Request for Comments: Customer Due Diligence Requirements for Financial Institutions; Public Hearing, 41334-41336 [2012-17065]
Download as PDF
41334
Proposed Rules
Federal Register
Vol. 77, No. 135
Friday, July 13, 2012
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Chapter X
RIN 1506–AB15
Request for Comments: Customer Due
Diligence Requirements for Financial
Institutions; Public Hearing
Financial Crimes Enforcement
Network (FinCEN), Treasury.
ACTION: Notice of public hearing; request
for comment.
AGENCY:
FinCEN is announcing the
first in an intended series of public
hearings to continue gathering
information on its Advance Notice of
Proposed Rulemaking (ANPRM) on
Customer Due Diligence (CDD)
Requirements for Financial Institutions,
published in the Federal Register on
March 5, 2012.1 In particular, FinCEN
seeks further clarification on the issues
described in this Notice. FinCEN invites
various components of the law
enforcement and regulatory
communities to participate. In addition,
FinCEN invites other interested parties,
including industry representatives, to
attend and/or provide comments at this
first public hearing, to be held on July
31, 2012 at the U.S. Department of the
Treasury building in Washington, DC
FinCEN will also provide information in
this Notice about how to submit
comments and/or attend the hearing and
what procedures to follow to submit
information to the Treasury Department
to obtain entry to the hearing site.
DATES: This public hearing will be held
on July 31, 2012, beginning at 9:30 a.m.,
Eastern Time, and ending at 5 p.m., in
Washington, DC Requests to attend the
hearing and/or provide oral comments,
written outlines of the oral comments,
mstockstill on DSK4VPTVN1PROD with PROPOSALS
SUMMARY:
1 Financial
Crimes Enforcement Network,
‘‘Customer Due Diligence Requirements for
Financial Institutions,’’ 77 FR 13046 (March 5,
2012), available at https://www.regulations.gov/#
!docketDetail;D=FINCEN-2012-0001;dct=FR%252
BPR%252BN%252BO%252BSR.
VerDate Mar<15>2010
16:46 Jul 12, 2012
Jkt 226001
and the personal identification
information required of those
individuals who wish to enter the
Treasury Department building, must be
received on or before July 24, 2012.
More information on the intended
subsequent hearings will be provided at
a later date.
ADDRESSES: Requests to attend and/or
provide comments: Requests to attend
and/or provide comments at the Public
Hearing must be submitted by email to
the FinCEN BSA Resource Center at
BSA_Resource_Center@FinCEN.Gov, or
by mail to FinCEN, P.O. Box 39, Vienna,
VA 22183. Include ‘‘CDD Public
Hearing’’ in the body of the text or the
‘‘subject’’ line of the email.
Meeting site: This public hearing will
be held at the United States Department
of the Treasury, located at 1500
Pennsylvania Avenue Northwest,
Washington, DC 20220.
Inspection of comments and outlines:
Written comments and outlines may be
inspected, between 10 a.m. and 4 p.m.,
in the FinCEN reading room in Vienna,
VA. Persons wishing to inspect the
comments submitted must request an
appointment with the Disclosure Officer
by telephoning (703) 905–5034 (not a
toll free call). In general, FinCEN will
make all written comments, including
outlines, publicly available by posting
them on https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
FinCEN: Regulatory Policy and
Programs Division, Financial Crimes
Enforcement Network, (800) 949–2732
and select option 6.
SUPPLEMENTARY INFORMATION:
Information About Attending and/or
Providing Comments at the Hearing
Individuals requesting to attend and/
or provide oral comments should
provide the following information in
their request, which must be submitted
to FinCEN at the address appearing in
this Notice under the heading
ADDRESSES: Request to attend and/or
provide oral comments: (1) The name of
the person wishing to attend and/or
provide comments; (2) the person’s
contact information (telephone number
and email address); (3) the
organization(s) the person represents, if
any; and, if wishing to provide
comments, (4) a separate written, one to
two-page outline of the proposed
comments. FinCEN is requesting a
written outline of comments in advance
PO 00000
Frm 00001
Fmt 4702
Sfmt 4702
of the hearing for scheduling purposes.
Given space and time limitations, not all
requests to attend and/or provide oral
comments may be honored. However,
any outlines received will be made part
of the public record for the hearing.
Based upon the requests received,
FinCEN will develop an agenda for
witness oral comments, will notify those
commenters scheduled as part of the
agenda, and will post the agenda on
FinCEN’s Web site (address:
www.fincen.gov). Each comment, as
well as a general summary of the
hearing’s discussion will be made
available for public inspection after the
public hearing; as such, information that
a respondent does not desire to be made
public, such as a phone number, should
not be included in the outline of the
comment discussed above. Information
about the webcast will be posted on
FinCEN’s Web site prior to the public
hearing, and the public hearing will be
made available via webcast.
Due to security requirements and to
facilitate entry to the meeting site,
anyone wishing to attend must contact
BSA_Resource_Center@FinCEN.Gov, or
(202) 354–6400 no later than July 24,
2012, in order to provide the following
required clearance information: For U.S.
citizens: Full name, business affiliation,
date of birth, and Social Security
number; For foreign nationals: Full
name, business affiliation, date of birth,
passport number, and the country where
the passport was issued. When arriving
for the meeting, attendees must present
a government-issued photo or passport
identification and should arrive at least
one-half hour prior to the start time of
the meeting. The public meeting is
physically accessible to people with
disabilities. Individuals requiring
special services, such as sign language
interpretation, are asked to indicate this
to BSA_Resource_Center@FinCEN.Gov.
For those unable to attend in person,
written comments to the detailed
questions may also be submitted for the
record by email or mail to the respective
address above by July 31, 2012. FinCEN
will make such written comments
publicly available by posting them on
https://www.regulations.gov.
Request for Hearing Comments
On March 5, 2012, FinCEN published
an Advance Notice of Proposed
Rulemaking (ANPRM) to solicit public
comment on a wide range of questions
pertaining to the development of a
E:\FR\FM\13JYP1.SGM
13JYP1
mstockstill on DSK4VPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Proposed Rules
Customer Due Diligence (CDD)
regulation that would codify, clarify,
consolidate, and strengthen existing
CDD regulatory requirements and
supervisory expectations, and establish
a categorical requirement for financial
institutions to identify the beneficial
owner(s) of their customers, subject to
risk-based verification. The comment
period for the CDD ANPRM ended on
June 11, 2012, and all comments are
currently under review. During this
ongoing comment review process,
FinCEN identified comment letters
submitted by multiple law enforcement
agencies stating a requirement for
financial institutions to identify
beneficial ownership of their customers,
as discussed in the ANPRM, would
significantly enhance law enforcement’s
ability to conduct financial
investigations of all manners of
financial crimes. FinCEN has also
identified several issues raised by
commenters, on which it is soliciting
further clarification through oral
comment and dialogue during the July
31, 2012 public hearing. Such
clarification would assist FinCEN in
adequately considering the issues as it
moves forward in the rulemaking
process. In addition to any other topics
or concerns a respondent wishes to
address at this public hearing, FinCEN
specifically seeks clarification,
including examples where appropriate,
on the following issues:
1. Multiple comment letters indicated
that some financial institutions already
identify beneficial ownership of their
customers in certain circumstances.
FinCEN seeks detailed information as to
how and when those financial
institutions currently obtain beneficial
ownership information, including, but
not limited to: (i) The circumstances in
which financial institutions obtain
beneficial ownership information other
than in connection with the regulations
implementing Section 312 of the USA
PATRIOT ACT,2 (ii) the basis for
determining that such circumstances
warrant the collection of beneficial
ownership information, (iii) the specific
procedures financial institutions
currently use to obtain beneficial
ownership information in such
circumstances, including the definition
of ‘‘beneficial owner’’ used, and (iv)
how those circumstances and
procedures vary across different lines of
business, product type, customer profile
and geographic location.
2. FinCEN seeks detailed information
as to whether and how financial
institutions currently verify beneficial
2 31 CFR 1010.610(b)(1)(iii)(A) and
1010.620(b)(1).
VerDate Mar<15>2010
16:46 Jul 12, 2012
Jkt 226001
ownership information obtained from
their customers. The information sought
includes, but is not limited to, whether
and how financial institutions verify: (i)
The identity of the individual identified
by the customer as the beneficial owner
of the customer, and (ii) that the
individual identified by the customer as
the beneficial owner, is indeed the
beneficial owner of the customer (i.e.,
the status of the identified individual).
3. FinCEN seeks detailed information
as to the costs associated with obtaining
beneficial ownership information under
current practices, and the expected costs
associated with obtaining beneficial
ownership information as discussed in
the ANPRM.
4. FinCEN seeks detailed information
as to the costs associated with verifying
beneficial ownership information to the
extent this is done under current
practices, and the expected costs
associated with verifying beneficial
ownership information as discussed in
the ANPRM.
5. Multiple comment letters expressed
concern regarding the definition of
‘‘beneficial owner’’ in connection with a
categorical requirement for financial
institutions to identify beneficial
ownership of their customers, as
discussed in the ANPRM. FinCEN seeks
detailed information about potential
alternative definitions, and why such
alternatives would be preferable from a
financial institution’s perspective.
6. As reflected in multiple comment
letters, certain financial institutions
already identify beneficial ownership of
their customers in certain circumstances
in order to manage risk more effectively.
FinCEN seeks detailed information
about how identifying beneficial owners
enhances a financial institution’s ability
to manage risk. FinCEN also seeks
detailed information as to the
circumstances and account
relationships in which beneficial
ownership information may not be
relevant for financial institutions in
managing risk.
7. Many commenters have suggested
FinCEN consider requiring financial
institutions to obtain beneficial
ownership information of their
customers on a risk basis. FinCEN seeks
detailed information as to (i) how
financial institutions would expect to
assess risk in determining whether to
obtain beneficial ownership information
(e.g., what specific factors would a
financial institution consider); (ii)
specific examples of any customer or
account relationships or red flags that
would be considered of higher risk for
purposes of obtaining and verifying
beneficial ownership information, and
similarly any such relationships that
PO 00000
Frm 00002
Fmt 4702
Sfmt 4702
41335
would be considered of lower risk for
purposes of obtaining and verifying
beneficial ownership information; and
(iii) how financial institutions would
obtain and verify beneficial ownership
information on a risk basis. For those
financial institutions that already obtain
beneficial ownership information on a
risk basis, FinCEN seeks detailed
information as to when they obtain it—
during the onboarding process, or after
a review of the account activity? If the
latter, would the review of the account
activity be a part of a periodic/routine
review conducted by the financial
institution or based upon the
identification of red flags? Do financial
institutions reassess risk presented
periodically or based upon red flags
identified? What steps do financial
institutions take when new risks have
been identified?
8. FinCEN seeks additional detailed
information as to the abilities and
limitations of a financial institution in
mitigating risk associated with its
customer’s underlying clients in the
context of intermediated accounts. The
information sought includes, but is not
limited to: (i) The factors a financial
institution considers when conducting
diligence on its customer (i.e., the
intermediary) to assess the risk of the
account (e.g., whether the customer is
(1) a domestic or foreign entity, (2)
regulated or unregulated for anti-money
laundering purposes, etc.), (ii) whether,
and if so, in what circumstances and
what type of information does a
financial institution obtain from its
customer (i.e., the intermediary) about
the customer’s underlying clients, and
(iii) any monitoring or other procedures
applied to the customer’s account to
identify suspicious activity and mitigate
risks that may be associated with the
customer’s underlying clients.
9. FinCEN seeks detailed information
as to how financial institutions
currently conduct due diligence on trust
accounts. The information sought
includes, but is not limited to: (i) How
financial institutions assess risk with
respect to trust accounts, as opposed to
accounts held by natural persons or
legal entities, and (ii) what information
a financial institution obtains about the
trust, including identifying information
about the trustee.
10. FinCEN seeks detailed
information as to the differences, if any,
in obtaining beneficial ownership
information from foreign legal entity
customers compared to domestic legal
entity customers.
11. Lack of transparency in the
formation and operation of ‘‘shell
E:\FR\FM\13JYP1.SGM
13JYP1
41336
Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Proposed Rules
companies’’ 3 may be a desired
characteristic for certain legitimate
business activity, but it is also a
vulnerability that allows these
companies to disguise their ownership
and purpose. FinCEN seeks detailed
information as to whether and how
financial institutions identify whether
legal entity customers are ‘‘shell
companies.’’
Conclusion
With this public hearing, FinCEN is
seeking clarification on the issues raised
by commenters regarding the CDD
ANPRM set forth above.
Dated: July 9, 2012.
Nicholas Colucci,
Acting Director, Financial Crimes
Enforcement Network.
[FR Doc. 2012–17065 Filed 7–12–12; 8:45 am]
BILLING CODE 4810–02–P
POSTAL SERVICE
39 CFR Part 501
Authorization to Manufacture and
Distribute Postage Evidencing
Systems; Discontinued Indicia
Postal ServiceTM.
ACTION: Proposed rule.
AGENCY:
The Postal Service proposes
to amend the rules concerning the
manufacture and distribution of postage
evidencing systems to clarify that
effective January 1, 2016, all postage
evidencing systems (postage meters and
PC Postage® products) will be required
to produce Information-Based Indicia
(IBI) or Intelligent Mail® Indicia (IMI)
for evidence of pre-paid postage, and
that indicia from noncompliant systems
will not be recognized as valid postage.
DATES: Submit all comments on or
before September 11, 2012.
ADDRESSES: Mail or deliver written
comments to the Manager, Payment
Technology, U.S. Postal Service, 475
L’Enfant Plaza SW., Room 3660,
Washington, DC 20260–4200. Copies of
all written comments will be available
for inspection and photocopying
between 9 a.m. and 4 p.m., Monday
through Friday, at the Payment
Technology office.
FOR FURTHER INFORMATION CONTACT:
Marlo Ivey, Business Programs
mstockstill on DSK4VPTVN1PROD with PROPOSALS
SUMMARY:
3 The term ‘‘shell company,’’ as used herein,
refers to non-publicly traded corporations and
limited liability companies that typically have no
physical presence (other than a mailing address)
and generate little to no independent economic
value. See FinCEN Guidance, FIN–2006–G014,
‘‘Potential Money Laundering Risks Related to Shell
Companies’’ (November 9, 2006).
VerDate Mar<15>2010
16:46 Jul 12, 2012
Jkt 226001
Specialist, Payment Technology, U.S.
Postal Service, (202) 268–7613.
SUPPLEMENTARY INFORMATION: In 1999,
the Postal Service introduced the
Information Based Indicia Program
(IBIP). Under IBIP, postage evidencing
systems submitted for Postal Service test
and evaluation were required to
produce IBI—digital indicia that use a
two-dimensional (2–D) barcode. In
2012, the next generation of postage
evidencing was introduced through the
publication of the IMI performance
criteria. Both IBI and IMI contain a 2–
D barcode that includes revenue
security–related data elements and
product and service information.
Effective January 1, 2016, all postage
evidencing systems (postage meters and
PC Postage products) will be required to
produce IBI or IMI for evidence of prepaid postage. Indicia from postage
evidencing systems that are not IBIcompliant or IMI-compliant will not be
recognized as valid after December 31,
2015. The following proposed
amendment to 39 CFR part 501 is
intended to clarify that noncompliant
indicia will be decertified, and will not
be recognized as valid after that date.
Although exempt from the notice and
comment requirements of the
Administrative Procedure Act (5 U.S.C.
553), the Postal Service invites public
comment on the following proposed
revisions to the Code of Federal
Regulations.
List of Subjects in 39 CFR Part 501
Postal Service.
Accordingly, the Postal Service
proposes to amend 39 CFR part 501 as
follows:
PART 501—AUTHORIZATION TO
MANUFACTURE AND DISTRIBUTE
POSTAGE EVIDENCING SYSTEMS
1. The authority citation for 39 CFR
part 501 continues to read as follows:
Authority: 5 U.S.C. 552(a); 39 U.S.C. 101,
401, 403, 404, 410, 2601, 2605, Inspector
General Act of 1978, as amended (Pub. L. 95–
452, as amended); 5 U.S.C. App. 3.
2. Add section 501.20 to read as
follows:
§ 501.20
Indicia.
Discontinued Postage Evidencing
(a) Decertified indicia (evidence of
pre-paid postage) are indicia that have
been withdrawn by the Postal Service as
valid forms of postage evidence through
publication by the Postal Service in the
Federal Register, or by voluntary
withdrawal undertaken by the provider.
(b) Effective January 1, 2016, all
Postage Evidencing Systems (postage
meters and PC Postage products) will be
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
required to produce Information-Based
Indicia (IBI) or Intelligent Mail Indicia
(IMI) for evidence of pre-paid postage.
Non-IBI and non-IMI indicia will be
decertified effective January 1, 2016,
and may not be used as a valid form of
postage evidence. These decertified
indicia will not be recognized as valid
postage after December 31, 2015.
Stanley F. Mires,
Attorney, Legal Policy & Legislative Advice.
[FR Doc. 2012–17067 Filed 7–12–12; 8:45 am]
BILLING CODE 7710–12–P
POSTAL REGULATORY COMMISSION
39 CFR Part 3050
[Docket No. RM2012–5; Order No. 1388]
Analytical Methods Used in Periodic
Reporting
Postal Regulatory Commission.
Notice of filing.
AGENCY:
ACTION:
The Commission is noticing a
recently-filed Postal Service request to
initiate an informal rulemaking
proceeding to consider changes in
analytical methods used in periodic
reporting. This notice addresses
procedural steps associated with the
filing.
DATES: Comments are due July 31, 2012.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Commenters who cannot
submit their views electronically should
contact the person identified in FOR
FURTHER INFORMATION CONTACT by
telephone for advice on alternatives to
electronic filing.
FOR FURTHER INFORMATION CONTACT:
Stephen L. Sharfman, General Counsel
at 202–789–6820.
SUPPLEMENTARY INFORMATION: On June
26, 2012, the Postal Service filed a
petition pursuant to 39 CFR 3050.11
requesting that the Commission initiate
an informal rulemaking proceeding to
consider changes in the analytical
methods approved for use in periodic
reporting.1
Proposal One. Elimination of
Separate Delivery Costs for Carrier
Route Letters, Flats, and Parcels. The
Postal Service proposes to eliminate the
separate, shape-based reporting of unit
costs within Standard Mail Carrier
Route. The Postal Service states that
‘‘Carrier Route flats represent over 99
SUMMARY:
1 Petition of the United States Postal Service for
the Initiation of a Proceeding to Consider Proposed
Changes in Analytical Principles (Proposals One
through Five), June 26, 2012 (Petition).
E:\FR\FM\13JYP1.SGM
13JYP1
Agencies
[Federal Register Volume 77, Number 135 (Friday, July 13, 2012)]
[Proposed Rules]
[Pages 41334-41336]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17065]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 /
Proposed Rules
[[Page 41334]]
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Chapter X
RIN 1506-AB15
Request for Comments: Customer Due Diligence Requirements for
Financial Institutions; Public Hearing
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice of public hearing; request for comment.
-----------------------------------------------------------------------
SUMMARY: FinCEN is announcing the first in an intended series of public
hearings to continue gathering information on its Advance Notice of
Proposed Rulemaking (ANPRM) on Customer Due Diligence (CDD)
Requirements for Financial Institutions, published in the Federal
Register on March 5, 2012.\1\ In particular, FinCEN seeks further
clarification on the issues described in this Notice. FinCEN invites
various components of the law enforcement and regulatory communities to
participate. In addition, FinCEN invites other interested parties,
including industry representatives, to attend and/or provide comments
at this first public hearing, to be held on July 31, 2012 at the U.S.
Department of the Treasury building in Washington, DC FinCEN will also
provide information in this Notice about how to submit comments and/or
attend the hearing and what procedures to follow to submit information
to the Treasury Department to obtain entry to the hearing site.
---------------------------------------------------------------------------
\1\ Financial Crimes Enforcement Network, ``Customer Due
Diligence Requirements for Financial Institutions,'' 77 FR 13046
(March 5, 2012), available at https://www.regulations.gov/#!docketDetail;D=FINCEN-2012-0001;dct=FR%252BPR%252BN%252BO%252BSR.
DATES: This public hearing will be held on July 31, 2012, beginning at
9:30 a.m., Eastern Time, and ending at 5 p.m., in Washington, DC
Requests to attend the hearing and/or provide oral comments, written
outlines of the oral comments, and the personal identification
information required of those individuals who wish to enter the
Treasury Department building, must be received on or before July 24,
2012. More information on the intended subsequent hearings will be
---------------------------------------------------------------------------
provided at a later date.
ADDRESSES: Requests to attend and/or provide comments: Requests to
attend and/or provide comments at the Public Hearing must be submitted
by email to the FinCEN BSA Resource Center at BSA_Resource_Center@FinCEN.Gov, or by mail to FinCEN, P.O. Box 39, Vienna, VA 22183.
Include ``CDD Public Hearing'' in the body of the text or the
``subject'' line of the email.
Meeting site: This public hearing will be held at the United States
Department of the Treasury, located at 1500 Pennsylvania Avenue
Northwest, Washington, DC 20220.
Inspection of comments and outlines: Written comments and outlines
may be inspected, between 10 a.m. and 4 p.m., in the FinCEN reading
room in Vienna, VA. Persons wishing to inspect the comments submitted
must request an appointment with the Disclosure Officer by telephoning
(703) 905-5034 (not a toll free call). In general, FinCEN will make all
written comments, including outlines, publicly available by posting
them on https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: FinCEN: Regulatory Policy and Programs
Division, Financial Crimes Enforcement Network, (800) 949-2732 and
select option 6.
SUPPLEMENTARY INFORMATION:
Information About Attending and/or Providing Comments at the Hearing
Individuals requesting to attend and/or provide oral comments
should provide the following information in their request, which must
be submitted to FinCEN at the address appearing in this Notice under
the heading ADDRESSES: Request to attend and/or provide oral comments:
(1) The name of the person wishing to attend and/or provide comments;
(2) the person's contact information (telephone number and email
address); (3) the organization(s) the person represents, if any; and,
if wishing to provide comments, (4) a separate written, one to two-page
outline of the proposed comments. FinCEN is requesting a written
outline of comments in advance of the hearing for scheduling purposes.
Given space and time limitations, not all requests to attend and/or
provide oral comments may be honored. However, any outlines received
will be made part of the public record for the hearing.
Based upon the requests received, FinCEN will develop an agenda for
witness oral comments, will notify those commenters scheduled as part
of the agenda, and will post the agenda on FinCEN's Web site (address:
www.fincen.gov). Each comment, as well as a general summary of the
hearing's discussion will be made available for public inspection after
the public hearing; as such, information that a respondent does not
desire to be made public, such as a phone number, should not be
included in the outline of the comment discussed above. Information
about the webcast will be posted on FinCEN's Web site prior to the
public hearing, and the public hearing will be made available via
webcast.
Due to security requirements and to facilitate entry to the meeting
site, anyone wishing to attend must contact BSA_Resource_Center@FinCEN.Gov, or (202) 354-6400 no later than July 24, 2012, in
order to provide the following required clearance information: For U.S.
citizens: Full name, business affiliation, date of birth, and Social
Security number; For foreign nationals: Full name, business
affiliation, date of birth, passport number, and the country where the
passport was issued. When arriving for the meeting, attendees must
present a government-issued photo or passport identification and should
arrive at least one-half hour prior to the start time of the meeting.
The public meeting is physically accessible to people with
disabilities. Individuals requiring special services, such as sign
language interpretation, are asked to indicate this to BSA_Resource_Center@FinCEN.Gov.
For those unable to attend in person, written comments to the
detailed questions may also be submitted for the record by email or
mail to the respective address above by July 31, 2012. FinCEN will make
such written comments publicly available by posting them on https://www.regulations.gov.
Request for Hearing Comments
On March 5, 2012, FinCEN published an Advance Notice of Proposed
Rulemaking (ANPRM) to solicit public comment on a wide range of
questions pertaining to the development of a
[[Page 41335]]
Customer Due Diligence (CDD) regulation that would codify, clarify,
consolidate, and strengthen existing CDD regulatory requirements and
supervisory expectations, and establish a categorical requirement for
financial institutions to identify the beneficial owner(s) of their
customers, subject to risk-based verification. The comment period for
the CDD ANPRM ended on June 11, 2012, and all comments are currently
under review. During this ongoing comment review process, FinCEN
identified comment letters submitted by multiple law enforcement
agencies stating a requirement for financial institutions to identify
beneficial ownership of their customers, as discussed in the ANPRM,
would significantly enhance law enforcement's ability to conduct
financial investigations of all manners of financial crimes. FinCEN has
also identified several issues raised by commenters, on which it is
soliciting further clarification through oral comment and dialogue
during the July 31, 2012 public hearing. Such clarification would
assist FinCEN in adequately considering the issues as it moves forward
in the rulemaking process. In addition to any other topics or concerns
a respondent wishes to address at this public hearing, FinCEN
specifically seeks clarification, including examples where appropriate,
on the following issues:
1. Multiple comment letters indicated that some financial
institutions already identify beneficial ownership of their customers
in certain circumstances. FinCEN seeks detailed information as to how
and when those financial institutions currently obtain beneficial
ownership information, including, but not limited to: (i) The
circumstances in which financial institutions obtain beneficial
ownership information other than in connection with the regulations
implementing Section 312 of the USA PATRIOT ACT,\2\ (ii) the basis for
determining that such circumstances warrant the collection of
beneficial ownership information, (iii) the specific procedures
financial institutions currently use to obtain beneficial ownership
information in such circumstances, including the definition of
``beneficial owner'' used, and (iv) how those circumstances and
procedures vary across different lines of business, product type,
customer profile and geographic location.
---------------------------------------------------------------------------
\2\ 31 CFR 1010.610(b)(1)(iii)(A) and 1010.620(b)(1).
---------------------------------------------------------------------------
2. FinCEN seeks detailed information as to whether and how
financial institutions currently verify beneficial ownership
information obtained from their customers. The information sought
includes, but is not limited to, whether and how financial institutions
verify: (i) The identity of the individual identified by the customer
as the beneficial owner of the customer, and (ii) that the individual
identified by the customer as the beneficial owner, is indeed the
beneficial owner of the customer (i.e., the status of the identified
individual).
3. FinCEN seeks detailed information as to the costs associated
with obtaining beneficial ownership information under current
practices, and the expected costs associated with obtaining beneficial
ownership information as discussed in the ANPRM.
4. FinCEN seeks detailed information as to the costs associated
with verifying beneficial ownership information to the extent this is
done under current practices, and the expected costs associated with
verifying beneficial ownership information as discussed in the ANPRM.
5. Multiple comment letters expressed concern regarding the
definition of ``beneficial owner'' in connection with a categorical
requirement for financial institutions to identify beneficial ownership
of their customers, as discussed in the ANPRM. FinCEN seeks detailed
information about potential alternative definitions, and why such
alternatives would be preferable from a financial institution's
perspective.
6. As reflected in multiple comment letters, certain financial
institutions already identify beneficial ownership of their customers
in certain circumstances in order to manage risk more effectively.
FinCEN seeks detailed information about how identifying beneficial
owners enhances a financial institution's ability to manage risk.
FinCEN also seeks detailed information as to the circumstances and
account relationships in which beneficial ownership information may not
be relevant for financial institutions in managing risk.
7. Many commenters have suggested FinCEN consider requiring
financial institutions to obtain beneficial ownership information of
their customers on a risk basis. FinCEN seeks detailed information as
to (i) how financial institutions would expect to assess risk in
determining whether to obtain beneficial ownership information (e.g.,
what specific factors would a financial institution consider); (ii)
specific examples of any customer or account relationships or red flags
that would be considered of higher risk for purposes of obtaining and
verifying beneficial ownership information, and similarly any such
relationships that would be considered of lower risk for purposes of
obtaining and verifying beneficial ownership information; and (iii) how
financial institutions would obtain and verify beneficial ownership
information on a risk basis. For those financial institutions that
already obtain beneficial ownership information on a risk basis, FinCEN
seeks detailed information as to when they obtain it--during the
onboarding process, or after a review of the account activity? If the
latter, would the review of the account activity be a part of a
periodic/routine review conducted by the financial institution or based
upon the identification of red flags? Do financial institutions
reassess risk presented periodically or based upon red flags
identified? What steps do financial institutions take when new risks
have been identified?
8. FinCEN seeks additional detailed information as to the abilities
and limitations of a financial institution in mitigating risk
associated with its customer's underlying clients in the context of
intermediated accounts. The information sought includes, but is not
limited to: (i) The factors a financial institution considers when
conducting diligence on its customer (i.e., the intermediary) to assess
the risk of the account (e.g., whether the customer is (1) a domestic
or foreign entity, (2) regulated or unregulated for anti-money
laundering purposes, etc.), (ii) whether, and if so, in what
circumstances and what type of information does a financial institution
obtain from its customer (i.e., the intermediary) about the customer's
underlying clients, and (iii) any monitoring or other procedures
applied to the customer's account to identify suspicious activity and
mitigate risks that may be associated with the customer's underlying
clients.
9. FinCEN seeks detailed information as to how financial
institutions currently conduct due diligence on trust accounts. The
information sought includes, but is not limited to: (i) How financial
institutions assess risk with respect to trust accounts, as opposed to
accounts held by natural persons or legal entities, and (ii) what
information a financial institution obtains about the trust, including
identifying information about the trustee.
10. FinCEN seeks detailed information as to the differences, if
any, in obtaining beneficial ownership information from foreign legal
entity customers compared to domestic legal entity customers.
11. Lack of transparency in the formation and operation of ``shell
[[Page 41336]]
companies'' \3\ may be a desired characteristic for certain legitimate
business activity, but it is also a vulnerability that allows these
companies to disguise their ownership and purpose. FinCEN seeks
detailed information as to whether and how financial institutions
identify whether legal entity customers are ``shell companies.''
---------------------------------------------------------------------------
\3\ The term ``shell company,'' as used herein, refers to non-
publicly traded corporations and limited liability companies that
typically have no physical presence (other than a mailing address)
and generate little to no independent economic value. See FinCEN
Guidance, FIN-2006-G014, ``Potential Money Laundering Risks Related
to Shell Companies'' (November 9, 2006).
---------------------------------------------------------------------------
Conclusion
With this public hearing, FinCEN is seeking clarification on the
issues raised by commenters regarding the CDD ANPRM set forth above.
Dated: July 9, 2012.
Nicholas Colucci,
Acting Director, Financial Crimes Enforcement Network.
[FR Doc. 2012-17065 Filed 7-12-12; 8:45 am]
BILLING CODE 4810-02-P