions in Iran, FinCEN
assesses that the prohibition on
maintaining such accounts will not have
a significant impact on a substantial
number of small entities. In addition, all
U.S. persons, including U.S. financial
institutions, currently must exercise
some degree of due diligence in order to
comply with various legal requirements.
The tools used for such purposes,
including commercially available
software used to comply with the
economic sanctions programs
administered by OFAC, can easily be
modified to monitor for the use of
correspondent accounts by Iranian
banking institutions. Thus, the special
due diligence that would be required by
this rulemaking—i.e., the one-time
transmittal of notice to certain
correspondent account holders and the
screening of transactions to identify any
indirect use of correspondent accounts,
is not expected to impose a significant
additional economic burden upon small
U.S. financial institutions. FinCEN
invites comments from members of the
public who believe there will be a
significant economic impact on small
entities.
VI. Paperwork Reduction Act
The collection of information
contained in this proposed rule is being
submitted to the Office of Management
E:\FR\FM\28NOP1.SGM
28NOP1
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
72884
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
and Budget for review in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on
the collection of information should be
sent to the Desk Officer for the
Department of Treasury, Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Paperwork Reduction Project (1506),
Washington, DC 20503 (or by email to
oira_submission@omb.eop.gov) with a
copy to FinCEN by mail or email at the
addresses previously specified.
Comments should be submitted by one
method only. Comments on the
collection of information should be
received by January 27, 2012. In
accordance with the requirements of the
Paperwork Reduction Act of 1995, 44
U.S.C. 3506(c)(2)(A), and its
implementing regulations, 5 CFR part
1320, the following information
concerning the collection of information
as required by 31 CFR 1010.657 is
presented to assist those persons
wishing to comment on the information
collection.
The collection of information in this
proposed rule is in 1010.657(b)(2)(i) and
1010.657(b)(3)(i). The notification
requirement in 1010.657(b)(2)(i) is
intended to ensure cooperation from
correspondent account holders in
denying Iranian banking institutions
access to the U.S. financial system. The
information required to be maintained
by 1010.657(b)(3)(i) will be used by
federal agencies and certain selfregulatory organizations to verify
compliance by covered financial
institutions with the provisions of 31
CFR 1010.657. The class of financial
institutions affected by the notification
requirement is identical to the class of
financial institutions affected by the
recordkeeping requirement. The
collection of information is mandatory.
Description of Affected Financial
Institutions: Banks, broker-dealers in
securities, futures commission
merchants and introducing brokers, and
mutual funds maintaining
correspondent accounts.
Estimated Number of Affected
Financial Institutions: 5,000.
Estimated Average Annual Burden
Hours per Affected Financial
Institution: The estimated average
burden associated with the collection of
information in this proposed rule is one
hour per affected financial institution.
Estimated Total Annual Burden:
5,000 hours.
FinCEN specifically invites comments
on: (a) Whether the proposed collection
of information is necessary for the
proper performance of the mission of
FinCEN, including whether the
information shall have practical utility;
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
(b) the accuracy of FinCEN’s estimate of
the burden of the proposed collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information required to be maintained;
(d) ways to minimize the burden of the
required collection of information,
including through the use of automated
collection techniques or other forms of
information technology; and (e)
estimates of capital or start-up costs and
costs of operation, maintenance, and
purchase of services to maintain the
information.
VII. Executive Order 12866
The proposed rule is not a significant
regulatory action for purposes of
Executive Order 12866, ‘‘Regulatory
Planning and Review.’’
List of Subjects in 31 CFR Chapter X
Administrative practice and
procedure, Banks and banking, Brokers,
Counter-money laundering, Counterterrorism, Foreign banking, Iran.
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:
Chapter X—Financial Recordkeeping and
Reporting of Currency and Financial
Transactions
1. The authority citation for chapter X
is amended to read as follows:
Authority: 12 U.S.C. 1829b and 1951–
1959; 31 U.S.C. 5311–5314, 5316–5332 Title
III, secs. 311, 312, 313, 314, 319, 326, 352,
Pub. L. 107–56, 115 Stat. 307.
2. Subpart F of Chapter X is amended
by adding new § 1010.657 under the
undesignated center heading ‘‘SPECIAL
DUE DILIGENCE FOR
CORRESPONDENT ACCOUNTS AND
PRIVATE BANKING ACCOUNTS’’ to
read as follows:
§ 1010.657 Special measures against the
Islamic Republic of Iran.
(a) Definitions. For purposes of this
section:
(1) Correspondent account has the
same meaning as provided in
§ 1010.605(c)(1)(ii).
(2) Covered financial institution has
the same meaning as provided in
§ 1010.605(f)(1)–(2).
(3) Foreign bank has the same
meaning as 1010.100(u).
(4) Iranian banking institution means
the following:
(i) Any foreign bank chartered by Iran,
including any branches, offices, or
subsidiaries of such bank operating in
any jurisdiction, and any branch or
office within Iran of any foreign bank
licensed by Iran;
PO 00000
Frm 00032
Fmt 4702
Sfmt 4702
(ii) The Central Bank of Iran (Bank
Markazi Iran); and
(iii) Any foreign bank of which more
than 50 percent of the voting stock or
analogous interest is owned by two or
more foreign banks chartered by Iran.
(5) Subsidiary means a company of
which more than 50 percent of the
voting stock or analogous interest is
owned by another company.
(b) Requirements for covered financial
institutions.
(1) Prohibition on direct use of
correspondent accounts. A covered
financial institution shall terminate any
correspondent account that is
established, maintained, administered,
or managed in the United States for, or
on behalf of, an Iranian banking
institution, provided that the account is
not blocked under any Executive Order
issued pursuant to the International
Emergency Economic Powers Act (50
U.S.C. 1701 et seq.) (IEEPA) or under 31
CFR Chapter V.
(2) Special due diligence of
correspondent accounts to prohibit
improper indirect use.
(i) A covered financial institution
shall apply special due diligence to its
correspondent accounts that is
reasonably designed to guard against
their improper indirect use by Iranian
banking institutions. At a minimum,
that special due diligence must include:
(A) Notifying those correspondent
account holders that the covered
financial institution knows or has
reason to know provide services to
Iranian banking institutions, that such
correspondents generally may not
provide Iranian banking institutions
with access to the correspondent
account maintained at the covered
financial institution; and
(B) Taking reasonable steps to identify
any indirect use of its correspondent
accounts by Iranian banking
institutions, to the extent that such
indirect use can be determined from
transactional records maintained in the
covered financial institution’s normal
course of business.
(ii) A covered financial institution
shall take a risk-based approach when
deciding what, if any, other due
diligence measures it should adopt to
guard against the improper indirect use
of its correspondent accounts by Iranian
banking institutions.
(iii) A covered financial institution
that obtains knowledge that a
correspondent account is being used by
the foreign bank to provide indirect
access to an Iranian banking institution,
shall take all appropriate steps to
prevent such indirect access, including
the notification of its correspondent
account holder under paragraph
E:\FR\FM\28NOP1.SGM
28NOP1
Federal Register / Vol. 76, No. 228 / Monday, November 28, 2011 / Proposed Rules
(b)(2)(i)(A) of this section and, where
necessary, terminating the
correspondent account, except to the
extent that such indirect access to the
correspondent accounts is necessary to
conduct transactions involving Iranian
banking institutions that are: (1)
Authorized pursuant to Executive
Orders issued under IEEPA or pursuant
to 31 CFR Chapter V, including
transactions authorized by the Office of
Foreign Assets Control; (2), exempted
from the prohibitions of such authority;
or (3) not prohibited by such authority.
(3) Recordkeeping and reporting.
(i) A covered financial institution is
required to document its compliance
with the notice requirement set forth in
paragraph (b)(2)(i)(A) of this section.
(ii) Nothing in this section shall
require a covered financial institution to
report any information not otherwise
required to be reported by law or
regulation.
Dated: November 18, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement
Network.
[FR Doc. 2011–30331 Filed 11–25–11; 8:45 am]
BILLING CODE 4810–02–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R04–OAR–2010–0017–201014(b) &
EPA–R04–OAR–2010–0018–201001(b);
FRL–9495–8]
Approval and Promulgation of Air
Quality Implementation Plans: South
Carolina; Negative Declarations for
Groups I, II, III and IV Control
Techniques Guidelines; and
Reasonably Available Control
Technology
Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
AGENCY:
EPA is proposing to approve
several State Implementation Plan (SIP)
revisions submitted by the South
Carolina Department of Health and
Environmental Control (SC DHEC).
These revisions establish reasonably
available control technology (RACT)
requirements for the three major sources
located in the portion of York County,
South Carolina that is within the bi-state
Charlotte-Gastonia-Rock Hill, North
Carolina-South Carolina 1997 8-hour
ozone nonattainment area that either
emit volatile organic compounds,
nitrogen oxides or both. The bi-state
Charlotte-Gastonia-Rock Hill 1997 8-
pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
SUMMARY:
VerDate Mar<15>2010
15:28 Nov 25, 2011
Jkt 226001
hour ozone nonattainment area is
hereinafter referred to as the ‘‘bi-state
Charlotte Area.’’ In addition, South
Carolina’s SIP revisions include
negative declarations for certain source
categories for which EPA has control
technique guidelines, meaning that SC
DHEC has concluded that no such
sources are located in that portion of the
nonattainment area. EPA has evaluated
the proposed revisions to South
Carolina’s SIP, and has preliminarily
concluded that they are consistent with
statutory and regulatory requirements
and EPA guidance.
DATES: Written comments must be
received on or before December 28,
2011.
Submit your comments,
identified by Docket ID No. EPA–R04–
OAR–2010–0017 and EPA–R04–OAR–
2010–0018 by one of the following
methods:
1. https://www.regulations.gov: Follow
the online instructions for submitting
comments.
2. Email: benjamin.lynorae@epa.gov.
3. Fax: (404) 562–9019.
4. Mail: ‘‘EPA–R04–OAR–2010–0017’’
for comments regarding the RACT
demonstration and the negative
declarations for Groups I and I CTG.
‘‘EPA–R04–OAR–2010–0018’’ for
comments regarding the negative
declarations for Groups III and IV CTG.
Regulatory Development Section, Air
Planning Branch, Air, Pesticides and
Toxics Management Division, U.S.
Environmental Protection Agency,
Region 4, 61 Forsyth Street SW.,
Atlanta, Georgia 30303–8960.
5. Hand Delivery or Courier: Lynorae
Benjamin, Regulatory Development
Section, Air Planning Branch, Air,
Pesticides and Toxics Management
Division, U.S. Environmental Protection
Agency, Region 4, 61 Forsyth Street
SW., Atlanta, Georgia 30303–8960. Such
deliveries are only accepted during the
Regional Office’s normal hours of
operation. The Regional Office’s official
hours of business are Monday through
Friday, 8:30 to 4:30, excluding Federal
holidays.
Please see the direct final rule which
is located in the Rules section of this
Federal Register for detailed
instructions on how to submit
comments.
ADDRESSES:
Zuri
Farngalo, Regulatory Development
Section, Air Planning Branch, Air,
Pesticides and Toxics Management
Division, U.S. Environmental Protection
Agency, Region 4, 61 Forsyth Street
SW., Atlanta, Georgia 30303–8960. Zuri
Farngalo may be reached by phone at
FOR FURTHER INFORMATION CONTACT:
PO 00000
Frm 00033
Fmt 4702
Sfmt 4702
72885
(404) 562–9152 or by electronic mail
address farngalo.zuri@epa.gov.
SUPPLEMENTARY INFORMATION: On March
12, 2008, EPA issued a revised ozone
NAAQS. See 73 FR 16436. EPA
subsequently announced a
reconsideration of the 2008 NAAQS,
and proposed new 8-hour ozone
NAAQS in January 2010. See 75 Fr
2938. In September 2011, EPA withdrew
the proposed reconsidered NAAQS and
began implementation of the 2008
NAAQS. The current action, however, is
being taken to address requirements
under the 1997 ozone NAAQS for a
portion of York County, South Carolina.
Requirements for the bi-state Charlotte
Area under the 2008 NAAQS will be
addressed in the future.
For additional information see the
direct final rule which is published in
the Rules Section of this Federal
Register. In the Final Rules Section of
this Federal Register, EPA is approving
the State’s SIP revision as a direct final
rule without prior proposal because the
Agency views this as a noncontroversial
submittal and anticipates no adverse
comments. A detailed rationale for the
approval is set forth in the direct final
rule. If no adverse comments are
received in response to this rule, no
further activity is contemplated. If EPA
receives adverse comments, the direct
final rule will be withdrawn and all
public comments received will be
addressed in a subsequent final rule
based on this proposed rule. EPA will
not institute a second comment period
on this document. Any parties
interested in commenting on this
document should do so at this time.
Dated: November 7, 2011.
A. Stanley Meiburg,
Acting Regional Administrator, Region 4.
[FR Doc. 2011–30297 Filed 11–25–11; 8:45 am]
BILLING CODE 6560–50–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 73
[MM Docket No. 99–325; DA 11–1832]
FM Asymmetric Sideband Operation
and Associated Technical Studies
Federal Communications
Commission.
ACTION: Proposed rule.
AGENCY:
In this document, the Federal
Communications Commission seeks
comment on a request by certain private
parties, identified below, that the
Commission authorize voluntary
asymmetric digital sideband power for
SUMMARY:
E:\FR\FM\28NOP1.SGM
28NOP1
]]>Agencies
[Federal Register Volume 76, Number 228 (Monday, November 28, 2011)]
[Proposed Rules]
[Pages 72878-72885]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30331]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
31 CFR Chapter X
RIN 1506-AB16
Financial Crimes Enforcement Network; Amendment to the Bank
Secrecy Act Regulations--Imposition of Special Measure Against the
Islamic Republic of Iran as a Jurisdiction of Primary Money Laundering
Concern
AGENCY: Financial Crimes Enforcement Network, Treasury (``FinCEN''),
Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In a notice of finding published elsewhere in this issue of
the Federal Register, the Secretary of the Treasury, through his
delegate, the Director of FinCEN, found that reasonable grounds exist
for concluding that the Islamic Republic of Iran (``Iran'') is a
jurisdiction of primary money laundering concern pursuant to 31 U.S.C.
5318A. FinCEN is issuing this notice of proposed rulemaking to impose a
special measure against Iran.
DATES: Written comments on the notice of proposed rulemaking must be
submitted on or before January 27, 2012.
ADDRESSES: You may submit comments, identified by RIN 1506-AB16, by any
of the following methods:
Federal E-rulemaking Portal: http:/www.regulations.gov.
Follow the instructions for submitting comments. Include 1506-AB16 in
the submission. Refer to Docket Number FINCEN-2011-0008.
Mail: The Financial Crimes Enforcement Network, P.O. Box
39, Vienna, VA 22183. Include RIN 1506-AB16 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 FUTHER INFORMATION CONTACT: The FinCEN regulatory helpline at (800)
949-2732 and select Option 6.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''),
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified
at 12 U.S.C. 1829b and 1951-1959, and 31 U.S.C. 5311-5314, and 5316-
5332, to promote the prevention, detection, and prosecution of
international money laundering and the financing of terrorism.
Regulations implementing the BSA appear at 31 CFR Chapter X. The
authority of the Secretary of the Treasury (the ``Secretary'') to
administer the BSA and its implementing regulations has been delegated
to the Director of FinCEN.\1\
---------------------------------------------------------------------------
\1\ Therefore, references to the authority of the Secretary of
the Treasury under section 311 of the USA PATRIOT Act apply equally
to the Director of FinCEN.
---------------------------------------------------------------------------
Section 311 of the USA PATRIOT Act (``section 311'') added section
5318A to the BSA, granting the Secretary the authority, upon finding
that reasonable grounds exist for concluding that a foreign
jurisdiction, institution, class of transaction, or type of account is
of ``primary money laundering concern,'' to require domestic financial
institutions and financial agencies to take certain ``special
measures'' against the primary money laundering concern. Section 311
identifies factors for the Secretary to consider and Federal agencies
to consult before the Secretary may conclude that a jurisdiction,
institution, class of transaction, or type of account is of primary
money laundering concern. The statute also provides similar procedures,
i.e., factors and consultation requirements, for selecting the specific
special measures to be imposed against the primary money laundering
concern.
Taken as a whole, section 311 provides the Secretary with a range
of options that can be adapted to target specific money laundering and
terrorist financing concerns most effectively. These options give the
Secretary the authority to bring additional pressure on those
jurisdictions and institutions that pose money laundering threats.
Through the imposition of various special measures, the Secretary can
gain more information about the jurisdictions, institutions,
transactions, or accounts of concern; can more effectively monitor the
respective jurisdictions, institutions,
[[Page 72879]]
transactions, or accounts; or can protect U.S. financial institutions
from involvement with jurisdictions, institutions, transactions, or
accounts that are of money laundering concern.
Before making a finding that reasonable grounds exist for
concluding that a jurisdiction is of primary money laundering concern,
the Secretary is required to consult with both the Secretary of State
and the Attorney General. The Secretary is also required by section
311, as amended,\2\ to consider ``such information as the Secretary
determines to be relevant, including the following potentially relevant
factors,'' which extend the Secretary's consideration beyond
traditional money laundering concerns to issues involving, inter alia,
terrorist financing and weapons proliferation:
---------------------------------------------------------------------------
\2\ 31 U.S.C. 5318A was amended by section 501 of the Iran
Freedom Support Act of 2006, Public Law 109-293.
---------------------------------------------------------------------------
Evidence that organized criminal groups, international
terrorists, or entities involved in the proliferation of weapons of
mass destruction or missiles, have transacted business in that
jurisdiction;
The extent to which that jurisdiction or financial
institutions operating in that jurisdiction offer bank secrecy or
special regulatory advantages to nonresidents or nondomiciliaries of
that jurisdiction;
The substance and quality of administration of the bank
supervisory and counter-money laundering laws of that jurisdiction;
The relationship between the volume of financial
transactions occurring in that jurisdiction and the size of the economy
of the jurisdiction;
The extent to which that jurisdiction is characterized as
an offshore banking or secrecy haven by credible international
organizations or multilateral expert groups;
Whether the United States has a mutual legal assistance
treaty with that jurisdiction, and the experience of United States law
enforcement officials and regulatory officials in obtaining information
about transactions originating in or routed through or to such
jurisdiction; and
The extent to which that jurisdiction is characterized by
high levels of official or institutional corruption.
If the Secretary determines that reasonable grounds exist for
concluding that a jurisdiction is of primary money laundering concern,
the Secretary must determine the appropriate special measure(s) to
address the specific money laundering risks. Section 311 provides a
range of special measures that can be imposed individually, jointly, in
any combination, and in any sequence.\3\ The Secretary's imposition of
special measures requires additional consultations to be made and
factors to be considered. The statute requires the Secretary to consult
with appropriate federal agencies and other interested parties \4\ and
to consider the following specific factors:
---------------------------------------------------------------------------
\3\ Available special measures include requiring: (1)
Recordkeeping and reporting of certain financial transactions; (2)
collection of information relating to beneficial ownership; (3)
collection of information relating to certain payable-through
accounts; (4) collection of information relating to certain
correspondent accounts; and (5) prohibition or conditions on the
opening or maintaining of correspondent or payable through accounts.
31 U.S.C. 5318A(b)(l)-(5). For a complete discussion of the range of
possible countermeasures, see 68 FR 18917 (April 17, 2003)
(proposing special measures against Nauru).
\4\ Section 5318A(a)(4)(A) requires the Secretary to consult
with the Chairman of the Board of Governors of the Federal Reserve
System, any other appropriate Federal banking agency, the Secretary
of State, the Securities and Exchange Commission (SEC), the
Commodity Futures Trading Commission (CFTC), the National Credit
Union Administration (NCUA), and, in the sole discretion of the
Secretary, ``such other agencies and interested parties as the
Secretary may find to be appropriate.'' The consultation process
must also include the Attorney General, if the Secretary is
considering prohibiting or imposing conditions on domestic financial
institutions opening or maintaining correspondent account
relationships with the designated jurisdiction.
---------------------------------------------------------------------------
Whether similar action has been or is being taken by other
nations or multilateral groups;
Whether the imposition of any particular special measures
would create a significant competitive disadvantage, including any
undue cost or burden associated with compliance, for financial
institutions organized or licensed in the United States;
The extent to which the action or the timing of the action
would have a significant adverse systemic impact on the international
payment, clearance, and settlement system, or on legitimate business
activities involving the particular jurisdiction; and
The effect of the action on United States national
security and foreign policy.
B. Finding
Today, as detailed elsewhere in this part,\5\ based upon a review
and analysis of the administrative record in this matter, consultations
with relevant Federal agencies and departments, and after consideration
of the factors enumerated in section 311, the Director of FinCEN has
determined that reasonable grounds exist for concluding that the
Islamic Republic of Iran is a jurisdiction of primary money laundering
concern.\6\
---------------------------------------------------------------------------
\5\ See the notice of this finding published elsewhere today in
the Federal Register.
\6\ Classified information used in support of a section 311
finding and measure(s) may be submitted by Treasury to a reviewing
court ex parte and in camera. See section 376 of the Intelligence
Authorization Act for fiscal year 2004, Public Law 108-177 (amending
31 U.S.C. 5318A by adding new paragraph (f)).
---------------------------------------------------------------------------
II. Imposition of Special Measure Against the Islamic Republic of Iran
as a Jurisdiction of Primary Money Laundering Concern, Including the
Central Bank of Iran Within the Definition of Iranian Banking
Institution
As a result of that finding, and based upon the additional
consultations and the consideration of all relevant factors discussed
in the finding and in this notice of proposed rulemaking, the Director
of FinCEN has determined that reasonable grounds exist for the
imposition of the fifth special measure authorized by section
5318A(b)(5).\7\ That special measure authorizes a prohibition against
the opening or maintaining of correspondent accounts \8\ by any
domestic financial institution or agency for or on behalf of a foreign
banking institution, if the correspondent account involves the targeted
jurisdiction. A discussion of the section 311 factors relevant to
imposing this particular special measure follows.
---------------------------------------------------------------------------
\7\ In connection with this action, FinCEN consulted with staffs
of the Federal functional regulators, the Department of Justice, and
the Department of State.
\8\ For purposes of the proposed rule, a correspondent account
is defined as an account established to receive deposits from, or
make payments or other disbursements on behalf of, a foreign bank,
or handle other financial transactions related to the foreign bank.
---------------------------------------------------------------------------
1. Whether Similar Actions Have Been or Will Be Taken by Other Nations
or Multilateral Groups Against Iran
The United Nations Security Council has adopted multiple
resolutions imposing sanctions on Iran for its refusal to comply with
international nuclear obligations and proliferation sensitive
activities, including United Nations Security Council resolutions
(``UNSCRs'') 1696,\9\ 1737,\10\ 1747,\11\
[[Page 72880]]
1803,\12\ and 1929.\13\ All resolutions were reaffirmed in 2008, 2009,
and 2010 through UNSCRs 1835,\14\ 1887,\15\ and 1929,\16\ respectively.
---------------------------------------------------------------------------
\9\ For a complete discussion of the sanctions adopted by UNSCR
1696, see ``Resolution 1696,'' United Nations Security Council, July
31, 2006 (https://www.un.org/Docs/sc/unsc_resolutions06.htm).
\10\ For a complete discussion of the sanctions adopted by UNSCR
1737, see ``Resolution 1737,'' United Nations Security Council,
December 23, 2006 (https://www.un.org/Docs/sc/unsc_resolutions06.htm).
\11\ For a complete discussion of the sanctions adopted by UNSCR
1747, see ``Resolution 1747,'' United Nations Security Council,
March 24, 2007 (https://www.un.org/Docs/sc/unsc_resolutions07.htm).
\12\ For a complete discussion of the sanctions adopted by UNSCR
1803, see ``Resolution 1803,'' United Nations Security Council,
March 3, 2008 (https://www.un.org/Docs/sc/unsc_resolutions08.htm).
\13\ For a complete discussion of the sanctions adopted by UNSCR
1929, see ``Resolution 1929,'' United Nations Security Council, June
9, 2010 (https://www.un.org/Docs/sc/unsc_resolutions10.htm).
\14\ See ``Resolution 1835,'' United Nations Security Council,
September 27, 2008 (https://www.un.org/Docs/sc/unsc_resolutions08.htm).
\15\ See ``Resolution 1887,'' United Nations Security Council,
September 24, 2009 (https://www.un.org/Docs/sc/unsc_resolutions09.htm).
\16\ See ``Resolution 1929,'' United Nations Security Council,
June 9, 2010 (https://www.un.org/Docs/sc/unsc_resolutions10.htm).
---------------------------------------------------------------------------
Iran's serious deficiencies with respect to anti-money laundering/
countering the financing of terrorism (``AML/CFT'') controls have long
been highlighted by numerous international bodies and government
agencies. Starting in October 2007, the Financial Action Task Force
(``FATF'') has issued a series of public statements expressing its
concern that Iran's lack of a comprehensive AML/CFT regime represents a
significant vulnerability within the international financial system.
The statements further called upon Iran to address those deficiencies
with urgency, and called upon FATF-member countries to advise their
institutions to conduct enhanced due diligence with respect to the
risks associated with Iran's deficiencies.\17\
---------------------------------------------------------------------------
\17\ In response to concerns raised by these FATF and IMF
reports, FinCEN issued an advisory on October 16, 2007 to financial
institutions regarding the heightened risk of Iranian ``money
laundering, terrorist financing, and weapons of mass destruction
proliferation financing.'' The advisory further cautioned
institutions that there may be an increased effort by Iranian
entities to circumvent international sanctions and related financial
community scrutiny through the use of deceptive practices. See
``Guidance to Financial Institutions on the Increasing Money
Laundering Threat Involving Illicit Iranian Activity,'' FinCEN,
October 16, 2007 (https://www.fincen.gov/statutes_regs/guidance/pdf/guidance_fi_increasing_mlt_iranian.pdf). The FATF simultaneously
published guidance to assist countries with implementation of UNSCRs
1737 and 1747. See ``Guidance Regarding the Implementation of
Activity-Based Financial Prohibitions of United Nations Security
Council Resolution 1737,'' October 12, 2007 (https://www.fatf-gafi.org/dataoecd/43/17/39494050.pdf) and ``Guidance Regarding the
Implementation of Financial Provisions of the United Nations
Security Council Resolutions to Counter the Proliferation of Weapons
of Mass Destruction,'' September 5, 2007 (https://www.fatf-gafi.org/dataoecd/23/16/39318680.pdf).
---------------------------------------------------------------------------
The FATF has been particularly concerned with Iran's failure to
address the risk of terrorist financing, and starting in February 2009,
the FATF called upon its members and urged all jurisdictions to apply
effective counter-measures to protect their financial sectors from the
terrorist financing risks emanating from Iran.\18\ In addition, the
FATF advised jurisdictions to protect correspondent relationships from
being used to bypass or evade counter-measures and risk mitigation
practices, and to take into account money laundering and financing of
terrorism risks when considering requests by Iranian financial
institutions to open branches and subsidiaries in their
jurisdictions.\19\ The FATF also called on its members and other
jurisdictions to advise their financial institutions to give special
attention to business relationships and transactions with Iran,
including Iranian companies and financial institutions.\20\ Over the
past three years, the FATF has repeatedly reiterated these concerns and
reaffirmed its call for FATF-member countries and all jurisdictions to
implement countermeasures to protect the international financial system
from the terrorist financing risk emanating from Iran. In response,
numerous countries, including all G7 countries, have issued advisories
to their financial institutions.\21\
---------------------------------------------------------------------------
\18\ See ``FATF Statement on Iran,'' The Financial Action Task
Force, February 25, 2009 (https://www.fatf-gafi.org/dataoecd/18/28/42242615.pdf).
\19\ Id.
\20\ Id.
\21\ See ``Circular 13/2008 (GW)--Statement of the FATF of 16
October 2008,'' November 7, 2008 (https://www.bafin.de/cln_171/nn_721228/SharedDocs/Veroeffentlichungen/EN/Service/Circulars/rs_0813_gw.html?_nnn=true); ``February 27, 2009 FINTRAC Advisory,''
February 27, 2009 (https://www.fintrac-canafe.gc.ca/publications/avs/2009-02-27-eng.asp); ``HM Treasury warns businesses of serious
threats posed to the international financial system,'' March 11,
2009 (https://webarchive.nationalarchives.gov.uk/+/https://www.hm-
treasury.gov.uk/press_26_09.htm); ``Letter from French Minister of
Economy,'' (https://www2.economie.gouv.fr/directions_services/dgtpe/sanctions/sanctionsiran.php); and ``Bank of Italy Circular,''
(https://www.dt.tesoro.it/it/prevenzione_reati_finanziari/).
---------------------------------------------------------------------------
The FATF's most recent statement in October 2011 reiterated, with a
renewed urgency, its concern regarding Iran's failure to address the
risk of terrorist financing and the serious threat this poses to the
integrity to the international financial system.\22\ The FATF
reaffirmed its February 2009 call to apply effective countermeasures to
protect their financial sectors from ML/FT risks emanating from Iran,
and further called upon its members to consider the steps already taken
and possible additional safeguards or strengthen existing ones.\23\ In
addition, the FATF stated that, if Iran fails to take concrete steps to
improve its AML/CFT regime, the FATF will consider calling on its
members and urging all jurisdictions to strengthen countermeasures in
February 2012.\24\ The numerous calls by the FATF for Iran to urgently
address its terrorist financing vulnerability, coupled with the
extensive record of Iranian entities using the financial system to
finance terrorism, proliferation activities, and other illicit
activity,\25\ raises significant concern over the willingness or
ability of Iran to establish adequate controls to counter terrorist
financing.
---------------------------------------------------------------------------
\22\ See ``FATF Public Statement,'' The Financial Action Task
Force, October 28, 2011 (https://www.fatf-gafi.org/document/55/0,3746,en_32250379_32236992_48966519_1_1_1_1,00.html).
\23\ Id.
\24\ Id.
\25\ ``Update on the Continuing Illicit Finance Threat Emanating
From Iran,'' FinCEN, June 22, 2010 (https://www.fincen.gov/statutes_regs/guidance/html/fin-2010-a008.html).
---------------------------------------------------------------------------
Although none of these actions to sanction Iran prohibit domestic
financial institutions and agencies from opening or maintaining a
correspondent account for or on behalf of any financial institution in
Iran, or require the type of special due diligence outlined in this
proposed rulemaking, FinCEN encourages other countries or multilateral
groups to take similar action based on the findings contained in this
rulemaking.
2. Whether the Imposition of the Fifth Special Measure Would Create a
Significant Competitive Disadvantage, Including Any Undue Cost or
Burden Associated With Compliance, for Financial Institutions Organized
or Licensed in the United States
The fifth special measure sought to be imposed by this rulemaking
would prohibit covered financial institutions from opening and
maintaining correspondent accounts for, or on behalf of, Iranian
banking institutions. As a corollary to this measure, covered financial
institutions also would be required to take reasonable steps to apply
special due diligence, as set forth below, to all of their
correspondent accounts to help ensure that no such account is being
used indirectly to provide services to an Iranian banking institution.
FinCEN does not expect the burden associated with these requirements to
be significant given that U.S. financial institutions have long been
subject to sanctions regulations prohibiting the provision of
correspondent account services for banking institutions in Iran. There
is a minimal burden involved in transmitting a one-time notice to
certain correspondent account holders concerning the prohibition on
indirectly providing services to Iranian banking institutions. In
addition, U.S. financial
[[Page 72881]]
institutions generally apply some degree of due diligence in screening
their transactions and accounts, often through the use of commercially
available software such as that used for compliance with the economic
sanctions programs administered by the Office of Foreign Assets Control
(OFAC) of the Department of the Treasury. As explained in more detail
in the section-by-section analysis below, financial institutions
should, if necessary, be able to easily adapt their current screening
procedures to comply with this special measure. Thus, the special due
diligence that would be required by this rulemaking is not expected to
impose a significant additional burden upon U.S. financial
institutions.
3. The Extent To Which the Proposed Action or Timing of the Action Will
Have a Significant Adverse Systemic Impact on the International
Payment, Clearance, and Settlement System, or on Legitimate Business
Activities of Iran
Banking institutions in Iran generally are not major participants
in the international payment system and are not relied upon by the
international banking community for clearance or settlement services.
Additionally, given the preexisting OFAC and international sanctions on
Iran and certain Iranian banking institutions, it is unlikely that
these new measures or the timing of the new measures will have a
significant impact on the international payment, clearance, and
settlement system. Financial transactions between the United States and
Iran pertaining to licensed agricultural and medical exports to Iran,
as well as other licensed transactions or transactions exempted or not
prohibited from the scope of OFAC sanctions, may continue under the
rule as proposed.\26\ Legitimate pre-existing personal investments held
by Iranian residents in the United States that do not involve Iranian
banking institutions will be unaffected. Consequently, in light of the
reasons for imposing this special measure, FinCEN does not believe that
it will impose an undue burden on legitimate business activities.
---------------------------------------------------------------------------
\26\ For a more complete discussion of prohibited and non-
prohibited transactions, see https://www.treas.gov/ofac.
---------------------------------------------------------------------------
4. The Effect of the Proposed Action on United States National Security
and Foreign Policy
The exclusion from the U.S. financial system of jurisdictions that
serve as conduits for significant money laundering activity, for the
financing of terrorism or weapons of mass destruction or their delivery
systems, and for other financial crimes enhances U.S. national security
by making it more difficult for terrorists and money launderers to
access the substantial resources of the U.S. financial system. To the
extent that this action serves as an additional tool in preventing Iran
from accessing the U.S. financial system, the proposed action supports
and upholds U.S. national security and foreign policy goals. More
generally, the imposition of the fifth special measure would complement
the U.S. Government's worldwide efforts to expose and disrupt
international money laundering and terrorist financing.
Therefore, pursuant to the finding of the Director of FinCEN that
Iran is a jurisdiction of primary money laundering concern, and after
conducting the required consultations and weighing the relevant
factors, FinCEN has determined that reasonable grounds exist for
imposing the fifth special measure authorized by 31 U.S.C. 5318A(b)(5)
against Iran.
III. Section-by-Section Analysis
The proposed rule would prohibit covered financial institutions
from establishing, maintaining, or managing in the United States any
correspondent account for, or on behalf of, banking institutions in
Iran. As a corollary to this prohibition, covered financial
institutions would be required to apply special due diligence to their
correspondent accounts to guard against their improper indirect use by
Iranian banking institutions. At a minimum, that special due diligence
must include two elements. First, a covered financial institution must
notify those correspondent account holders that the covered financial
institution knows or has reason to know provide services to Iranian
banking institutions, that such correspondents may not provide Iranian
banking institutions with access to the correspondent account
maintained at the covered financial institution. Second, a covered
financial institution must take reasonable steps to identify any
indirect use of its correspondent accounts by Iranian banking
institutions, to the extent that such indirect use can be determined
from transactional records maintained by the covered financial
institution in the normal course of business. A covered financial
institution should take a risk-based approach when deciding what, if
any, additional due diligence measures it should adopt to guard against
the improper indirect use of its correspondent accounts by Iranian
banking institutions, based on risk factors such as the type of
services it offers and the geographic locations of its correspondents.
A. 1010.657(a)--Definitions
1. Correspondent Account
Section 1010.657(a)(1) defines the term ``correspondent account''
by reference to the definition contained in 31 CFR 1010.605(c)(1)(ii).
Section 1010.605(c)(1)(ii) defines a correspondent account to mean:
An account established to receive deposits from, or
make payments or other disbursements on behalf of, a foreign bank,
or handle other financial transactions related to the foreign bank.
In the case of a U.S. depository institution, this broad definition
includes most types of banking relationships between a U.S. depository
institution and a foreign bank that are established to provide regular
services, dealings, and other financial transactions including demand
deposit, savings deposit, or other transaction or asset accounts, and
credit accounts or other extensions of credit.\27\
---------------------------------------------------------------------------
\27\ See 31 CFR 1010.605(c)(2)(i)(A)-(B).
---------------------------------------------------------------------------
In the case of securities broker-dealers, futures commission
merchants, introducing brokers in commodities, and investment companies
that are open-end companies (mutual funds), we are using the same
definition of ``account'' for purposes of this rule as was established
in the final rule implementing section 312 of the USA PATRIOT Act.\28\
---------------------------------------------------------------------------
\28\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
---------------------------------------------------------------------------
2. Covered Financial Institution
Section 1010.657(a)(2) of the proposed rule defines ``covered
financial institution'' with the same definition used in the final rule
implementing section 312 of the USA PATRIOT Act,\29\ which in general
includes the following:
---------------------------------------------------------------------------
\29\ See 31 CFR 1010.605(f)(1)-(2).
---------------------------------------------------------------------------
An insured bank (as defined in section 3(h) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(h));
A commercial bank;
An agency or branch of a foreign bank in the United
States;
A federally insured credit union;
A credit union;
A savings association;
A corporation acting under section 25A of the Federal
Reserve Act (12 U.S.C. 611);
A trust bank or trust company that is federally regulated
and is subject to an anti-money laundering program requirements;
A broker or dealer in securities registered, or required
to be registered,
[[Page 72882]]
with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.), except persons who
register pursuant to section 15(b)(11) of the Securities Exchange Act
of 1934;
A futures commission merchant or an introducing broker
registered, or required to be registered, with the Commodity Futures
Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et
seq.), except persons who register pursuant to section 4(f)(a)(2) of
the Commodity Exchange Act;
A private banker; and
A mutual fund.
3. Iranian Banking Institution
Section 1010.657(a)(3) of the proposed rule defines a foreign bank
as that term is defined in 1010.100(u). An Iranian banking institution
shall mean any foreign bank chartered by Iran, including any branches,
offices, or subsidiaries of such bank operating in any jurisdiction,
and any branch or office within Iran of any foreign bank licensed by
Iran. In addition, the Central Bank of Iran (Bank Markazi Iran),\30\ as
well as any foreign bank of which more than 50 percent of the voting
stock or analogous interest is owned by two or more foreign banks
chartered by Iran, shall be considered an Iranian banking institution.
For purposes of this rule, a subsidiary shall mean a company of which
more than 50 percent of the voting stock or analogous interest is
directly or indirectly owned by another company.
---------------------------------------------------------------------------
\30\ Prior regulations that have applied Section 311 special
measures to jurisdictions of primary money laundering concern have
not included the jurisdiction's central bank within the scope of the
regulation. However, in the case of the Islamic Republic of Iran,
this inclusion is justified due to the deceptive practices the
Central Bank of Iran engages in and encourages among Iranian state-
owned banks. This behavior is discussed in the notice of finding
that the Islamic Republic of Iran is a jurisdiction of primary money
laundering concern published elsewhere today in the Federal
Register. See footnote 5, supra.
---------------------------------------------------------------------------
A covered financial institution should take commercially reasonable
measures to determine whether it maintains a correspondent account for
an Iranian banking institution, including a branch, office, or
subsidiary of an Iranian banking institution.
B. 1010.657(b)--Requirements for Covered Financial Institutions
For purposes of complying with the proposed rule's prohibition on
the opening or maintaining of correspondent accounts for, or on behalf
of, Iranian banking institutions, FinCEN expects that a covered
financial institution will take such steps that a reasonable and
prudent financial institution would take to protect itself from loan
fraud or other fraud or loss based on misidentification of a person's
status.
1. Prohibition on Direct Use of Correspondent Accounts
Section 1010.657(b)(1) of the proposed rule requires all covered
financial institutions to terminate any correspondent account that is
established, maintained, administered, or managed in the United States
for, or on behalf of, Iranian banking institutions, provided that the
account is not blocked under any Executive Order issued pursuant to the
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.)
(IEEPA) or under 31 CFR Chapter V. The prohibition would require all
covered financial institutions to review their account records to
ensure that they maintain no accounts directly for, or on behalf of, an
Iranian banking institution.
2. Special Due Diligence of Correspondent Accounts To Prohibit Improper
Indirect Use
As a corollary to the prohibition on maintaining correspondent
accounts directly for Iranian banking institutions, proposed section
1010.657(b)(2) requires a covered financial institution to apply
special due diligence to its correspondent accounts \31\ that is
reasonably designed to guard against their improper indirect use by
Iranian banking institutions. At a minimum, that special due diligence
must include notifying those correspondent account holders that the
covered financial institution knows or has reason to know provide
services to Iranian banking institutions, that such correspondents
generally may not provide Iranian banking institutions with access to
the correspondent account maintained at the covered financial
institution. A covered financial institution would, for example, have
knowledge that the correspondents provide such access to Iranian
banking institutions through transaction screening software or through
the processing of Iranian transactions under OFAC licenses. A covered
financial institution may satisfy this requirement by transmitting the
following notice to its correspondent account holders that it knows or
has reason to know provide services to Iranian banking institutions:
---------------------------------------------------------------------------
\31\ Again, for purposes of the proposed rule, a correspondent
account is defined as an account established to receive deposits
from, or make payments or other disbursements on behalf of, a
foreign bank, or handle other financial transactions related to the
foreign bank.
Notice: Pursuant to U.S. regulations issued under section 311 of
the USA PATRIOT Act, 31 CFR 1010.657, we are prohibited from
establishing, maintaining, administering or managing a correspondent
account for, or on behalf of, an Iranian banking institution or any
of its subsidiaries. The regulations also require us to notify you
that you may not provide an Iranian banking institution or any of
its subsidiaries with access to the correspondent account you hold
at our financial institution other than for the purpose of
processing transactions that are authorized, exempt, or not
prohibited pursuant to any Executive Order issued under the
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.)
or 31 C.F.R. Chapter V. If we become aware that an Iranian banking
institution or any of its subsidiaries is indirectly using the
correspondent account you hold at our financial institution for
transactions other than those specified above, we will be required
to take appropriate steps to prevent such access, including
---------------------------------------------------------------------------
terminating your account.
The purpose of the notice requirement is to help ensure cooperation
from correspondent account holders in denying Iranian banking
institutions access to the U.S. financial system. However, FinCEN does
not require or expect a covered financial institution to obtain a
certification from any of its correspondent account holders that
indirect access will not be provided in order to comply with this
notice requirement. Instead, methods of compliance with the notice
requirement could include, for example, transmitting a one-time notice
by mail, fax, or email to certain of the covered financial
institution's correspondent account customers, informing them that they
may not provide Iranian banking institutions with access to the covered
financial institution's correspondent account, or including such
information in the next regularly occurring transmittal from the
covered financial institution to those correspondent account holders.
FinCEN specifically solicits comments on the form and scope of the
notice that would be required under the rule. FinCEN also requests
comment as to whether a one-time notice will be sufficient to ensure
cooperation from correspondent account holders in denying Iranian
banking institutions access to the financial system, as well as the
incremental costs that financial institutions would incur if this rule
required an annual notice.
A covered financial institution also would be required under this
rulemaking to take reasonable steps to identify any indirect use of its
correspondent accounts by Iranian
[[Page 72883]]
banking institutions, to the extent that such indirect use can be
determined from transactional records maintained by the covered
financial institution in the normal course of business. For example, a
covered financial institution would be expected to apply an appropriate
screening mechanism to be able to identify a funds transfer order that
on its face listed an Iranian banking institution as the originator's
or beneficiary's financial institution, or otherwise referenced an
Iranian banking institution in a manner detectable under the financial
institution's normal screening processes. An appropriate screening
mechanism could be the mechanism used by a covered financial
institution to comply with various legal requirements, such as the
commercially available software programs used to comply with the
economic sanctions programs administered by OFAC. FinCEN specifically
solicits comments on the requirement under the proposed rule that
covered financial institutions take reasonable steps to screen their
correspondent accounts in order to identify any indirect use of such
accounts by Iranian banking institutions.
Notifying certain correspondent account holders and taking
reasonable steps to identify any indirect use of its correspondent
accounts by Iranian banking institutions in the manner discussed above
are the minimum due diligence requirements under the proposed rule.
Beyond these minimum steps, a covered financial institution should
adopt a risk-based approach for determining what, if any, additional
due diligence measures it should implement to guard against the
improper indirect use of its correspondent accounts by Iranian banking
institutions, based on risk factors such as the type of services it
offers and the geographic locations of its correspondent account
holders.
A covered financial institution that obtains knowledge that a
correspondent account is being used by a foreign bank to provide
indirect access to an Iranian banking institution must take all
appropriate steps to prevent such indirect access, including the
notification of its correspondent account holder per section
1010.657(b)(2)(i)(A) and, where necessary, terminating the
correspondent account. However, this provision does not require
financial institutions to prevent indirect access to correspondent
accounts when such access is necessary to conduct transactions
involving Iranian banking institutions that are: (1) Authorized
pursuant to Executive Orders issued under IEEPA or pursuant to 31 CFR
Chapter V, including transactions authorized by the Office of Foreign
Assets Control; (2), exempted from the prohibitions of such authority;
or (3) not prohibited by such authority.
A covered financial institution may afford the foreign bank a
reasonable opportunity to take corrective action prior to terminating
the correspondent account. Should the foreign bank refuse to comply, or
if the covered financial institution cannot obtain adequate assurances
that Iranian banking institutions will no longer be able to improperly
access the correspondent account, the covered financial institution
must terminate the account within a commercially reasonable time. This
means that the covered financial institution should not permit the
foreign bank to establish any new positions or execute any transactions
through the account, other than those necessary to close the account. A
covered financial institution may reestablish an account closed under
the proposed rule if it determines that the account will not be used to
provide improper indirect access to an Iranian banking institution.
FinCEN specifically solicits comments on the requirement under the
proposed rule that covered financial institutions prevent improper
indirect access to Iranian banking institutions, once such indirect
access is identified.
3. Reporting Not Required
Section 1010.657(b)(3) of the proposed rule clarifies that the rule
does not impose any reporting requirement upon any covered financial
institution that is not otherwise required by applicable law or
regulation. A covered financial institution must, however, document its
compliance with the requirement that it notify those correspondent
account holders that the covered financial institution knows or has
reason to know provide services to Iranian banking institutions, that
such correspondents may not provide Iranian banking institutions with
improper access to the correspondent account maintained at the covered
financial institution.
IV. Request for Comments
FinCEN invites comments on all aspects of the proposal to prohibit
the opening or maintaining of correspondent accounts for or on behalf
of Iranian banking institutions, and specifically invites comments on
the following matters:
1. The form and scope of the notice to certain correspondent
account holders that would be required under the rule and whether a
one-time notice will be sufficient to ensure cooperation from
correspondent account holders in denying Iranian banking institutions
access to the financial system, and the incremental costs that
financial institutions would incur if this rule required an annual
notice;
2. The appropriate scope of the proposed requirement for a covered
financial institution to take reasonable steps to identify any indirect
use of its correspondent accounts by Iranian banking institutions;
3. The appropriate steps a covered financial institution should
take once it identifies an indirect use of one of its correspondent
accounts by an Iranian banking institution; and
4. The impact of the proposed special measure upon legitimate
transactions with Iran involving, in particular, U.S. persons and
entities; foreign persons, entities, and governments; and multilateral
organizations doing legitimate business with persons or entities
operating in Iran.
V. Regulatory Flexibility Act
It is hereby certified that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
Given that U.S. financial institutions have long been subject to
sanctions regulations prohibiting the provision of correspondent
account services for banking institutions in Iran, FinCEN assesses that
the prohibition on maintaining such accounts will not have a
significant impact on a substantial number of small entities. In
addition, all U.S. persons, including U.S. financial institutions,
currently must exercise some degree of due diligence in order to comply
with various legal requirements. The tools used for such purposes,
including commercially available software used to comply with the
economic sanctions programs administered by OFAC, can easily be
modified to monitor for the use of correspondent accounts by Iranian
banking institutions. Thus, the special due diligence that would be
required by this rulemaking--i.e., the one-time transmittal of notice
to certain correspondent account holders and the screening of
transactions to identify any indirect use of correspondent accounts, is
not expected to impose a significant additional economic burden upon
small U.S. financial institutions. FinCEN invites comments from members
of the public who believe there will be a significant economic impact
on small entities.
VI. Paperwork Reduction Act
The collection of information contained in this proposed rule is
being submitted to the Office of Management
[[Page 72884]]
and Budget for review in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on the collection of information
should be sent to the Desk Officer for the Department of Treasury,
Office of Information and Regulatory Affairs, Office of Management and
Budget, Paperwork Reduction Project (1506), Washington, DC 20503 (or by
email to oira_submission@omb.eop.gov) with a copy to FinCEN by mail or
email at the addresses previously specified. Comments should be
submitted by one method only. Comments on the collection of information
should be received by January 27, 2012. In accordance with the
requirements of the Paperwork Reduction Act of 1995, 44 U.S.C.
3506(c)(2)(A), and its implementing regulations, 5 CFR part 1320, the
following information concerning the collection of information as
required by 31 CFR 1010.657 is presented to assist those persons
wishing to comment on the information collection.
The collection of information in this proposed rule is in
1010.657(b)(2)(i) and 1010.657(b)(3)(i). The notification requirement
in 1010.657(b)(2)(i) is intended to ensure cooperation from
correspondent account holders in denying Iranian banking institutions
access to the U.S. financial system. The information required to be
maintained by 1010.657(b)(3)(i) will be used by federal agencies and
certain self-regulatory organizations to verify compliance by covered
financial institutions with the provisions of 31 CFR 1010.657. The
class of financial institutions affected by the notification
requirement is identical to the class of financial institutions
affected by the recordkeeping requirement. The collection of
information is mandatory.
Description of Affected Financial Institutions: Banks, broker-
dealers in securities, futures commission merchants and introducing
brokers, and mutual funds maintaining correspondent accounts.
Estimated Number of Affected Financial Institutions: 5,000.
Estimated Average Annual Burden Hours per Affected Financial
Institution: The estimated average burden associated with the
collection of information in this proposed rule is one hour per
affected financial institution.
Estimated Total Annual Burden: 5,000 hours.
FinCEN specifically invites comments on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the mission of FinCEN, including whether the information shall have
practical utility; (b) the accuracy of FinCEN's estimate of the burden
of the proposed collection of information; (c) ways to enhance the
quality, utility, and clarity of the information required to be
maintained; (d) ways to minimize the burden of the required collection
of information, including through the use of automated collection
techniques or other forms of information technology; and (e) estimates
of capital or start-up costs and costs of operation, maintenance, and
purchase of services to maintain the information.
VII. Executive Order 12866
The proposed rule is not a significant regulatory action for
purposes of Executive Order 12866, ``Regulatory Planning and Review.''
List of Subjects in 31 CFR Chapter X
Administrative practice and procedure, Banks and banking, Brokers,
Counter-money laundering, Counter-terrorism, Foreign banking, Iran.
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:
Chapter X--Financial Recordkeeping and Reporting of Currency and
Financial Transactions
1. The authority citation for chapter X is amended to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314,
5316-5332 Title III, secs. 311, 312, 313, 314, 319, 326, 352, Pub.
L. 107-56, 115 Stat. 307.
2. Subpart F of Chapter X is amended by adding new Sec. 1010.657
under the undesignated center heading ``SPECIAL DUE DILIGENCE FOR
CORRESPONDENT ACCOUNTS AND PRIVATE BANKING ACCOUNTS'' to read as
follows:
Sec. 1010.657 Special measures against the Islamic Republic of Iran.
(a) Definitions. For purposes of this section:
(1) Correspondent account has the same meaning as provided in Sec.
1010.605(c)(1)(ii).
(2) Covered financial institution has the same meaning as provided
in Sec. 1010.605(f)(1)-(2).
(3) Foreign bank has the same meaning as 1010.100(u).
(4) Iranian banking institution means the following:
(i) Any foreign bank chartered by Iran, including any branches,
offices, or subsidiaries of such bank operating in any jurisdiction,
and any branch or office within Iran of any foreign bank licensed by
Iran;
(ii) The Central Bank of Iran (Bank Markazi Iran); and
(iii) Any foreign bank of which more than 50 percent of the voting
stock or analogous interest is owned by two or more foreign banks
chartered by Iran.
(5) Subsidiary means a company of which more than 50 percent of the
voting stock or analogous interest is owned by another company.
(b) Requirements for covered financial institutions.
(1) Prohibition on direct use of correspondent accounts. A covered
financial institution shall terminate any correspondent account that is
established, maintained, administered, or managed in the United States
for, or on behalf of, an Iranian banking institution, provided that the
account is not blocked under any Executive Order issued pursuant to the
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.)
(IEEPA) or under 31 CFR Chapter V.
(2) Special due diligence of correspondent accounts to prohibit
improper indirect use.
(i) A covered financial institution shall apply special due
diligence to its correspondent accounts that is reasonably designed to
guard against their improper indirect use by Iranian banking
institutions. At a minimum, that special due diligence must include:
(A) Notifying those correspondent account holders that the covered
financial institution knows or has reason to know provide services to
Iranian banking institutions, that such correspondents generally may
not provide Iranian banking institutions with access to the
correspondent account maintained at the covered financial institution;
and
(B) Taking reasonable steps to identify any indirect use of its
correspondent accounts by Iranian banking institutions, to the extent
that such indirect use can be determined from transactional records
maintained in the covered financial institution's normal course of
business.
(ii) A covered financial institution shall take a risk-based
approach when deciding what, if any, other due diligence measures it
should adopt to guard against the improper indirect use of its
correspondent accounts by Iranian banking institutions.
(iii) A covered financial institution that obtains knowledge that a
correspondent account is being used by the foreign bank to provide
indirect access to an Iranian banking institution, shall take all
appropriate steps to prevent such indirect access, including the
notification of its correspondent account holder under paragraph
[[Page 72885]]
(b)(2)(i)(A) of this section and, where necessary, terminating the
correspondent account, except to the extent that such indirect access
to the correspondent accounts is necessary to conduct transactions
involving Iranian banking institutions that are: (1) Authorized
pursuant to Executive Orders issued under IEEPA or pursuant to 31 CFR
Chapter V, including transactions authorized by the Office of Foreign
Assets Control; (2), exempted from the prohibitions of such authority;
or (3) not prohibited by such authority.
(3) Recordkeeping and reporting.
(i) A covered financial institution is required to document its
compliance with the notice requirement set forth in paragraph
(b)(2)(i)(A) of this section.
(ii) Nothing in this section shall require a covered financial
institution to report any information not otherwise required to be
reported by law or regulation.
Dated: November 18, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2011-30331 Filed 11-25-11; 8:45 am]
BILLING CODE 4810-02-P
