Financial Crimes Enforcement Network; Imposition of Special Measure Against JSC CredexBank as a Financial Institution of Primary Money Laundering Concern, 31794-31803 [2012-12747]
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Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 / Proposed Rules
unpaid liability against U at any time on or
before October 27 of Year 8. The result would
be the same even if S–1 ceased to exist before
March 1 of Year 5, the date P executed the
waiver.
Example 11. Consent to extend the statute
of limitations for a partnership where a
member of the consolidated group is a
partner of such partnership subject to the
provisions of sections 6221 through 6234 and
the tax matters partner is not a member of
the group. (i) P, a domestic corporation, is the
common parent and agent for the P
consolidated group consisting of P and its
two subsidiary corporations, S and S–1. The
P group has a November 30 fiscal year end
and P files consolidated returns for the P
group for the years ending November 30,
Year 1 and November 30, Year 2. S–1 is a
partner in the PRS partnership which is
subject to the provisions of sections 6221
through 6234. PRS has a calendar year end
and A, an individual, is the tax matters
partner of the PRS partnership. PRS files a
partnership return for the year ending
December 31, Year 1. On January 10, Year 5,
A, as the tax matters partner for the PRS
partnership, executes a consent to extend the
period for assessment of partnership items of
PRS for all partners, and the Service coexecutes the consent on the same day for the
year ending December 31, Year 1.
(ii) A’s consent to extend the statute of
limitations for the partnership items of PRS
partnership for the year ending December 31,
Year 1, extends the statute of limitations with
respect to the partnership items for all
members of the P group, including P, S and
S–1 for the consolidated return year ending
November 30, Year 2. This is because S–1 is
a partner in the PRS partnership for which
A, the tax matters partner for the PRS
partnership, consents to extend the statute of
limitations for the year ending December 31,
Year 1. However, under paragraph (f)(2)(iii),
such agreement with respect to the statute of
limitations for the PRS partnership for the
year ending December 31, Year 1 does not
obviate the need to obtain a consent from P,
the agent for the P consolidated group, to
extend the statute of limitations for the P
consolidated group for the P group’s
consolidated return years ending November
30, Year 1 and November 30, Year 2
regarding any items other than partnership
items or affected items of the PRS
partnership.
Example 12. Contacting subsidiary member
in order to facilitate the conduct of an
examination, appeal or settlement where a
member of the consolidated group is a
partner of a partnership subject to the
provisions of sections 6221 through 6234. (i)
P, a domestic corporation, is the common
parent and agent for the P consolidated group
consisting of P and its two subsidiary
corporations, S and S–1. The P group has a
November 30 fiscal year end, and P files
consolidated returns for the P group for the
years ending November 30, Year 1 and
November 30, Year 2. S–1 is a partner in the
PRS partnership which is subject to the
provisions of sections 6221 through 6234.
PRS has a calendar year end and A, an
individual, is the tax matters partner of the
PRS partnership. PRS files a partnership
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return for the year ending December 31, Year
1. The Commissioner, on January 10, Year 4,
in the course of an examination of the PRS
partnership for the year ending December 31,
Year 1, seeks to obtain information in the
course of that examination in order to resolve
the audit.
(ii) Because the direct contact with a
subsidiary member of a consolidated group
that is a partner in a partnership subject to
the provisions under sections 6221 through
6234 may facilitate the conduct of an
examination, appeal or settlement, the
Commissioner, under paragraph (f)(2)(iii) of
this section, may communicate directly with
either S–1, P or A regarding the PRS
partnership without breaking agency
pursuant to paragraph (f)(2)(i) of this section.
However, if the Commissioner were instead
seeking to execute a settlement agreement
with respect to S–1 as a partner with respect
to its liability as a partner in PRS
partnership, P would need to execute such
settlement agreement for all members of the
group including the partner subsidiary.
(i) [Reserved]
(j) Cross-reference. For further rules
applicable to groups that include
insolvent financial institutions, see
§ 301.6402–7 of this chapter.
(k) Effective/applicability date. The
rules of this section apply to taxable
years ending on or after the date of
publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2012–13056 Filed 5–29–12; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
31 CFR Chapter X
Financial Crimes Enforcement
Network; Imposition of Special
Measure Against JSC CredexBank as a
Financial Institution of Primary Money
Laundering Concern
Financial Crimes Enforcement
Network, Treasury (‘‘FinCEN’’),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:
In a 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 JSC
CredexBank is a financial institution of
primary money laundering concern
pursuant to 31 U.S.C. 5318A. FinCEN is
issuing this notice of proposed
rulemaking to propose the imposition of
SUMMARY:
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Written comments on the notice
of proposed rulemaking must be
submitted on or before July 30, 2012.
DATES:
You may submit comments,
identified by RIN 1506–AB19 by any of
the following methods:
• Federal E-rulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Include 1506–AB19 in the submission.
Refer to Docket Number FINCEN–2012–
0003.
• Mail: The Financial Crimes
Enforcement Network, P.O. Box 39,
Vienna, VA 22183. Include RIN 1506–
AB19 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).
ADDRESSES:
The
FinCEN regulatory helpline at (800)
949–2732 and select Option 6.
FOR FUTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
RIN 1506–AB19
PO 00000
two special measures against JSC
CredexBank.
Sfmt 4702
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, 12
U.S.C. 1951–1959, and 31 U.S.C. 5311–
5314, 5316–5332, to promote the
prevention, detection, and prosecution
of international money laundering and
the financing of terrorism. Regulations
implementing the BSA appear at 31 CFR
chapter X. The authority of the
Secretary of the Treasury (‘‘the
Secretary’’) to administer the BSA and
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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 entity of 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 control and limit access to
the U.S. financial system to any
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, transactions,
or accounts; and 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 financial institution operating
outside the United States 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 to consider
‘‘such information as the Secretary
determines to be relevant, including the
following potentially relevant factors 2:
• The extent to which such financial
institution is used to facilitate or
promote money laundering in or
through the jurisdiction;
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.
2 31 U.S.C. 5318A(c)(2).
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• The extent to which such financial
institution is used for legitimate
business purposes in the jurisdiction;
and
• The extent to which the finding that
the institution is of primary money
laundering concern is sufficient to
ensure, with respect to transactions
involving the institution operating in
the jurisdiction, that the purposes of the
BSA continue to be fulfilled, and to
guard against international money
laundering and other financial crimes.
If the Secretary determines that
reasonable grounds exist for concluding
that a financial institution operating
outside the United States 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:
• 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
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.
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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 the
United States national security and
foreign policy.5
B. JSC CredexBank
In this rulemaking, FinCEN proposes
to impose both the first special measure
(31 U.S.C. 5318A(b)(1)) and the fifth
special measure (31 U.S.C. 5318A(b)(5))
against JSC CredexBank (‘‘Credex’’). The
first special measure imposes
requirements with respect to
recordkeeping and reporting of certain
financial transactions and may be
imposed by order prior to finalization of
this proposed regulation, as explained
in more detail below. The fifth special
measure prohibits or conditions the
opening or maintaining of
correspondent or payable-through
accounts for the identified institution by
U.S. financial institutions and may be
imposed only through the finalization of
this proposed regulation.
Credex is a depository institution that
is located and licensed in the Republic
of Belarus and primarily services
corporate entities.6 Originally
established on September 27, 2001, as
Nordic Investment Bank Corporation by
Ximex Executive Limited (‘‘Ximex’’),7 8
the bank changed its name to Northern
Investment Bank on April 5, 2006, and
then to the current name of Credex on
February 12, 2007. Credex is 96.82%
owned by Vicpart Holding SA, based in
Fribourg City, Switzerland.9 With 169
employees 10 and a total capitalization
of approximately $19 million,11 the
bank currently ranks as the 22nd largest
among 31 commercial banks in Belarus
in total assets.12 Credex has six
domestic branches and one
representative office in the Czech
Republic.13 While the majority of its
correspondent banking relationships are
with domestic banks, Credex maintains
correspondent relationships with
5 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)).
6 Bankers Almanac (2012).
7 ‘‘Belarus on a Roll,’’ Business New Europe, July
22, 2009 (https://www.businessneweurope.eu/
story1701/Belarus_on_a_roll).
8 Bankers Almanac (2012).
9 Id.
10 Id.
11 Id.
12 Id.
13 Id.
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Russian, Latvian, German, and Austrian
banks.14 According to available public
information, Credex does not appear to
have any direct U.S. correspondent
relationship.15
II. Imposition of Special Measures
Against JSC CredexBank as a Financial
Institution of Primary Money
Laundering Concern
As a result of the finding on [INSERT
DATE OF TREASURY FINDING], the
Secretary, through his delegate, the
Director of FinCEN, found that
reasonable grounds exist for concluding
that Credex is a financial institution of
primary money laundering concern.
Based upon that finding, the Director of
FinCEN is authorized to impose one or
more special measures. Following the
required consultations and the
consideration of all relevant factors
discussed in the finding and in this
notice of proposed rulemaking, the
Secretary, through the Director of
FinCEN, is proposing to impose the first
and fifth special measures authorized by
section 5318A(b).16
The first special measure authorizes
the Secretary, through the Director of
FinCEN, to require any domestic
financial institution ‘‘to maintain
records, file reports, or both, concerning
the aggregate amount of transactions, or
concerning each transaction, with
respect to’’ a financial institution
operating outside of the United States
found to be of primary money
laundering concern. The fifth special
measure authorizes a prohibition against
the opening or maintaining of
correspondent accounts 17 by any
domestic financial institution or agency
for or on behalf of a financial institution
found to be a primary money laundering
concern.
FinCEN is imposing the first special
measure in addition to the fifth special
measure in this case because of the
special circumstances and concerns
raised by the activities of Credex.
Specifically, the pervasive lack of
transparency surrounding Credex—
including its engagement in a
disproportionately large volume of
transactions for a bank of its size and its
ownership and use by shell companies
in a manner that obscures the purpose
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14 Id.
15 Id.
16 In connection with this action, FinCEN
consulted with staff of the Federal functional
regulators, the Department of Justice, and the
Department of State, among others.
17 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.
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and ownership of funds moving through
the United States—indicates a high
degree of money laundering risk and
vulnerability to other financial crimes.
This lack of transparency and use of the
bank by shell corporations is the reason
why FinCEN proposes to employ the
first special measure in this case. The
imposition of the first special measure
in this case will serve a number of
functions. Information gathered through
reports submitted by financial
institutions pursuant to the first special
measure will provide FinCEN and law
enforcement with greater insight into
transactions or attempted transactions
related to Credex, including details
regarding the underlying beneficial
owners. This knowledge, in turn, could
help FinCEN and law enforcement
pierce the veil of the shell corporations
behind which the true owners of the
funds involved hide.
Under Section 311, FinCEN may
impose the first special measure by
order prior to the implementation of any
finalized rule,18 provided that any such
order be issued with a NPRM relating to
the imposition of the special measure
and that such order may not remain in
effect for more than 120 days absent the
promulgation of a rule on or before the
end of the 120-day period beginning on
the date the order was issued.19 The
authority to issue such an order
immediately upon finding that an
institution is of primary money
laundering concern is particularly
important in addressing illicit finance
risks associated with the identified
financial institution that could continue
posing a threat to the U.S. financial
system while a proposed rule is under
consideration.
Although the factual circumstances
surrounding Credex could merit an
immediate imposition of the first special
measure, FinCEN has elected not to
issue an order to this effect in this case.
Taking into account the fact that this
NPRM marks the inaugural use of the
first special measure in a Section 311
action, FinCEN has decided not to
implement the first special measure
prior to the finalization of the proposed
rule in order to provide financial
institutions and other interested parties
with an opportunity to comment on
how the first special measure could be
implemented in a manner that most
effectively mitigates the risk posed by
the identified institution to the U.S.
financial system and enables the
collection of useful information while
minimizing the overall burden on U.S.
financial institutions.
18 31
19 31
PO 00000
U.S.C. 5318A(a)(2)(B).
U.S.C. 5318A(a)(3).
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As such, FinCEN requests comment
on the scope and practicability of the
potential obligations under the first
special measure, and in particular, any
input on the feasibility of implementing
the first special measure by order prior
to a final rule or in the absence of a
prohibition on opening or maintaining
correspondent accounts with an
identified institution as proposed under
fifth special measure. FinCEN will
consider such input not only in the
context of assessing whether to finalize
the proposed rule, but also in the event
that it determines that it is necessary in
a future Section 311 action to issue an
order imposing the first special measure
prior to the finalization of a rule.
A. Form of Records and Reports Under
the First Special Measure
As to the form of records and reports
required by the first special measure,
Section 5318A(b)(1)(B) provides:
Such records and reports shall be
made and retained at such time, in such
manner, and for such period of time, as
the Secretary shall determine, and shall
include such information as the
Secretary may determine, including—
(i) The identity and address of the
participants in a transaction or
relationship, including the identity of
the originator of any funds transfer;
(ii) The legal capacity in which a
participant in any transaction is acting;
(iii) The identity of the beneficial
owner of the funds involved in any
transaction, in accordance with such
procedures as the Secretary determines
to be reasonable and practicable to
obtain and retain the information; and
(iv) A description of any transaction.
The Director of FinCEN determines
that records and reports under the first
special measure, if imposed, shall be
made and retained as follows. The
covered financial institution is required
to take reasonable steps to collect and
report to FinCEN the following
information with respect to any
transaction or attempted transaction
related to Credex:
(i) The identity and address of the
participants in a transaction or
attempted transaction, including the
identity of the originator and beneficiary
of any funds transfer;
(ii) The legal capacity in which
Credex is acting with respect to the
transaction or attempted transaction
and, to the extent Credex is not acting
on its own behalf, then the customer or
other person on whose behalf Credex is
acting;
(iii) The identity of the beneficial
owner of the funds involved in any
transaction or attempted transaction;
and
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(iv) A description of the transaction or
attempted transaction and its purpose.
This information shall be reported to
FinCEN within ten business days
following the day when the covered
financial institution engaged in the
transaction or became aware of the
attempted transaction.
B. Discussion of Section 311 Factors
A discussion of the section 311 factors
relevant to imposing the first and fifth
special measures follows.
srobinson on DSK4SPTVN1PROD with PROPOSALS
1. Whether Similar Actions Have Been
or Will Be Taken by Other Nations or
Multilateral Groups Against Credex
Other countries or multilateral groups
have not yet taken action similar to
those proposed in this rulemaking that
would: (1) Require domestic financial
institutions and agencies to file reports
concerning any transactions or
attempted transactions related to
Credex; and (2) prohibit domestic
financial institutions and agencies from
opening or maintaining a correspondent
account for or on behalf of Credex, and
to require those domestic financial
institutions and agencies to screen their
correspondents in a manner that is
reasonably designed to guard against
indirect use by Credex, including access
through the use of nested correspondent
accounts held by Credex. FinCEN
encourages other countries to take
similar action based on the findings
contained in this rulemaking.
2. Whether the Imposition of the First or
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 first special measure sought to be
imposed by this rulemaking would
require domestic financial institutions
and agencies to file reports concerning
any transactions or attempted
transactions related to Credex. Given the
general recordkeeping and reporting
obligations already in place, FinCEN
does not expect incremental increase in
the burden associated with these
requirements to be significant. U.S.
financial institutions generally apply
some level of screening and (when
required) reporting of their transactions
and accounts, often through the use of
commercially available software such as
that used for compliance with the
economic sanctions programs
administered by the Office of Foreign
Assets Control (OFAC) of the
Department of the Treasury. They are
also required to have enhanced due
diligence policies and procedures,
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which involve the collection of
beneficial ownership information for
certain types of correspondent accounts
with certain foreign financial
institutions. As explained in more detail
in the section-by-section analysis below,
financial institutions should be able to
easily adapt these current screening and
reporting procedures to comply with
this special measure. Moreover, the
number of transactions or attempted
transactions for which the
recordkeeping and reporting obligations
apply is expected to be relatively
limited because, according to available
public information, Credex does not
appear to have any direct U.S.
correspondent relationships. Thus, the
additional reporting and recordkeeping
requirements that would be required by
this rulemaking are not expected to
create a significant competitive
disadvantage for U.S. financial
institutions.
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, Credex. 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
Credex. FinCEN does not expect the
burden associated with these
requirements to be significant, given its
understanding that, according to
available public information, no U.S.
financial institutions currently maintain
a correspondent account for Credex.
There is a minimal burden involved in
transmitting a one-time notice to all
correspondent account holders
concerning the prohibition on indirectly
providing services to Credex. As noted
above, U.S. financial institutions
generally apply some level of
transaction and account screening, often
through the use of commercially
available software. 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 support compliance 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.
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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 Credex
This proposed rulemaking targets
Credex specifically; it does not target a
class of financial transactions (such as
wire transfers) or a particular
jurisdiction. Credex is not a major
participant in the international payment
system and is not relied upon by the
international banking community for
clearance or settlement services. Thus,
the imposition of the first and fifth
special measures against Credex will not
have a significant adverse systemic
impact on the international payment,
clearance, and settlement system. In
light of the reasons for imposing these
special measures, FinCEN does not
believe that it will impose an undue
burden on legitimate business activities,
and notes that the presence of many
larger banks in Belarus will alleviate the
burden on legitimate business activities
within that jurisdiction.
4. The Effect of the Proposed Action on
United States National Security and
Foreign Policy
The additional recordkeeping and
reporting requirements required by the
first special measure would enhance the
U.S. Government’s understanding of the
transactions engaged in by Credex and
enhance transparency into Credex’s
activities of money laundering concern,
which in turn would be utilized in
efforts to detect and deter significant
money laundering activity and other
financial crimes. Such efforts would
enhance national security, making it
more difficult for terrorists and money
launderers to access the substantial
resources of the U.S. financial system.
The exclusion from the U.S. financial
system of banks that serve as conduits
for significant money laundering
activity and other financial crimes
required by the fifth special measure
would similarly enhance national
security by making it more difficult for
terrorists and money launderers to
access the substantial resources of the
U.S. financial system.
More generally, the imposition of the
first and fifth special measures would
complement the U.S. Government’s
worldwide efforts to expose and disrupt
international money laundering.
Therefore, pursuant to the finding that
Credex is an institution of primary
money laundering concern, and after
conducting the required consultations
and weighing the relevant factors, the
Director of FinCEN is proposing to
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impose the first and fifth special
measures.
II. Section-by-Section Analysis for
Imposition of First and Fifth Special
Measures
A. 1010.658(a)—Definitions
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1. JSC CredexBank
Section 1010.658(a)(1) of the
proposed rule defines Credex to include
all branches, offices, and subsidiaries of
Credex operating in Belarus or in any
jurisdiction. FinCEN will provide
updated information, as it is available;
however, covered financial institutions
should take commercially reasonable
measures to determine whether a
customer is a branch, office, or
subsidiary of Credex. FinCEN is not
aware of any subsidiaries of Credex.
2. Correspondent Account
Section 1010.658(a)(2) of the
proposed rule 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 a demand
deposit, savings deposit, or other
transaction or asset account, and a
credit account or other extension of
credit. We are using the same definition
of ‘‘account’’ for purposes of this rule as
was established for depository
institutions in the final rule
implementing section 312 of the USA
PATRIOT Act.20
In the case of securities brokerdealers, futures commission merchants,
introducing brokers-commodities, and
investment companies that are open-end
companies (mutual funds), we are also
using the same definition of ‘‘account’’
for purposes of this rule as was
established for these entities in the final
rule implementing section 312 of the
USA PATRIOT Act.21
3. Covered Financial Institution
Section 1010.658(a)(3) of the
proposed rule defines ‘‘covered
20 See
21 See
31 CFR 1010.605(c)(2)(i).
31 CFR 1010.605(c)(2)(ii)–(iv).
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financial institution’’ with the same
definition used in the final rule
implementing section 312 of the USA
PATRIOT Act,22 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 savings association;
• A corporation acting under section
25A of the Federal Reserve Act (12
U.S.C. 611);
• A trust bank or trust company;
• A broker or dealer in securities;
• A futures commission merchant or
an introducing broker-commodities; and
a mutual fund.
4. Beneficial Owner
Section 1010.658(a)(4) of the
proposed rule defines ‘‘beneficial
owner’’ as an individual who has a level
of control over, or entitlement to, the
funds involved in the transaction that,
as a practical matter, enables the
individual, directly or indirectly, to
control, manage or direct the funds.
This definition derives from the
definition used in the final rule
implementing section 312 of the USA
PATRIOT Act.23
5. Subsidiary
Section 1010.658(a)(5) of the
proposed rule defines ‘‘subsidiary’’ as a
company of which more than 50 percent
of the voting stock or analogous equity
interest is owned by another company.
This definition means that the
subsidiary is under the control of the
owner of the majority interest.
B. 1010.658(b)—Requirements for
Covered Financial Institutions With
Regard to the First Special Measure
The proposed rule imposing the first
special measure would require that
covered financial institutions take
reasonable steps to collect and report to
FinCEN specified information regarding
any transaction or attempted transaction
related to Credex that the covered
financial institution is requested to
engage in after the imposition of the first
special measure in order to increase the
transparency regarding Credex’s
attempts to engage in transactions in or
through the U.S. financial system.
Transactions related to Credex would
include, but are not limited to, those
that are conducted or are attempted by
Credex itself. This proposed rule would
22 See
23 See
PO 00000
31 CFR 1010.605(e)(1).
31 CFR 1010.605(a).
Frm 00061
Fmt 4702
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not alter or otherwise impact other
regulatory obligations of the covered
financial institution requiring the
reporting of suspicious activity.
1. Reporting
(a) Identity of the Participants in a
Transaction or Attempted Transaction
Section 1010.658(b)(1)(i) of the
proposed rule imposing the first special
measure would require covered
financial institutions to report the
identity and address of the participants
in any transaction or attempted
transaction related to Credex, including
the identity of the originator and
beneficiary of any funds transfer. This
information would include any
identifying information in the
possession of the financial institution in
the ordinary course of business,
including the information required
under 31 CFR § 1010.410(f) (generally
known as the ‘‘travel rule’’), such as
name, account number if used, address,
the identity of the beneficiary’s financial
institution, or any other specific
identifier of the recipient received with
the transmittal order.
(b) Legal Capacity
Section 1010.658(b)(1)(ii) of the
proposed rule imposing the first special
measure would require covered
financial institutions to report the legal
capacity in which Credex and any
customer of Credex is acting with
respect to the transaction or attempted
transaction. This information would
include any identifying information
collected by the financial institution in
the ordinary course of business and may
include identification of the roles of
Credex or any of its customers in the
transaction such as transmittor or
recipient of a funds transfer or
intermediary financial institutions
involved in the payment chain
associated with the transaction.
(c) Beneficial Owner of the Funds
Section 1010.658(b)(1)(ii) of the
proposed rule imposing the first special
measure would require covered
financial institutions to report the
identity of the beneficial owner of the
funds involved in any transaction or
attempted transaction related to Credex.
Under existing FinCEN regulations,
there are two limited situations where
financial institutions are expressly
obligated to obtain beneficial ownership
information. Specifically, under the
rules implementing Section 312 of the
USA PATRIOT Act, certain ‘‘covered
financial institutions,’’ 24 which include
the same institutions covered by the
24 31
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scope of this proposed regulation, must
implement enhanced due diligence
programs, including obtaining beneficial
ownership information, in two
situations: (i) Covered financial
institutions that offer private banking
accounts are required to take reasonable
steps to identify the nominal and
beneficial owners of such accounts; 25
and (ii) covered financial institutions
that offer correspondent accounts for
certain foreign financial institutions 26
are required to take reasonable steps to
obtain information from the foreign
financial institution about the identity
of any person with authority to direct
transactions through any correspondent
account that is a payable-through
account, and the sources and beneficial
owner of funds or other assets in the
payable-through account.27 The
requirement to report beneficial
ownership of funds information about
transactions or attempted transactions
related to Credex can be satisfied by
employing the same policies and
procedures as are used for the regulatory
obligations mentioned in (ii) above
promulgated under Section 312 of the
USA PATRIOT Act, and covered
financial institutions should follow the
same procedures for obtaining such
beneficial ownership information as
they would for those obligations.
Collecting such information may require
personal contact with the
correspondent. Where the covered
financial institution is unable to identify
the beneficial owner of funds associated
with a Credex-related transaction, it
should consider the transaction to be
one of primary money laundering
concern and determine, based on
identified risks, whether or not it should
process the transaction.
(d) Description of the Transaction or
Attempted Transaction and its Purpose
Section 1010.658(b)(1)(iii) of the
proposed rule imposing the first special
measure would require covered
financial institutions to report a
description of the transaction or
attempted transaction and its purpose.
The description would include
additional details of the transaction,
including amounts, and in particular, a
general description of any underlying
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25 31
CFR 1010.620(b)(1).
foreign financial institutions include
foreign banks that operate under an offshore
banking license; operate under a banking license
issued by a country named as non-cooperative by
an international body (such as the Financial Action
Task Force (FATF)) of which the United States is
a member; or operate under a banking license
issued by country designated by the Treasury
Secretary as warranting special measures. See 31
CFR 1010.610(c).
27 31 CFR 1010.610(b)(1)(iii)(A).
26 These
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reason for the transaction or obligation
which the financial transaction
supports, such as the purchase of
specific goods or services, initiation or
repayment of a loan or other debt,
settlement of a trade, transaction in
foreign exchange, or other type of
financial obligation, or other relevant
information the covered financial
institution may have available. To the
extent a covered financial institution
finds that it does not have sufficient
information to enable it to report a
description of the transaction and its
purpose, it would be reasonable for the
covered financial institution to inquire
further (for example, with any
applicable customer, respondent bank,
or correspondent bank) to obtain
additional information. In so doing, a
covered financial institution should
consider analogizing to procedures it
would follow in fulfilling its obligation
to determine whether a transaction
should be reported as suspicious.
Specifically, it should consider
‘‘examining the available facts,
including the background and possible
purpose of the transaction’’ in order to
determine whether it is consistent with
the type of transaction in which a
particular customer would normally be
expected to engage.28
2. Filing Requirements
Section 1010.658(b)(2) of the
proposed rule imposing the first special
measure would require covered
financial institutions to make the
reports required by Section
1010.658(b)(1) within ten business days
following the day when the covered
financial institution engaged in the
transaction or became aware of the
attempted transaction. By ensuring that
FinCEN receives information shortly
after a transaction is executed, the
contemplated time period will enable
FinCEN to more effectively monitor the
ongoing activities of Credex, thereby
enhancing transparency. This time
period was specifically chosen because
it will provide FinCEN with reporting
more quickly than that required for
suspicious activity reporting. FinCEN
requests comment on whether ten days
is sufficient time for covered financial
institutions to obtain the required
information or whether some other
period of time, still less than that
allowed for the filing of suspicious
activity reports, is more appropriate.
A covered financial institution would
additionally be required to take
reasonable steps to identify any
reportable transaction or attempted
transaction, direct or indirect, related to
28 See,
PO 00000
e.g., 31 CFR 1020.320(a)(2)(iii).
Frm 00062
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31799
Credex, to the extent that such 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 Credex as the originator’s or
beneficiary’s financial institution, or
otherwise referenced Credex 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.
Willful failure to provide timely,
accurate, and complete information in
such reporting may constitute a
violation of these requirements subject
to civil and criminal penalties under 31
U.S.C. 5321 and 5322.
FinCEN specifically solicits
comments on the requirement under the
proposed rule that covered financial
institutions take reasonable steps to
screen their transactions in order to
identify any transaction or attempted
transaction related to Credex.
C. 1010.658(c)—Requirements for
Covered Financial Institutions With
Regard to the Fifth Special Measure
The proposed imposition of the fifth
special measure would prohibit covered
financial institutions from establishing,
maintaining, or managing in the United
States any correspondent account for, or
on behalf of, Credex. 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 indirect use by Credex. 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 Credex that such
correspondents may not provide Credex
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
Credex, 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
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financial institution should take a riskbased approach when deciding what, if
any, additional due diligence measures
it should adopt to guard against the
indirect use of its correspondent
accounts by Credex, based on risk
factors such as the type of services it
offers and geographic locations of its
correspondents.
1. Prohibition on Direct Use of
Correspondent Accounts
Section 1010.658(c)(1) of the
proposed rule imposing the fifth special
measure prohibits all covered financial
institutions from establishing,
maintaining, administering, or
managing a correspondent account in
the United States for, or on behalf of,
Credex. 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, Credex.
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2. Special Due Diligence of
Correspondent Accounts to Prohibit
Indirect Use
As a corollary to the prohibition on
maintaining correspondent accounts
directly for Credex, section
1010.658(c)(2) of the proposed rule
imposing the fifth special measure
requires a covered financial institution
to apply special due diligence to its
correspondent accounts 29 that is
reasonably designed to guard against
their indirect use by Credex. 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
Credex that such correspondents may
not provide Credex 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 access to
Credex through transaction screening
software. 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 Credex:
Notice: Pursuant to U.S. regulations issued
under section 311 of the USA PATRIOT Act,
31 CFR 1010.658, we are prohibited from
establishing, maintaining, administering or
managing a correspondent account for, or on
behalf of, JSC CredexBank or any of its
29 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.
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subsidiaries. The regulations also require us
to notify you that you may not provide JSC
CredexBank or any of its subsidiaries with
access to the correspondent account you hold
at our financial institution. If we become
aware that JSC CredexBank or any of its
subsidiaries is indirectly using the
correspondent account you hold at our
financial institution for transactions, 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 Credex 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 Credex 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.
A covered financial institution also
would be required to take reasonable
steps to identify any indirect use of its
correspondent accounts by Credex, 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
Credex as the financial institution of the
originator or beneficiary, or otherwise
referenced Credex 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
PO 00000
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take reasonable steps to screen their
correspondent accounts in order to
identify any indirect use of such
accounts by Credex.
Notifying certain correspondent
account holders and taking reasonable
steps to identify any indirect use of its
correspondent accounts by Credex in
the manner discussed above are the
minimum due diligence requirements
under the proposed rule imposing the
fifth special measure. 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
indirect use of its correspondent
accounts by Credex, based on risk
factors such as the type of services it
offers and the geographic locations of its
correspondent account holders.
Under the proposed rule imposing the
fifth special measure, a covered
financial institution that obtains
knowledge that a correspondent account
is being used by a foreign bank to
provide indirect access to Credex must
take all appropriate steps to prevent
such indirect access, including the
notification of its correspondent account
holder per section 1010.658(c)(2)(i)(A)
and, where necessary, terminating the
correspondent account. 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 the account will no
longer be available to Credex, 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 banking services
indirectly to Credex. FinCEN
specifically solicits comments on the
requirement under the proposed rule
that covered financial institutions
prevent indirect access to Credex, once
such indirect access is identified.
3. Reporting Not Required
Section 1010.658(c)(3) of the
proposed rule imposing the fifth special
measure clarifies that the rule does not
impose any reporting requirement upon
any covered financial institution that is
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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 Credex, such
correspondents may not provide Credex
with access to the correspondent
account maintained at the covered
financial institution.
III. Request for Comments
FinCEN invites comments on all
aspects of the proposals to impose the
first and fifth special measures against
Credex and specifically invites
comments on the following matters:
1. The impact of the proposed special
measures upon legitimate transactions
with Credex 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 Belarus.
First Special Measure
2. The form and scope of the reports
to FinCEN required under the proposed
rule to impose the first special measure;
3. The appropriate time within which
a covered institution would be required
to report to FinCEN;
4. The appropriate scope of the
proposed requirement for a covered
financial institution to take reasonable
steps to identify any reportable
transactions by Credex;
5. The appropriate steps a covered
financial institution should take once it
identifies a transaction related to
Credex; and
6. Whether a definition of ‘‘attempted
transaction’’ needs to be included and
what that definition should be.
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Fifth Special Measure
7. The form and scope of the notice
to certain correspondent account
holders that would be required under
the rule;
8. 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 Credex; and
9. The appropriate steps a covered
financial institution should take once it
identifies an indirect use of one of its
correspondent accounts by Credex.
Possible Future Implementation of First
Special Measure by Order
10. FinCEN has the authority,
pursuant to 31 U.S.C. 5318A(b)(1), to
impose the first special measure by
order, without notice and comment, for
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up to 120 days prior to the
implementation of a final rule imposing
that special measure. FinCEN requests
comment on the feasibility of so
implementing the requirements of the
first special measure by order prior to a
final rule imposing the first special
measure;
11. The feasibility of implementing an
order imposing the first special measure
in the absence of a prohibition on
opening and maintaining correspondent
accounts with the identified institution
under the fifth special measure;
12. Whether the current definition of
covered financial institutions would be
appropriate if the first special measure
were implemented by order; and
13. Whether there are any potential
differences among the types of covered
financial institutions that might make it
more difficult for some to implement
the order.
IV. Regulatory Flexibility Act
It is hereby certified that the proposed
imposition of the first and fifth special
measures would not have a significant
economic impact on a substantial
number of small entities.
On the basis of publicly available
information, FinCEN understands that
Credex currently maintains no
correspondent accounts in the United
States. Moreover, to the extent that a
transaction related to Credex were to be
processed through a U.S. financial
institution, this would most likely
involve the small subset of the largest
financial institutions that actively
engage in international transactions.
Thus, the requirement to report
transactions related to Credex under the
first special measure would 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 and existing
suspicious activity reporting programs,
can easily be modified to monitor for
and report transactions related to
Credex. Thus, any increase in the
reporting burden that would be required
by the imposition of the first special
measure—i.e., reporting of all
transactions related to Credex on a
timelier basis—would not impose a
significant additional economic burden
upon small U.S. financial institutions.
As noted above, FinCEN understands
that Credex currently maintains no
correspondent accounts in the United
PO 00000
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31801
States. Thus, the prohibition on
maintaining such accounts under the
fifth special measure would 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 Credex.
Thus, the special due diligence that
would be required by the imposition of
the fifth special measure—i.e., the onetime transmittal of notice to certain
correspondent account holders and the
screening of transactions to identify any
indirect use of correspondent
accounts—would not 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 from the
imposition of the first and fifth special
measures on Credex.
V. Paperwork Reduction Act
The collection of information
contained in this proposed rule is being
submitted to the Office of Management
and Budget for review in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on
the collection of information should be
sent to the Desk Officer for the
Department of Treasury, Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Paperwork Reduction Project (1506),
Washington, DC 20503 (or by email to
oira_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 July 30, 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 1320, the following
information concerning the collection of
information as required by 31 CFR
1010.658 is presented to assist those
persons wishing to comment on the
information collection.
31 CFR 1010.658 is proposed
imposing the first and fifth special
measures under 31 U.S.C. 5318A. The
Paperwork reduction act analysis for
both follows.
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The provisions in this proposed rule
pertaining to the collection of
information can be found in sections
1010.658(b)(1), 1010.658(c)(2)(i), and
1010.658(c)(3)(i). The information
required to be reported by section
1010.658(b)(1) will be used by the U.S.
Government to monitor the activities of
the institution of primary money
laundering concern. The notification
requirement in section 1010.658(c)(2)(i)
is intended to ensure cooperation from
correspondent account holders in
denying Credex access to the U.S.
financial system. The information
required to be maintained by section
1010.658(c)(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 1010.658. 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 brokerscommodities, and mutual funds.
Estimated Number of Affected
Financial Institutions: 5,000.
Estimated Average Annual Burden
Hours Per Affected Financial
Institutions: 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 report the
information.
An agency may not conduct or
sponsor and a person is not required to
respond to a collection of information
unless it displays a valid OMB control
number.
VerDate Mar<15>2010
16:32 May 29, 2012
Jkt 226001
VI. Executive Order 12866
Executive Orders 12866 and 13563
direct agencies to assess costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. It has been
determined that the final rule is not a
‘‘significant regulatory action’’ for
purposes of Executive Order 12866.
List of Subjects in 31 CFR Chapter X
Administrative practice and
procedure, Banks and banking, Brokers,
Counter-money laundering, Counterterrorism, Foreign banking.
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 CRIMES
ENFORCEMENT NETWORK, DEPARTMENT
OF THE TREASURY
1. The authority citation for Chapter
X continues 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 Part Chapter X is
proposed to be amended by adding new
§ 1010.658, as follows:
A. Under the undesignated center
heading ‘‘SPECIAL DUE DILIGENCE
FOR CORRESPONDENT ACCOUNTS
AND PRIVATE BANKING ACCOUNTS’’
to read as follows:
§ 1010.658 Special measures against the
JSC CredexBank
(a) Definitions. For purposes of this
section:
(1) JSC CredexBank means all
branches, offices, and subsidiaries of
JSC CredexBank operating in any
jurisdiction.
(2) Correspondent account has the
same meaning as provided in
§ 1010.605(c)(1)(ii).
(3) Covered financial institution has
the same meaning as provided in
§ 1010.605(e)(1).
(4) Beneficial Owner means an
individual who has a level of control
over, or entitlement to, the funds
involved in the transaction that, as a
practical matter, enables the individual,
directly or indirectly, to control,
manage, or direct the funds.
PO 00000
Frm 00065
Fmt 4702
Sfmt 4702
(5) Subsidiary means a company of
which more than 50 percent of the
voting stock or analogous equity interest
is owned by another company.
(b) Reporting requirements for
covered financial institutions (1)
Reporting. A covered financial
institution is required to take reasonable
steps to collect and report to FinCEN the
following information with respect to
any transaction or attempted transaction
related to JSC CredexBank:
(i) The identity and address of the
participants in a transaction or
attempted transaction, including the
identity of the originator and beneficiary
of any funds transfer;
(ii) The legal capacity in which JSC
CredexBank is acting with respect to the
transaction or attempted transaction
and, to the extent JSC CredexBank is not
acting on its own behalf, then the
customer or other person on whose
behalf JSC CredexBank is acting;
(iii) The identity of the beneficial
owner of the funds involved in any
transaction or attempted transaction;
and
(iv) A description of the transaction or
attempted transaction and its purpose.
(2) When to file. A report required by
paragraph (a) of this section shall be
filed by the reporting financial
institution within ten business days
following the day when the covered
financial institution engaged in the
transaction or became aware of the
attempted transaction.
(c) Prohibition on accounts and due
diligence 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, JSC CredexBank.
(2) Special due diligence of
correspondent accounts to prohibit
indirect use. (i) A covered financial
institution shall apply special due
diligence to its correspondent accounts
that is reasonably designed to guard
against their indirect use by JSC
CredexBank. 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 JSC
CredexBank, that such correspondents
may not provide JSC CredexBank 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 JSC CredexBank, to the
E:\FR\FM\30MYP1.SGM
30MYP1
Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 / Proposed Rules
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 indirect use of its
correspondent accounts by JSC
CredexBank.
(iii) A covered financial institution
that obtains knowledge that a
correspondent account is being used by
the foreign bank to provide indirect
access to JSC CredexBank, shall take all
appropriate steps to prevent such
indirect access, including the
notification of its correspondent account
holder under paragraph (b)(2)(i)(A) and,
where necessary, terminating the
correspondent account.
(3) Recordkeeping and reporting. (i) A
covered financial institution is required
to document its compliance with the
notice requirement set forth in
paragraph (b)(2)(i)(A) of this section.
(ii) Nothing in this subsection (c) shall
require a covered financial institution to
report any information not otherwise
required to be reported by law or
regulation.
Dated: May 22, 2012.
Peter S. Alvarado,
Deputy Director, Financial Crimes
Enforcement Network.
[FR Doc. 2012–12747 Filed 5–29–12; 8:45 am]
BILLING CODE 4810–02–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket Number USCG–2012–0358]
Table of Acronyms
RIN 1625–AA00
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of Proposed Rulemaking
Safety Zone for Fifth Coast Guard
District Fireworks Display Currituck
Sound; Corolla, NC
Coast Guard, DHS.
Notice of Proposed Rulemaking.
AGENCY:
ACTION:
The Coast Guard proposes to
temporarily change the enforcement
location of a safety zone for one specific
recurring fireworks display in the Fifth
Coast Guard District. This regulation
applies to only one recurring fireworks
event, held adjacent to the Currituck
Sound, Corolla, North Carolina. The
fireworks display previously originated
from a barge but will this year originate
from a location on land; the safety zone
is necessary to provide for the safety of
srobinson on DSK4SPTVN1PROD with PROPOSALS
SUMMARY:
VerDate Mar<15>2010
16:32 May 29, 2012
Jkt 226001
life on navigable waters during the
event. This action is intended to restrict
vessel traffic in a portion of the
Currituck Sound, Corolla, NC, during
the event.
DATES: Comments and related material
must be received by the Coast Guard on
or before June 14, 2012.
Compliance Dates: This proposed
temporary rule would be effective from
5:30 p.m. on July 4, 2012, through
1 a.m. on July 5, 2012.
ADDRESSES: You may submit comments
identified by docket number using any
one of the following methods:
(1) Federal eRulemaking Portal:
https://www.regulations.gov.
(2) Fax: 202–493–2251.
(3) Mail or Delivery: Docket
Management Facility (M–30), U.S.
Department of Transportation, West
Building Ground Floor, Room W12–140,
1200 New Jersey Avenue SE.,
Washington, DC 20590–0001. Deliveries
accepted between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The telephone number is 202–
366–9329.
See the ‘‘Public Participation and
Request for Comments’’ portion of the
SUPPLEMENTARY INFORMATION section
below for further instructions on
submitting comments. To avoid
duplication, please use only one of
these three methods.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email CWO3 Joseph M. Edge, U.S. Coast
Guard Sector North Carolina; telephone
252–247–4525, email Joseph.M.Edge@
uscg.mil. If you have questions on
viewing or submitting material to the
docket, call Renee V. Wright, Program
Manager, Docket Operations, telephone
(202) 366–9826.
SUPPLEMENTARY INFORMATION:
A. Public Participation and Request for
Comments
We encourage you to participate in
this rulemaking by submitting
comments and related materials. All
comments received will be posted
without change to https://www.
regulations.gov and will include any
personal information you have
provided.
1. Submitting Comments
If you submit a comment, please
include the docket number for this
rulemaking, indicate the specific section
of this document to which each
PO 00000
Frm 00066
Fmt 4702
Sfmt 4702
31803
comment applies, and provide a reason
for each suggestion or recommendation.
You may submit your comments and
material online at https://
www.regulations.gov, or by fax, mail, or
hand delivery, but please use only one
of these means. If you submit a
comment online, it will be considered
received by the Coast Guard when you
successfully transmit the comment. If
you fax, hand deliver, or mail your
comment, it will be considered as
having been received by the Coast
Guard when it is received at the Docket
Management Facility. We recommend
that you include your name and a
mailing address, an email address, or a
telephone number in the body of your
document so that we can contact you if
we have questions regarding your
submission.
To submit your comment online, go to
https://www.regulations.gov, type the
docket number (USCG–2012–0358) in
the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on ‘‘Submit a
Comment’’ on the line associated with
this rulemaking.
If you submit your comments by mail
or hand delivery, submit them in an
unbound format, no larger than 81⁄2 by
11 inches, suitable for copying and
electronic filing. If you submit
comments by mail and would like to
know that they reached the Facility,
please enclose a stamped, self-addressed
postcard or envelope. We will consider
all comments and material received
during the comment period and may
change the rule based on your
comments.
2. Viewing Comments and Documents
To view comments, as well as
documents mentioned in this preamble
as being available in the docket, go to
https://www.regulations.gov, type the
docket number (USCG–2012–0358) in
the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
rulemaking. You may also visit the
Docket Management Facility in Room
W12–140 on the ground floor of the
Department of Transportation West
Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
3. Privacy Act
Anyone can search the electronic
form of comments received into any of
our dockets by the name of the
individual submitting the comment (or
signing the comment, if submitted on
behalf of an association, business, labor
union, etc.). You may review a Privacy
Act notice regarding our public dockets
E:\FR\FM\30MYP1.SGM
30MYP1
]]>Agencies
[Federal Register Volume 77, Number 104 (Wednesday, May 30, 2012)]
[Proposed Rules]
[Pages 31794-31803]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12747]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
31 CFR Chapter X
RIN 1506-AB19
Financial Crimes Enforcement Network; Imposition of Special
Measure Against JSC CredexBank as a Financial Institution of Primary
Money Laundering Concern
AGENCY: Financial Crimes Enforcement Network, Treasury (``FinCEN''),
Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In a 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 JSC CredexBank is a financial institution of primary money
laundering concern pursuant to 31 U.S.C. 5318A. FinCEN is issuing this
notice of proposed rulemaking to propose the imposition of two special
measures against JSC CredexBank.
DATES: Written comments on the notice of proposed rulemaking must be
submitted on or before July 30, 2012.
ADDRESSES: You may submit comments, identified by RIN 1506-AB19 by any
of the following methods:
Federal E-rulemaking Portal:
http:[sol][sol]www.regulations.gov. Follow the instructions for
submitting comments. Include 1506-AB19 in the submission. Refer to
Docket Number FINCEN-2012-0003.
Mail: The Financial Crimes Enforcement Network, P.O. Box
39, Vienna, VA 22183. Include RIN 1506-AB19 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 http:[sol][sol]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, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-
5332, to promote the prevention, detection, and prosecution of
international money laundering and the financing of terrorism.
Regulations implementing the BSA appear at 31 CFR chapter X. The
authority of the Secretary of the Treasury (``the Secretary'') to
administer the BSA and
[[Page 31795]]
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 entity of 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 control and limit access to the U.S.
financial system to any 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,
transactions, or accounts; and 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 financial institution operating outside the United
States 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 to consider
``such information as the Secretary determines to be relevant,
including the following potentially relevant factors \2\:
---------------------------------------------------------------------------
\2\ 31 U.S.C. 5318A(c)(2).
---------------------------------------------------------------------------
The extent to which such financial institution is used to
facilitate or promote money laundering in or through the jurisdiction;
The extent to which such financial institution is used for
legitimate business purposes in the jurisdiction; and
The extent to which the finding that the institution is of
primary money laundering concern is sufficient to ensure, with respect
to transactions involving the institution operating in the
jurisdiction, that the purposes of the BSA continue to be fulfilled,
and to guard against international money laundering and other financial
crimes.
If the Secretary determines that reasonable grounds exist for
concluding that a financial institution operating outside the United
States 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 the United States national
security and foreign policy.\5\
---------------------------------------------------------------------------
\5\ 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)).
---------------------------------------------------------------------------
B. JSC CredexBank
In this rulemaking, FinCEN proposes to impose both the first
special measure (31 U.S.C. 5318A(b)(1)) and the fifth special measure
(31 U.S.C. 5318A(b)(5)) against JSC CredexBank (``Credex''). The first
special measure imposes requirements with respect to recordkeeping and
reporting of certain financial transactions and may be imposed by order
prior to finalization of this proposed regulation, as explained in more
detail below. The fifth special measure prohibits or conditions the
opening or maintaining of correspondent or payable-through accounts for
the identified institution by U.S. financial institutions and may be
imposed only through the finalization of this proposed regulation.
Credex is a depository institution that is located and licensed in
the Republic of Belarus and primarily services corporate entities.\6\
Originally established on September 27, 2001, as Nordic Investment Bank
Corporation by Ximex Executive Limited (``Ximex''),7 8 the
bank changed its name to Northern Investment Bank on April 5, 2006, and
then to the current name of Credex on February 12, 2007. Credex is
96.82% owned by Vicpart Holding SA, based in Fribourg City,
Switzerland.\9\ With 169 employees \10\ and a total capitalization of
approximately $19 million,\11\ the bank currently ranks as the 22nd
largest among 31 commercial banks in Belarus in total assets.\12\
Credex has six domestic branches and one representative office in the
Czech Republic.\13\ While the majority of its correspondent banking
relationships are with domestic banks, Credex maintains correspondent
relationships with
[[Page 31796]]
Russian, Latvian, German, and Austrian banks.\14\ According to
available public information, Credex does not appear to have any direct
U.S. correspondent relationship.\15\
---------------------------------------------------------------------------
\6\ Bankers Almanac (2012).
\7\ ``Belarus on a Roll,'' Business New Europe, July 22, 2009
(https://www.businessneweurope.eu/story1701/Belarus_on_a_roll).
\8\ Bankers Almanac (2012).
\9\ Id.
\10\ Id.
\11\ Id.
\12\ Id.
\13\ Id.
\14\ Id.
\15\ Id.
---------------------------------------------------------------------------
II. Imposition of Special Measures Against JSC CredexBank as a
Financial Institution of Primary Money Laundering Concern
As a result of the finding on [INSERT DATE OF TREASURY FINDING],
the Secretary, through his delegate, the Director of FinCEN, found that
reasonable grounds exist for concluding that Credex is a financial
institution of primary money laundering concern. Based upon that
finding, the Director of FinCEN is authorized to impose one or more
special measures. Following the required consultations and the
consideration of all relevant factors discussed in the finding and in
this notice of proposed rulemaking, the Secretary, through the Director
of FinCEN, is proposing to impose the first and fifth special measures
authorized by section 5318A(b).\16\
---------------------------------------------------------------------------
\16\ In connection with this action, FinCEN consulted with staff
of the Federal functional regulators, the Department of Justice, and
the Department of State, among others.
---------------------------------------------------------------------------
The first special measure authorizes the Secretary, through the
Director of FinCEN, to require any domestic financial institution ``to
maintain records, file reports, or both, concerning the aggregate
amount of transactions, or concerning each transaction, with respect
to'' a financial institution operating outside of the United States
found to be of primary money laundering concern. The fifth special
measure authorizes a prohibition against the opening or maintaining of
correspondent accounts \17\ by any domestic financial institution or
agency for or on behalf of a financial institution found to be a
primary money laundering concern.
---------------------------------------------------------------------------
\17\ 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.
---------------------------------------------------------------------------
FinCEN is imposing the first special measure in addition to the
fifth special measure in this case because of the special circumstances
and concerns raised by the activities of Credex. Specifically, the
pervasive lack of transparency surrounding Credex--including its
engagement in a disproportionately large volume of transactions for a
bank of its size and its ownership and use by shell companies in a
manner that obscures the purpose and ownership of funds moving through
the United States--indicates a high degree of money laundering risk and
vulnerability to other financial crimes. This lack of transparency and
use of the bank by shell corporations is the reason why FinCEN proposes
to employ the first special measure in this case. The imposition of the
first special measure in this case will serve a number of functions.
Information gathered through reports submitted by financial
institutions pursuant to the first special measure will provide FinCEN
and law enforcement with greater insight into transactions or attempted
transactions related to Credex, including details regarding the
underlying beneficial owners. This knowledge, in turn, could help
FinCEN and law enforcement pierce the veil of the shell corporations
behind which the true owners of the funds involved hide.
Under Section 311, FinCEN may impose the first special measure by
order prior to the implementation of any finalized rule,\18\ provided
that any such order be issued with a NPRM relating to the imposition of
the special measure and that such order may not remain in effect for
more than 120 days absent the promulgation of a rule on or before the
end of the 120-day period beginning on the date the order was
issued.\19\ The authority to issue such an order immediately upon
finding that an institution is of primary money laundering concern is
particularly important in addressing illicit finance risks associated
with the identified financial institution that could continue posing a
threat to the U.S. financial system while a proposed rule is under
consideration.
---------------------------------------------------------------------------
\18\ 31 U.S.C. 5318A(a)(2)(B).
\19\ 31 U.S.C. 5318A(a)(3).
---------------------------------------------------------------------------
Although the factual circumstances surrounding Credex could merit
an immediate imposition of the first special measure, FinCEN has
elected not to issue an order to this effect in this case. Taking into
account the fact that this NPRM marks the inaugural use of the first
special measure in a Section 311 action, FinCEN has decided not to
implement the first special measure prior to the finalization of the
proposed rule in order to provide financial institutions and other
interested parties with an opportunity to comment on how the first
special measure could be implemented in a manner that most effectively
mitigates the risk posed by the identified institution to the U.S.
financial system and enables the collection of useful information while
minimizing the overall burden on U.S. financial institutions.
As such, FinCEN requests comment on the scope and practicability of
the potential obligations under the first special measure, and in
particular, any input on the feasibility of implementing the first
special measure by order prior to a final rule or in the absence of a
prohibition on opening or maintaining correspondent accounts with an
identified institution as proposed under fifth special measure. FinCEN
will consider such input not only in the context of assessing whether
to finalize the proposed rule, but also in the event that it determines
that it is necessary in a future Section 311 action to issue an order
imposing the first special measure prior to the finalization of a rule.
A. Form of Records and Reports Under the First Special Measure
As to the form of records and reports required by the first special
measure, Section 5318A(b)(1)(B) provides:
Such records and reports shall be made and retained at such time,
in such manner, and for such period of time, as the Secretary shall
determine, and shall include such information as the Secretary may
determine, including--
(i) The identity and address of the participants in a transaction
or relationship, including the identity of the originator of any funds
transfer;
(ii) The legal capacity in which a participant in any transaction
is acting;
(iii) The identity of the beneficial owner of the funds involved in
any transaction, in accordance with such procedures as the Secretary
determines to be reasonable and practicable to obtain and retain the
information; and
(iv) A description of any transaction.
The Director of FinCEN determines that records and reports under
the first special measure, if imposed, shall be made and retained as
follows. The covered financial institution is required to take
reasonable steps to collect and report to FinCEN the following
information with respect to any transaction or attempted transaction
related to Credex:
(i) The identity and address of the participants in a transaction
or attempted transaction, including the identity of the originator and
beneficiary of any funds transfer;
(ii) The legal capacity in which Credex is acting with respect to
the transaction or attempted transaction and, to the extent Credex is
not acting on its own behalf, then the customer or other person on
whose behalf Credex is acting;
(iii) The identity of the beneficial owner of the funds involved in
any transaction or attempted transaction; and
[[Page 31797]]
(iv) A description of the transaction or attempted transaction and
its purpose.
This information shall be reported to FinCEN within ten business days
following the day when the covered financial institution engaged in the
transaction or became aware of the attempted transaction.
B. Discussion of Section 311 Factors
A discussion of the section 311 factors relevant to imposing the
first and fifth special measures follows.
1. Whether Similar Actions Have Been or Will Be Taken by Other Nations
or Multilateral Groups Against Credex
Other countries or multilateral groups have not yet taken action
similar to those proposed in this rulemaking that would: (1) Require
domestic financial institutions and agencies to file reports concerning
any transactions or attempted transactions related to Credex; and (2)
prohibit domestic financial institutions and agencies from opening or
maintaining a correspondent account for or on behalf of Credex, and to
require those domestic financial institutions and agencies to screen
their correspondents in a manner that is reasonably designed to guard
against indirect use by Credex, including access through the use of
nested correspondent accounts held by Credex. FinCEN encourages other
countries to take similar action based on the findings contained in
this rulemaking.
2. Whether the Imposition of the First or 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 first special measure sought to be imposed by this rulemaking
would require domestic financial institutions and agencies to file
reports concerning any transactions or attempted transactions related
to Credex. Given the general recordkeeping and reporting obligations
already in place, FinCEN does not expect incremental increase in the
burden associated with these requirements to be significant. U.S.
financial institutions generally apply some level of screening and
(when required) reporting of their transactions and accounts, often
through the use of commercially available software such as that used
for compliance with the economic sanctions programs administered by the
Office of Foreign Assets Control (OFAC) of the Department of the
Treasury. They are also required to have enhanced due diligence
policies and procedures, which involve the collection of beneficial
ownership information for certain types of correspondent accounts with
certain foreign financial institutions. As explained in more detail in
the section-by-section analysis below, financial institutions should be
able to easily adapt these current screening and reporting procedures
to comply with this special measure. Moreover, the number of
transactions or attempted transactions for which the recordkeeping and
reporting obligations apply is expected to be relatively limited
because, according to available public information, Credex does not
appear to have any direct U.S. correspondent relationships. Thus, the
additional reporting and recordkeeping requirements that would be
required by this rulemaking are not expected to create a significant
competitive disadvantage for U.S. financial institutions.
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, Credex. 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
Credex. FinCEN does not expect the burden associated with these
requirements to be significant, given its understanding that, according
to available public information, no U.S. financial institutions
currently maintain a correspondent account for Credex. There is a
minimal burden involved in transmitting a one-time notice to all
correspondent account holders concerning the prohibition on indirectly
providing services to Credex. As noted above, U.S. financial
institutions generally apply some level of transaction and account
screening, often through the use of commercially available software. 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 support compliance 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 Credex
This proposed rulemaking targets Credex specifically; it does not
target a class of financial transactions (such as wire transfers) or a
particular jurisdiction. Credex is not a major participant in the
international payment system and is not relied upon by the
international banking community for clearance or settlement services.
Thus, the imposition of the first and fifth special measures against
Credex will not have a significant adverse systemic impact on the
international payment, clearance, and settlement system. In light of
the reasons for imposing these special measures, FinCEN does not
believe that it will impose an undue burden on legitimate business
activities, and notes that the presence of many larger banks in Belarus
will alleviate the burden on legitimate business activities within that
jurisdiction.
4. The Effect of the Proposed Action on United States National Security
and Foreign Policy
The additional recordkeeping and reporting requirements required by
the first special measure would enhance the U.S. Government's
understanding of the transactions engaged in by Credex and enhance
transparency into Credex's activities of money laundering concern,
which in turn would be utilized in efforts to detect and deter
significant money laundering activity and other financial crimes. Such
efforts would enhance national security, making it more difficult for
terrorists and money launderers to access the substantial resources of
the U.S. financial system.
The exclusion from the U.S. financial system of banks that serve as
conduits for significant money laundering activity and other financial
crimes required by the fifth special measure would similarly enhance
national security by making it more difficult for terrorists and money
launderers to access the substantial resources of the U.S. financial
system.
More generally, the imposition of the first and fifth special
measures would complement the U.S. Government's worldwide efforts to
expose and disrupt international money laundering.
Therefore, pursuant to the finding that Credex is an institution of
primary money laundering concern, and after conducting the required
consultations and weighing the relevant factors, the Director of FinCEN
is proposing to
[[Page 31798]]
impose the first and fifth special measures.
II. Section-by-Section Analysis for Imposition of First and Fifth
Special Measures
A. 1010.658(a)--Definitions
1. JSC CredexBank
Section 1010.658(a)(1) of the proposed rule defines Credex to
include all branches, offices, and subsidiaries of Credex operating in
Belarus or in any jurisdiction. FinCEN will provide updated
information, as it is available; however, covered financial
institutions should take commercially reasonable measures to determine
whether a customer is a branch, office, or subsidiary of Credex. FinCEN
is not aware of any subsidiaries of Credex.
2. Correspondent Account
Section 1010.658(a)(2) of the proposed rule 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 a demand
deposit, savings deposit, or other transaction or asset account, and a
credit account or other extension of credit. We are using the same
definition of ``account'' for purposes of this rule as was established
for depository institutions in the final rule implementing section 312
of the USA PATRIOT Act.\20\
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\20\ See 31 CFR 1010.605(c)(2)(i).
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In the case of securities broker-dealers, futures commission
merchants, introducing brokers-commodities, and investment companies
that are open-end companies (mutual funds), we are also using the same
definition of ``account'' for purposes of this rule as was established
for these entities in the final rule implementing section 312 of the
USA PATRIOT Act.\21\
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\21\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
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3. Covered Financial Institution
Section 1010.658(a)(3) 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,\22\ which in general
includes the following:
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\22\ See 31 CFR 1010.605(e)(1).
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An insured bank (as defined in section 3(h) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(h));
A commercial bank;
An agency or branch of a foreign bank in the United
States;
A Federally insured credit union;
A savings association;
A corporation acting under section 25A of the Federal
Reserve Act (12 U.S.C. 611);
A trust bank or trust company;
A broker or dealer in securities;
A futures commission merchant or an introducing broker-
commodities; and a mutual fund.
4. Beneficial Owner
Section 1010.658(a)(4) of the proposed rule defines ``beneficial
owner'' as an individual who has a level of control over, or
entitlement to, the funds involved in the transaction that, as a
practical matter, enables the individual, directly or indirectly, to
control, manage or direct the funds. This definition derives from the
definition used in the final rule implementing section 312 of the USA
PATRIOT Act.\23\
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\23\ See 31 CFR 1010.605(a).
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5. Subsidiary
Section 1010.658(a)(5) of the proposed rule defines ``subsidiary''
as a company of which more than 50 percent of the voting stock or
analogous equity interest is owned by another company. This definition
means that the subsidiary is under the control of the owner of the
majority interest.
B. 1010.658(b)--Requirements for Covered Financial Institutions With
Regard to the First Special Measure
The proposed rule imposing the first special measure would require
that covered financial institutions take reasonable steps to collect
and report to FinCEN specified information regarding any transaction or
attempted transaction related to Credex that the covered financial
institution is requested to engage in after the imposition of the first
special measure in order to increase the transparency regarding
Credex's attempts to engage in transactions in or through the U.S.
financial system. Transactions related to Credex would include, but are
not limited to, those that are conducted or are attempted by Credex
itself. This proposed rule would not alter or otherwise impact other
regulatory obligations of the covered financial institution requiring
the reporting of suspicious activity.
1. Reporting
(a) Identity of the Participants in a Transaction or Attempted
Transaction
Section 1010.658(b)(1)(i) of the proposed rule imposing the first
special measure would require covered financial institutions to report
the identity and address of the participants in any transaction or
attempted transaction related to Credex, including the identity of the
originator and beneficiary of any funds transfer. This information
would include any identifying information in the possession of the
financial institution in the ordinary course of business, including the
information required under 31 CFR Sec. 1010.410(f) (generally known as
the ``travel rule''), such as name, account number if used, address,
the identity of the beneficiary's financial institution, or any other
specific identifier of the recipient received with the transmittal
order.
(b) Legal Capacity
Section 1010.658(b)(1)(ii) of the proposed rule imposing the first
special measure would require covered financial institutions to report
the legal capacity in which Credex and any customer of Credex is acting
with respect to the transaction or attempted transaction. This
information would include any identifying information collected by the
financial institution in the ordinary course of business and may
include identification of the roles of Credex or any of its customers
in the transaction such as transmittor or recipient of a funds transfer
or intermediary financial institutions involved in the payment chain
associated with the transaction.
(c) Beneficial Owner of the Funds
Section 1010.658(b)(1)(ii) of the proposed rule imposing the first
special measure would require covered financial institutions to report
the identity of the beneficial owner of the funds involved in any
transaction or attempted transaction related to Credex. Under existing
FinCEN regulations, there are two limited situations where financial
institutions are expressly obligated to obtain beneficial ownership
information. Specifically, under the rules implementing Section 312 of
the USA PATRIOT Act, certain ``covered financial institutions,'' \24\
which include the same institutions covered by the
[[Page 31799]]
scope of this proposed regulation, must implement enhanced due
diligence programs, including obtaining beneficial ownership
information, in two situations: (i) Covered financial institutions that
offer private banking accounts are required to take reasonable steps to
identify the nominal and beneficial owners of such accounts; \25\ and
(ii) covered financial institutions that offer correspondent accounts
for certain foreign financial institutions \26\ are required to take
reasonable steps to obtain information from the foreign financial
institution about the identity of any person with authority to direct
transactions through any correspondent account that is a payable-
through account, and the sources and beneficial owner of funds or other
assets in the payable-through account.\27\ The requirement to report
beneficial ownership of funds information about transactions or
attempted transactions related to Credex can be satisfied by employing
the same policies and procedures as are used for the regulatory
obligations mentioned in (ii) above promulgated under Section 312 of
the USA PATRIOT Act, and covered financial institutions should follow
the same procedures for obtaining such beneficial ownership information
as they would for those obligations. Collecting such information may
require personal contact with the correspondent. Where the covered
financial institution is unable to identify the beneficial owner of
funds associated with a Credex-related transaction, it should consider
the transaction to be one of primary money laundering concern and
determine, based on identified risks, whether or not it should process
the transaction.
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\24\ 31 CFR 1010.605(e)(1).
\25\ 31 CFR 1010.620(b)(1).
\26\ These foreign financial institutions include foreign banks
that operate under an offshore banking license; operate under a
banking license issued by a country named as non-cooperative by an
international body (such as the Financial Action Task Force (FATF))
of which the United States is a member; or operate under a banking
license issued by country designated by the Treasury Secretary as
warranting special measures. See 31 CFR 1010.610(c).
\27\ 31 CFR 1010.610(b)(1)(iii)(A).
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(d) Description of the Transaction or Attempted Transaction and its
Purpose
Section 1010.658(b)(1)(iii) of the proposed rule imposing the first
special measure would require covered financial institutions to report
a description of the transaction or attempted transaction and its
purpose. The description would include additional details of the
transaction, including amounts, and in particular, a general
description of any underlying reason for the transaction or obligation
which the financial transaction supports, such as the purchase of
specific goods or services, initiation or repayment of a loan or other
debt, settlement of a trade, transaction in foreign exchange, or other
type of financial obligation, or other relevant information the covered
financial institution may have available. To the extent a covered
financial institution finds that it does not have sufficient
information to enable it to report a description of the transaction and
its purpose, it would be reasonable for the covered financial
institution to inquire further (for example, with any applicable
customer, respondent bank, or correspondent bank) to obtain additional
information. In so doing, a covered financial institution should
consider analogizing to procedures it would follow in fulfilling its
obligation to determine whether a transaction should be reported as
suspicious. Specifically, it should consider ``examining the available
facts, including the background and possible purpose of the
transaction'' in order to determine whether it is consistent with the
type of transaction in which a particular customer would normally be
expected to engage.\28\
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\28\ See, e.g., 31 CFR 1020.320(a)(2)(iii).
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2. Filing Requirements
Section 1010.658(b)(2) of the proposed rule imposing the first
special measure would require covered financial institutions to make
the reports required by Section 1010.658(b)(1) within ten business days
following the day when the covered financial institution engaged in the
transaction or became aware of the attempted transaction. By ensuring
that FinCEN receives information shortly after a transaction is
executed, the contemplated time period will enable FinCEN to more
effectively monitor the ongoing activities of Credex, thereby enhancing
transparency. This time period was specifically chosen because it will
provide FinCEN with reporting more quickly than that required for
suspicious activity reporting. FinCEN requests comment on whether ten
days is sufficient time for covered financial institutions to obtain
the required information or whether some other period of time, still
less than that allowed for the filing of suspicious activity reports,
is more appropriate.
A covered financial institution would additionally be required to
take reasonable steps to identify any reportable transaction or
attempted transaction, direct or indirect, related to Credex, to the
extent that such 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 Credex as the
originator's or beneficiary's financial institution, or otherwise
referenced Credex 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. Willful failure to
provide timely, accurate, and complete information in such reporting
may constitute a violation of these requirements subject to civil and
criminal penalties under 31 U.S.C. 5321 and 5322.
FinCEN specifically solicits comments on the requirement under the
proposed rule that covered financial institutions take reasonable steps
to screen their transactions in order to identify any transaction or
attempted transaction related to Credex.
C. 1010.658(c)--Requirements for Covered Financial Institutions With
Regard to the Fifth Special Measure
The proposed imposition of the fifth special measure would prohibit
covered financial institutions from establishing, maintaining, or
managing in the United States any correspondent account for, or on
behalf of, Credex. 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 indirect use by
Credex. 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 Credex that such
correspondents may not provide Credex 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 Credex, 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
[[Page 31800]]
financial institution should take a risk-based approach when deciding
what, if any, additional due diligence measures it should adopt to
guard against the indirect use of its correspondent accounts by Credex,
based on risk factors such as the type of services it offers and
geographic locations of its correspondents.
1. Prohibition on Direct Use of Correspondent Accounts
Section 1010.658(c)(1) of the proposed rule imposing the fifth
special measure prohibits all covered financial institutions from
establishing, maintaining, administering, or managing a correspondent
account in the United States for, or on behalf of, Credex. 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, Credex.
2. Special Due Diligence of Correspondent Accounts to Prohibit Indirect
Use
As a corollary to the prohibition on maintaining correspondent
accounts directly for Credex, section 1010.658(c)(2) of the proposed
rule imposing the fifth special measure requires a covered financial
institution to apply special due diligence to its correspondent
accounts \29\ that is reasonably designed to guard against their
indirect use by Credex. 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
Credex that such correspondents may not provide Credex 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 access to Credex through
transaction screening software. 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 Credex:
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\29\ 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 1010.658, we are prohibited from
establishing, maintaining, administering or managing a correspondent
account for, or on behalf of, JSC CredexBank or any of its
subsidiaries. The regulations also require us to notify you that you
may not provide JSC CredexBank or any of its subsidiaries with
access to the correspondent account you hold at our financial
institution. If we become aware that JSC CredexBank or any of its
subsidiaries is indirectly using the correspondent account you hold
at our financial institution for transactions, 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 Credex 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 Credex 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.
A covered financial institution also would be required to take
reasonable steps to identify any indirect use of its correspondent
accounts by Credex, 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 Credex as the financial institution of the
originator or beneficiary, or otherwise referenced Credex 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 Credex.
Notifying certain correspondent account holders and taking
reasonable steps to identify any indirect use of its correspondent
accounts by Credex in the manner discussed above are the minimum due
diligence requirements under the proposed rule imposing the fifth
special measure. 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 indirect use of its correspondent accounts by Credex, based
on risk factors such as the type of services it offers and the
geographic locations of its correspondent account holders.
Under the proposed rule imposing the fifth special measure, a
covered financial institution that obtains knowledge that a
correspondent account is being used by a foreign bank to provide
indirect access to Credex must take all appropriate steps to prevent
such indirect access, including the notification of its correspondent
account holder per section 1010.658(c)(2)(i)(A) and, where necessary,
terminating the correspondent account. 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 the account will no longer be
available to Credex, 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 banking services indirectly to Credex. FinCEN specifically
solicits comments on the requirement under the proposed rule that
covered financial institutions prevent indirect access to Credex, once
such indirect access is identified.
3. Reporting Not Required
Section 1010.658(c)(3) of the proposed rule imposing the fifth
special measure clarifies that the rule does not impose any reporting
requirement upon any covered financial institution that is
[[Page 31801]]
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 Credex, such correspondents may not provide Credex with
access to the correspondent account maintained at the covered financial
institution.
III. Request for Comments
FinCEN invites comments on all aspects of the proposals to impose
the first and fifth special measures against Credex and specifically
invites comments on the following matters:
1. The impact of the proposed special measures upon legitimate
transactions with Credex 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 Belarus.
First Special Measure
2. The form and scope of the reports to FinCEN required under the
proposed rule to impose the first special measure;
3. The appropriate time within which a covered institution would be
required to report to FinCEN;
4. The appropriate scope of the proposed requirement for a covered
financial institution to take reasonable steps to identify any
reportable transactions by Credex;
5. The appropriate steps a covered financial institution should
take once it identifies a transaction related to Credex; and
6. Whether a definition of ``attempted transaction'' needs to be
included and what that definition should be.
Fifth Special Measure
7. The form and scope of the notice to certain correspondent
account holders that would be required under the rule;
8. 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 Credex; and
9. The appropriate steps a covered financial institution should
take once it identifies an indirect use of one of its correspondent
accounts by Credex.
Possible Future Implementation of First Special Measure by Order
10. FinCEN has the authority, pursuant to 31 U.S.C. 5318A(b)(1), to
impose the first special measure by order, without notice and comment,
for up to 120 days prior to the implementation of a final rule imposing
that special measure. FinCEN requests comment on the feasibility of so
implementing the requirements of the first special measure by order
prior to a final rule imposing the first special measure;
11. The feasibility of implementing an order imposing the first
special measure in the absence of a prohibition on opening and
maintaining correspondent accounts with the identified institution
under the fifth special measure;
12. Whether the current definition of covered financial
institutions would be appropriate if the first special measure were
implemented by order; and
13. Whether there are any potential differences among the types of
covered financial institutions that might make it more difficult for
some to implement the order.
IV. Regulatory Flexibility Act
It is hereby certified that the proposed imposition of the first
and fifth special measures would not have a significant economic impact
on a substantial number of small entities.
On the basis of publicly available information, FinCEN understands
that Credex currently maintains no correspondent accounts in the United
States. Moreover, to the extent that a transaction related to Credex
were to be processed through a U.S. financial institution, this would
most likely involve the small subset of the largest financial
institutions that actively engage in international transactions. Thus,
the requirement to report transactions related to Credex under the
first special measure would 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 and existing suspicious activity reporting
programs, can easily be modified to monitor for and report transactions
related to Credex. Thus, any increase in the reporting burden that
would be required by the imposition of the first special measure--i.e.,
reporting of all transactions related to Credex on a timelier basis--
would not impose a significant additional economic burden upon small
U.S. financial institutions.
As noted above, FinCEN understands that Credex currently maintains
no correspondent accounts in the United States. Thus, the prohibition
on maintaining such accounts under the fifth special measure would 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 Credex.
Thus, the special due diligence that would be required by the
imposition of the fifth special measure--i.e., the one-time transmittal
of notice to certain correspondent account holders and the screening of
transactions to identify any indirect use of correspondent accounts--
would not 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 from the
imposition of the first and fifth special measures on Credex.
V. Paperwork Reduction Act
The collection of information contained in this proposed rule is
being submitted to the Office of Management and Budget for review in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)). Comments on the collection of information should be sent to
the Desk Officer for the Department of Treasury, Office of Information
and Regulatory Affairs, Office of Management and Budget, Paperwork
Reduction Project (1506), Washington, DC 20503 (or by email to oira_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 July 30, 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 1320, the following information
concerning the collection of information as required by 31 CFR 1010.658
is presented to assist those persons wishing to comment on the
information collection.
31 CFR 1010.658 is proposed imposing the first and fifth special
measures under 31 U.S.C. 5318A. The Paperwork reduction act analysis
for both follows.
[[Page 31802]]
The provisions in this proposed rule pertaining to the collection
of information can be found in sections 1010.658(b)(1),
1010.658(c)(2)(i), and 1010.658(c)(3)(i). The information required to
be reported by section 1010.658(b)(1) will be used by the U.S.
Government to monitor the activities of the institution of primary
money laundering concern. The notification requirement in section
1010.658(c)(2)(i) is intended to ensure cooperation from correspondent
account holders in denying Credex access to the U.S. financial system.
The information required to be maintained by section 1010.658(c)(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 1010.658. 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-commodities, and mutual funds.
Estimated Number of Affected Financial Institutions: 5,000.
Estimated Average Annual Burden Hours Per Affected Financial
Institutions: 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 report the information.
An agency may not conduct or sponsor and a person is not required
to respond to a collection of information unless it displays a valid
OMB control number.
VI. Executive Order 12866
Executive Orders 12866 and 13563 direct agencies to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility. It
has been determined that the final rule is not a ``significant
regulatory action'' for purposes of Executive Order 12866.
List of Subjects in 31 CFR Chapter X
Administrative practice and procedure, Banks and banking, Brokers,
Counter-money laundering, Counter-terrorism, Foreign banking.
Authority and Issuance
For the reasons set forth in the preamble, Chapter X of title 31 of
the Code of Federal Regulations is proposed to be amended as follows:
CHAPTER X--FINANCIAL CRIMES ENFORCEMENT NETWORK, DEPARTMENT OF THE
TREASURY
1. The authority citation for Chapter X continues 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 Part Chapter X is proposed to be amended by adding
new Sec. 1010.658, as follows:
A. Under the undesignated center heading ``SPECIAL DUE DILIGENCE
FOR CORRESPONDENT ACCOUNTS AND PRIVATE BANKING ACCOUNTS'' to read as
follows:
Sec. 1010.658 Special measures against the JSC CredexBank
(a) Definitions. For purposes of this section:
(1) JSC CredexBank means all branches, offices, and subsidiaries of
JSC CredexBank operating in any jurisdiction.
(2) Correspondent account has the same meaning as provided in Sec.
1010.605(c)(1)(ii).
(3) Covered financial institution has the same meaning as provided
in Sec. 1010.605(e)(1).
(4) Beneficial Owner means an individual who has a level of control
over, or entitlement to, the funds involved in the transaction that, as
a practical matter, enables the individual, directly or indirectly, to
control, manage, or direct the funds.
(5) Subsidiary means a company of which more than 50 percent of the
voting stock or analogous equity interest is owned by another company.
(b) Reporting requirements for covered financial institutions (1)
Reporting. A covered financial institution is required to take
reasonable steps to collect and report to FinCEN the following
information with respect to any transaction or attempted transaction
related to JSC CredexBank:
(i) The identity and address of the participants in a transaction
or attempted transaction, including the identity of the originator and
beneficiary of any funds transfer;
(ii) The legal capacity in which JSC CredexBank is acting with
respect to the transaction or attempted transaction and, to the extent
JSC CredexBank is not acting on its own behalf, then the customer or
other person on whose behalf JSC CredexBank is acting;
(iii) The identity of the beneficial owner of the funds involved in
any transaction or attempted transaction; and
(iv) A description of the transaction or attempted transaction and
its purpose.
(2) When to file. A report required by paragraph (a) of this
section shall be filed by the reporting financial institution within
ten business days following the day when the covered financial
institution engaged in the transaction or became aware of the attempted
transaction.
(c) Prohibition on accounts and due diligence 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, JSC CredexBank.
(2) Special due diligence of correspondent accounts to prohibit
indirect use. (i) A covered financial institution shall apply special
due diligence to its correspondent accounts that is reasonably designed
to guard against their indirect use by JSC CredexBank. 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
JSC CredexBank, that such correspondents may not provide JSC CredexBank
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 JSC CredexBank, to the
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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 indirect use of its correspondent
accounts by JSC CredexBank.
(iii) A covered financial institution that obtains knowledge that a
correspondent account is being used by the foreign bank to provide
indirect access to JSC CredexBank, shall take all appropriate steps to
prevent such indirect access, including the notification of its
correspondent account holder under paragraph (b)(2)(i)(A) and, where
necessary, terminating the correspondent account.
(3) Recordkeeping and reporting. (i) A covered financial
institution is required to document its compliance with the notice
requirement set forth in paragraph (b)(2)(i)(A) of this section.
(ii) Nothing in this subsection (c) shall require a covered
financial institution to report any information not otherwise required
to be reported by law or regulation.
Dated: May 22, 2012.
Peter S. Alvarado,
Deputy Director, Financial Crimes Enforcement Network.
[FR Doc. 2012-12747 Filed 5-29-12; 8:45 am]
BILLING CODE 4810-02-P
