Federal Register / Vol. 69, No. 163 / Tuesday, August 24, 2004 / Proposed Rules 51979 (3) Covered financial institution has to document its compliance with the include the agency name and the the same meaning as provided in notice requirement set forth in Regulatory Information Number (RIN) § 103.175(f)(2) and also includes: paragraph (b)(2)(i)(A) of this section. for this proposed rulemaking. All (i) A futures commission merchant or (ii) Nothing in this section shall comments received will be posted an introducing broker registered, or require a covered financial institution to without change to http:// required to register, with the report any information not otherwise www.fincen.gov, including any personal Commodity Futures Trading required to be reported by law or information provided. Comments may Commission under the Commodity regulation. be inspected at FinCEN between 10 a.m. Exchange Act (7 U.S.C. 1 et seq.); and Dated: August 18, 2004. and 4 p.m., in the FinCEN reading room (ii) An investment company (as in Washington, DC. Persons wishing to William J. Fox, defined in section 3 of the Investment inspect the comments submitted must Company Act of 1940 (15 U.S.C. 80a–5)) Director, Financial Crimes Enforcement request an appointment by telephoning Network. that is an open-end company (as defined (202) 354–6400 (not a toll-free number). [FR Doc. 04–19266 Filed 8–23–04; 8:45 am] in section 5 of the Investment Company FOR FURTHER INFORMATION CONTACT: Act (15 U.S.C. 80a–5)) and that is BILLING CODE 4810–02–P Office of Regulatory Programs, FinCEN, registered, or required to register, with at (202) 354–6400 or Office of Chief the Securities and Exchange DEPARTMENT OF THE TREASURY Counsel, FinCEN, at (703) 905–3590 Commission under section 8 of the (not toll-free numbers). Investment Company Act (15 U.S.C. 31 CFR Part 103 SUPPLEMENTARY INFORMATION: 80a–8). (4) Subsidiary means a company of RIN 1506–AA65 I. Background which more than 50 percent of the A. Statutory Provisions voting stock or analogous equity interest Financial Crimes Enforcement is owned by another company. Network; Amendment to the Bank On October 26, 2001, the President (b) Requirements for covered financial Secrecy Act Regulations—Imposition signed into law the Uniting and institutions—(1) Prohibition on direct of Special Measure Against First Strengthening America by Providing use of correspondent accounts. A Merchant Bank OSH Ltd, Including Its Appropriate Tools Required to Intercept covered financial institution shall Subsidiaries, FMB Finance Ltd, First and Obstruct Terrorism (USA PATRIOT terminate any correspondent account Merchant International Inc, First Act) Act of 2001 (the USA Patriot Act), that is established, maintained, Merchant Finance Ltd, and First Pub. L. 107–56. Title III of the USA administered, or managed in the United Merchant Trust Ltd, as a Financial Patriot Act amends the anti-money States for, or on behalf of, Infobank. Institution of Primary Money laundering provisions of the Bank (2) Special due diligence of Laundering Concern Secrecy Act (BSA), codified at 12 U.S.C. correspondent accounts to prohibit 1829b, 12 U.S.C. 1951–1959, and 31 AGENCY: Financial Crimes Enforcement U.S.C. 5311–5314, 5316–5332, to indirect use. (i) A covered financial Network (FinCEN), Treasury. institution shall apply special due promote the prevention, detection, and ACTION: Notice of proposed rulemaking. diligence to its correspondent accounts prosecution of international money laundering and the financing of that is reasonably designed to guard SUMMARY: FinCEN is issuing this notice terrorism. Regulations implementing the against their indirect use by Infobank. of proposed rulemaking to impose a BSA appear at 31 CFR Part 103. The At a minimum, that special due special measure against First Merchant authority of the Secretary of the diligence must include: Bank OSH Ltd as a financial institution Treasury (Secretary) to administer the (A) Notifying correspondent account of primary money laundering concern, BSA and its implementing regulations holders that they may not provide pursuant to the authority contained in has been delegated to the Director of Infobank with access to the 31 U.S.C. 5318A of the Bank Secrecy FinCEN. correspondent account maintained at Act. the covered financial institution; and Section 311 of the USA Patriot Act (B) Taking reasonable steps to identify DATES: Written comments on the notice (section 311) added section 5318A to any indirect use of its correspondent of proposed rulemaking must be the BSA, granting the Secretary the accounts by Infobank, to the extent that submitted on or before September 23, authority, upon finding that reasonable such indirect use can be determined 2004. grounds exist for concluding that a from transactional records maintained ADDRESSES: You may submit comments, foreign jurisdiction, institution, class of in the covered financial institution’s identified by RIN 1506–AA65, by any of transactions, or type of account is of normal course of business. the following methods: ‘‘primary money laundering concern,’’ (ii) A covered financial institution • Federal e-rulemaking portal: http:// to require domestic financial shall take a risk-based approach when www.regulations.gov. Follow the institutions and financial agencies to deciding what, if any, additional due instructions for submitting comments. take certain ‘‘special measures’’ against diligence measures it should adopt to • E-mail: the primary money laundering concern. guard against the indirect use of its [email protected]. Include Section 311 identifies factors for the correspondent accounts by Infobank. RIN 1506–AA65 in the subject line of Secretary to consider and Federal (iii) A covered financial institution the message. agencies to consult before the Secretary that obtains knowledge that a • Mail: FinCEN, P.O. Box 39, Vienna, may find that reasonable grounds exist correspondent account is being used by VA 22183. Include RIN 1506–AA65 in for concluding that a jurisdiction, the foreign bank to provide indirect the body of the text. institution, or transaction is of primary access to Infobank, shall take all Instructions: It is preferable for money laundering concern. The statute appropriate steps to block such indirect comments to be submitted by electronic also provides similar procedures, i.e., access, including, where necessary, mail because paper mail in the factors and consultation requirements, terminating the correspondent account. Washington, DC, area may be delayed. for selecting the imposition of specific (3) Recordkeeping and reporting. (i) A Please submit comments by one method special measures against the primary covered financial institution is required only. All submissions received must money laundering concern. VerDate jul<14>2003 10:59 Aug 23, 2004 Jkt 203001 PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 E:\FR\FM\24AUP1.SGM 24AUP1 51980 Federal Register / Vol. 69, No. 163 / Tuesday, August 24, 2004 / Proposed Rules Taken as a whole, section 311 the imposition of special measures, the financial institution of primary money provides the Secretary with a range of Secretary follows procedures similar to laundering concern. This special options that can be adapted to target those for finding a foreign financial measure may be imposed only through specific money laundering and terrorist institution to be of primary money the issuance of a regulation. financing concerns most effectively. laundering concern, but performs Cyprus was divided in 1974 when a These options give the Secretary the additional consultations and considers coup d’etat directed from Greece authority to bring additional and useful additional factors. Section 311 requires induced the Turkish military to pressure on those jurisdictions and the Secretary to consult with other intervene. Since then, the southern part institutions that pose money laundering appropriate Federal agencies and of the country has been under the threats. Through the imposition of parties 2 and to consider the following control of the Government of the various special measures, the Secretary specific factors: Republic of Cyprus. The northern part is can gain more information about the • Whether similar action has been or controlled by a Turkish Cypriot concerned jurisdictions, institutions, is being taken by other nations or administration that in 1983 proclaimed transactions, and accounts; monitor multilateral groups; itself the ‘‘Turkish Republic of Northern more effectively the respective • Whether the imposition of any Cyprus’’ (‘‘TRNC’’).4 Turkey is the only jurisdictions, institutions, transactions, particular special measure would create country that recognizes the ‘‘TRNC.’’ and accounts; and/or protect U.S. a significant competitive disadvantage, The ‘‘TRNC’’ has a sizeable offshore financial institutions from involvement including any undue cost or burden sector that is not subject to effective with jurisdictions, institutions, associated with compliance, for anti-money laundering regulation. The transactions, or accounts that pose a financial institutions organized or offshore sector consists of 33 banks and money laundering concern. Before licensed in the United States; approximately 54 international business • making a finding that reasonable The extent to which the action or companies. Under Turkish Cypriot law, grounds exist for concluding that a the timing of the action would have a the offshore banks may not conduct foreign financial institution is of significant adverse systemic