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Home , November 28

66708 Federal Register / Vol. 68, No. 229 / Friday, 28, 2003 / Rules and Regulations

Background transmittal order. This document further to determine whether to remove, The temporary regulations that are the explains that FinCEN is revoking prior modify, or make permanent the subject of these corrections are under guidance regarding the meaning of the Exception. term ‘‘address’’, eliminating the need to section 448 of the Internal Revenue II. Terms of CIF Exception Code. utilize the conditional exception for transmittal orders lacking a transmittor’s FinCEN promulgated the Travel Rule Need for Correction street address. in 1995. The Travel Rule requires As published, this temporary DATES: Effective 2, 2003. financial institutions to include certain regulation (TD 9090) contain errors that FOR FURTHER INFORMATION CONTACT: Don information in transmittal orders prove to be misleading and are in Carbaugh, Office of Regulatory relating to transmittals of funds of need of clarification. Programs, FinCEN, (202) 354–6400; and $3,000 or more, which must ‘‘travel’’ with the order throughout the funds Correction of Publication Al Zarate, Office of Chief Counsel, FinCEN, at (703) 905–3590 (not toll-free transmittal sequence. Among these Accordingly, the publication of numbers). requirements is that each transmittor’s temporary regulations (TD 9090), which SUPPLEMENTARY INFORMATION: financial institution and intermediary were the subject of FR Doc. 03–22458, financial institution include in a is corrected as follows: I. Background transmittal order the transmittor’s name 1. On page 52504, column 1, § 1.448– In 1998, FinCEN granted a conditional and address. See 31 CFR 103.33(g)(1)(i)– 2T(f)(c) T3Example 4, the sixth entry in exception (the Customer Information (ii) and (g)(2)(i)–(ii). Subsequently, the table is corrected to read as follows: File (CIF) Exception) to the strict financial institutions represented to operation of 31 CFR 103.33(g) (the FinCEN that their ability to comply with Total ac- Bad debts Travel Rule). See FinCEN Issuance the Travel Rule at all depended on their Taxable year counts re­ adjusted for ability to use their automated customer ceivable recoveries 98–1, 63 FR 3640 ( 26, 1998). The Travel Rule requires a financial information files, known as CIFs. * * * * * institution to include certain Although an originating institution 2002 ...... 90,000 16,800 information in transmittal orders always maintains the originating * * * * * relating to transmittals of funds of customer’s true name and address, the $3,000 or more. The CIF Exception CIFs were sometimes programmed with 2. On page 52504, column 1, § 1.448– addressed computer programming coded or nominee names and addresses 2T(f)(c), Example 4 (ii), third line, the problems in the banking and securities (or post office boxes). The language ‘‘Assume that $49,300 of the industries by relaxing the Travel Rule’s reprogramming tasks involved in total $80,000 of’’ is corrected to read requirement that a customer’s true name changing the CIFs were represented to ‘‘Assume that $49,300 of the total and address be included in a funds be a significant barrier to compliance $90,000 of’’. transmittal order, so long as alternate with the Travel Rule. In light of these burdens, and in the interest of obtaining Cynthia E. Grigsby, steps, described in FinCEN Issuance 98– 1 and designed to prevent avoidance of prompt compliance, FinCEN Acting Chief, Publications and Regulations promulgated the conditional exception. Branch, Legal Processing Division, Associate the Travel Rule, were satisfied. By its Chief Counsel, (Procedure and terms, the CIF Exception to the Travel The conditional exception provides Administration). Rule was to expire on , 1999; that a financial institution may satisfy [FR Doc. 03–29727 Filed 11–26–03; 8:45 am] however, in light of programming the requirements of 31 CFR 103.33(g) BILLING CODE 4830–01–P burdens associated with year 2000 that a customer’s true name and address compliance issues, FinCEN extended be included in a transmittal order, only the CIF Exception so that it would upon satisfaction of the following DEPARTMENT OF THE TREASURY expire on May 31, 2001. See FinCEN conditions: Issuance 99–1, 64 FR 41041 ( 29, (1) The CIFs are not specifically 31 CFR Part 103 1999). On , 2001, after first altered for the particular transmittal of soliciting input from the law funds in question; Notice of Expiration of Conditional enforcement community for its views on (2) The CIFs are generally Exception to Bank Secrecy Act any law enforcement burdens caused by programmed and used by the institution Regulations Relating to Orders for the CIF Exception, FinCEN again for customer communications, not Transmittals of Funds by Financial extended the CIF Exception so that it simply for transmittal of funds Institutions would expire on May 31, 2003. See transactions, and are programmed to AGENCY: Financial Crimes Enforcement FinCEN Issuance 2001–1, 66 FR 32746 generate other than true name and street Network (FinCEN), Treasury. ( 18, 2001). On 7, 2003, address information; ACTION: Notice of expiration of FinCEN published a Notice of intent to (3) The institution itself knows and conditional exception following permit the CIF exception to expire on can associate the CIF information used extension. May 31, 2003. See 68 FR 10965 (Notice in the funds transmittal order with the of Intent). The Notice of Intent solicited true name and street address of the SUMMARY: FinCEN is giving notice that comment on a number of issues relating transmittor of the order; on , 2004, a conditional exception to the operation of the CIF Exception. (4) The transmittal order includes a to a Bank Secrecy Act (BSA) On , 2003, FinCEN published a question mark symbol immediately requirement will permanently expire. notice that again extended the CIF following any designation of the Upon expiration of that exception, Exception so that it would expire on transmittor other than by a true name on financial institutions will no longer be , 2003. See FinCEN Issuance the order; able to comply with the terms of that 2003–1, 68 FR 26996. The purpose of (5) Any currency transaction report or BSA requirement by using coded this most recent extension was to allow suspicious activity report by the information or pseudonyms for the time for FinCEN to conduct a study on institution with respect to the funds name of a customer in a funds the operation of the CIF Exception, and transmittal contains the true name and

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address information for the transmittor Based on its factfinding and input overwhelmingly outweighed by the and plainly associates the report with from the Subcommittee, FinCEN has potential harm resulting from an the particular funds transmittal in made the following determinations. intermediary or receiving financial question. First, there is a powerful law institution not being able to determine The conditional exception further enforcement interest, particularly in whether it has records related to a provides that it has no application to light of the tragic events of 9/11, in government target. Weighed against the any funds transmittals for whose ensuring that a financial institution can small number of clients for which the processing an institution does not identify funds transfers conducted by a CIF Exception is used, the law automatically rely on preprogrammed terrorist suspect listed in a subpoena or enforcement interests predominate. and prespecified CIF name and address other authorized search request. The use FinCEN wishes to clarify that, although information. FinCEN’s release of coded names and pseudonyms the Travel Rule does not permit the use promulgating the CIF Exception further effectively prevents an intermediary or of coded names or pseudonyms, the informed financial institutions that any a receiving financial institution from Rule does allow the use of abbreviated customer request for a nominee name in recognizing if it has records related to a names, names reflecting different a CIF should be carefully evaluated as government target. Second, to the extent accounts of a corporation (e.g., XYZ a potentially suspicious transaction. See that code names and pseudonyms are Payroll Account), as well as trade and 63 FR 3642. used in transmittal orders, such use assumed names of businesses (D/B/A) or III. Results of CIF Exception Study appears to be limited to select private the names of unincorporated divisions banking customers for confidentiality or departments of businesses. Since the issuance in May 2003 of the purposes. Because the use of coded FinCEN has reached a different Notice of Intent, FinCEN has studied the names and pseudonyms is so conclusion regarding the requirement to use of the CIF Exception by financial infrequent, there is not a substantial cost use a transmittor’s street address. The institutions, and the implications of involved in changing CIFs to reflect true term ‘‘address,’’ as it is used in 31 continuing the CIF exception for law names. Lastly, FinCEN understands that U.S.C. 103.33(g), is not defined. FinCEN enforcement investigations. The staff of mailing addresses, rather than street has previously issued guidance that has the Federal Reserve Bank of New York addresses, are widely used by financial been interpreted as not allowing the use assisted in this process by providing institutions in their CIFs. The banking of mailing addresses, including post FinCEN with a sample of funds transfer industry contends that changing CIFs to office boxes, in situations in which a activity using the Fedwire system, reflect street addresses would require street address is known to the which gave FinCEN a one-day snapshot banks to examine each address in a CIF, transmittor’s financial institution.3 of the frequency and type of use of the and compare it with other customer Because the use of the conditional CIF Exception. FinCEN also obtained information maintained by the bank, to exception for mailing addresses arises the views of law enforcement officials determine whether the CIF address was and financial institutions on this issue. from a prior interpretation, rather than a mailing address or street address. In the explicit language of section Ultimately, FinCEN formed a addition, a new field would have to be Subcommittee of the Bank Secrecy Act 103.33(g) itself, FinCEN believes this created in the CIF to accommodate issue is more appropriately addressed Advisory Group (BSAAG)1 to advise street address information, because FinCEN on the costs and benefits of through a regulatory interpretation, customers would still want their rather than through a temporary maintaining, terminating, or modifying statements and other information sent to the Exception. The Subcommittee exception. their mailing address. Finally, each FinCEN believes that the Travel Rule, consists of officials representing program that links the CIF to each of the FinCEN, the U.S. Department of the like all Bank Secrecy Act rules, should bank’s systems would have to be revised be read with some flexibility so as to Treasury, the U.S. Department of so that the correct address would be Justice, the federal bank and securities avoid the unnecessary burdening of used for each application. According to financial institutions. After weighing regulators, the banking industry, and the the banking industry, each of these steps securities industry. FinCEN presented the competing interests involved in would have to be accomplished largely whether to require street address the Subcommittee with the results of its on a manual basis, resulting in information FinCEN has determined factfinding and the Subcommittee also significant costs to financial that the Travel Rule should be read to reviewed information provided by the institutions. Law enforcement has allow the use of mailing addresses. New York Clearing House Association acknowledged that the conduct of a 2 Consequently, for purposes of 31 CFR L.L.C. reliable search is more dependent upon 103.33(g), the term address means either the use of true names than it is upon the 1 the transmittor’s street address, or the The BSAAG is an advisory group consisting of use of street addresses. representatives of government, financial transmittor’s address maintained in the Based upon these findings, and after institutions, and other interested persons. The financial institution’s automated weighing the competing interests BSAAG meets semiannually for the purpose of customer information file so long as the informing private sector representatives of the involved, FinCEN has determined that institution maintains the transmittor’s utility of Bank Secrecy Act reports and to advise the revocation of the CIF Exception is Secretary of the Treasury (or his designee) of address on file and such address appropriate. Regarding true name potential enhancements or modifications to existing information is retrievable upon request information, whatever legitimate Bank Secrecy Act requirements. by law enforcement.4 Under no 2 See Letter from Clearing House to Director James interest is served by the use of coded F. Sloan, FinCEN, 20, 2003. The members names or pseudonyms in shielding the of the Clearing House are: Bank of America, 3 See Clearing House Letter (citing FinCEN National Association; The Bank of New York; Bank identity of a few select clients is Advisory Issue 3, Funds Transfers: Questions and One, National Association; Citibank, N.A.; Deutsche Answers, June 1996 (Q&A no. 18). Bank Trust Company Americas; Fleet National the positions taken in the letter: 4 Consistent with the final rules issued under Bank; HSBC Bank USA; JPMorgan Chase Bank; American Express Bank, Ltd.; The Bank of Tokyo- section 326 of the USA Patriot Act (Pub. L. 107– LaSalle Bank National Association; Wachovia Bank, Mitsubishi, Ltd., New York Branch; and UBS AG, 56), an ‘‘address’’ for purposes of the Travel Rule, National Association; and Wells Fargo Bank, Stamford Branch. In addition, the American for an individual, is a residential or business street National Association. The following members of Banker’s Association participated in the drafting of address, or an Army Post Office Box or a Fleet Post The Clearing House’s affiliate, The Clearing House the October 20 letter and supports the views Office Box, or the residential or business street Interbank Payments Company L.L.C, also support expressed in it. Continued

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circumstances may a financial Dated: , 2003. Printing Office. The Web site address is institution use its own address or William F. Baity, http://www.access.gpo.gov/nara/ another financial institution’s address in Acting Director, Financial Crimes index.html. place of the customer’s address, Enforcement Network. I. Background notwithstanding any prior guidance that [FR Doc. 03–29617 Filed 11–26–03; 8:45 am] appeared to allow the use of a financial BILLING CODE 4810–02–P Section 4454 of the Balanced Budget institution’s address under limited Act of 1997 (BBA ’97), (Pub. L. 105–33, circumstances.5 To avoid any confusion enacted 5, 1997) provides for on the issue of addresses in transmittal DEPARTMENT OF HEALTH AND removal of all statutory and regulatory orders, FinCEN, by this notice, hereby HUMAN SERVICES references to Christian Science revokes Q&A no. 18 contained in sanatoria, and for coverage and payment FinCEN Advisory Issue 3 (June 1996) Centers for Medicare and Medicaid of inpatient hospital services and post­ and Q&A no.16 contained in FinCEN Services hospital extended care services Advisory Issue 7 (January 1997). furnished in qualified religious FinCEN anticipates issuing a new set of 42 CFR Parts 403, 489 and 498 nonmedical health care institutions frequently asked questions and answers [CMS–1909–F] (RNHCIs) under Medicare and as a State regarding the application of the funds Plan option under Medicaid. (We will transfer rules very shortly. Nothing in RIN 0938–AI93 refer to these services as ‘‘RNHCI this notice affects the obligation of a Medicare and Medicaid Programs; services.’’) The new amendments make financial institution to comply with any it possible for institutions other than other requirement imposed under the Religious Nonmedical Health Care Institutions and Advance Directives Christian Science facilities to qualify as Bank Secrecy Act, including a customer RNHCIs and to participate in Medicare identification program requirement AGENCY: Centers for Medicare and and Medicaid. imposed under Section 326 of the USA Medicaid Services (CMS), HHS. On , 1999, we published Patriot Act. ACTION: Final rule. an interim final rule in the Federal Finally, to give financial institutions Register (67 FR 67028) to implement the the opportunity to take those steps SUMMARY: This final rule implements BBA ’97 amendments that set forth the necessary to comply fully with the requirements under the Balanced requirements for coverage and payment Travel Rule, this Notice extends the Budget Act of 1997, which set forth for services furnished by RNHCIs, and conditional exception through July 1, requirements for the new Religious modified the rules regarding advance 2004. Nonmedical Health Care Institution directives. program and advance directives. This IV. FinCEN Issuance rule finalizes the Medicare requirements Specifically, the interim final rule for coverage and payment of services presented the methodologies under By virtue of the authority contained in furnished by religious nonmedical which we will pay RNHCIs, monitor the 31 CFR 103.55(a) and (b), which has health care institutions, the conditions Medicare expenditure level for RNHCI been delegated to the Director of of participation that these institutions secular services for any given federal FinCEN, the effective period of the CIF must meet before they can participate in fiscal year (FFY), and implement a Exception, as such Exception is set forth Medicare, and the methodology we will statutory ‘‘sunset’’ of the RNHCI benefit. (as part of FinCEN Issuance 98–1, 63 FR use to pay these institutions and In addition, the rule set forth the 3640 (, 1998)) under the monitor expenditures for services they conditions of participation that an heading ‘‘Grant of Exceptions’’ (63 FR furnish. This rule also finalizes the rules RNHCI must fully meet to participate in 3641) is extended so that CIF Exception governing States’ optional coverage of the Medicare program and revised will expire on July 1, 2004, for religious nonmedical health care Medicaid regulations to reflect statutory transmittals of funds initiated after that institution services under the Medicaid changes and made necessary date. program. Additionally, this final rule nomenclature and conforming changes. addresses comments we received on the Finally, the rule revised the regulations address of next of kin or another contact individual November 30, 1999, interim final rule pertaining to advance directives for all for individuals who do not have a residential or providers. business address. For a person other than an and also makes minor changes to clarify individual (such as a corporation, partnership, or our policy. Lastly, this rule incorporates II. Provisions of the Interim Final Rule trust), ‘‘address’’ is a principal place of business, a minor change to the requirements for local office, or other physical location. See 68 FR advance directives. Below we provide a brief summary of 25090 (, 2003) (Final Rules for Customer Identification Programs) issued jointly with the DATES: Effective date: These regulations the provisions we implemented in the Board of Governors of the Federal Reserve System, are effective , 2003. November 30, 1999, interim final rule to Office of the Comptroller of the Currency, Office of comply with requirements set forth by FOR FURTHER INFORMATION CONTACT: Thrift Supervision, Federal Deposit Insurance section 4454 of BBA ’97. Corporation, National Credit Union Administration, Jean-Marie Moore, (410) 786–3508 (for Commodity Futures Trading Commission, and general information, Medicare A. RNHCI Medicare Benefits, Conditions Securities and Exchange Commission. Note, however, that while the Section 326 rules apply coverage, and payment issues); of Participation, and Payment Nancy Archer, (410) 786–0596 (for only to new customers opening accounts on or after 1. Basis and Purpose (§ 403.700) , 2003, and exempt wire transfers from the Medicare conditions of participation definition of ‘‘account’’ for banks, the Travel Rule issues); and Linda Tavener, (410) applies to all transmittals of funds of $3,000 or This subpart implemented sections more, whether or not the transmittor is a customer 786–3838 (for Medicaid issues). 1821; 1861(e), (y) and (ss); 1869; and for purposes of the Section 326 rules. SUPPLEMENTARY INFORMATION: 1878 of the Social Security Act (the Act) 5 See FinCEN Advisory Issue 7, Funds ‘‘Travel’’ Copies: This Federal Register regarding Medicare payment for Regulations: Questions & Answers, January 1997 (Q&A no. 16) (stating that a financial institution document is available from the Federal inpatient hospital or post-hospital must not use its own address ‘‘except where it is Register online database through GPO extended care services furnished to the actual address of record of the person’’). access, a service of the U.S. Government eligible beneficiaries in RNHCIs.

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