Imposition of Special Measure Regarding Al-Huda Bank as a Financial Institution of Primary Money Laundering Concern, 55051-55059 [2024-14415]
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Federal Register / Vol. 89, No. 128 / Wednesday, July 3, 2024 / Rules and Regulations
§ 58.6151–1 Time and place for paying of
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(a) In general. The tax shown on any
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required by § 58.6011–1(a) must,
without assessment or notice and
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For provisions relating to the time and
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excise tax return required under
§ 58.6011–1(a), see §§ 58.6071–1 and
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§ 58.6694–1
Section 6694 penalties.
(a) Penalties applicable to tax return
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and to procedural matters regarding the
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28, 2024, and during taxable years
ending after June 28, 2024.
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§ 58.6695–1 Other assessable penalties
with respect to the preparation of tax
returns or claims for refund for other
persons.
(a) In general. A person who is a tax
return preparer of any return or claim
for refund of tax under chapter 37 of the
Internal Revenue Code (Code) may be
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a copy to the taxpayer under section
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return under section 6695(b), failure to
furnish an identifying number under
section 6695(c), failure to retain a copy
or list under section 6695(d), failure to
file a correct information return under
section 6695(e), and endorsement or
negotiation of a check under section
6695(f), in the manner stated in
§ 1.6695–1 of this chapter.
(b) Applicability date. This section
applies to returns and claims for refund
filed after June 28, 2024, and during
taxable years ending after June 28, 2024.
§ 58.6696–1 Claims for credit or refund by
tax return preparers.
(a) In general. The rules under
§ 1.6696–1 of this chapter apply to
claims for credit or refund by a tax
return preparer who prepared a return
or claim for credit or refund for tax
under chapter 37 of the Internal
Revenue Code.
(b) Applicability date. This section
applies to returns and claims for credit
or refund filed, and advice provided,
after June 28, 2024, and during taxable
years ending after June 28, 2024.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: June 24, 2024.
Aviva R. Aron-Dine,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2024–14426 Filed 6–28–24; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506–AB65
Imposition of Special Measure
Regarding Al-Huda Bank as a Financial
Institution of Primary Money
Laundering Concern
Financial Crimes Enforcement
Network (FinCEN), Treasury.
ACTION: Final rule.
AGENCY:
FinCEN is issuing this final
rule to prohibit covered U.S. financial
institutions from opening or
SUMMARY:
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55051
maintaining a correspondent account
for, or on behalf of Al-Huda Bank, a
foreign financial institution based in
Iraq found to be of primary money
laundering concern pursuant to section
311 of the USA PATRIOT Act. The rule
further requires covered U.S. financial
institutions to take reasonable steps not
to process transactions for the
correspondent account of a foreign
banking institution in the United States
if such a transaction involves Al-Huda
Bank. It also requires covered
institutions to apply special due
diligence to their foreign correspondent
accounts that is reasonably designed to
guard against their use to process
transactions involving Al-Huda Bank.
DATES: This final rule is effective August
2, 2024.
FOR FURTHER INFORMATION CONTACT: The
FinCEN Regulatory Support Section at
1–800–767–2825 or electronically at
frc@fincen.gov.
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,
Public Law 107–56 (USA PATRIOT
Act). Title III of the USA PATRIOT Act
amended the anti-money laundering
(AML) provisions of the Bank Secrecy
Act (BSA) to promote the prevention,
detection, and prosecution of
international money laundering and the
financing of terrorism.1 Section 311 of
the USA PATRIOT Act (section 311),
codified at 31 U.S.C. 5318A, grants the
Secretary of the Treasury (Secretary)
authority, upon finding that reasonable
grounds exist for concluding that one or
more financial institutions operating
outside of the United States is of
primary money laundering concern, to
require domestic financial institutions
and domestic financial agencies to take
certain ‘‘special measures.’’ The
authority of the Secretary to administer
the Bank Secrecy Act (BSA) and its
implementing regulations has been
delegated to FinCEN.2
1 The BSA, as amended, is the popular name for
a collection of statutory authorities that FinCEN
administers that is codified at 12 U.S.C. 1829b,
1951–1960 and 31 U.S.C. 5311–5314, 5316–5336,
and includes other authorities reflected in notes
thereto. Regulations implementing the BSA appear
at 31 CFR Chapter X.
2 Pursuant to Treasury Order 180–01 (Jan. 14,
2020), the authority of the Secretary to administer
the BSA, including, but not limited to, 31 U.S.C.
5318A, has been delegated to the Director of
FinCEN.
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The five special measures set out in
section 311 are safeguards that may be
employed to defend the U.S. financial
system from money laundering and
terrorist financing risks. The Secretary
may impose one or more of these special
measures in order to protect the U.S.
financial system from such threats.
Through special measures one through
four, the Secretary may impose
additional recordkeeping, information
collection, and reporting requirements
on covered domestic financial
institutions and domestic financial
agencies—collectively, ‘‘covered
financial institutions.’’ 3 Through
special measure five, the Secretary may
prohibit, or impose conditions on, the
opening or maintaining in the United
States of a correspondent account for or
on behalf of a foreign banking
institution, if such correspondent
account involves the foreign financial
institution found to be of primary
money laundering concern.4
B. Al-Huda Bank
Al-Huda Bank is a private commercial
bank registered and headquartered in
Baghdad, Iraq, with five branch
locations in Baghdad, Karbala, and
Nasiriyah, Iraq. Al-Huda Bank has no
subsidiaries or branches outside of Iraq
and is regulated by the Central Bank of
Iraq (CBI).
Al-Huda Bank has no direct U.S.
correspondent banking relationships but
interacts with the U.S. financial system
indirectly through U.S. dollar (USD)
correspondent accounts at six foreign
financial institutions. In other words,
Al-Huda Bank interacts with foreign
banks that themselves have
correspondent accounts with U.S.
banks.
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II. FinCEN’s Section 311 Rulemaking
Regarding Al-Huda Bank
A. Finding
In a notice of proposed rulemaking
(NPRM) published in the Federal
Register on January 31, 2024, FinCEN
found that reasonable grounds exist for
concluding that Al-Huda Bank is a
foreign financial institution of primary
money laundering concern pursuant to
31 U.S.C. 5318A.5
As described in the NPRM, FinCEN
assesses that Al-Huda Bank has
exploited its access to USD to support
designated foreign terrorist
organizations (FTOs), including Iran’s
Islamic Revolutionary Guard Corps
(IRGC) and IRGC-Quds Force (IRGC–
QF), as well as Iran-aligned Iraqi
3 31
U.S.C. 5318A(b)(1)–(b)(4).
U.S.C. 5318A(b)(5).
5 89 FR 6074 (Jan. 31, 2024).
4 31
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militias Kata’ib Hizballah (KH) and
Asa’ib Ahl al-Haq (AAH).6 Since its
establishment, Al-Huda Bank has been
controlled and operated by the IRGC
and IRGC–QF. Moreover, the chairman
of Al-Huda Bank is complicit in AlHuda Bank’s illicit financial activities,
including money laundering through
front companies that conceal the true
nature of and parties involved in illicit
transactions, ultimately enabling the
financing of terrorism.
Given the nature of Iraq’s economy
and trade relationships, Iraqi businesses
that import goods into Iraq rely on wire
transfers of USD from the CBI account
at the Federal Reserve Bank of New
York (FRBNY), a process known as the
wire auction, or more generally the ‘‘CBI
dollar auction.’’ 7 Many Iraqi businesses
and financial institutions use the CBI
dollar auction for legitimate purposes.
However, FinCEN assesses that Al-Huda
Bank has deliberately embarked on a
strategy that relies on exploiting the CBI
dollar auction to support designated
FTOs, including the IRGC, IRGC–QF,
KH, and AAH, with the support of the
Iranian government. Al-Huda Bank has
actively supported terrorist groups and
abused the CBI dollar auction through
numerous money laundering typologies,
including use of fraudulent
documentation to obscure the ultimate
beneficiaries of the transactions. Given
these facts, FinCEN assesses that there
is a high risk of Al-Huda Bank
exploiting USD correspondent
relationships to support its money
laundering and terrorist financing
activity.
1. Al-Huda Bank Has Exploited Its
Access to USD Through the Wire
Auction
Individual Iraqi businesses that
import goods into Iraq rely on wire
transfers of USD from CBI’s account at
the FRBNY. The wire auction, a part of
what is known as the CBI dollar auction,
is the mechanism by which the CBI
provides USD to facilitate the purchase
of imports. When Iraq sells oil in the
international petroleum markets, the
revenues are credited in USD to the
CBI’s account at the FRBNY. Iraqi
6 The U.S. Department of State has authority to
designate organizations as FTOs. The U.S.
Department of the Treasury’s Office of Foreign
Assets Control (OFAC) has also designated the
IRGC, IRGC–QF, KH, and AAH pursuant to multiple
sanctions authorities.
7 The CBI dollar auction comprises both (1) the
wire auction, and (2) bulk USD banknote shipments
to Iraq which the CBI sells to exchange houses and
banks in return for Iraqi dinar (IQD). The latter is
known as the ‘‘cash auction’’ and is a separate
process from the wire auction. Al-Huda Bank’s
known illicit finance activities described herein are
related to the wire auction.
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companies with accounts at Iraqi banks
can then access the CBI dollar auction
to purchase USD with IQD to pay for
imports. USD are transferred from the
CBI’s FRBNY account to an Iraqi bank,
and onward to a third-country bank on
behalf of a third-country exporter.
Many Iraqi businesses and their banks
use the CBI dollar auction for its
intended, legitimate purpose of
facilitating imports of goods. However,
FinCEN assesses that Al-Huda Bank has
deliberately embarked on a strategy that
relies on illegitimate exploitation of the
CBI dollar auction to support designated
FTOs, including the IRGC, IRGC–QF,
KH, and AAH, with the support of the
Iranian government.
With the knowledge of Al-Huda
Bank’s chairman, Al-Huda Bank’s abuse
of the CBI dollar auction was obfuscated
through the application of numerous
money laundering typologies, including
the use of fraudulent documentation,
fake deposits, identity documents of the
deceased, fake companies, and
counterfeit IQD, which were used to
purchase USD and support terrorist
groups and militias. For years, Al-Huda
Bank has been involved in these
deceptive money laundering activities.
Examples of three of these money
laundering typologies are discussed
below: (1) fraudulent documentation; (2)
stolen identities; and (3) counterfeit
IQD. Al-Huda Bank’s use of these
money laundering typologies also risks
exposing covered financial institutions
to Al-Huda Bank’s exploitation of USD
correspondent banking relationships to
support its terrorist financing activities.
Since at least 2012, Al-Huda Bank has
used fraudulent documentation to
purchase foreign currency—including
USD—from the CBI at CBI dollar
auctions. Based on media reporting,
between 2012 and 2014, Al-Huda Bank
filed false documentation to justify
international transfers of over $6 billion
to banks and companies.8 On at least
one occasion, government authorities
detected Al-Huda Bank’s filing of
fraudulent documentation, which
resulted in freezing of a transfer of a
significant amount of money. In another
scheme, Al-Huda Bank would deposit
fake checks to make the balance seem
higher on the account Al-Huda Bank
used in CBI dollar auctions. The fake
check deposits would allow Al-Huda
Bank to purchase USD using that false
higher balance before the fake check
8 Al-Arabiya, ‘‘Billions of Dollars’’ Smuggled Out
of Iraq During Maliki’s Rule (Nov. 9, 2015),
available at https://english.alarabiya.net/News/
middle-east/2015/11/09/Iraq-smuggled-billions-ofdollars-during-Maliki-s-rule.
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bounced, which Al-Huda Bank would
then write off.
Al-Huda Bank, with its chairman’s
knowledge, has also abused the CBI
dollar auction by utilizing stolen
identities. In one scheme, the Al-Huda
Bank chairman and other Al-Huda Bank
officials would use the identification
documents of deceased individuals to
purchase USD in CBI dollar auctions.
Al-Huda Bank officials would also pay
living people for use of their
identification documents. The illicit use
of identification documents allowed AlHuda Bank to circumvent limits on
currency purchases.
With the knowledge of Al-Huda
Bank’s chairman, Al-Huda Bank has
also been involved in funneling of
counterfeit IQD through fake businesses
in Iraq. The counterfeit IQD would be
printed in Iran, funneled through Iraqi
businesses, and then exchanged for
USD. The use of counterfeit IQD greatly
increases the amount of illicit profit
gained from exchanging IQD for USD at
the CBI dollar auction, and the
funneling of counterfeit IQD through
Iraqi businesses disguises the
counterfeit IQD’s source in Iran.
2. Through the Exploitation of the Wire
Auction, Al-Huda Bank Has Provided
Support to Designated FTOs
Iran has exploited its relationship
with Iraq-based, Iran-backed militias to
influence Iraqi businesses and officials
to generate illicit revenue for the
militias’ operations. As part of this
effort, Iran has developed a network of
commercial platforms, including
financial institutions, to move funds
and misrepresent trade-based financial
transactions that obscure the ultimate
beneficiaries, namely Iran-backed
terrorist groups and militias.
Since its establishment, Al-Huda
Bank has been controlled and operated
by the IRGC and IRGC–QF. In 2008, the
chairman of Al-Huda Bank established
the bank specifically for the benefit of
KH and has met with and taken orders
from IRGC–QF leadership in Tehran,
Iran. After establishing the bank, the AlHuda Bank chairman began money
laundering operations on behalf of the
IRGC–QF and KH.
Al-Huda Bank has funded Iranaligned militias through a scheme in
which Al-Huda Bank and other Iraqi
banks have falsely claimed imports into
Iraq that did not exist worth billions of
dollars to justify the purchase of USD in
the CBI dollar auction. Al-Huda Bank
would purchase the USD with
counterfeit IQD printed in Iran. Al-Huda
Bank was not allowed to conduct
financial transactions without the Iranaligned militias’ involvement and Al-
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Huda Bank would provide part of AlHuda Bank’s revenue from this scheme
to those Iran-aligned militias.
This fraudulent scheme has been a
substantial source of funding for Iranaligned militias’ operations. The Iranaligned Iraqi militia AAH has used
companies based across Iraq to generate
revenue, launder illicit profits, and
convert IQD to USD. AAH has used AlHuda Bank to maintain accounts for
some of these companies, as well as to
access the currency auction. The use of
false imports, counterfeit currency, and
front companies are essential
components of exploitation of the CBI
dollar auction by obscuring the source
of funds and the purpose and ultimate
beneficiaries of the transactions that
support Iran-aligned Iraqi militias.
Overall, IRGC and IRGC–QF use of AlHuda Bank and several other Iraqi banks
to access the CBI dollar auction resulted
in approximately $70 billion USD in
profit, from 2019 through 2020.
B. Proposed Special Measure
In the NPRM, FinCEN proposed: (1) to
prohibit covered financial institutions
from opening or maintaining a
correspondent account in the United
States for, or on behalf of, Al-Huda
Bank; (2) to prohibit covered financial
institutions from processing a
transaction involving Al-Huda Bank
through the United States correspondent
account of a foreign banking institution;
and (3) a requirement for covered
financial institutions to apply special
due diligence to their foreign
correspondent accounts that is
reasonably designed to guard against
their use to process transactions
involving Al-Huda Bank.9 The comment
period for the NPRM closed on March
1, 2024.
As further described below, FinCEN is
adopting the proposal as a final rule. In
so doing, FinCEN has considered public
comments and the relevant statutory
factors and has engaged in the required
consultations prescribed by 31 U.S.C.
5318A.
C. Subsequent Developments
Following the issuance of the NPRM,
the CBI banned Al-Huda Bank from
accessing the CBI dollar auction.10
However, in light of Al-Huda Bank’s
consistent and longstanding ties to
terrorist organizations since its
inception and its history of obfuscating
transactions and account holders in
support of those organizations, it is
FR 6074 (Jan. 31, 2024).
Iraq bans 8 local banks from US dollar
transactions (Feb. 4, 2024), available at https://
www.reuters.com/business/finance/iraq-bans-8local-banks-us-dollar-transactions-2024-02-04/.
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10 Reuters,
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reasonable to assess that Al-Huda Bank
will seek ways to continue that support
even without access to the CBI dollar
auction, through its access to USD
correspondent banking relationships in
the region. Therefore, Al-Huda Bank
remains of primary money laundering
concern.
D. Consideration of Comments
Concurrent with the issuance of the
NPRM on January 31, 2024, FinCEN
opened a comment period that closed
on March 1, 2024. FinCEN received
seven comments; they are described
below, along with FinCEN’s response.
Neither Al-Huda Bank nor its officers
submitted any comments.
1. Comments Attesting to Al-Huda
Bank’s or Bank Owner Hamad alMoussawi’s Good Reputation
In response to the NPRM, FinCEN
received four comments attesting to the
good reputation of the owner and
chairman of Al-Huda Bank, Hamad alMoussawi (al-Moussawi). Commenters
claimed that al-Moussawi is ‘‘proWestern,’’ a ‘‘democracy supporter,’’
and holds ‘‘purely liberal ideas.’’
Several commenters also claimed that
al-Moussawi ‘‘does not have any
suspicious relationships’’, or ties with
‘‘Iranian backed groups’’ or ‘‘extremist
Islamic parties or other sectarian
parties.’’ Two commenters commented
on the reputation of Al-Huda Bank
itself. One described the bank as ‘‘one
of the disciplined banks with a good
reputation.’’ The second claimed that
‘‘the bank has not faced any accusations
of this kind previously.’’ These
commenters have not provided any
specific evidence or documentation to
support their claims. Further, even if
they could be substantiated, such
general claims about Al-Huda Bank and
its owner al-Moussawi would not allay
FinCEN’s concerns regarding Al-Huda
Bank’s specific illicit conduct.
2. Comments Disputing the Feasibility
of Money Laundering Typologies
Outlined in the NPRM
Two commenters claimed that it
would be ‘‘impossible’’ or ‘‘unrealistic’’
for a bank to conduct the type of illicit
activity described in the NPRM, given
the CBI’s supervision and controls.
Specifically, these commenters disputed
the ability of any Iraqi bank to utilize
forged checks and counterfeit IQD.
These comments do not allay
FinCEN’s concerns regarding Al-Huda
Bank, as the commenters have not
provided specific evidence or
documentation to support their claims.
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3. Comments Questioning the Sources
Cited in the NPRM
Four comments claimed that FinCEN
did not provide sufficient evidence,
and/or relied upon inaccurate, biased
public and non-public information.
Four comments questioned the veracity
of media reporting as evidence in the
NPRM. One commenter found that the
NPRM ‘‘relied on information from
media sources’’ and stated that ‘‘media
in the Middle East, as a whole, is
unprofessional, participates in corrupt
practices, lacks neutrality, and is
irresponsible.’’ Another commenter
claimed that information FinCEN used,
including media reporting, ‘‘is often not
thoroughly researched, and if the
reports received by [FinCEN] originated
from Iraqi parties, [. . .] those reports
were built on the basis of animosity
towards individuals and a desire to
harm their interests, rather than a desire
to present facts.’’ These comments do
not allay FinCEN’s concerns regarding
Al-Huda Bank, as they cite no specific
evidence that would call into question
the reliability of the media reporting
and sources upon which FinCEN has
relied.
Moreover, FinCEN based its findings
on corroborated evidence from both
public and non-public sources, of which
media reporting was only a small part.
In making its finding of primary money
laundering concern and adopting
special measure five to address it,
FinCEN has considered the totality of
information available to it, including
from media organizations, and has
independently evaluated its sources for
credibility, potential bias, and accuracy.
One commenter claimed to have ‘‘found
a document issued by the Central Bank
of Iraq denying the accuracy’’ of an
article cited in the NPRM. The article
reported that, from 2012 to 2014, AlHuda Bank used forged documents in
transfers of over $6 billion to banks and
companies outside of Iraq.11 The
document stated that there were no such
personal money transfers transferred out
of Iraq to the account of Al-Huda Bank’s
owner. Because the document focuses
narrowly on the owner’s personal
money transfers, it does not contradict
the information reported in the article,
which is also corroborated by other
sources.
11 Al-Arabiya, ‘‘Billions of Dollars’’ Smuggled Out
of Iraq During Maliki’s Rule (Nov. 9, 2015),
available at https://english.alarabiya.net/News/
middle-east/2015/11/09/Iraq-smuggled-billions-ofdollars-during-Maliki-s-rule.
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E. Summary of FinCEN’s Ongoing
Concerns Regarding Al-Huda Bank
After considering comments received
from the public, as well as other
information available to the agency,
including both public and non-public
information, FinCEN is issuing this final
rule, imposing a prohibition on U.S.
financial institutions from opening or
maintaining a correspondent account
for, or on behalf of, Al-Huda Bank. The
information available to FinCEN
provides reason to conclude that AlHuda Bank continues to be a foreign
financial institution of primary money
laundering concern.
III. Imposition of a Special Measure
Regarding Al-Huda Bank as a Foreign
Financial Institution of Primary Money
Laundering Concern
Based upon this finding, FinCEN is
authorized to impose one or more
special measures. Following the
required consultations and the
consideration of all relevant factors
discussed in the NPRM, FinCEN
proposed a prohibition under the fifth
special measure.12
After reviewing the comments and
considering all potential special
measures, FinCEN concludes that a
prohibition under special measure five
is warranted. Consistent with the
finding that Al-Huda Bank is a foreign
financial institution of primary money
laundering concern, and in
consideration of additional relevant
factors, this final rule imposes a
prohibition on the opening or
maintaining of correspondent accounts
by covered financial institutions for, or
on behalf of, Al-Huda Bank. This
prohibition will help guard against the
money laundering and terrorist
financing risks to the U.S. financial
12 Prior to issuing the January 2024 NPRM and
this final rule, FinCEN consulted with
representatives and staff of the following
Departments and agencies regarding this action:
Department of Justice; the Department of State; the
Board of Governors of the Federal Reserve System;
the Federal Deposit Insurance Corporation; the
Securities and Exchange Commission; the
Commodity Futures Trading Commission; the
Office of the Comptroller of the Currency; and the
National Credit Union Administration. During those
consultations, FinCEN shared drafts and
information for the purpose of obtaining
interagency views on: (1) the finding that Al-Huda
Bank is of primary money laundering concern; (2)
the imposition of special measure five prohibiting
covered U.S. financial institutions from opening or
maintaining a correspondent account for, or on
behalf of Al-Huda Bank and requiring covered U.S.
financial institutions to take reasonable steps not to
process transactions for the correspondent account
of a foreign banking institution in the United States
if such a transaction involves Al-Huda Bank; and
(3) the effect such prohibition would have on the
domestic and international financial system. Those
views are reflected in FinCEN’s explanation of the
reasons for issuing this final rule.
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system posed by Al-Huda Bank, as
identified in the NPRM and this final
rule.
A. Whether Similar Action Has Been or
Is Being Taken by Other Nations or
Multilateral Groups Regarding Al-Huda
Bank
Following the issuance of the NPRM,
the CBI banned Al-Huda Bank from
accessing the CBI dollar auction.13
Nevertheless, as indicated above,
FinCEN remains concerned by Al-Huda
Bank’s continued potential to interact
with the U.S. financial system indirectly
through U.S. dollar (USD)
correspondent accounts at six foreign
financial institutions.
B. Whether the Imposition of Any
Particular 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
While FinCEN assesses that the final
rule will place some cost and burden on
covered financial institutions, these
burdens are neither undue nor
inappropriate in view of the threat
posed by the illicit activity facilitated by
Al-Huda Bank. As described in the
NPRM, Al-Huda Bank has had access to
USD through the CBI dollar auction,
which does not require Iraqi banks to
have direct USD correspondent
relationships. Further, as described
above, Al-Huda Bank has no direct USD
correspondent relationships with U.S.
financial institutions. Rather, it accesses
USD through its nested correspondent
relationships, including, but not limited
to, six USD accounts outside the United
States. These accounts may be used for
commercial payments, as well as foreign
exchange and money markets. Covered
financial institutions and transaction
partners have ample opportunity to
arrange for alternative payment
mechanisms in the absence of
correspondent banking relationships
with Al-Huda Bank.
As such, a prohibition on
correspondent banking with Al-Huda
Bank will impose minimal additional
compliance costs for covered financial
institutions, which would most
commonly involve merely adding AlHuda Bank to existing sanctions and
money laundering screening tools.
FinCEN assesses that given the risks
posed by Al-Huda Bank’s facilitation of
money laundering, the additional
13 Reuters, Iraq bans 8 local banks from US dollar
transactions (Feb. 4, 2024), available at https://
www.reuters.com/business/finance/iraq-bans-8local-banks-us-dollar-transactions-2024-02-04/.
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burden on covered financial institutions
in preventing the opening of
correspondent accounts with Al-Huda
Bank, as well as conducting due
diligence on foreign correspondent
account holders and notifying them of
the prohibition, will be minimal and not
undue.
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C. 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 of Al-Huda Bank
FinCEN assesses that imposing the
final rule will have minimal impact
upon the international payment,
clearance, and settlement system. As a
comparatively small bank, responsible
for a nominal amount of transaction
volume in the region, Al-Huda Bank is
not a systemically important financial
institution in Iraq, regionally, or
globally. FinCEN views that prohibiting
Al-Huda Bank’s access to U.S.-Iraq
correspondent banking channels should
not affect overall cross-border
transaction volumes.
Further, a prohibition under special
measure five will not prevent Al-Huda
Bank from conducting legitimate
business activities in other foreign
currencies. In addition to the six
correspondent accounts used to access
USD noted above, Al-Huda Bank
currently holds two Euro accounts and
two United Arab Emirates dirham
accounts.14 Provided that its legitimate
activities do not involve a
correspondent account maintained in
the United States, and so long as AlHuda Bank maintains non-USD
correspondent relationships in the
region, the bank could continue to
engage in those activities.
D. The Effect of the Action on United
States National Security and Foreign
Policy
As described in the NPRM, evidence
available to FinCEN has demonstrated
that Al-Huda Bank served as a
significant conduit for the financing of
FTOs in violation of U.S. and
international sanctions. Imposing a
prohibition under special measure five
will: (1) limit Al-Huda Bank’s ability to
facilitate illicit finance within an
international network of front
companies and sanctions evasion
infrastructure supporting these FTOs, by
removing its access to correspondent
accounts in the United States; and (2)
raise awareness of the way illicit actors
exploit weaknesses in vulnerable
14 BankCheck, Al-Huda Bank—Iraq (accessed
May 28, 2024), available at https://bankcheck.app.
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jurisdictions to circumvent sanctions
and finance terrorism.
E. Consideration of Alternative Special
Measures
In assessing the appropriate special
measure to impose, FinCEN considered
alternatives to a prohibition on the
opening or maintaining in the United
States of correspondent accounts,
including the imposition of one or more
of the first four special measures, or
imposing conditions on the opening or
maintaining of correspondent accounts
under special measure five. Having
considered these alternatives and for the
reasons set out below, FinCEN assesses
that none of the other special measures
available under section 311 would
appropriately address the risks posed by
Al-Huda Bank and the urgent need to
prevent it from accessing USD through
correspondent banking entirely.
With the knowledge of Al-Huda
Bank’s chairman, Al-Huda Bank’s abuse
of the dollar auction was obfuscated
through the application of numerous
money laundering typologies, including
the use of fraudulent documentation,
fake deposits, identity documents of the
deceased, fake companies, and
counterfeit IQD, which were used to
purchase USD and support terrorist
groups and militias. Taken as a whole,
Al-Huda Bank’s illicit activities present
a heightened risk of obscured
transaction counterparty identification
that would be undetectable by covered
financial institutions. Indeed, a key
feature of the facilitation of funding for
Iranian and Iran-aligned FTOs through
Al-Huda Bank is the use of fake
companies to obscure the true beneficial
owners and ultimate destinations of
funds involved in the transactions.
Moreover, this behavior provides
opportunities for obscuring the
identities of transaction counterparties
to correspondent banking relationship
providers.
Because of the nature, extent, and
purpose of the obfuscation engaged in
by Al-Huda Bank, any special measure
intended to mandate additional
information collection would likely be
ineffective and insufficient to determine
the true identity of illicit finance actors.
For example, the provision under
special measure one, that ‘‘the identity
and address of the participants in a
transaction or relationship, including
the identity of the originator of any
funds transfer’’ be collected in records
and reports, could be circumvented by
the operations of shell companies,
wherein the reported identity of the
originator serves to obscure the true
beneficial owner or originator. This
would accordingly be ineffective in
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55055
preventing illicit transactions. Al-Huda
Bank’s record of such circumvention
suggests special measure one would not
adequately protect the U.S. financial
system from the threats posed by the
bank.
Further, the requirements under
special measures three and four, that
domestic financial institutions obtain
‘‘with respect to each customer (and
each such representative), information
that is substantially comparable to that
which the depository institution obtains
in the ordinary course of business with
respect to its customers residing in the
United States’’, are also likely to be
ineffective. First, Al-Huda Bank’s use of
nested correspondent account access
through layers of payment systems
would render these alternative measures
ineffective. Only significant effort and
expense by U.S. institutions could fill
this gap, which would impose a
disproportionate compliance burden
and with no guarantee that the money
laundering threat would be addressed
through customer due diligence
research.
FinCEN also considered special
measure two, which may require
domestic financial institutions to
‘‘obtain and retain information
concerning the beneficial ownership of
any account opened or maintained in
the United States by a foreign person.’’
The agency determined this special
measure to be largely irrelevant since
the concerns involving Al-Huda Bank
do not involve the opening or
maintaining of accounts in the U.S. by
foreign persons.
FinCEN similarly assesses that merely
imposing conditions under special
measure five would be inadequate to
address the risks posed by Al-Huda
Bank’s activities. Special measure five
also enables FinCEN to impose
conditions as an alternative to a
prohibition on the opening or
maintaining of correspondent accounts.
Given Al-Huda Bank’s consistent and
longstanding ties to terrorist
organizations since its inception, and its
track record of obfuscating transactions
and account holders, FinCEN
determined that imposing any condition
would not be an effective measure to
safeguard the U.S. financial system.
FinCEN assesses that the billions of
dollars supplied to terrorist groups
through Al-Huda Bank’s exploitation of
its access to USD, and the exposure of
U.S. financial institutions to Al-Huda
Bank’s illicit activity outweigh the value
in providing conditioned access to the
U.S. financial system for any
purportedly legitimate business activity.
Conditions on the opening or
maintaining of correspondent accounts
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would likely be insufficient to prevent
illicit financial flows through the U.S.
financial system, given Al-Huda Bank’s
use of fraudulent documentation and
front companies to obscure its financing
of terrorist groups in order to access
USD. Given Al-Huda Bank’s deliberate
use of these money laundering
typologies, FinCEN cannot craft
sufficient conditions to enable covered
financial institutions to open or
maintain correspondent accounts for AlHuda Bank without introducing severe
risk to those financial institutions in
processing transactions that ultimately
finance terrorism.
FinCEN, thus, assesses that any
condition or additional recordkeeping
or reporting requirement would be an
ineffective measure to safeguard the
U.S. financial system. Such measures
would not prevent Al-Huda Bank from
accessing the correspondent accounts of
U.S. financial institutions, thus leaving
the U.S. financial system vulnerable to
processing illicit transfers that are likely
to finance terrorist groups, posing a
significant national security and money
laundering risk. In addition, no
recordkeeping or reporting requirements
or conditions would be sufficient to
guard against the risks posed by a bank
that processes transactions that are
designed to obscure the transactions’
true nature and are ultimately for the
benefit of terrorist groups. For these
reasons, and after thorough
consideration of alternate measures,
FinCEN has determined that a
prohibition on opening or maintaining
correspondent banking relationships is
the only special measure out of the
special measures available under
section 311 that can adequately protect
the U.S. financial system from the illicit
finance risk posed by Al-Huda Bank.
IV. Section-by-Section Analysis
A. 1010.663(a)—Definitions
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1. Definition of Al-Huda Bank
The final rule defines the term ‘‘AlHuda Bank’’ to mean all subsidiaries,
branches, and offices of Al-Huda Bank
operating as a bank in any jurisdiction.
FinCEN is not currently aware of any
subsidiary banks or branches outside of
Iraq.
2. Definition of Correspondent Account
The final rule defines the term
‘‘correspondent account’’ to have the
same meaning as the definition
contained in 31 CFR 1010.605(c)(1)(ii).
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
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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. FinCEN is using the same
definition of ‘‘account’’ for purposes of
this final rule as is established for
depository institutions in the final rule
implementing the provisions of section
312 of the USA PATRIOT Act, requiring
enhanced due diligence for
correspondent accounts maintained for
certain foreign banks.15 Under this
definition, ‘‘payable-through accounts’’
are a type of correspondent account.
In the case of securities brokerdealers, futures commission merchants,
introducing brokers in commodities,
and investment companies that are
open-end companies (mutual funds),
FinCEN is also using the same
definition of ‘‘account’’ for purposes of
this final rule as was established for
these entities in the final rule
implementing the provisions of section
312 of the USA PATRIOT Act, requiring
due diligence for correspondent
accounts maintained for certain foreign
banks.16
3. Definition of Covered Financial
Institution
In a change from the proposed rule,17
and consistent with prior section 311
actions imposing special measure five,
the final rule defines the term ‘‘covered
financial institution’’ by reference to 31
CFR 1010.605(e)(1), the same definition
used in the BSA rule (31 CFR 1010.610)
requiring the establishment of due
diligence programs for correspondent
accounts for financial institutions. In
general, this definition includes the
following:
• a bank;
• a broker or dealer in securities;
• a futures commission merchant or
an introducing broker in commodities;
and
• a mutual fund.
4. Definition of Foreign Banking
Institution
The final rule defines the term
‘‘foreign banking institution’’ to mean a
bank organized under foreign law, or an
agency, branch, or office located outside
the United States of a bank. The term
31 CFR 1010.605(c)(2)(i).
31 CFR 1010.605(c)(2)(ii)–(iv).
17 When defining a covered financial institution,
the proposed regulatory text incorrectly referenced
31 CFR 1010.605(e)(2), instead of 31 CFR
1010.605(e)(1). In addition, although the regulatory
impact analysis properly considered those financial
institutions listed in 31 CFR 1010.605(e)(1), it
incorrectly cited 31 CFR 1010.100(t) (as did the
section-by-section analysis).
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15 See
16 See
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does not include an agent, agency,
branch, or office within the United
States of a bank organized under foreign
law. This is consistent with the
definition of ‘‘foreign bank’’ under 31
CFR 1010.100(u). This final rule
interprets Al-Huda Bank to be a foreign
banking institution.
5. Definition of Subsidiary
The final rule defines the term
‘‘subsidiary’’ to mean a company of
which more than 50 percent of the
voting stock or analogous equity interest
is owned by another company.
B. 1010.663(b)—Prohibition on
Accounts and Due Diligence
Requirements for Covered Financial
Institutions
1. Prohibition on Opening or
Maintaining Correspondent Accounts
Section 1010.663(b)(1) of the final
rule prohibits covered financial
institutions from opening or
maintaining in the United States a
correspondent account for, or on behalf
of, Al-Huda Bank.
2. Prohibition on Use of Correspondent
Accounts Involving Al-Huda Bank
Section 1010.663(b)(2) of the final
rule requires covered financial
institutions to take reasonable steps to
not process a transaction for the
correspondent account of a foreign
banking institution in the United States
if such a transaction involves Al-Huda
Bank. Such reasonable steps are
described in 1010.663(b)(3), which sets
forth the special due diligence
requirements a covered financial
institution is required to take when it
knows or has reason to believe that a
transaction involves Al-Huda Bank.
3. Special Due Diligence for
Correspondent Accounts
As a corollary to the prohibition set
forth in sections 1010.663(b)(1) and
(b)(2), section 1010.663(b)(3) of the final
rule requires covered financial
institutions to apply special due
diligence to all of their foreign
correspondent accounts that is
reasonably designed to guard against
such accounts being used to process
transactions involving Al-Huda Bank.
As part of that special due diligence,
covered financial institutions are
required to notify those foreign
correspondent account holders that the
covered financial institutions know or
have reason to believe provide services
to Al-Huda Bank, that such
correspondents may not provide AlHuda Bank with access to the
correspondent account maintained at
the covered financial institution. A
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covered financial institution may satisfy
this notification requirement using the
following notice:
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Notice: Pursuant to U.S. regulations issued
under Section 311 of the USA PATRIOT Act,
see 31 CFR 1010.663, we are prohibited from
opening or maintaining in the United States
a correspondent account for, or on behalf of,
Al-Huda Bank. The regulations also require
us to notify you that you may not provide AlHuda Bank, including any of its subsidiaries,
branches, and offices access to the
correspondent account you hold at our
financial institution. If we become aware that
the correspondent account you hold at our
financial institution has processed any
transactions involving Al-Huda Bank,
including any of its subsidiaries, branches,
and offices, we will be required to take
appropriate steps to prevent such access,
including terminating your account.
The purpose of the notice requirement
is to aid cooperation with correspondent
account holders in preventing
transactions involving Al-Huda Bank
from accessing the U.S. financial
system. FinCEN does not require or
expect a covered financial institution to
obtain a certification from any of its
correspondent account holders that
access will not be provided to comply
with this notice requirement.
Methods of compliance with the
notice requirement could include, for
example, transmitting a notice by mail,
fax, or email. The notice should be
transmitted whenever a covered
financial institution knows or has
reason to believe that a foreign
correspondent account holder provides
services to Al-Huda Bank.
Special due diligence also includes
implementing risk-based procedures
designed to identify any use of
correspondent accounts to process
transactions involving Al-Huda Bank. A
covered financial institution is expected
to apply an appropriate screening
mechanism to identify a funds transfer
order that on its face lists Al-Huda Bank
as the financial institution of the
originator or beneficiary, or otherwise
references Al-Huda Bank in a manner
detectable under the financial
institution’s normal screening
mechanisms. An appropriate screening
mechanism could be one of the tools
used by a covered financial institution
to comply with various legal
requirements, such as commercially
available software programs used to
comply with the economic sanctions
programs administered by OFAC.
4. Recordkeeping and Reporting
Section 1010.663(b)(4) of the final
rule clarifies that the rule does not
impose any reporting requirement upon
any covered financial institution that is
not otherwise required by applicable
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law or regulation. A covered financial
institution must, however, document its
compliance with the notification
requirement described above.
V. Regulatory Impact Analysis
FinCEN has analyzed this final rule
under Executive Orders 12866, 13563,
and 14094, the Regulatory Flexibility
Act,18 the Unfunded Mandates Reform
Act,19 and the Paperwork Reduction
Act.20
As discussed above, the intended
effects of the imposition of special
measure five to Al-Huda Bank are
twofold. The rule is expected to: (1)
combat and deter money laundering in
facilitation of terrorist financing
associated with Al-Huda Bank, and (2)
prevent Al-Huda Bank from using the
U.S. financial system to enable its illicit
finance behavior. In the analysis below,
FinCEN discusses the economic effects
that are expected to accompany
adoption of the final rule and assess
such expectations in more granular
detail. This discussion includes a
detailed explanation of certain ways
FinCEN’s conclusions may be sensitive
to methodological choices and
underlying assumptions made in
drawing inferences from available data.
A. Executive Orders
Executive Orders 12866, 13563, and
14094 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 this final
rule is not a significant regulatory action
under section 3(f) of Executive Order
12866, as amended by Executive Order
14094. Accordingly, a regulatory impact
analysis is not required.
B. Regulatory Flexibility Act
When an agency issues a final rule,
the Regulatory Flexibility Act (RFA)
requires the agency to ‘‘prepare and
make available for public comment an
initial regulatory flexibility analysis’’
(IRFA) that will ‘‘describe the impact of
the proposed rule on small entities.’’ 21
However, Section 605 of the RFA allows
18 5
19 2
U.S.C. 603.
U.S.C. 1532, Public Law 104–4 (Mar. 22,
1995).
20 44 U.S.C. 3507(a)(1)(D).
21 5 U.S.C. 603(a).
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55057
an agency to certify a rule, in lieu of
preparing an analysis, if the final rule is
not expected to have a significant
economic impact on a substantial
number of small entities. This final rule
applies to all covered financial
institutions and affects a substantial
number of small entities. However, for
the reasons described below, FinCEN
assesses that these changes do not have
a significant economic impact on such
entities.
In addition to prohibiting covered
financial institutions from opening or
maintaining in the United States a
correspondent account for, or on behalf
of, Al-Huda Bank, this final rule
requires that covered financial
institutions take reasonable measures to
detect use of their correspondent
accounts to process transactions
involving Al-Huda Bank. All U.S.
persons, including U.S. financial
institutions, currently must comply
with OFAC sanctions, and U.S. financial
institutions generally have suspicious
activity reporting requirements and
systems in place to screen transactions
to comply with OFAC sanctions and
section 311 special measures
administered by FinCEN. The systems
that U.S. financial institutions have in
place to comply with these
requirements can easily be modified to
adapt to this final rule. Thus, the special
due diligence that is required under the
final rule—i.e., preventing the
processing of transactions involving AlHuda Bank and the transmittal of
notification to certain correspondent
account holders—does not impose a
significant additional economic burden
upon small U.S. financial institutions.
For these reasons, FinCEN certifies that
the requirements contained in this
rulemaking do not have a significant
economic impact on a substantial
number of small entities.
C. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 22
(Unfunded Mandates Reform Act),
requires that an agency prepare a
budgetary impact statement before
promulgating a rule that may result in
expenditure by the state, local, and
tribal governments, in the aggregate, or
by the private sector, of $100 million or
more in any one year, adjusted for
inflation.23 If a budgetary impact
statement is required, section 202 of the
Unfunded Mandates Reform Act also
requires an agency to identify and
consider a reasonable number of
22 2 U.S.C. 1532, Public Law 104–4 (Mar. 22,
1995).
23 Id.
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regulatory alternatives before
promulgating a rule.24
FinCEN has determined that this final
rule will not result in expenditures by
state, local, and tribal governments, in
the aggregate, or by the private sector, of
an annual $100 million or more,
adjusted for inflation ($184.7 million).25
Accordingly, FinCEN has not prepared
a budgetary impact statement or
specifically addressed the regulatory
alternatives considered.
D. Paperwork Reduction Act
The recordkeeping and reporting
requirements, referred to by the Office
of Management and Budget (OMB) as a
collection of information, contained in
this final rule were submitted by
FinCEN to the OMB for review in
accordance with the Paperwork
Reduction Act of 1995 (PRA) and were
assigned OMB Control Number 1506–
0079.26 Under the PRA, 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
control number assigned by the OMB.
The notification requirement in
section 1010.663(b)(3)(i)(A) is intended
to aid cooperation from foreign
correspondent account holders in
preventing transactions involving AlHuda Bank from being processed by the
U.S. financial system. The information
required to be maintained by section
1010.663(b)(4)(i) will be used by federal
agencies and certain self-regulatory
organizations to verify compliance by
covered financial institutions with the
notification requirements of section
663(b)(3)(i)(A). The collection of
information is mandatory.
Frequency: As required.
Description of Affected Financial
Institutions: Banks, broker-dealers in
securities, futures commission
merchants, introducing brokers in
commodities, and mutual funds.
Estimated Number of Affected
Financial Institutions: Approximately
15,000.27
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24 Id.
25 The Unfunded Mandates Reform Act requires
an assessment of mandates that will result in an
annual expenditure of $100 million or more,
adjusted for inflation. The U.S. Bureau of Economic
Analysis reports the annual value of the gross
domestic product (GDP) deflator in the first quarter
of 1995, the year of the Unfunded Mandates Reform
Act, as 66.452, and as 122.762 in the third quarter
of 2023, the most recent available. See U.S. Bureau
of Economic Analysis, ‘‘Table 1.1.9. Implicit Price
Deflators for Gross Domestic Product’’ (accessed
Dec. 14, 2023) available at https://www.bea.gov/
itable/. Thus, the inflation adjusted estimate for
$100 million is 122.762/66.452 × 100 = $184.7
million.
26 44 U.S.C. 3507(a)(1)(D).
27 This estimate is informed by public and nonpublic data sources regarding both an expected
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TABLE 1—ESTIMATES OF AFFECTED
FINANCIAL INSTITUTIONS BY TYPE
Financial institution type
Banks 28 ......................................
Broker-Dealers in securities 30 ...
Mutual Funds 32 ..........................
Futures Commission Merchants 34 ..................................
Introducing Brokers in Commodities 36 ......................................
Number of
entities
29 9,209
31 3,477
33 1,495
35 62
37 937
Estimated Average Annual Burden in
Hours per Affected Financial
Institution: The estimated average
annual burden associated with the
collection of information in this final
rule is one hour per affected financial
institution.
Estimated Total Annual Burden:
Approximately 15,000 hours.
VI. Regulatory Text
List of Subjects in 31 CFR Part 1010
Administrative practice and
procedure, Banks, Banking, Brokers,
Crime, Foreign banking, Terrorism.
Authority and Issuance
For the reasons set forth in the
preamble, 31 CFR part 1010 is amended
as follows:
maximum number of entities that may be affected
and the number of active, or currently reporting,
registered financial institutions.
28 See 31 CFR 1010.605(e)(1)(i).
29 Bank data is as of December 14, 2023, from
Federal Deposit Insurance Corporation BankFind.
See Federal Deposit Insurance Corporation,
BankFind, available at https://banks.data.fdic.gov/
bankfind-suite/bankfind. Credit union data is as of
December 31, 2023, from the National Credit Union
Administration Quarterly Data Summary Reports.
See National Credit Union Administration,
Quarterly Data Summary Reports, available at
https://ncua.gov/analysis/credit-union-corporatecall-report-data/quarterly-data-summary-reports.
30 31 CFR 1010.605(e)(1)(ii).
31 According to the Securities and Exchange
Commission (SEC), there are 3,477 broker-dealers in
securities as of December 2023. See SEC, Company
Information About Active Broker-Dealers, available
at https://www.sec.gov/help/foiadocsbdfoia.
32 31 CFR 1010.605(e)(1)(iv).
33 According to the SEC, as of the third quarter
of 2023, there are 1,495 open-end registered
investment companies that report on Form N–CEN.
See SEC, Form N–CEN Data Sets, available at
https://www.sec.gov/dera/data/form-ncen-data-sets.
34 31 CFR 1010.605(e)(1)(iii).
35 According to the Commodity Futures Trading
Commission (CFTC), there are 62 futures
commission merchants as of October 31, 2023. See
CFTC, Financial Data for FCMs, available at https://
www.cftc.gov/MarketReports/financialfcmdata/
index.htm.
36 31 CFR 1010.605(e)(1)(iii).
37 According to National Futures Association,
there are 937 introducing brokers in commodities
as of November 30, 2023.
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PART 1010—GENERAL PROVISIONS
1. The authority citation for part 1010
continues to read as follows:
■
Authority: 12 U.S.C. 1829b and 1951–
1959; 31 U.S.C. 5311–5314, 5316–5336; title
III, sec. 314, Pub. L. 107–56, 115 Stat. 307;
sec. 2006, Pub. L. 114–41, 129 Stat. 458–459;
sec. 701 Pub. L. 114–74, 129 Stat. 599; sec.
6403, Pub. L. 116–283, 134 Stat. 3388.
■
2. Add § 1010.663 to read as follows:
§ 1010.663 Special measures regarding AlHuda Bank.
(a) Definitions. For purposes of this
section, the following terms have the
following meanings.
(1) Al-Huda Bank. The term ‘‘Al-Huda
Bank’’ means all subsidiaries, branches,
and offices of Al-Huda Bank operating
as a bank in any jurisdiction.
(2) Correspondent account. The term
‘‘correspondent account’’ has the same
meaning as provided in
§ 1010.605(c)(1)(ii).
(3) Covered financial institution. The
term ‘‘covered financial institution’’ has
the same meaning as provided in
§ 1010.605(e)(1).
(4) Foreign banking institution. The
term ‘‘foreign banking institution’’
means a bank organized under foreign
law, or an agency, branch, or office
located outside the United States of a
bank. The term does not include an
agent, agency, branch, or office within
the United States of a bank organized
under foreign law.
(5) Subsidiary. The term ‘‘subsidiary’’
means a company of which more than
50 percent of the voting stock or
analogous equity interest is owned by
another company.
(b) Prohibition on accounts and due
diligence requirements for covered
financial institutions—(1) Prohibition
on opening or maintaining
correspondent accounts for Al-Huda
Bank. A covered financial institution
shall not open or maintain in the United
States a correspondent account for, or
on behalf of, Al-Huda Bank.
(2) Prohibition on processing
transactions involving Al-Huda Bank. A
covered financial institution shall take
reasonable steps not to process a
transaction for the correspondent
account in the United States of a foreign
banking institution if such a transaction
involves Al-Huda Bank.
(3) Special due diligence of
correspondent accounts to prohibit
transactions. (i) A covered financial
institution shall apply special due
diligence to its foreign correspondent
accounts that is reasonably designed to
guard against their use to process
transactions involving Al-Huda Bank.
At a minimum, that special due
diligence must include:
E:\FR\FM\03JYR1.SGM
03JYR1
Federal Register / Vol. 89, No. 128 / Wednesday, July 3, 2024 / Rules and Regulations
(A) Notifying those foreign
correspondent account holders that the
covered financial institution knows or
has reason to believe provide services to
Al-Huda Bank that such correspondents
may not provide Al-Huda Bank with
access to the correspondent account
maintained at the covered financial
institution; and
(B) Taking reasonable steps to identify
any use of its foreign correspondent
accounts by Al-Huda Bank, to the extent
that such 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 reasonably must
adopt to guard against the use of its
foreign correspondent accounts to
process transactions involving Al-Huda
Bank.
(iii) A covered financial institution
that knows or has reason to believe that
a foreign bank’s correspondent account
has been or is being used to process
transactions involving Al-Huda Bank
shall take all appropriate steps to further
investigate and prevent such access,
including the notification of its
correspondent account holder under
paragraph (b)(3)(i)(A) of this section
and, where necessary, termination of the
correspondent account.
(4) Recordkeeping and reporting. (i) A
covered financial institution is required
to document its compliance with the
notification requirement set forth in
paragraph (b)(3)(i)(A) of this section.
(ii) Nothing in this paragraph (b) shall
require a covered financial institution to
report any information not otherwise
required to be reported by law or
regulation.
Andrea M. Gacki,
Director, Financial Crimes Enforcement
Network.
[FR Doc. 2024–14415 Filed 7–2–24; 8:45 am]
BILLING CODE 4810–02–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
khammond on DSKJM1Z7X2PROD with RULES
[Docket No. USCG–2024–0579]
Safety Zones; Annual Events in the
Captain of the Port Eastern Great
Lakes Zone
Coast Guard, DHS.
Notification of enforcement of
regulation.
AGENCY:
ACTION:
VerDate Sep<11>2014
18:48 Jul 02, 2024
Jkt 262001
The Coast Guard will enforce
multiple safety zones located in federal
regulations for recurring marine events
taking place in July 2024. This action is
necessary and intended for the safety of
life and property on navigable waters
during these events. During the
enforcement periods, no person or
vessel may enter the respective safety
zone without the permission of the
Captain of the Port Eastern Great Lakes
or a designated representative.
DATES: The regulations listed in 33 CFR
165.939, table 165.939, will be enforced
for the following events during the dates
and times indicated below:
• Paragraph (b)(15) French Festival
Fireworks (Cape Vincent French
Festival)—from 9:15 p.m. through 10:30
p.m. on July 13, 2024, in St Lawrence
River.
• Paragraph (b)(16) Lyme Community
Days Fireworks (Chaumont Three-Mile
Bay)—from 9 p.m. through 10:30 p.m.
on July 27, 2024, in Chaumont Bay,
Lake Ontario.
• Paragraph (b)(19) Brewerton
Fireworks (Brewerton, NY)—from 8:30
p.m. through 11:30 p.m. on July 3, 2024,
in Oneida Lake.
• Paragraph (b)(28) Oswego
Harborfest (Oswego, NY)—from 9:30
p.m. through 10 p.m. on July 27, 2024,
in Lake Ontario.
• Paragraph (b)(29) Oswego
Independence Day Celebration
Fireworks (Oswego, NY)—from 9 p.m.
through 10:30 p.m. on July 7, 2024, in
Oswego River.
FOR FURTHER INFORMATION CONTACT: If
you have questions about this notice of
enforcement, call or email Marine Safety
Unit Thousand Islands’ Waterways
Management Division; telephone 315–
774–8724, email SMBMSUThousandIslandsWaterwaysManagement@uscg.mil.
SUPPLEMENTARY INFORMATION: The Coast
Guard will enforce multiple safety zones
for annual events in the Captain of the
Port Eastern Great Lakes Zone listed in
33 CFR 165.939, table 165.939, for
events occurring in the month of July as
listed in the ‘Dates’ section above.
Pursuant to 33 CFR 165.23, entry into,
transiting, or anchoring within these
safety zones during an enforcement
period is prohibited unless authorized
by the Captain of the Port Eastern Great
Lakes or his designated representative.
Those seeking permission to enter the
safety zone may request permission
from the Captain of Port Eastern Great
Lakes via channel 16, VHF–FM. Vessels
and persons granted permission to enter
the safety zone shall obey the directions
of the Captain of the Port Eastern Great
Lakes or his designated representative.
SUMMARY:
PO 00000
Frm 00039
Fmt 4700
Sfmt 4700
55059
While within a safety zone, all vessels
shall operate at the minimum speed
necessary to maintain a safe course.
This notice of enforcement is issued
under authority of 33 CFR 165.939 and
5 U.S.C. 552 (a). In addition to this
notice of enforcement in the Federal
Register, the Coast Guard will provide
the maritime community with advance
notification of this enforcement period
via Broadcast Notice to Mariners or
Local Notice to Mariners. If the Captain
of the Port Eastern Great Lakes
determines that the safety zone need not
be enforced for the full duration stated
in this notice, he may use a Broadcast
Notice to Mariners to grant general
permission to enter the respective safety
zone. This notification is being issued
by the Coast Guard Sector Eastern Great
Lakes Prevention Department Head at
the direction of the Captain of the Port.
Dated: June 27, 2024.
J.B. Bybee,
Commander, U.S. Coast Guard, Sector
Eastern Great Lakes Prevention Department
Head.
[FR Doc. 2024–14613 Filed 7–2–24; 8:45 am]
BILLING CODE 9110–04–P
DEPARTMENT OF THE INTERIOR
National Park Service
36 CFR Part 13
[NPS–AKRO–36475; PPAKAKROZ5,
PPMPRLE1Y.L00000]
RIN 1024–AE70
Alaska; Hunting and Trapping in
National Preserves
National Park Service, Interior.
Final rule.
AGENCY:
ACTION:
The National Park Service
amends its regulations for sport hunting
and trapping in national preserves in
Alaska to prohibit bear baiting and
clarify trapping regulations.
DATES: This rule is effective on August
2, 2024.
ADDRESSES:
Docket: For access to the docket to
read comments received, go to https://
www.regulations.gov and search for
Docket ID: NPS–2023–0001.
Document Availability: The Revisiting
Sport Hunting and Trapping on
National Park System Preserves in
Alaska Revised Environmental
Assessment (EA) and Finding of No
Significant Impact (FONSI) provide
information and context for this rule
and are available online at https://park
planning.nps.gov/akro by clicking the
SUMMARY:
E:\FR\FM\03JYR1.SGM
03JYR1
Agencies
[Federal Register Volume 89, Number 128 (Wednesday, July 3, 2024)]
[Rules and Regulations]
[Pages 55051-55059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14415]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB65
Imposition of Special Measure Regarding Al-Huda Bank as a
Financial Institution of Primary Money Laundering Concern
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: FinCEN is issuing this final rule to prohibit covered U.S.
financial institutions from opening or maintaining a correspondent
account for, or on behalf of Al-Huda Bank, a foreign financial
institution based in Iraq found to be of primary money laundering
concern pursuant to section 311 of the USA PATRIOT Act. The rule
further requires covered U.S. financial institutions to take reasonable
steps not to process transactions for the correspondent account of a
foreign banking institution in the United States if such a transaction
involves Al-Huda Bank. It also requires covered institutions to apply
special due diligence to their foreign correspondent accounts that is
reasonably designed to guard against their use to process transactions
involving Al-Huda Bank.
DATES: This final rule is effective August 2, 2024.
FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section
at 1-800-767-2825 or electronically at [email protected].
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, Public Law 107-56 (USA
PATRIOT Act). Title III of the USA PATRIOT Act amended the anti-money
laundering (AML) provisions of the Bank Secrecy Act (BSA) to promote
the prevention, detection, and prosecution of international money
laundering and the financing of terrorism.\1\ Section 311 of the USA
PATRIOT Act (section 311), codified at 31 U.S.C. 5318A, grants the
Secretary of the Treasury (Secretary) authority, upon finding that
reasonable grounds exist for concluding that one or more financial
institutions operating outside of the United States is of primary money
laundering concern, to require domestic financial institutions and
domestic financial agencies to take certain ``special measures.'' The
authority of the Secretary to administer the Bank Secrecy Act (BSA) and
its implementing regulations has been delegated to FinCEN.\2\
---------------------------------------------------------------------------
\1\ The BSA, as amended, is the popular name for a collection of
statutory authorities that FinCEN administers that is codified at 12
U.S.C. 1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, and
includes other authorities reflected in notes thereto. Regulations
implementing the BSA appear at 31 CFR Chapter X.
\2\ Pursuant to Treasury Order 180-01 (Jan. 14, 2020), the
authority of the Secretary to administer the BSA, including, but not
limited to, 31 U.S.C. 5318A, has been delegated to the Director of
FinCEN.
---------------------------------------------------------------------------
[[Page 55052]]
The five special measures set out in section 311 are safeguards
that may be employed to defend the U.S. financial system from money
laundering and terrorist financing risks. The Secretary may impose one
or more of these special measures in order to protect the U.S.
financial system from such threats. Through special measures one
through four, the Secretary may impose additional recordkeeping,
information collection, and reporting requirements on covered domestic
financial institutions and domestic financial agencies--collectively,
``covered financial institutions.'' \3\ Through special measure five,
the Secretary may prohibit, or impose conditions on, the opening or
maintaining in the United States of a correspondent account for or on
behalf of a foreign banking institution, if such correspondent account
involves the foreign financial institution found to be of primary money
laundering concern.\4\
---------------------------------------------------------------------------
\3\ 31 U.S.C. 5318A(b)(1)-(b)(4).
\4\ 31 U.S.C. 5318A(b)(5).
---------------------------------------------------------------------------
B. Al-Huda Bank
Al-Huda Bank is a private commercial bank registered and
headquartered in Baghdad, Iraq, with five branch locations in Baghdad,
Karbala, and Nasiriyah, Iraq. Al-Huda Bank has no subsidiaries or
branches outside of Iraq and is regulated by the Central Bank of Iraq
(CBI).
Al-Huda Bank has no direct U.S. correspondent banking relationships
but interacts with the U.S. financial system indirectly through U.S.
dollar (USD) correspondent accounts at six foreign financial
institutions. In other words, Al-Huda Bank interacts with foreign banks
that themselves have correspondent accounts with U.S. banks.
II. FinCEN's Section 311 Rulemaking Regarding Al-Huda Bank
A. Finding
In a notice of proposed rulemaking (NPRM) published in the Federal
Register on January 31, 2024, FinCEN found that reasonable grounds
exist for concluding that Al-Huda Bank is a foreign financial
institution of primary money laundering concern pursuant to 31 U.S.C.
5318A.\5\
---------------------------------------------------------------------------
\5\ 89 FR 6074 (Jan. 31, 2024).
---------------------------------------------------------------------------
As described in the NPRM, FinCEN assesses that Al-Huda Bank has
exploited its access to USD to support designated foreign terrorist
organizations (FTOs), including Iran's Islamic Revolutionary Guard
Corps (IRGC) and IRGC-Quds Force (IRGC-QF), as well as Iran-aligned
Iraqi militias Kata'ib Hizballah (KH) and Asa'ib Ahl al-Haq (AAH).\6\
Since its establishment, Al-Huda Bank has been controlled and operated
by the IRGC and IRGC-QF. Moreover, the chairman of Al-Huda Bank is
complicit in Al-Huda Bank's illicit financial activities, including
money laundering through front companies that conceal the true nature
of and parties involved in illicit transactions, ultimately enabling
the financing of terrorism.
---------------------------------------------------------------------------
\6\ The U.S. Department of State has authority to designate
organizations as FTOs. The U.S. Department of the Treasury's Office
of Foreign Assets Control (OFAC) has also designated the IRGC, IRGC-
QF, KH, and AAH pursuant to multiple sanctions authorities.
---------------------------------------------------------------------------
Given the nature of Iraq's economy and trade relationships, Iraqi
businesses that import goods into Iraq rely on wire transfers of USD
from the CBI account at the Federal Reserve Bank of New York (FRBNY), a
process known as the wire auction, or more generally the ``CBI dollar
auction.'' \7\ Many Iraqi businesses and financial institutions use the
CBI dollar auction for legitimate purposes. However, FinCEN assesses
that Al-Huda Bank has deliberately embarked on a strategy that relies
on exploiting the CBI dollar auction to support designated FTOs,
including the IRGC, IRGC-QF, KH, and AAH, with the support of the
Iranian government. Al-Huda Bank has actively supported terrorist
groups and abused the CBI dollar auction through numerous money
laundering typologies, including use of fraudulent documentation to
obscure the ultimate beneficiaries of the transactions. Given these
facts, FinCEN assesses that there is a high risk of Al-Huda Bank
exploiting USD correspondent relationships to support its money
laundering and terrorist financing activity.
---------------------------------------------------------------------------
\7\ The CBI dollar auction comprises both (1) the wire auction,
and (2) bulk USD banknote shipments to Iraq which the CBI sells to
exchange houses and banks in return for Iraqi dinar (IQD). The
latter is known as the ``cash auction'' and is a separate process
from the wire auction. Al-Huda Bank's known illicit finance
activities described herein are related to the wire auction.
---------------------------------------------------------------------------
1. Al-Huda Bank Has Exploited Its Access to USD Through the Wire
Auction
Individual Iraqi businesses that import goods into Iraq rely on
wire transfers of USD from CBI's account at the FRBNY. The wire
auction, a part of what is known as the CBI dollar auction, is the
mechanism by which the CBI provides USD to facilitate the purchase of
imports. When Iraq sells oil in the international petroleum markets,
the revenues are credited in USD to the CBI's account at the FRBNY.
Iraqi companies with accounts at Iraqi banks can then access the CBI
dollar auction to purchase USD with IQD to pay for imports. USD are
transferred from the CBI's FRBNY account to an Iraqi bank, and onward
to a third-country bank on behalf of a third-country exporter.
Many Iraqi businesses and their banks use the CBI dollar auction
for its intended, legitimate purpose of facilitating imports of goods.
However, FinCEN assesses that Al-Huda Bank has deliberately embarked on
a strategy that relies on illegitimate exploitation of the CBI dollar
auction to support designated FTOs, including the IRGC, IRGC-QF, KH,
and AAH, with the support of the Iranian government.
With the knowledge of Al-Huda Bank's chairman, Al-Huda Bank's abuse
of the CBI dollar auction was obfuscated through the application of
numerous money laundering typologies, including the use of fraudulent
documentation, fake deposits, identity documents of the deceased, fake
companies, and counterfeit IQD, which were used to purchase USD and
support terrorist groups and militias. For years, Al-Huda Bank has been
involved in these deceptive money laundering activities. Examples of
three of these money laundering typologies are discussed below: (1)
fraudulent documentation; (2) stolen identities; and (3) counterfeit
IQD. Al-Huda Bank's use of these money laundering typologies also risks
exposing covered financial institutions to Al-Huda Bank's exploitation
of USD correspondent banking relationships to support its terrorist
financing activities.
Since at least 2012, Al-Huda Bank has used fraudulent documentation
to purchase foreign currency--including USD--from the CBI at CBI dollar
auctions. Based on media reporting, between 2012 and 2014, Al-Huda Bank
filed false documentation to justify international transfers of over $6
billion to banks and companies.\8\ On at least one occasion, government
authorities detected Al-Huda Bank's filing of fraudulent documentation,
which resulted in freezing of a transfer of a significant amount of
money. In another scheme, Al-Huda Bank would deposit fake checks to
make the balance seem higher on the account Al-Huda Bank used in CBI
dollar auctions. The fake check deposits would allow Al-Huda Bank to
purchase USD using that false higher balance before the fake check
[[Page 55053]]
bounced, which Al-Huda Bank would then write off.
---------------------------------------------------------------------------
\8\ Al-Arabiya, ``Billions of Dollars'' Smuggled Out of Iraq
During Maliki's Rule (Nov. 9, 2015), available at https://english.alarabiya.net/News/middle-east/2015/11/09/Iraq-smuggled-billions-of-dollars-during-Maliki-s-rule.
---------------------------------------------------------------------------
Al-Huda Bank, with its chairman's knowledge, has also abused the
CBI dollar auction by utilizing stolen identities. In one scheme, the
Al-Huda Bank chairman and other Al-Huda Bank officials would use the
identification documents of deceased individuals to purchase USD in CBI
dollar auctions. Al-Huda Bank officials would also pay living people
for use of their identification documents. The illicit use of
identification documents allowed Al-Huda Bank to circumvent limits on
currency purchases.
With the knowledge of Al-Huda Bank's chairman, Al-Huda Bank has
also been involved in funneling of counterfeit IQD through fake
businesses in Iraq. The counterfeit IQD would be printed in Iran,
funneled through Iraqi businesses, and then exchanged for USD. The use
of counterfeit IQD greatly increases the amount of illicit profit
gained from exchanging IQD for USD at the CBI dollar auction, and the
funneling of counterfeit IQD through Iraqi businesses disguises the
counterfeit IQD's source in Iran.
2. Through the Exploitation of the Wire Auction, Al-Huda Bank Has
Provided Support to Designated FTOs
Iran has exploited its relationship with Iraq-based, Iran-backed
militias to influence Iraqi businesses and officials to generate
illicit revenue for the militias' operations. As part of this effort,
Iran has developed a network of commercial platforms, including
financial institutions, to move funds and misrepresent trade-based
financial transactions that obscure the ultimate beneficiaries, namely
Iran-backed terrorist groups and militias.
Since its establishment, Al-Huda Bank has been controlled and
operated by the IRGC and IRGC-QF. In 2008, the chairman of Al-Huda Bank
established the bank specifically for the benefit of KH and has met
with and taken orders from IRGC-QF leadership in Tehran, Iran. After
establishing the bank, the Al-Huda Bank chairman began money laundering
operations on behalf of the IRGC-QF and KH.
Al-Huda Bank has funded Iran-aligned militias through a scheme in
which Al-Huda Bank and other Iraqi banks have falsely claimed imports
into Iraq that did not exist worth billions of dollars to justify the
purchase of USD in the CBI dollar auction. Al-Huda Bank would purchase
the USD with counterfeit IQD printed in Iran. Al-Huda Bank was not
allowed to conduct financial transactions without the Iran-aligned
militias' involvement and Al-Huda Bank would provide part of Al-Huda
Bank's revenue from this scheme to those Iran-aligned militias.
This fraudulent scheme has been a substantial source of funding for
Iran-aligned militias' operations. The Iran-aligned Iraqi militia AAH
has used companies based across Iraq to generate revenue, launder
illicit profits, and convert IQD to USD. AAH has used Al-Huda Bank to
maintain accounts for some of these companies, as well as to access the
currency auction. The use of false imports, counterfeit currency, and
front companies are essential components of exploitation of the CBI
dollar auction by obscuring the source of funds and the purpose and
ultimate beneficiaries of the transactions that support Iran-aligned
Iraqi militias. Overall, IRGC and IRGC-QF use of Al-Huda Bank and
several other Iraqi banks to access the CBI dollar auction resulted in
approximately $70 billion USD in profit, from 2019 through 2020.
B. Proposed Special Measure
In the NPRM, FinCEN proposed: (1) to prohibit covered financial
institutions from opening or maintaining a correspondent account in the
United States for, or on behalf of, Al-Huda Bank; (2) to prohibit
covered financial institutions from processing a transaction involving
Al-Huda Bank through the United States correspondent account of a
foreign banking institution; and (3) a requirement for covered
financial institutions to apply special due diligence to their foreign
correspondent accounts that is reasonably designed to guard against
their use to process transactions involving Al-Huda Bank.\9\ The
comment period for the NPRM closed on March 1, 2024.
---------------------------------------------------------------------------
\9\ 89 FR 6074 (Jan. 31, 2024).
---------------------------------------------------------------------------
As further described below, FinCEN is adopting the proposal as a
final rule. In so doing, FinCEN has considered public comments and the
relevant statutory factors and has engaged in the required
consultations prescribed by 31 U.S.C. 5318A.
C. Subsequent Developments
Following the issuance of the NPRM, the CBI banned Al-Huda Bank
from accessing the CBI dollar auction.\10\ However, in light of Al-Huda
Bank's consistent and longstanding ties to terrorist organizations
since its inception and its history of obfuscating transactions and
account holders in support of those organizations, it is reasonable to
assess that Al-Huda Bank will seek ways to continue that support even
without access to the CBI dollar auction, through its access to USD
correspondent banking relationships in the region. Therefore, Al-Huda
Bank remains of primary money laundering concern.
---------------------------------------------------------------------------
\10\ Reuters, Iraq bans 8 local banks from US dollar
transactions (Feb. 4, 2024), available at https://www.reuters.com/business/finance/iraq-bans-8-local-banks-us-dollar-transactions-2024-02-04/.
---------------------------------------------------------------------------
D. Consideration of Comments
Concurrent with the issuance of the NPRM on January 31, 2024,
FinCEN opened a comment period that closed on March 1, 2024. FinCEN
received seven comments; they are described below, along with FinCEN's
response. Neither Al-Huda Bank nor its officers submitted any comments.
1. Comments Attesting to Al-Huda Bank's or Bank Owner Hamad al-
Moussawi's Good Reputation
In response to the NPRM, FinCEN received four comments attesting to
the good reputation of the owner and chairman of Al-Huda Bank, Hamad
al-Moussawi (al-Moussawi). Commenters claimed that al-Moussawi is
``pro-Western,'' a ``democracy supporter,'' and holds ``purely liberal
ideas.'' Several commenters also claimed that al-Moussawi ``does not
have any suspicious relationships'', or ties with ``Iranian backed
groups'' or ``extremist Islamic parties or other sectarian parties.''
Two commenters commented on the reputation of Al-Huda Bank itself. One
described the bank as ``one of the disciplined banks with a good
reputation.'' The second claimed that ``the bank has not faced any
accusations of this kind previously.'' These commenters have not
provided any specific evidence or documentation to support their
claims. Further, even if they could be substantiated, such general
claims about Al-Huda Bank and its owner al-Moussawi would not allay
FinCEN's concerns regarding Al-Huda Bank's specific illicit conduct.
2. Comments Disputing the Feasibility of Money Laundering Typologies
Outlined in the NPRM
Two commenters claimed that it would be ``impossible'' or
``unrealistic'' for a bank to conduct the type of illicit activity
described in the NPRM, given the CBI's supervision and controls.
Specifically, these commenters disputed the ability of any Iraqi bank
to utilize forged checks and counterfeit IQD.
These comments do not allay FinCEN's concerns regarding Al-Huda
Bank, as the commenters have not provided specific evidence or
documentation to support their claims.
[[Page 55054]]
3. Comments Questioning the Sources Cited in the NPRM
Four comments claimed that FinCEN did not provide sufficient
evidence, and/or relied upon inaccurate, biased public and non-public
information. Four comments questioned the veracity of media reporting
as evidence in the NPRM. One commenter found that the NPRM ``relied on
information from media sources'' and stated that ``media in the Middle
East, as a whole, is unprofessional, participates in corrupt practices,
lacks neutrality, and is irresponsible.'' Another commenter claimed
that information FinCEN used, including media reporting, ``is often not
thoroughly researched, and if the reports received by [FinCEN]
originated from Iraqi parties, [. . .] those reports were built on the
basis of animosity towards individuals and a desire to harm their
interests, rather than a desire to present facts.'' These comments do
not allay FinCEN's concerns regarding Al-Huda Bank, as they cite no
specific evidence that would call into question the reliability of the
media reporting and sources upon which FinCEN has relied.
Moreover, FinCEN based its findings on corroborated evidence from
both public and non-public sources, of which media reporting was only a
small part. In making its finding of primary money laundering concern
and adopting special measure five to address it, FinCEN has considered
the totality of information available to it, including from media
organizations, and has independently evaluated its sources for
credibility, potential bias, and accuracy. One commenter claimed to
have ``found a document issued by the Central Bank of Iraq denying the
accuracy'' of an article cited in the NPRM. The article reported that,
from 2012 to 2014, Al-Huda Bank used forged documents in transfers of
over $6 billion to banks and companies outside of Iraq.\11\ The
document stated that there were no such personal money transfers
transferred out of Iraq to the account of Al-Huda Bank's owner. Because
the document focuses narrowly on the owner's personal money transfers,
it does not contradict the information reported in the article, which
is also corroborated by other sources.
---------------------------------------------------------------------------
\11\ Al-Arabiya, ``Billions of Dollars'' Smuggled Out of Iraq
During Maliki's Rule (Nov. 9, 2015), available at https://english.alarabiya.net/News/middle-east/2015/11/09/Iraq-smuggled-billions-of-dollars-during-Maliki-s-rule.
---------------------------------------------------------------------------
E. Summary of FinCEN's Ongoing Concerns Regarding Al-Huda Bank
After considering comments received from the public, as well as
other information available to the agency, including both public and
non-public information, FinCEN is issuing this final rule, imposing a
prohibition on U.S. financial institutions from opening or maintaining
a correspondent account for, or on behalf of, Al-Huda Bank. The
information available to FinCEN provides reason to conclude that Al-
Huda Bank continues to be a foreign financial institution of primary
money laundering concern.
III. Imposition of a Special Measure Regarding Al-Huda Bank as a
Foreign Financial Institution of Primary Money Laundering Concern
Based upon this finding, FinCEN is authorized to impose one or more
special measures. Following the required consultations and the
consideration of all relevant factors discussed in the NPRM, FinCEN
proposed a prohibition under the fifth special measure.\12\
---------------------------------------------------------------------------
\12\ Prior to issuing the January 2024 NPRM and this final rule,
FinCEN consulted with representatives and staff of the following
Departments and agencies regarding this action: Department of
Justice; the Department of State; the Board of Governors of the
Federal Reserve System; the Federal Deposit Insurance Corporation;
the Securities and Exchange Commission; the Commodity Futures
Trading Commission; the Office of the Comptroller of the Currency;
and the National Credit Union Administration. During those
consultations, FinCEN shared drafts and information for the purpose
of obtaining interagency views on: (1) the finding that Al-Huda Bank
is of primary money laundering concern; (2) the imposition of
special measure five prohibiting covered U.S. financial institutions
from opening or maintaining a correspondent account for, or on
behalf of Al-Huda Bank and requiring covered U.S. financial
institutions to take reasonable steps not to process transactions
for the correspondent account of a foreign banking institution in
the United States if such a transaction involves Al-Huda Bank; and
(3) the effect such prohibition would have on the domestic and
international financial system. Those views are reflected in
FinCEN's explanation of the reasons for issuing this final rule.
---------------------------------------------------------------------------
After reviewing the comments and considering all potential special
measures, FinCEN concludes that a prohibition under special measure
five is warranted. Consistent with the finding that Al-Huda Bank is a
foreign financial institution of primary money laundering concern, and
in consideration of additional relevant factors, this final rule
imposes a prohibition on the opening or maintaining of correspondent
accounts by covered financial institutions for, or on behalf of, Al-
Huda Bank. This prohibition will help guard against the money
laundering and terrorist financing risks to the U.S. financial system
posed by Al-Huda Bank, as identified in the NPRM and this final rule.
A. Whether Similar Action Has Been or Is Being Taken by Other Nations
or Multilateral Groups Regarding Al-Huda Bank
Following the issuance of the NPRM, the CBI banned Al-Huda Bank
from accessing the CBI dollar auction.\13\ Nevertheless, as indicated
above, FinCEN remains concerned by Al-Huda Bank's continued potential
to interact with the U.S. financial system indirectly through U.S.
dollar (USD) correspondent accounts at six foreign financial
institutions.
---------------------------------------------------------------------------
\13\ Reuters, Iraq bans 8 local banks from US dollar
transactions (Feb. 4, 2024), available at https://www.reuters.com/business/finance/iraq-bans-8-local-banks-us-dollar-transactions-2024-02-04/.
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B. Whether the Imposition of Any Particular 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
While FinCEN assesses that the final rule will place some cost and
burden on covered financial institutions, these burdens are neither
undue nor inappropriate in view of the threat posed by the illicit
activity facilitated by Al-Huda Bank. As described in the NPRM, Al-Huda
Bank has had access to USD through the CBI dollar auction, which does
not require Iraqi banks to have direct USD correspondent relationships.
Further, as described above, Al-Huda Bank has no direct USD
correspondent relationships with U.S. financial institutions. Rather,
it accesses USD through its nested correspondent relationships,
including, but not limited to, six USD accounts outside the United
States. These accounts may be used for commercial payments, as well as
foreign exchange and money markets. Covered financial institutions and
transaction partners have ample opportunity to arrange for alternative
payment mechanisms in the absence of correspondent banking
relationships with Al-Huda Bank.
As such, a prohibition on correspondent banking with Al-Huda Bank
will impose minimal additional compliance costs for covered financial
institutions, which would most commonly involve merely adding Al-Huda
Bank to existing sanctions and money laundering screening tools. FinCEN
assesses that given the risks posed by Al-Huda Bank's facilitation of
money laundering, the additional
[[Page 55055]]
burden on covered financial institutions in preventing the opening of
correspondent accounts with Al-Huda Bank, as well as conducting due
diligence on foreign correspondent account holders and notifying them
of the prohibition, will be minimal and not undue.
C. 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 of Al-Huda Bank
FinCEN assesses that imposing the final rule will have minimal
impact upon the international payment, clearance, and settlement
system. As a comparatively small bank, responsible for a nominal amount
of transaction volume in the region, Al-Huda Bank is not a systemically
important financial institution in Iraq, regionally, or globally.
FinCEN views that prohibiting Al-Huda Bank's access to U.S.-Iraq
correspondent banking channels should not affect overall cross-border
transaction volumes.
Further, a prohibition under special measure five will not prevent
Al-Huda Bank from conducting legitimate business activities in other
foreign currencies. In addition to the six correspondent accounts used
to access USD noted above, Al-Huda Bank currently holds two Euro
accounts and two United Arab Emirates dirham accounts.\14\ Provided
that its legitimate activities do not involve a correspondent account
maintained in the United States, and so long as Al-Huda Bank maintains
non-USD correspondent relationships in the region, the bank could
continue to engage in those activities.
---------------------------------------------------------------------------
\14\ BankCheck, Al-Huda Bank--Iraq (accessed May 28, 2024),
available at https://bankcheck.app.
---------------------------------------------------------------------------
D. The Effect of the Action on United States National Security and
Foreign Policy
As described in the NPRM, evidence available to FinCEN has
demonstrated that Al-Huda Bank served as a significant conduit for the
financing of FTOs in violation of U.S. and international sanctions.
Imposing a prohibition under special measure five will: (1) limit Al-
Huda Bank's ability to facilitate illicit finance within an
international network of front companies and sanctions evasion
infrastructure supporting these FTOs, by removing its access to
correspondent accounts in the United States; and (2) raise awareness of
the way illicit actors exploit weaknesses in vulnerable jurisdictions
to circumvent sanctions and finance terrorism.
E. Consideration of Alternative Special Measures
In assessing the appropriate special measure to impose, FinCEN
considered alternatives to a prohibition on the opening or maintaining
in the United States of correspondent accounts, including the
imposition of one or more of the first four special measures, or
imposing conditions on the opening or maintaining of correspondent
accounts under special measure five. Having considered these
alternatives and for the reasons set out below, FinCEN assesses that
none of the other special measures available under section 311 would
appropriately address the risks posed by Al-Huda Bank and the urgent
need to prevent it from accessing USD through correspondent banking
entirely.
With the knowledge of Al-Huda Bank's chairman, Al-Huda Bank's abuse
of the dollar auction was obfuscated through the application of
numerous money laundering typologies, including the use of fraudulent
documentation, fake deposits, identity documents of the deceased, fake
companies, and counterfeit IQD, which were used to purchase USD and
support terrorist groups and militias. Taken as a whole, Al-Huda Bank's
illicit activities present a heightened risk of obscured transaction
counterparty identification that would be undetectable by covered
financial institutions. Indeed, a key feature of the facilitation of
funding for Iranian and Iran-aligned FTOs through Al-Huda Bank is the
use of fake companies to obscure the true beneficial owners and
ultimate destinations of funds involved in the transactions. Moreover,
this behavior provides opportunities for obscuring the identities of
transaction counterparties to correspondent banking relationship
providers.
Because of the nature, extent, and purpose of the obfuscation
engaged in by Al-Huda Bank, any special measure intended to mandate
additional information collection would likely be ineffective and
insufficient to determine the true identity of illicit finance actors.
For example, the provision under special measure one, that ``the
identity and address of the participants in a transaction or
relationship, including the identity of the originator of any funds
transfer'' be collected in records and reports, could be circumvented
by the operations of shell companies, wherein the reported identity of
the originator serves to obscure the true beneficial owner or
originator. This would accordingly be ineffective in preventing illicit
transactions. Al-Huda Bank's record of such circumvention suggests
special measure one would not adequately protect the U.S. financial
system from the threats posed by the bank.
Further, the requirements under special measures three and four,
that domestic financial institutions obtain ``with respect to each
customer (and each such representative), information that is
substantially comparable to that which the depository institution
obtains in the ordinary course of business with respect to its
customers residing in the United States'', are also likely to be
ineffective. First, Al-Huda Bank's use of nested correspondent account
access through layers of payment systems would render these alternative
measures ineffective. Only significant effort and expense by U.S.
institutions could fill this gap, which would impose a disproportionate
compliance burden and with no guarantee that the money laundering
threat would be addressed through customer due diligence research.
FinCEN also considered special measure two, which may require
domestic financial institutions to ``obtain and retain information
concerning the beneficial ownership of any account opened or maintained
in the United States by a foreign person.'' The agency determined this
special measure to be largely irrelevant since the concerns involving
Al-Huda Bank do not involve the opening or maintaining of accounts in
the U.S. by foreign persons.
FinCEN similarly assesses that merely imposing conditions under
special measure five would be inadequate to address the risks posed by
Al-Huda Bank's activities. Special measure five also enables FinCEN to
impose conditions as an alternative to a prohibition on the opening or
maintaining of correspondent accounts. Given Al-Huda Bank's consistent
and longstanding ties to terrorist organizations since its inception,
and its track record of obfuscating transactions and account holders,
FinCEN determined that imposing any condition would not be an effective
measure to safeguard the U.S. financial system. FinCEN assesses that
the billions of dollars supplied to terrorist groups through Al-Huda
Bank's exploitation of its access to USD, and the exposure of U.S.
financial institutions to Al-Huda Bank's illicit activity outweigh the
value in providing conditioned access to the U.S. financial system for
any purportedly legitimate business activity. Conditions on the opening
or maintaining of correspondent accounts
[[Page 55056]]
would likely be insufficient to prevent illicit financial flows through
the U.S. financial system, given Al-Huda Bank's use of fraudulent
documentation and front companies to obscure its financing of terrorist
groups in order to access USD. Given Al-Huda Bank's deliberate use of
these money laundering typologies, FinCEN cannot craft sufficient
conditions to enable covered financial institutions to open or maintain
correspondent accounts for Al-Huda Bank without introducing severe risk
to those financial institutions in processing transactions that
ultimately finance terrorism.
FinCEN, thus, assesses that any condition or additional
recordkeeping or reporting requirement would be an ineffective measure
to safeguard the U.S. financial system. Such measures would not prevent
Al-Huda Bank from accessing the correspondent accounts of U.S.
financial institutions, thus leaving the U.S. financial system
vulnerable to processing illicit transfers that are likely to finance
terrorist groups, posing a significant national security and money
laundering risk. In addition, no recordkeeping or reporting
requirements or conditions would be sufficient to guard against the
risks posed by a bank that processes transactions that are designed to
obscure the transactions' true nature and are ultimately for the
benefit of terrorist groups. For these reasons, and after thorough
consideration of alternate measures, FinCEN has determined that a
prohibition on opening or maintaining correspondent banking
relationships is the only special measure out of the special measures
available under section 311 that can adequately protect the U.S.
financial system from the illicit finance risk posed by Al-Huda Bank.
IV. Section-by-Section Analysis
A. 1010.663(a)--Definitions
1. Definition of Al-Huda Bank
The final rule defines the term ``Al-Huda Bank'' to mean all
subsidiaries, branches, and offices of Al-Huda Bank operating as a bank
in any jurisdiction. FinCEN is not currently aware of any subsidiary
banks or branches outside of Iraq.
2. Definition of Correspondent Account
The final rule defines the term ``correspondent account'' to have
the same meaning as the definition contained in 31 CFR
1010.605(c)(1)(ii). 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.
FinCEN is using the same definition of ``account'' for purposes of this
final rule as is established for depository institutions in the final
rule implementing the provisions of section 312 of the USA PATRIOT Act,
requiring enhanced due diligence for correspondent accounts maintained
for certain foreign banks.\15\ Under this definition, ``payable-through
accounts'' are a type of correspondent account.
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\15\ See 31 CFR 1010.605(c)(2)(i).
---------------------------------------------------------------------------
In the case of securities broker-dealers, futures commission
merchants, introducing brokers in commodities, and investment companies
that are open-end companies (mutual funds), FinCEN is also using the
same definition of ``account'' for purposes of this final rule as was
established for these entities in the final rule implementing the
provisions of section 312 of the USA PATRIOT Act, requiring due
diligence for correspondent accounts maintained for certain foreign
banks.\16\
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\16\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
---------------------------------------------------------------------------
3. Definition of Covered Financial Institution
In a change from the proposed rule,\17\ and consistent with prior
section 311 actions imposing special measure five, the final rule
defines the term ``covered financial institution'' by reference to 31
CFR 1010.605(e)(1), the same definition used in the BSA rule (31 CFR
1010.610) requiring the establishment of due diligence programs for
correspondent accounts for financial institutions. In general, this
definition includes the following:
---------------------------------------------------------------------------
\17\ When defining a covered financial institution, the proposed
regulatory text incorrectly referenced 31 CFR 1010.605(e)(2),
instead of 31 CFR 1010.605(e)(1). In addition, although the
regulatory impact analysis properly considered those financial
institutions listed in 31 CFR 1010.605(e)(1), it incorrectly cited
31 CFR 1010.100(t) (as did the section-by-section analysis).
---------------------------------------------------------------------------
a bank;
a broker or dealer in securities;
a futures commission merchant or an introducing broker in
commodities; and
a mutual fund.
4. Definition of Foreign Banking Institution
The final rule defines the term ``foreign banking institution'' to
mean a bank organized under foreign law, or an agency, branch, or
office located outside the United States of a bank. The term does not
include an agent, agency, branch, or office within the United States of
a bank organized under foreign law. This is consistent with the
definition of ``foreign bank'' under 31 CFR 1010.100(u). This final
rule interprets Al-Huda Bank to be a foreign banking institution.
5. Definition of Subsidiary
The final rule defines the term ``subsidiary'' to mean a company of
which more than 50 percent of the voting stock or analogous equity
interest is owned by another company.
B. 1010.663(b)--Prohibition on Accounts and Due Diligence Requirements
for Covered Financial Institutions
1. Prohibition on Opening or Maintaining Correspondent Accounts
Section 1010.663(b)(1) of the final rule prohibits covered
financial institutions from opening or maintaining in the United States
a correspondent account for, or on behalf of, Al-Huda Bank.
2. Prohibition on Use of Correspondent Accounts Involving Al-Huda Bank
Section 1010.663(b)(2) of the final rule requires covered financial
institutions to take reasonable steps to not process a transaction for
the correspondent account of a foreign banking institution in the
United States if such a transaction involves Al-Huda Bank. Such
reasonable steps are described in 1010.663(b)(3), which sets forth the
special due diligence requirements a covered financial institution is
required to take when it knows or has reason to believe that a
transaction involves Al-Huda Bank.
3. Special Due Diligence for Correspondent Accounts
As a corollary to the prohibition set forth in sections
1010.663(b)(1) and (b)(2), section 1010.663(b)(3) of the final rule
requires covered financial institutions to apply special due diligence
to all of their foreign correspondent accounts that is reasonably
designed to guard against such accounts being used to process
transactions involving Al-Huda Bank. As part of that special due
diligence, covered financial institutions are required to notify those
foreign correspondent account holders that the covered financial
institutions know or have reason to believe provide services to Al-Huda
Bank, that such correspondents may not provide Al-Huda Bank with access
to the correspondent account maintained at the covered financial
institution. A
[[Page 55057]]
covered financial institution may satisfy this notification requirement
using the following notice:
Notice: Pursuant to U.S. regulations issued under Section 311 of
the USA PATRIOT Act, see 31 CFR 1010.663, we are prohibited from
opening or maintaining in the United States a correspondent account
for, or on behalf of, Al-Huda Bank. The regulations also require us
to notify you that you may not provide Al-Huda Bank, including any
of its subsidiaries, branches, and offices access to the
correspondent account you hold at our financial institution. If we
become aware that the correspondent account you hold at our
financial institution has processed any transactions involving Al-
Huda Bank, including any of its subsidiaries, branches, and offices,
we will be required to take appropriate steps to prevent such
access, including terminating your account.
The purpose of the notice requirement is to aid cooperation with
correspondent account holders in preventing transactions involving Al-
Huda Bank from accessing the U.S. financial system. FinCEN does not
require or expect a covered financial institution to obtain a
certification from any of its correspondent account holders that access
will not be provided to comply with this notice requirement.
Methods of compliance with the notice requirement could include,
for example, transmitting a notice by mail, fax, or email. The notice
should be transmitted whenever a covered financial institution knows or
has reason to believe that a foreign correspondent account holder
provides services to Al-Huda Bank.
Special due diligence also includes implementing risk-based
procedures designed to identify any use of correspondent accounts to
process transactions involving Al-Huda Bank. A covered financial
institution is expected to apply an appropriate screening mechanism to
identify a funds transfer order that on its face lists Al-Huda Bank as
the financial institution of the originator or beneficiary, or
otherwise references Al-Huda Bank in a manner detectable under the
financial institution's normal screening mechanisms. An appropriate
screening mechanism could be one of the tools used by a covered
financial institution to comply with various legal requirements, such
as commercially available software programs used to comply with the
economic sanctions programs administered by OFAC.
4. Recordkeeping and Reporting
Section 1010.663(b)(4) of the final rule clarifies that the rule
does not impose any reporting requirement upon any covered financial
institution that is not otherwise required by applicable law or
regulation. A covered financial institution must, however, document its
compliance with the notification requirement described above.
V. Regulatory Impact Analysis
FinCEN has analyzed this final rule under Executive Orders 12866,
13563, and 14094, the Regulatory Flexibility Act,\18\ the Unfunded
Mandates Reform Act,\19\ and the Paperwork Reduction Act.\20\
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\18\ 5 U.S.C. 603.
\19\ 2 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
\20\ 44 U.S.C. 3507(a)(1)(D).
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As discussed above, the intended effects of the imposition of
special measure five to Al-Huda Bank are twofold. The rule is expected
to: (1) combat and deter money laundering in facilitation of terrorist
financing associated with Al-Huda Bank, and (2) prevent Al-Huda Bank
from using the U.S. financial system to enable its illicit finance
behavior. In the analysis below, FinCEN discusses the economic effects
that are expected to accompany adoption of the final rule and assess
such expectations in more granular detail. This discussion includes a
detailed explanation of certain ways FinCEN's conclusions may be
sensitive to methodological choices and underlying assumptions made in
drawing inferences from available data.
A. Executive Orders
Executive Orders 12866, 13563, and 14094 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 this final rule is not a significant
regulatory action under section 3(f) of Executive Order 12866, as
amended by Executive Order 14094. Accordingly, a regulatory impact
analysis is not required.
B. Regulatory Flexibility Act
When an agency issues a final rule, the Regulatory Flexibility Act
(RFA) requires the agency to ``prepare and make available for public
comment an initial regulatory flexibility analysis'' (IRFA) that will
``describe the impact of the proposed rule on small entities.'' \21\
However, Section 605 of the RFA allows an agency to certify a rule, in
lieu of preparing an analysis, if the final rule is not expected to
have a significant economic impact on a substantial number of small
entities. This final rule applies to all covered financial institutions
and affects a substantial number of small entities. However, for the
reasons described below, FinCEN assesses that these changes do not have
a significant economic impact on such entities.
---------------------------------------------------------------------------
\21\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------
In addition to prohibiting covered financial institutions from
opening or maintaining in the United States a correspondent account
for, or on behalf of, Al-Huda Bank, this final rule requires that
covered financial institutions take reasonable measures to detect use
of their correspondent accounts to process transactions involving Al-
Huda Bank. All U.S. persons, including U.S. financial institutions,
currently must comply with OFAC sanctions, and U.S. financial
institutions generally have suspicious activity reporting requirements
and systems in place to screen transactions to comply with OFAC
sanctions and section 311 special measures administered by FinCEN. The
systems that U.S. financial institutions have in place to comply with
these requirements can easily be modified to adapt to this final rule.
Thus, the special due diligence that is required under the final rule--
i.e., preventing the processing of transactions involving Al-Huda Bank
and the transmittal of notification to certain correspondent account
holders--does not impose a significant additional economic burden upon
small U.S. financial institutions. For these reasons, FinCEN certifies
that the requirements contained in this rulemaking do not have a
significant economic impact on a substantial number of small entities.
C. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 \22\
(Unfunded Mandates Reform Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that may result
in expenditure by the state, local, and tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any one
year, adjusted for inflation.\23\ If a budgetary impact statement is
required, section 202 of the Unfunded Mandates Reform Act also requires
an agency to identify and consider a reasonable number of
[[Page 55058]]
regulatory alternatives before promulgating a rule.\24\
---------------------------------------------------------------------------
\22\ 2 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
\23\ Id.
\24\ Id.
---------------------------------------------------------------------------
FinCEN has determined that this final rule will not result in
expenditures by state, local, and tribal governments, in the aggregate,
or by the private sector, of an annual $100 million or more, adjusted
for inflation ($184.7 million).\25\ Accordingly, FinCEN has not
prepared a budgetary impact statement or specifically addressed the
regulatory alternatives considered.
---------------------------------------------------------------------------
\25\ The Unfunded Mandates Reform Act requires an assessment of
mandates that will result in an annual expenditure of $100 million
or more, adjusted for inflation. The U.S. Bureau of Economic
Analysis reports the annual value of the gross domestic product
(GDP) deflator in the first quarter of 1995, the year of the
Unfunded Mandates Reform Act, as 66.452, and as 122.762 in the third
quarter of 2023, the most recent available. See U.S. Bureau of
Economic Analysis, ``Table 1.1.9. Implicit Price Deflators for Gross
Domestic Product'' (accessed Dec. 14, 2023) available at https://www.bea.gov/itable/. Thus, the inflation adjusted estimate for $100
million is 122.762/66.452 x 100 = $184.7 million.
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D. Paperwork Reduction Act
The recordkeeping and reporting requirements, referred to by the
Office of Management and Budget (OMB) as a collection of information,
contained in this final rule were submitted by FinCEN to the OMB for
review in accordance with the Paperwork Reduction Act of 1995 (PRA) and
were assigned OMB Control Number 1506-0079.\26\ Under the PRA, 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
control number assigned by the OMB.
---------------------------------------------------------------------------
\26\ 44 U.S.C. 3507(a)(1)(D).
---------------------------------------------------------------------------
The notification requirement in section 1010.663(b)(3)(i)(A) is
intended to aid cooperation from foreign correspondent account holders
in preventing transactions involving Al-Huda Bank from being processed
by the U.S. financial system. The information required to be maintained
by section 1010.663(b)(4)(i) will be used by federal agencies and
certain self-regulatory organizations to verify compliance by covered
financial institutions with the notification requirements of section
663(b)(3)(i)(A). The collection of information is mandatory.
Frequency: As required.
Description of Affected Financial Institutions: Banks, broker-
dealers in securities, futures commission merchants, introducing
brokers in commodities, and mutual funds.
Estimated Number of Affected Financial Institutions: Approximately
15,000.\27\
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\27\ This estimate is informed by public and non-public data
sources regarding both an expected maximum number of entities that
may be affected and the number of active, or currently reporting,
registered financial institutions.
Table 1--Estimates of Affected Financial Institutions by Type
------------------------------------------------------------------------
Number of
Financial institution type entities
------------------------------------------------------------------------
Banks \28\.................................................. \29\ 9,209
Broker-Dealers in securities \30\........................... \31\ 3,477
Mutual Funds \32\........................................... \33\ 1,495
Futures Commission Merchants \34\........................... \35\ 62
Introducing Brokers in Commodities \36\..................... \37\ 937
------------------------------------------------------------------------
Estimated Average Annual Burden in Hours per Affected Financial
Institution: The estimated average annual burden associated with the
collection of information in this final rule is one hour per affected
financial institution.
---------------------------------------------------------------------------
\28\ See 31 CFR 1010.605(e)(1)(i).
\29\ Bank data is as of December 14, 2023, from Federal Deposit
Insurance Corporation BankFind. See Federal Deposit Insurance
Corporation, BankFind, available at https://banks.data.fdic.gov/bankfind-suite/bankfind. Credit union data is as of December 31,
2023, from the National Credit Union Administration Quarterly Data
Summary Reports. See National Credit Union Administration, Quarterly
Data Summary Reports, available at https://ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-data-summary-reports.
\30\ 31 CFR 1010.605(e)(1)(ii).
\31\ According to the Securities and Exchange Commission (SEC),
there are 3,477 broker-dealers in securities as of December 2023.
See SEC, Company Information About Active Broker-Dealers, available
at https://www.sec.gov/help/foiadocsbdfoia.
\32\ 31 CFR 1010.605(e)(1)(iv).
\33\ According to the SEC, as of the third quarter of 2023,
there are 1,495 open-end registered investment companies that report
on Form N-CEN. See SEC, Form N-CEN Data Sets, available at https://www.sec.gov/dera/data/form-ncen-data-sets.
\34\ 31 CFR 1010.605(e)(1)(iii).
\35\ According to the Commodity Futures Trading Commission
(CFTC), there are 62 futures commission merchants as of October 31,
2023. See CFTC, Financial Data for FCMs, available at https://www.cftc.gov/MarketReports/financialfcmdata/index.htm.
\36\ 31 CFR 1010.605(e)(1)(iii).
\37\ According to National Futures Association, there are 937
introducing brokers in commodities as of November 30, 2023.
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Estimated Total Annual Burden: Approximately 15,000 hours.
VI. Regulatory Text
List of Subjects in 31 CFR Part 1010
Administrative practice and procedure, Banks, Banking, Brokers,
Crime, Foreign banking, Terrorism.
Authority and Issuance
For the reasons set forth in the preamble, 31 CFR part 1010 is
amended as follows:
PART 1010--GENERAL PROVISIONS
0
1. The authority citation for part 1010 continues to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314,
5316-5336; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec.
2006, Pub. L. 114-41, 129 Stat. 458-459; sec. 701 Pub. L. 114-74,
129 Stat. 599; sec. 6403, Pub. L. 116-283, 134 Stat. 3388.
0
2. Add Sec. 1010.663 to read as follows:
Sec. 1010.663 Special measures regarding Al-Huda Bank.
(a) Definitions. For purposes of this section, the following terms
have the following meanings.
(1) Al-Huda Bank. The term ``Al-Huda Bank'' means all subsidiaries,
branches, and offices of Al-Huda Bank operating as a bank in any
jurisdiction.
(2) Correspondent account. The term ``correspondent account'' has
the same meaning as provided in Sec. 1010.605(c)(1)(ii).
(3) Covered financial institution. The term ``covered financial
institution'' has the same meaning as provided in Sec. 1010.605(e)(1).
(4) Foreign banking institution. The term ``foreign banking
institution'' means a bank organized under foreign law, or an agency,
branch, or office located outside the United States of a bank. The term
does not include an agent, agency, branch, or office within the United
States of a bank organized under foreign law.
(5) Subsidiary. The term ``subsidiary'' means a company of which
more than 50 percent of the voting stock or analogous equity interest
is owned by another company.
(b) Prohibition on accounts and due diligence requirements for
covered financial institutions--(1) Prohibition on opening or
maintaining correspondent accounts for Al-Huda Bank. A covered
financial institution shall not open or maintain in the United States a
correspondent account for, or on behalf of, Al-Huda Bank.
(2) Prohibition on processing transactions involving Al-Huda Bank.
A covered financial institution shall take reasonable steps not to
process a transaction for the correspondent account in the United
States of a foreign banking institution if such a transaction involves
Al-Huda Bank.
(3) Special due diligence of correspondent accounts to prohibit
transactions. (i) A covered financial institution shall apply special
due diligence to its foreign correspondent accounts that is reasonably
designed to guard against their use to process transactions involving
Al-Huda Bank. At a minimum, that special due diligence must include:
[[Page 55059]]
(A) Notifying those foreign correspondent account holders that the
covered financial institution knows or has reason to believe provide
services to Al-Huda Bank that such correspondents may not provide Al-
Huda Bank with access to the correspondent account maintained at the
covered financial institution; and
(B) Taking reasonable steps to identify any use of its foreign
correspondent accounts by Al-Huda Bank, to the extent that such 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
reasonably must adopt to guard against the use of its foreign
correspondent accounts to process transactions involving Al-Huda Bank.
(iii) A covered financial institution that knows or has reason to
believe that a foreign bank's correspondent account has been or is
being used to process transactions involving Al-Huda Bank shall take
all appropriate steps to further investigate and prevent such access,
including the notification of its correspondent account holder under
paragraph (b)(3)(i)(A) of this section and, where necessary,
termination of the correspondent account.
(4) Recordkeeping and reporting. (i) A covered financial
institution is required to document its compliance with the
notification requirement set forth in paragraph (b)(3)(i)(A) of this
section.
(ii) Nothing in this paragraph (b) shall require a covered
financial institution to report any information not otherwise required
to be reported by law or regulation.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-14415 Filed 7-2-24; 8:45 am]
BILLING CODE 4810-02-P