Financial Crimes Enforcement Network; Repeal of Special Measure Involving Banco Delta Asia (BDA), 48105-48107 [2020-17143]

Agencies

• DEPARTMENT OF THE TREASURY
• Financial Crimes Enforcement Network

[Federal Register Volume 85, Number 154 (Monday, August 10, 2020)]
[Rules and Regulations]
[Pages 48105-48107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17143]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506-AA83


Financial Crimes Enforcement Network; Repeal of Special Measure 
Involving Banco Delta Asia (BDA)

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

ACTION: Final rule.

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SUMMARY: This rule repeals regulations concerning Special measures 
against Banco Delta Asia, which were issued pursuant to Section 311 of 
the USA PATRIOT Act (Section 311). Subsequent to the issuance of this 
rule, FinCEN will

[[Page 48106]]

reassess whether BDA is presently a financial institution of primary 
money laundering concern and additional rulemaking is warranted. 
Elsewhere in this issue of the Federal Register, FinCEN is publishing a 
withdrawal of the finding regarding BDA, issued September 20, 2005.

DATES: Effective August 10, 2020.

FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center at 
[email protected].

I. Statutory Background

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (USA 
PATRIOT Act). 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 to administer the BSA and its implementing 
regulations has been delegated to the Director of FinCEN.
    Section 311 of the USA PATRIOT Act grants the Secretary the 
authority, upon finding that reasonable grounds exist for concluding 
that a foreign jurisdiction, foreign financial institution, class of 
transactions, or type of account is of ``primary money laundering 
concern,'' to require domestic financial institutions and financial 
agencies to take certain ``special measures'' to address the primary 
money laundering concern. The five special measures enumerated under 
Section 311 are prophylactic safeguards that defend the U.S. financial 
system from money laundering and terrorist financing. FinCEN may impose 
one or more of these special measures in order to protect the U.S. 
financial system from these threats. To that end, special measures one 
through four, codified at 31 U.S.C. 5318A(b)(1)-(b)(4), impose 
additional recordkeeping, information collection, and information 
reporting requirements on covered U.S. financial institutions. The 
fifth special measure, codified at 31 U.S.C. 5318A(b)(5), allows the 
Secretary to prohibit or impose conditions on the opening or 
maintaining of correspondent or payable-through accounts by covered 
U.S. financial institutions for or on behalf of a foreign banking 
institution.
    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 provide 
the authority to bring additional and necessary pressure on those 
jurisdictions and institutions that pose money-laundering threats and 
the ability to take steps to protect the U.S. financial system. Through 
the imposition of various special measures, FinCEN can: Gain more 
information about the concerned jurisdictions, financial institutions, 
transactions, and accounts; monitor more effectively the respective 
jurisdictions, financial institutions, transactions, and accounts; and, 
ultimately, protect U.S. financial institutions from involvement with 
jurisdictions, financial institutions, transactions, or accounts that 
pose a money laundering concern.

II. Administrative Background

    On September 20, 2005, FinCEN published a finding in the Federal 
Register that reasonable grounds existed to conclude that BDA was a 
foreign financial institution of primary money laundering concern 
(Notice of Finding).\1\ Simultaneous with publication of the Notice of 
Finding, FinCEN published a Notice of Proposed Rulemaking proposing the 
imposition of the fifth special measure against BDA.\2\ On March 19, 
2007, FinCEN published a final rule in the Federal Register imposing 
the fifth special measure against BDA, codified at 31 CFR 103.193 
(subsequently renumbered as 31 CFR 1010.655) (Final Rule).\3\
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    \1\ 70 FR 55214 (Sept. 20, 2005).
    \2\ Id. at 55217.
    \3\ 72 FR 12731 (Mar. 19, 2007).
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    Shortly after FinCEN concluded its rulemaking proceedings, in April 
2007, BDA submitted a petition requesting the immediate rescission of 
the Final Rule. The following month, Stanley Au and Delta Asia Group 
(Holdings) Ltd., the owners of BDA, filed a separate petition for 
rescission of the Final Rule. FinCEN denied both petitions on September 
21, 2007. On November 16, 2010, BDA again petitioned FinCEN to repeal 
the Final Rule. As part of an ongoing dialogue between FinCEN and BDA 
from 2012 through 2019, BDA agreed to arrange for two independent 
reviews of the bank, the results of which were subsequently shared with 
FinCEN.
    By letter dated September 26, 2019, FinCEN ultimately denied BDA's 
November 2010 petition, providing BDA a memorandum thoroughly 
explaining its decision. In its denial, FinCEN discussed the results of 
the independent reviews of BDA and identified the limitations in these 
reviews. FinCEN acknowledged that BDA had taken steps to address some 
of the deficiencies highlighted in the Notice of Finding and Final 
Rule, but concluded that BDA had failed to correct other significant 
deficiencies. FinCEN ultimately determined that BDA's AML compliance 
efforts remained inadequate to address the risks identified in the 
Notice of Finding and Final Rule.
    In addition to petitioning FinCEN to withdraw the Final Rule, BDA 
filed suit on March 14, 2013, in the United States District Court for 
the District of Columbia challenging the Notice of Finding and the 
Final Rule. This litigation was stayed for many years so that the 
dialogue described above could continue. Both FinCEN and BDA have since 
agreed that there are advantages to FinCEN's revisiting the Final Rule 
and to settling this litigation. This course of action allows BDA to 
submit any remaining additional comments and permits FinCEN to take 
stock of the present circumstances and, if appropriate, to avail itself 
of the informal rulemaking process (providing the public with an 
opportunity for notice and comment, in contrast to action on a 
petition) if it decides to take further action. As part of this 
settlement, FinCEN has agreed to reassess whether BDA is presently a 
financial institution of primary money laundering concern. BDA will be 
permitted to submit comments to FinCEN regarding the September 26, 
2019, petition denial prior to FinCEN's engaging in any additional 
Section 311 rulemaking involving BDA.
    In the event that FinCEN determines that the imposition of any 
special measures may be warranted, it will undertake a new rulemaking 
effort (including the publication of a new notice of proposed 
rulemaking). Any such proposed rule will allow for 30 days of comment, 
and as part of the rulemaking proceeding, FinCEN will make available 
for comment the unclassified, non-protected material relied upon by 
FinCEN in connection with any such rulemaking. If FinCEN determines 
that a final rule is appropriate, FinCEN will publish such a final rule 
60 days following the close of the comment period. If the extent of 
submitted comments requires additional time, or if COVID-19-related 
issues hinder the agency's ability to satisfy the proposed timeframes, 
FinCEN will so announce in the Federal Register.

III. Repeal of the Final Rule

    For the reasons set forth above, FinCEN hereby repeals the Final 
Rule.

[[Page 48107]]

Elsewhere in this issue of the Federal Register, FinCEN is publishing a 
withdrawal of the Notice of Finding.

IV. Regulatory Matters

    Although Section 553 of the Administrative Procedure Act (5 U.S.C. 
551 et seq.) requires notice and an opportunity for comment before an 
agency issues a final rule as well as a 30-day delayed effective date, 
it provides that an agency may dispense with these procedures when good 
cause exists. In this final rule, FinCEN has found that public comment 
procedures and delaying the effective date of the removal of the 
regulation would be contrary to the public interest. As discussed 
earlier in this document, FinCEN has agreed to reassess whether BDA is 
presently a financial institution of primary money laundering concern. 
Accordingly, FinCEN has found that good cause exists to dispense with 
prior notice and comment and a delay in effective date.

A. Executive Order 12866

    It has been determined that this rulemaking is not a significant 
regulatory action for purposes of Executive Order 12866. Accordingly, a 
regulatory impact analysis is not required.

B. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act), Public Law 104-4 (March 22, 1995), requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that may result in expenditure by state, local, and tribal governments, 
in the aggregate, or by the private sector, of $100 million or more in 
any one year. If a budgetary impact statement is required, section 202 
of the Unfunded Mandates Act also requires an agency to identify and 
consider a reasonable number of regulatory alternatives before 
promulgating a rule. FinCEN has determined that it is not required to 
prepare a written statement under Section 202 and has concluded that on 
balance the rule provides the most cost effective and least burdensome 
alternative to achieve the objectives of the rule.

C. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et 
seq.), FinCEN certifies that this final regulation likely will not have 
a significant economic impact on a substantial number of small 
entities. The regulatory changes in this final rule merely remove the 
current obligations for financial institutions under 31 CFR 1010.654.

D. Paperwork Reduction Act

    This regulation discontinues the Office of Management and Budget 
Control Number 1506-0041 assigned to the final rule and, as a result, 
reduces the estimated average burden of one hour per affected financial 
institution, totaling 5,000 hours. This regulation contains no new 
information collection requirements subject to review and approval by 
the Office of Management and Budget under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3507(d) et seq.).

List of Subjects in 31 CFR Part 1010

    Administrative practice and procedure, Banks and banking, Brokers, 
Counter-money laundering, Counter-terrorism, Foreign banking.

Authority and Issuance

    For the reasons set forth above, 31 CFR part 1010 is amended as 
follows:

PART 1010--GENERAL PROVISIONS

0
1. The authority citation for 31 CFR part 1010 continues to read as 
follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 
5316-5332; Title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec. 
701, Pub. L. 114-74, 129 Stat. 599.


Sec.  1010.655   [Removed]

0
2. Section 1010.655 is removed.

Michael Mosier,
Deputy Director, Financial Crimes Enforcement Network.
[FR Doc. 2020-17143 Filed 8-7-20; 8:45 am]
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