67460 federal register /vol. 66, no. 249/friday, december ...67460 federal register/vol. 66, no....

67460 Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

1 Treasury issued the interim guidance afterconsultation with the Department of Justice, theOffice of the Comptroller of the Currency, the Officeof Thrift Supervision, the staff of the Board ofGovernors of the Federal Reserve System, theFederal Deposit Insurance Corporation, theCommodity Futures Trading Commission, and theSecurities and Exchange Commission. Treasury alsoconsulted with these agencies in preparing thisproposed rule.

DEPARTMENT OF THE TREASURY

31 CFR Part 104

RIN 1505–AA87

Departmental Offices; Counter MoneyLaundering Requirements—Correspondent Accounts for ForeignShell Banks; Recordkeeping andTermination of CorrespondentAccounts for Foreign Banks

AGENCY: Departmental Offices,Department of the Treasury.ACTION: Notice of proposed rulemaking.

SUMMARY: The Department of theTreasury (Treasury) is issuing aproposed rule to implement newprovisions of the Bank Secrecy Act that:Prohibit certain financial institutionsfrom providing correspondent accountsto foreign shell banks; require suchfinancial institutions to take reasonablesteps to ensure that correspondentaccounts provided to foreign banks arenot being used to indirectly providebanking services to foreign shell banks;require certain financial institutions thatprovide correspondent accounts toforeign banks to maintain records of theownership of such foreign banks andtheir agents in the United Statesdesignated for service of legal processfor records regarding the correspondentaccount; and require the termination ofcorrespondent accounts of foreign banksthat fail to turn over their accountrecords in response to a lawful requestof the Secretary of the Treasury(Secretary) or the Attorney General ofthe United States (Attorney General).DATES: Written comments on theproposed rule may be submitted to theTreasury Department on or beforeFebruary 11, 2002.ADDRESSES: Submit comments(preferably an original and three copies)to Office of the Assistant GeneralCounsel (Enforcement), Attention:Official Comment Record, Room 2000,Department of the Treasury, 1500Pennsylvania Ave., NW., Washington,DC 20220. Comments will be availablefor public inspection by appointmentonly at the Reading Room of theTreasury Library by advancearrangement. To make appointments,call (202) 622–0990 (not a toll-freenumber).

FOR FURTHER INFORMATION CONTACT: GaryW. Sutton, Senior Banking Counsel,Office of the Assistant General Counsel(Banking & Finance), (202) 622–1976, orWilliam Langford, Attorney-Advisor,Office of the Assistant General Counsel(Enforcement), (202) 622–1932 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

I. BackgroundOn October 26, 2001, the President

signed into law the Uniting andStrengthening America by ProvidingAppropriate Tools Required to Interceptand Obstruct Terrorism (USA PATRIOT)Act of 2001 (Public Law 107–56) (theAct). Title III of the Act makes a numberof amendments to the anti-moneylaundering provisions of the BankSecrecy Act (BSA), which is codified insubchapter II of chapter 53 of title 31,United States Code. These amendmentsare intended to make it easier toprevent, detect, and prosecuteinternational money laundering and thefinancing of terrorism. Two of theseprovisions become effective onDecember 26, 2001.

First, section 313(a) of the Act adds anew subsection (j) to 31 U.S.C. 5318 thatprohibits a ‘‘covered financialinstitution’’ from providing‘‘correspondent accounts’’ in the UnitedStates to foreign banks without aphysical presence in any country (shellbanks) and requires those financialinstitutions to take reasonable steps toensure that correspondent accountsprovided to foreign banks are not beingused to indirectly provide bankingservices to foreign shell banks. TheDepartment of the Treasury expects thatcovered financial institutions, asrequired by 31 U.S.C. 5318(j), willimmediately terminate allcorrespondent accounts with anyforeign bank that it knows to be a shellbank that is not a regulated affiliate asdefined in the proposed rule, and willterminate any correspondent accountwith a foreign bank that it knows isbeing used to indirectly provide bankingservices to a foreign shell bank.

Second, section 319(b) of the Act addsa new subsection (k) to 31 U.S.C. 5318that requires any covered financialinstitution that provides acorrespondent account to a foreign bankto maintain records of the foreign bank’sowners and agent in the United Statesdesignated to accept service of legalprocess for records regarding thecorrespondent account. Subsection (k)also authorizes the Secretary and theAttorney General to issue a summons orsubpoena to any foreign bank thatmaintains a correspondent account inthe United States and to request recordsrelating to such account, includingrecords maintained outside the UnitedStates relating to the deposit of fundsinto the foreign bank. If a foreign bankfails to comply with or contest thesummons or subpoena, any coveredfinancial institution with which theforeign bank maintains a correspondent

account must terminate the accountupon notice from the Secretary or theAttorney General.

Under the Act, Treasury is authorizedto interpret and administer theseprovisions. On November 20, 2001,Treasury issued Interim Guidance tobanks, savings associations, and otherdepository institutions to assist them inmeeting their compliance obligationsunder sections 5318(j) and (k).1 TheInterim Guidance, published in theFederal Register on November 27, 2001(66 FR 59342), included definitions ofkey terms in sections 5318(j) and (k) anda model certification that depositoryinstitutions may use as an interimmeans to assist them in meeting theirobligations related to dealing withforeign shell banks under section 5318(j)and recordkeeping under section5318(k). In issuing the InterimGuidance, Treasury stated that it may berelied upon by financial institutionsuntil superseded by regulations or asubsequent notice. Treasury now isproposing to codify the InterimGuidance, with some modifications, asregulatory standards, and proposingstandards applicable to securitiesbrokers and dealers.

When issuing the Interim Guidance,Treasury deferred addressing thecompliance obligations of securitiesbrokers and dealers with respect to therequirements of sections 5318(j) and (k),because the Act requires Treasury todefine by regulation, after consultationwith the Securities and ExchangeCommission (SEC), the types ofaccounts maintained by brokers anddealers for foreign banks that are similarto correspondent accounts thatdepository institutions maintain forforeign banks. As further discussedbelow, Treasury is proposing to applythe requirements of sections 5318(j) and(k)(3)(B)(i) to brokers and dealers in thesame manner that they apply to othercovered financial institutions.

The proposed rule also carriesforward from the Interim Guidance,with some modifications, the modelcertification that covered financialinstitutions may use to assist them inmeeting the requirements of sections5318(j) and (k). Use of the modelcertification (Appendix A to part 104)will provide a covered financialinstitution with a safe harbor for

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67461Federal Register / Vol. 66, No. 249 / Friday, December 28, 2001 / Proposed Rules

2 12 CFR 204.2(e).

purposes of compliance with thosesections. Treasury is proposing thatcovered financial institutions mustverify the information provided by aforeign bank, or otherwise relied uponfor purposes of sections 5318(j) and (k),every two years or at any time a coveredfinancial institution has reason tobelieve that the previously providedinformation is no longer accurate. Theproposed rule also includes a modelrecertification (Appendix B to part 104),which also will provide a coveredfinancial institution with a safe harborin connection with the verification ofpreviously provided information.

Proposed section 104.40(f) providesspecial rules and safe harbors for acovered financial institution that,consistent with the Interim Guidance orthis notice of proposed rulemaking,requests information from a foreignbank before the effective date of thefinal rule and receives such informationnot later than the date that is 90 daysafter the publication of the final rule.Such information will be deemed tosatisfy the covered financialinstitution’s obligations for purposes ofthe final rule until such time as theinformation must be verified.

As an administrative matter, theproposed rule also establishes a newpart 104 of title 31 of the Code ofFederal Regulations. Part 104 eventuallywill include other regulationsimplementing the anti-moneylaundering provisions of the Act forwhich Treasury is authorized orrequired to issue regulations. At thispoint, most of part 104 has beenreserved for these future regulations.

II. Description of the Proposed Rule

A. Limitations on CorrespondentAccounts for Foreign Shell Banks

Section 5318(j) provides that a‘‘covered financial institution’’ shall notestablish, maintain, administer, ormanage a ‘‘correspondent account’’ inthe United States for, or on behalf of, ashell bank that is not a regulatedaffiliate (as described below). Inaddition, a covered financial institutionmust take reasonable steps to ensurethat any correspondent accountestablished, maintained, administered,or managed by the covered financialinstitution in the United States for aforeign bank is not being used by thatforeign bank to indirectly providebanking services to a foreign shell bankthat is not a regulated affiliate.

1. What Is a Covered FinancialInstitution?

For purposes of section 5318(j), theterm ‘‘covered financial institution’’ is

defined as: (1) Any insured bank (asdefined in section 3(h) of the FederalDeposit Insurance Act (12 U.S.C.1813(h))); (2) a commercial bank or trustcompany; (3) a private banker; (4) anagency or branch of a foreign bank inthe United States; (4) a credit union; (5)a thrift institution; or (6) a broker ordealer registered with the SEC under theSecurities Exchange Act of 1934 (15U.S.C. 78a et seq.). See 31 U.S.C.5318(j)(1), 5312(a)(2). The proposed ruleincorporates this statutory definition.Covered financial institutions includeinsured banks organized in U.S.territories, Puerto Rico, Guam,American Samoa, and the VirginIslands, and corporations organizedunder section 25A of the FederalReserve Act (12 U.S.C. 611 et seq.).

2. What Is a Correspondent Account?Section 5318(j) applies to any

‘‘correspondent account’’ established,maintained, administered, or managedby the covered financial institution inthe United States for a foreign bank. Forpurposes of section 5318(j),‘‘correspondent account’’ is definedwith respect to banking institutions as‘‘an account established to receivedeposits from, make payments on behalfof a foreign financial institution, orhandle other financial transactionsrelated to such institution.’’ See 31U.S.C. 5318A(e)(1)(B). The Act alsodefines the term ‘‘account’’ as ‘‘a formalbanking or business relationshipestablished to provide regular services,dealings, and other financialtransactions [and] includes a demanddeposit, savings deposit, or othertransaction or asset account and a creditaccount or other extension of credit.’’See 31 U.S.C. 5318A(e)(1)(A).

Treasury, after consultation with theSEC, is required under the Act to definethe types of accounts that come withinthe definition of ‘‘correspondentaccount’’ for purposes of securitiesbrokers’ and dealers’ compliance withsection 5318(j). See 31 U.S.C.5318A(e)(2). In addition, Treasury mayfurther define the terms ‘‘correspondentaccount’’ and ‘‘account’’ as the Secretarydeems appropriate. See 31 U.S.C.5318A(e)(4). Treasury intends tomaintain parity in treatment betweenaccounts provided to foreign banks bybanks and broker-dealers, and to treatfunctionally equivalent accounts,whether maintained by banks or broker-dealers, in the same manner.

The statutory definition of‘‘correspondent account’’ is broadlyworded; it is not limited to anyparticular type of account. Theproposed rule incorporates the statutorydefinition of ‘‘correspondent account.’’

It includes, for example, any accountthat falls within the definition of‘‘transaction account’’ under RegulationD of the Board of Governors of theFederal Reserve System (FederalReserve).2 It also includes clearing andsettlement accounts (which may alsofall within the definition of ‘‘transactionaccount’’). Such accounts are typicallyused by foreign banks for remittance offunds in settlement of U.S. dollartransactions with parties other than theU.S. bank at which the account ismaintained. In addition, foreign banksmaintain fiduciary accounts with U.S.banks for the benefit of such foreignbanks or their customers, includingcustody and escrow accounts. U.S.banks also establish time depositaccounts for foreign banks that are usedby foreign banks primarily as fundingmechanisms, as well as money marketdeposit accounts (‘‘MMDAs’’) that sharelimited use for transactions processing.In addition, U.S. banks engage intransactions with foreign banks insecurities, derivatives, repurchaseagreements, foreign exchange, and otherinstruments. To the extent that thesetransactions involve an account, theywould be covered by the definition of‘‘correspondent account.’’

In light of the broad statutorydefinitions of ‘‘correspondent account’’and ‘‘account’’ for banking institutions,Treasury is proposing to apply the samedefinition for purposes of the types ofbroker-dealer accounts that are coveredby section 5318(j). Thus, under theproposed rule, brokers and dealers mustcomply with section 5318(j) withrespect to any account they provide inthe U.S. to a foreign bank that permitsthe foreign bank to engage in securitiestransactions, funds transfers, or otherfinancial transactions through thataccount. Such accounts would include,for example, the following: (1) Accountsto purchase, sell, lend or otherwise holdsecurities, either in a proprietaryaccount or an omnibus account fortrading on behalf of the foreign bank’scustomers on a fully disclosed or non-disclosed basis; (2) prime brokerageaccounts that consolidate trading doneat a number of firms; (3) accounts fortrading foreign currency; (4) variousforms of custody accounts for theforeign bank and its customers; (5) over-the-counter derivatives accounts; and(6) futures accounts to purchase futures,which would be maintained primarilyby broker-dealers that are duallyregistered as futures commissionmerchants.

Treasury requests comments on thebreadth of the definition of



‘‘correspondent account’’ as applied toaccounts maintained by depositoryinstitutions and brokers and dealers forforeign banks. Comments are requestedon the extent to which different types ofaccounts may be used to providefinancial services directly or indirectlyto foreign shell banks. Comments arerequested on the extent to whichdifferent types of accounts may be usedto facilitate money laundering, terroristfinancing, or other criminaltransactions, including the extent towhich different types of accounts maybe used to disguise the nature, location,source, ownership, or control of theproceeds of unlawful activity. Treasuryalso seeks comments on whetherparticular types of accounts pose solittle vulnerability to criminaltransactions as to merit exclusion fromthe broad definition of ‘‘correspondentaccount,’’ together with the reasonstherefor. Comments also are requestedon the adverse business implications forcovered financial institutions, if any, ofadopting a broad definition of‘‘correspondent account’’ for purposesof section 5318(j).

Covered financial institutions maythrough their foreign branches establish,maintain, administer, or managecorrespondent accounts for foreignbanks. Because these foreign brancheslegally are part of covered financialinstitutions, Treasury considers thesecorrespondent accounts to bemaintained in the United States forpurposes of section 5318(j). In addition,Treasury has broad authority under theAct to establish anti-money launderingstandards for U.S. financial institutionsand their foreign branches. See 31U.S.C. 5318(h). Therefore, the proposedrule applies to any correspondentaccounts provided by a foreign branchof a covered financial institution to aforeign bank. Treasury requestscomments on the extent to which suchaccounts are in fact established,maintained, administered or managed inthe United States, as well as whetherimposing this requirement on foreignbranches of covered financialinstitutions is commensurate with thesize, location, and activities of suchinstitutions.

3. What Is a Foreign Bank?The Act does not define ‘‘foreign

bank.’’ For purposes of the proposedrule, ‘‘foreign bank’’ is any organizationthat (1) Is organized under the laws ofa foreign country, (2) engages in thebusiness of banking, (3) is recognized asa bank by the bank supervisory ormonetary authority of the country of itsorganization or principal bankingoperations, (4) and receives deposits in

the regular course of its business. A‘‘foreign bank’’ also includes a branch ofa foreign bank located in a territory ofthe United States, Puerto Rico, Guam,American Samoa, or the Virgin Islands.A ‘‘foreign bank’’ does not include anagency or branch of a foreign banklocated in the United States or aninsured bank organized in a territory ofthe United States, Puerto Rico, Guam,American Samoa, or the Virgin Islands.Those entities are ‘‘covered financialinstitutions’’ under the statute. Inaddition, a foreign central bank orforeign monetary authority thatfunctions as a central bank is not a‘‘foreign bank.’’ Comments are requestedon whether the term ‘‘foreign bank’’should be defined more specifically.

4. What Is a Foreign Shell Bank?For purposes of section 5318(j), a

foreign shell bank is a foreign bankwithout a physical presence in anycountry. See 31 U.S.C. 5318(j)(1).‘‘Physical presence’’ means a place ofbusiness that is maintained by a foreignbank and is located at a fixed address,other than solely a post office box or anelectronic address, in a country inwhich the foreign bank is authorized toconduct banking activities, at whichlocation the foreign bank: (1) Employsone or more individuals on a full-timebasis; (2) maintains operating recordsrelated to its banking activities; and (3)is subject to inspection by the bankingauthority that licensed the foreign bankto conduct banking activities. See 31U.S.C. 5318(j)(4)(B).

5. What Is a Regulated Affiliate?The limitations on the direct and

indirect provision of correspondentaccounts to foreign shell banks do notapply to a foreign shell bank that is a‘‘regulated affiliate.’’ A regulatedaffiliate is a foreign shell bank that: (1)Is an affiliate of a depository institution,credit union, or foreign bank thatmaintains a physical presence in theUnited States or a foreign country, asapplicable; and (2) is subject tosupervision by a banking authority inthe country regulating such affiliateddepository institution, credit union, orforeign bank. An affiliate is a foreignbank that is controlled by or is undercommon control with a depositoryinstitution, credit union, or foreignbank. See 31 U.S.C. 5318(j)(3).

6. What Steps Must a Covered FinancialInstitution Take To Comply WithSection 5318(j)?

In order to comply with thelimitations on the direct and indirectprovision of correspondent accounts toforeign shell banks, a covered financial

institution must ensure that each foreignbank to which it provides acorrespondent account is not a shellbank, and take reasonable steps toensure that correspondent accountsprovided to such foreign banks are notbeing used to indirectly provide bankingservices to foreign shell banks. Althoughthe proposed rule does not prescribe themanner in which a covered financialinstitution must satisfy its obligationsunder section 5318(j), it does provide asafe harbor if a covered financialinstitution uses the model certificationsin Appendix A and Appendix B forthese purposes. A covered financialinstitution that does not obtain, from aforeign bank or otherwise, theinformation necessary to fulfill itsobligations under section 5318(j) withinthe prescribed time periods mustterminate its correspondent accountrelationship with the concerned foreignbank.

The Department of the Treasuryexpects that covered financialinstitutions, as required by 31 U.S.C.5318(j), will immediately terminate allcorrespondent accounts with anyforeign bank that it knows to be a shellbank that is not a regulated affiliate, andwill terminate any correspondentaccount with a foreign bank that itknows is being used to indirectlyprovide banking services to a foreignshell bank. Because some correspondentaccounts, at the time of termination,may contain open securities or futurespositions, a covered financial institutionmay exercise its commerciallyreasonable discretion in liquidatingsuch open positions (including, but notlimited to, following its ordinarypractices upon the default of a client).However, a covered financial institutionmust take reasonable steps to ensurethat an account that is in the process ofbeing terminated is not permitted toestablish new positions.

B. Recordkeeping and TerminationRequirements for CorrespondentAccounts of Foreign Banks

Under 31 U.S.C. 5318(k), as added bysection 319(b) of the Act, any coveredfinancial institution that maintains acorrespondent account in the UnitedStates for a foreign bank shall maintainrecords in the United States identifying:(1) the owner(s) of such foreign bank;and (2) the name and address of aperson (as defined in 31 CFR 103.11(z))who resides in the United States and isauthorized to accept service of legalprocess for records regarding thecorrespondent account.

Section 5318(k) authorizes theSecretary and the Attorney General toissue a summons or subpoena to any



3 The same family means parents, spouses,children, siblings, uncles, aunts, grandparents,grandchildren, first cousins, second cousins,stepchildren, stepsiblings, parents-in-law andspouses of any of the foregoing.

foreign bank that maintains acorrespondent account in the UnitedStates and request records related tosuch correspondent account, includingrecords maintained outside of theUnited States relating to the deposit offunds into the foreign bank. Thesummons or subpoena may be served onthe foreign bank in the United States ifthe foreign bank has a representative inthe United States, or in a foreigncountry pursuant to any mutual legalassistance treaty, multilateralagreement, or other request forinternational law enforcementassistance.

A covered financial institution mustterminate any correspondentrelationship with a foreign bank notlater than 10 business days after receiptof written notice from the Secretary orthe Attorney General (in each case, afterconsultation with the other) that theforeign bank has failed either: (1) tocomply with the summons or subpoenaissued; or (2) to initiate proceedings ina United States court contesting suchsummons or subpoena. See 31 U.S.C.5318(k)(3)(C).

If a covered financial institution failsto terminate the correspondentrelationship upon receiving notice fromthe Secretary or the Attorney General, itis subject to a civil penalty of up to$10,000 per day until the correspondentrelationship is so terminated. A coveredfinancial institution is not liable to anyperson in any court or arbitrationproceeding for terminating acorrespondent relationship inaccordance with section 5318(k).

1. What Is a Covered FinancialInstitution?

There is no statutory definition of‘‘covered financial institution’’ forpurposes of section 5318(k). For thefollowing reasons, Treasury believesthat ‘‘covered financial institution’’ insection 5318(k) should be read to havethe same meaning as the identical termin section 5318(j), which includesbrokers and dealers.

Both sections 5318(j) and (k) dealwith anti-money laundering effortsrelated to correspondent relationshipsbetween U.S. financial institutions andforeign banks. Congress expresslyincluded brokers and dealers in thecategory of ‘‘covered financialinstitutions’’ under section 5318(j) andrequired Treasury to identify the typesof accounts that brokers and dealersmaintain for foreign banks that aresimilar to correspondent accounts. Inaddition, Congress provided that thesame definition of ‘‘correspondentaccount’’ applies in both sections5318(j) and (k).

Excluding brokers and dealers fromthe category of ‘‘covered financialinstitutions’’ subject to therecordkeeping requirements andaccount termination safeguards undersection 5318(k) would be inconsistentwith the statutory scheme and wouldnot reflect a comprehensive approach toimplementing the Act’s anti-moneylaundering requirements. In addition,Treasury has broad authority under theAct to establish anti-money launderingstandards for securities brokers anddealers. See 31 U.S.C. 5318(h).Consequently, under the proposed rule,brokers and dealers are coveredfinancial institutions subject to section5318(k).

2. What Accounts Are Covered?Section 5318(k) applies to

‘‘correspondent accounts,’’ which hasthe same meaning as in section 5318(j),i.e., an account established to receivedeposits from, make payments on behalfof a foreign financial institution, orhandle other financial transactionsrelated to such institution. In light of theAct’s use of the same definition ofcorrespondent account in both sections5318(j) and (k), Treasury believes thatboth sections should be read ascoextensive in the types of accounts towhich they apply.

3. Who Is an Owner of a Foreign Bank?Section 5318(k) does not define

‘‘owner’’ for purposes of therequirement that a covered financialinstitution maintain records of theowners of foreign banks to which itprovides correspondent accounts.Treasury is proposing to define an‘‘owner’’ as any person who is a ‘‘largedirect owner,’’ an ‘‘indirect owner,’’ anda ‘‘reportable small direct owner.’’ Theproposed definition of each of theseterms is discussed below. For purposesof these definitions, ‘‘person’’ meansany individual, bank, corporation,partnership, limited liability company,or any other legal entity, except thatmembers of the same family 3 shall beconsidered one person, and each familymember who has an ownership interestin the foreign bank must be identified.‘‘Voting shares or other voting interests’’means shares or other interests thatentitle the holder to vote for or selectdirectors (or individuals exercisingsimilar functions).

The definition of ‘‘owner’’ appliesonly with respect to the provisions ofsection 5318(k), which are designed to

facilitate the service of legal process. Noinference may be drawn as to theapplicability of this definition to otherprovisions of the Act, including theenhanced due diligence requirements of31 U.S.C. 5318(i) (as added by section312 of the Act), which sets forthdifferent standards for reportingownership information.

Foreign banks that maintain U.S.branches or agencies are required by theFederal Reserve to file an Annual Report(FR Y–7), which lists the foreign bank’sagent for service of process in the U.S.and information on the ownership of theforeign bank. The current FR Y–7generally requires the reporting ofpersons who own, directly or indirectly,5 percent or more of any class of thevoting shares of a foreign bank. A U.S.branch or agency of a foreign bank orother covered financial institution mayuse the relevant portions of a current FRY–7 filed by the foreign bank to meet itsrecordkeeping obligations under section5318(k) with respect to a correspondentaccount the U.S. branch or agency orother covered financial institutionmaintains for the foreign bank.

The definition of ‘‘owner’’ in theproposed rule is intended to minimizereporting burdens by focusing on thosepersons who are likely to have theability to exert influence over theoperations of a foreign bank. Theproposed definition necessarily reflectsthe complexity of ownershiprelationships, including those that canbe used or structured to obscurecontrolling or influential owners of aforeign bank. The Departmentrecognizes that the reporting regime ofFR Y–7 is significantly simpler that theproposed definition, but believes that itwould be more burdensome for foreignbanks. Comments are specificallyrequested concerning whether theTreasury should use the ownershipcriteria of FR Y–7 in lieu of thedefinition of ‘‘owner’’ in the proposedrule.

a. Who Is a Small Direct Owner of aForeign Bank?

A ‘‘small direct owner’’ of a foreignbank is a person who owns, controls, orhas power to vote less than 25 percentof the voting shares or other votinginterests of the foreign bank. Theidentity of a small direct owner is notsubject to reporting unless such personis a ‘‘reportable small direct owner.’’

A ‘‘reportable small direct owner’’ is:(1) Each of two or more small directowners that in the aggregate own 25percent or more of any class of thevoting shares or other voting interests ofthe foreign bank and are majority-ownedby the same person, or by a chain of



majority-owned persons; or (2) each ofany one or more small direct ownersthat are majority-owned by anothersmall direct owner and in the aggregateall such small direct owners own 25percent or more of the voting shares orother voting interests of the foreignbank. In determining who is a‘‘reportable small direct owner,’’ a smalldirect owner that owns or controls lessthan 5 percent of the voting shares orother voting interests of the foreign bankneed not be taken into account.

b. Who Is a Large Direct Owner of aForeign Bank?

A ‘‘large direct owner’’ of a foreignbank is a person who: (1) Owns,controls, or has power to vote 25percent or more of any class of votingshares or other voting interests of theforeign bank; or (2) controls in anymanner the election of a majority of thedirectors (or individuals exercisingsimilar functions) of the foreign bank. Acovered financial institution mustobtain the identity of each large directowner of a foreign bank.

c. Who Is an Indirect Owner of a ForeignBank?

An indirect owner is any person inthe ownership chain of any large directowner or a reportable small directowner who is not majority-owned byanother person. In determining who isan ‘‘indirect owner,’’ a small directowner that owns or controls less than 5percent of the voting shares or othervoting interests of the foreign bank neednot be taken into account. A coveredfinancial institution must obtain theidentity of each indirect owner of aforeign bank.

For example, if any two or more smalldirect owners of a foreign bank (1) in theaggregate own, control, or have power tovote 25 percent or more of any class ofvoting securities or other votinginterests of the foreign bank, and (2) aremajority-owned by the same person, orby the same chain of majority-ownedpersons, the ‘‘indirect owner’’ is anyperson in the ownership chain of thosesmall direct owners who is not majority-owned by another person.

Similarly, if one or more small directowners of a foreign bank is majority-owned by another small direct ownerand in the aggregate all such smalldirect owners own, control, or havepower to vote 25 percent or more of anyclass of voting shares or other votinginterests of the foreign bank, the‘‘indirect owner’’ is (1) the small directowner that is the majority-owner of theother small direct owner(s), or (2) anyperson in the ownership chain of thesmall direct owner that is the majority-

owner of the other small direct owner(s)that is not majority-owned by anotherperson.

Examples of reportable owners.Example 1. FB–1 is a foreign bank. Voting

securities of FB–1 are owned by Person C (15percent), Person D (35 percent), Person E (10percent), Person F (20 percent), and PersonG (20 percent).

Persons C and G are both majority-ownedby Person X, which is majority-owned byPerson Y, which is majority-owned by PersonZ, which is not majority-owned by anotherperson.

Person D is majority-owned by Person V,which is majority-owned by Person W, whichis not majority-owned by another person.

Persons E and F are not owned by anotherperson.

Persons C, E, F, and G are small directowners because each owns less than 25percent of the voting securities of FB–1. Theidentities of Persons C and G are reportablesmall direct owners because: (1) In theaggregate they own more than 25 percent ofthe voting securities of FB–1; and (2) they aremajority-owned by the same indirect ownerZ. The identities of Persons E and F are notsubject to reporting.

Person D is a large direct owner because itowns 25 percent or more of the votingsecurities of FB–1. The identity of Person Dis subject to reporting.

Person W is an indirect owner because itis a majority-owner of Person V, which is amajority-owner of Person D. The identity ofPerson W is subject to reporting. The identityof Person V is not subject to reporting.

Person Z is an indirect owner because it isa majority-owner of Person Y, which is amajority-owner of Person X, which is amajority-owner of Persons C and G, whichare small direct owners that in the aggregateown 25 percent or more of the votingsecurities of FB–1. The identity of Person Zis subject to reporting. The identities ofPersons Y and X are not subject to reporting.

Example 2. FB–2 is a foreign bank. Votingsecurities of FB–2 are owned by Person K (20percent) and Person L (10 percent). Person Kis majority-owned by Person L. Person L isnot majority-owned by another person.Persons K and L are small direct owners.However, Person L is also an indirect ownersubject to reporting because: (1) Person L isa majority-owner of Person K; and (2) in theaggregate Persons K and L own more than 25percent of the voting securities of FB–2.Person K is a reportable small direct ownerfor the same reason.

Example 3. Same facts as in Example 2,except that Person L is majority-owned byPerson M, who is majority-owned by PersonN, who is not majority-owned by anotherperson. In this example, Person N is anindirect owner subject to reporting becausePerson N is the person in the ownershipchain of small direct owner Person L and isnot majority-owned by another person.Persons K and L are reportable small directowners. The identity of Person M is notsubject to reporting.

Example 4. FB–3 is a foreign bank. 30percent of the voting securities of FB–2 areowned by 6 members of the same family (asdefined in the proposed rule) in amounts

ranging from 2 percent to 10 percent. The 6family members are considered to be oneperson who is a large direct owner of thebank. The identity of each of the 6 familymembers is subject to reporting. Other familymembers who do not own voting securitiesin FB–3 are not subject to reporting.

4. What Steps Must a Covered FinancialInstitution Take To Comply WithSection 5318(k)(3)(B)(i)?

Although the proposed rule does notprescribe the manner in which acovered financial institution mustobtain information concerning theidentity of owners of foreign banks andtheir agents in the U.S. authorized toreceive service of legal process, it doesprovide a safe harbor if a coveredfinancial institution uses the modelcertifications in Appendix A andAppendix B for these purposes. Acovered financial institution that doesnot obtain, from a foreign bank orotherwise, the information necessary tofulfill its obligations under section5318(k)(3)(B)(i) must terminate itscorrespondent account relationshipwith the concerned foreign bank.

III. Submission of Comments

All comments will be available forpublic inspection and copying, and nomaterial in any comments, including thename of any person submittingcomments, will be recognized asconfidential. Material not intended to bedisclosed to the public should not besubmitted.

IV. Regulatory Flexibility Act

It is hereby certified that thisproposed rule is not likely to have asignificant economic impact on asubstantial number of small entities.Covered financial institutions that aresubject to the recordkeepingrequirements in the statute and theproposed rule tend to be largeinstitutions. Moreover, any economicconsequences that might result from theprohibition on dealings with foreignshell banks, or from the failure of aforeign bank to provide the informationnecessary for a covered financialinstitution to fulfill its recordkeepingobligations, flow directly from theunderlying statute. Accordingly, theanalysis provisions of the RegulatoryFlexibility Act (5 U.S.C. 601 et seq.) donot apply.

V. Executive Order 12866

This proposed rule is not a‘‘significant regulatory action’’ asdefined in Executive Order 12866.Accordingly, a regulatory assessment isnot required.



VI. Paperwork Reduction ActThe collections of information

contained in Appendix A to proposed31 CFR part 104 rulemaking have beenpreviously reviewed and approved bythe Office of Management and Budget(OMB) in accordance with therequirements of the PaperworkReduction Act (44 U.S.C. 3501 et seq.),and assigned OMB Control Number1505–0184.

The collection of informationcontained in Appendix B to proposed31 CFR part 104 and the recordkeepingrequirement in proposed 31 CFR104.40(e) have been submitted to OMBfor review in accordance with therequirements of the PaperworkReduction Act. An agency may notconduct or sponsor, and a person is notrequired to respond to, a collection ofinformation unless it displays acurrently valid OMB control number.

Comments concerning the collectionof information should be directed toOMB, Attention: Desk Officer for theDepartment of the Treasury, Office ofInformation and Regulatory Affairs,New Executive Office Building,Washington, DC 20503, and to theDepartment of the Treasury at theaddress previously specified in theADDRESSES portion of this preamble.Any such comments should besubmitted not later than February 26,2002.

Comments are specifically requestedconcerning:

Whether the collection of informationis necessary for the proper performanceof the functions of the Department of theTreasury, including whether theinformation will have practical utility;

The accuracy of the estimated burdenassociated with the collection ofinformation (see below), which wasdeveloped in part on the basis ofdiscussions with industryrepresentatives. The Department isparticularly interested in commentsconcerning the number of coveredfinancial institutions and the number offoreign banks for which correspondentaccounts are maintained.

How to enhance the quality, utility,and clarity of the information to becollected;

How to minimize the burden ofcomplying with the collection ofinformation, including the applicationof automated collection techniques orother forms of information technology;and

Estimates of capital or start-up costsand costs of operation, maintenance,and purchase of services to provideinformation.

This information will enable financialinstitutions to comply with the

requirements of sections 31 U.S.C.5318(j) and (k), and will be used byFederal agencies to verify complianceby covered financial institutions withthese provisions. The respondents areforeign banks that establish or maintaincorrespondent accounts with U.S.financial institutions. The reporting ofthis information by foreign bankinginstitutions is voluntary; howeverfailure to provide the information maypreclude the establishment or thecontinuation of correspondent accountswith U.S. financial institutions. Therecordkeepers are covered financialinstitutions. The recordkeepingrequirement concerning owners andagents of foreign banks is required bystatute.

Estimated total annual reportingburden for Appendix B: 45,000 hours.

Estimated number of respondents(foreign banks): 9,000.

Estimated average annual reportingburden per respondent: 5 hours.

Estimated frequency of responses:Once every 2 years.

Estimated total annual recordkeepingburden: 18,000 hours.

Estimated number of recordkeepers(covered financial institutions): 2000.

Estimated average annualrecordkeeping burden per recordkeeper:9 hours.

List of Subjects in 31 CFR Part 104

Banks, banking, Brokers, Countermoney laundering, Counter-terrorism,Currency, Foreign banking, Reportingand recordkeeping requirements.

Dated: December 19, 2001.David D. Aufhauser,General Counsel.

Authority and Issuance

For the reasons set forth in thepreamble, the Treasury is proposing toamend 31 CFR subtitle B, chapter I byadding part 104 to read as follows:

PART 104—COUNTER MONEYLAUNDERING REQUIREMENTS

Subpart A—Definitions

Sec.104.10 Definitions.

Subpart B—Anti Money LaunderingPrograms [Reserved]

Subpart C—Special Due Diligence forCorrespondent Accounts and PrivateBanking Accounts

104.40 Records concerning owners offoreign banks and agents designated toreceive service of legal process;prohibition on correspondent accountsfor foreign shell banks.

104.50 [Reserved]

Subpart D—Law Enforcement Access toForeign Bank Records

104.60 Summons or subpoena of foreignbank records.

104.70 Termination of correspondentrelationship.

Subpart E—Cooperative Efforts to DeterMoney Laundering [Reserved]

Appendix A to Part 104—CertificationRegarding Correspondent Accounts

Appendix B to Part 104—RecertificationRegarding Correspondent Accounts

Authority: 31 U.S.C. 5318, 5318A; title III,secs 311, 313, 319, 352, Pub. L. 107–56, 115Stat. 298, 306, 311, 322.

Subpart A—Definitions

§ 104.10 Definitions.For purposes of subparts C and D of

this part:(a) Attorney General means the

Attorney General of the United States.(b) Correspondent account means an

account established to receive depositsfrom, make payments on behalf of aforeign bank, or handle other financialtransactions related to such bank.

(c) Covered financial institutionmeans:

(1) An insured bank (as defined insection 3(h) of the Federal DepositInsurance Act (12 U.S.C. 1813(h)) andany foreign branch of an insured bank;

(2) A commercial bank or trustcompany;

(3) A private banker;(4) An agency or branch of a foreign

bank in the United States;(5) A credit union;(6) A thrift institution;(7) A corporation organized under

section 25A of the Federal Reserve Act(12 U.S.C. 611 et seq.); and

(8) A broker or dealer registered withthe Securities and ExchangeCommission under the SecuritiesExchange Act of 1934 (15 U.S.C. 78a etseq.).

(d) Foreign bank. (1) The term foreignbank means any organization that:

(i) Is organized under the laws of aforeign country;

(ii) Engages in the business ofbanking;

(iii) Is recognized as a bank by thebank supervisory or monetary authorityof the country of its organization orprincipal banking operations; and

(iv) Receives deposits in the regularcourse of its business.

(2) For purposes of this definition:(i) The term foreign bank includes a

branch of a foreign bank in a territoryof the United States, Puerto Rico, Guam,American Samoa, or the Virgin Islands.

(ii) The term foreign bank does notinclude:

(A) A U.S. agency or branch of aforeign bank;



(B) An insured bank organized underthe laws of a territory of the UnitedStates, Puerto Rico, Guam, AmericanSamoa, or the Virgin Islands;

(C) A foreign central bank or foreignmonetary authority that functions as acentral bank; and

(D) The African Development Bank,Asian Development Bank, Bank forInternational Settlements, EuropeanBank for Reconstruction andDevelopment, Inter-AmericanDevelopment Bank, International Bankfor Reconstruction and Development(the World Bank), International FinanceCorporation, International MonetaryFund, North American DevelopmentBank, African Development Bank,International Development Association,Multilateral Investment GuaranteeAgency, and similar internationalfinancial institutions of which theUnited States is a member or asotherwise designated by the Secretary.

(e) Foreign shell bank means a foreignbank without a physical presence in anycountry.

(f) Majority-owned means a personwho is owned 50 percent or more byanother person.

(g) Owner means any large directowner, indirect owner, and reportablesmall direct owner. For purposes of thisdefinition:

(1) Large direct owner means a personwho:

(i) Owns, controls, or has power tovote 25 percent or more of any class ofvoting shares or other voting interests ofthe foreign bank; or

(ii) Controls in any manner theelection of a majority of the directors (orindividuals exercising similar functions)of the foreign bank.

(2) Small direct owner means a personwho owns, controls, or has power tovote less than 25 percent of any class ofvoting shares or other voting interests ofthe foreign bank.

(3) Reportable small direct owner. (i)Subject to paragraph (g)(3)(ii) of thissection, the term reportable small directowner means:

(A) Each of two or more small directowners who in the aggregate own 25percent or more of any class of votingshares or other voting interests of theforeign bank and are majority-owned bythe same person, or by the same chainof majority-owned persons; and

(B) Each of one or more small directowners who are majority-owned byanother small direct owner and in theaggregate all such small direct ownersown 25 percent or more of any class ofvoting shares or other voting interests ofthe foreign bank.

(ii) In determining who is a reportablesmall direct owner for purposes of

paragraph (g)(3)(i) of this section, asmall direct owner who owns orcontrols less than 5 percent of the votingshares or other voting interests of theforeign bank need not be taken intoaccount.

(4) Indirect owner. (i) The termindirect owner means:

(A) Any person in the ownershipchain of any large direct owner who isnot majority-owned by another person.

(B) Any person, including a smalldirect owner who is a majority-owner asdescribed in paragraph (g)(3)(i)(B) ofthis section, in the ownership chain ofany reportable small direct owner whois not majority-owned by anotherperson.

(ii) A person who is a reportable smalldirect owner as defined in paragraph(g)(3) of this section need not also bereported as an indirect owner under thisparagraph (g)(4).

(5) Person means any individual,bank, corporation, partnership, limitedliability company, or any other legalentity. For purposes of this definition:

(i) Members of the same family shallbe considered to be one person.

(ii) The term same family meansparents, spouses, children, siblings,uncles, aunts, grandparents,grandchildren, first cousins, secondcousins, stepchildren, stepsiblings,parents-in-law and spouses of any of theforegoing.

(iii) Each member of the same familywho has an ownership interest in aforeign bank must be identified if thefamily is an owner because of theaggregate ownership interests of themembers of the family. In determiningthe ownership interests of the samefamily, any voting interest of any familymember shall be taken into account.

(6) Voting shares or other votinginterests means shares or other intereststhat entitle the holder to vote for orselect directors (or individualsexercising similar functions).

(h) Person. Except with respect toparagraph (g) of this section, the termperson shall have the same meaning asprovided in § 103.11(z) of this chapter.

(i) Physical presence means a place ofbusiness that:

(1) Is maintained by a foreign bank;(2) Is located at a fixed address (other

than solely an electronic address or apost-office box) in a country in whichthe foreign bank is authorized toconduct banking activities, at whichlocation the foreign bank:

(i) Employs 1 or more individuals ona full-time basis; and

(ii) Maintains operating recordsrelated to its banking activities; and

(3) Is subject to inspection by thebanking authority that licensed the

foreign bank to conduct bankingactivities.

(j) Regulated affiliate. (1) The termregulated affiliate means a foreign shellbank that:

(i) Is an affiliate of a depositoryinstitution, credit union, or foreign bankthat maintains a physical presence inthe United States or a foreign country,as applicable; and

(ii) Is subject to supervision by abanking authority in the countryregulating such affiliated depositoryinstitution, credit union, or foreignbank.

(2) For purposes of this definition:(i) Affiliate means any company that

controls, is controlled by, or is undercommon control with another company.

(ii) Control means:(A) Ownership, control, or power to

vote 25 percent or more of any class ofvoting shares or other voting interests ofanother company; or

(B) Control in any manner the electionof a majority of the directors (orindividuals exercising similar functions)of another company.

(k) Secretary means the Secretary ofthe Treasury.

Subpart B—Anti Money LaunderingPrograms [Reserved]

Subpart C—Special Due Diligence forCorrespondent Accounts and PrivateBanking Accounts

§ 104.40 Records concerning owners offoreign banks and agents designated toreceive service of legal process; prohibitionon correspondent accounts for foreign shellbanks.

(a) Requirements for covered financialinstitutions—(1) Records of owners andagents. A covered financial institutionthat maintains a correspondent accountin the United States for a foreign bankshall maintain records in the UnitedStates identifying the owners of eachsuch foreign bank and the name andaddress of a person who resides in theUnited States and is authorized, and hasagreed to be an agent to accept serviceof legal process for records regardingeach such account. For purposes of thissection, any correspondent accountmaintained by a foreign branch of acovered financial institution for aforeign bank shall be deemed to bemaintained in the United States.

(2) Prohibition on correspondentaccounts for foreign shell banks. (i) Acovered financial institution shall notestablish, maintain, administer, ormanage a correspondent account in theUnited States for, or on behalf of, aforeign shell bank.

(ii) A covered financial institutionshall take reasonable steps to ensure



1 The November 20, 2001 Interim Guidance maybe found on the Treasury Internet site at http://www.treas.gov/press/releases/po813.htm.

that any correspondent accountestablished, maintained, administered,or managed by that covered financialinstitution in the United States for aforeign bank is not being used by thatforeign bank to indirectly providebanking services to a foreign shell bank.

(iii) Nothing in this paragraph (a)(2)prohibits a covered financial institutionfrom providing a correspondent accountor banking services to a regulatedaffiliate.

(iv) For purposes of this paragraph(a)(2), any correspondent accountestablished, maintained, administered,or managed by a foreign branch of acovered financial institution shall bedeemed to be established, maintained,administered, or managed in the UnitedStates.

(b) Safe harbor. Subject to paragraph(d) of this section, a covered financialinstitution will be deemed to be incompliance with the requirements ofparagraph (a) of this section withrespect to a foreign bank if the coveredfinancial institution obtains from theforeign bank the certification describedin Appendix A to this part (including allannexes thereto).

(c) Verification requirements—(1)Biennial verification. At least once every2 years, a covered financial institutionshall verify the information previouslyprovided by each foreign bank for whichit maintains a correspondent account, orotherwise relied upon by the coveredfinancial institution for purposes of thissection.

(2) Interim verification. If at any timea covered financial institution hasreason to believe that any informationprovided by a foreign bank or otherwiserelied upon by the covered financialinstitution for purposes of this section isno longer correct, the covered financialinstitution shall request that the foreignbank verify such information.

(3) Safe harbor. Subject to paragraph(d) of this section, a covered financialinstitution will be deemed to continueto be in compliance with therequirements of this paragraph (c) andparagraph (a) of this section if thecovered financial institution obtainsfrom the foreign bank:

(i) A revised Appendix A certification(including all annexes thereto); or

(ii) The recertification described inAppendix B to this part.

(d) Closure of correspondentaccounts—(1) Accounts existing on [thedate that is 30 days after the date ofpublication of the final rule in theFederal Register]. In the case of aforeign bank with respect to which acovered financial institution maintains acorrespondent account that was inexistence on [the date that is 30 days

after the date of publication of the finalrule in the Federal Register], thecovered financial institution shall closeall correspondent accounts with suchforeign bank not later than [the date thatis 90 days after the date of publicationof the final rule in the Federal Register]if the covered financial institution hasnot obtained, from the foreign bank orotherwise, the information described inAppendix A to this part (including allannexes thereto).

(2) Accounts established after [thedate that is 30 days after the date ofpublication of the final rule in theFederal Register]. In the case of aforeign bank with respect to which acovered financial institution establishesa correspondent account after [the datethat is 30 days after the date ofpublication of the final rule in theFederal Register], the covered financialinstitution shall close such account ifthe covered financial institution has notobtained, from the foreign bank orotherwise, the information described inAppendix A to this part (including allannexes thereto), or the informationdescribed in Appendix B to this part,not later than the date that is:

(i) In the case of an accountestablished before January 1, 2003, 60calendar days after the date the accountis established; or

(ii) In the case of an accountestablished after December 31, 2002, 30calendar days after the date the accountis established.

(3) Verification of previously providedinformation. In the case of a foreignbank from which a covered financialinstitution requests a verification ofinformation or with respect to which thecovered financial institution otherwiseundertakes to verify informationpursuant to paragraph (c)(1) or (2) ofthis section, the covered financialinstitution shall close all correspondentaccounts with such foreign bank if thecovered financial institution has notobtained, from the foreign bank orotherwise, the information described inAppendix A to this part (including allannexes thereto) or the informationdescribed in Appendix B to this part,not later than the date that is:

(i) In the case of a verificationinitiated before January 1, 2003, 90calendar days after the date of therequest or otherwise undertaking theverification; or

(ii) In the case of a verificationinitiated after December 31, 2002, 60calendar days after the date of therequest or otherwise undertaking theverification.

(4) Reestablishment of closedaccounts and establishment of newaccounts. A covered financial

institution shall not reestablish anyaccount closed pursuant to thisparagraph, and shall not establish anyother correspondent account with theconcerned foreign bank, until it obtains,from the foreign bank or otherwise, theinformation described in Appendix A tothis part (including all annexes thereto)or the information described inAppendix B to this part, as appropriate.

(5) Limitation on liability. A coveredfinancial institution shall not be liableto any person in any court or arbitrationproceeding for terminating acorrespondent relationship inaccordance with this paragraph (d).

(e) Recordkeeping requirement. Acovered financial institution shall retainthe original of any document providedby a foreign bank, and the original or acopy of any document otherwise reliedupon by the covered financialinstitution, for purposes of this section,for at least 5 years after the date that thecovered financial institution no longermaintains any account for such foreignbank. A covered financial institutionshall retain such records with respect toany foreign bank for such longer periodas the Secretary may direct.

(f) Special rules concerninginformation requested prior to (the datethat is 30 days after the date ofpublication of the final rule in theFederal Register)—(1) Definition. Forpurposes of this paragraph (f) the term‘‘Interim Guidance’’ means:

(i) The Interim Guidance of theDepartment of the Treasury datedNovember 20, 2001 1 and published inthe Federal Register on November 27,2001; or

(ii) The provisions of this part aspublished in the Federal Register onDecember 28, 2001.

(2) Safe harbors. (i) For purposes ofparagraph (b) of this section, a coveredfinancial institution that requested aforeign bank to provide the informationdescribed in the Interim Guidance priorto [the date that is 30 days after the dateof publication of the final rule in theFederal Register] will be deemed to bein compliance with the requirements ofparagraph (a) of this section withrespect to such foreign bank if theforeign bank provides such informationto the covered financial institution on orbefore [the date that is 90 days after thedate of publication of the final rule inthe Federal Register].

(ii) Nothing in this section shall beconstrued to cause any informationobtained pursuant to the InterimGuidance to be considered incorrect for



purposes of paragraph (c)(2) of thissection if such information wasobtained pursuant to a request to aforeign bank made prior to [the date thatis 30 days after the date of publicationof the final rule in the Federal Register]and received on or before [the date thatis 90 days after the date of publicationof the final rule].

(iii) For purposes of paragraph (d)(1)of this section, the reference inparagraph (d)(1) of this section to ‘‘theinformation described in Appendix A tothis part (including all annexesthereto)’’ shall be deemed to refer tosuch information as described in theInterim Guidance if such informationwas obtained pursuant to a request to aforeign bank made prior to [the date thatis 30 days after the date of publicationof the final rule in the Federal Register]and received on or before [the date thatis 90 days after the date of publicationof the final rule].

(3) Verification of information. Forpurposes of paragraph (c)(1) of thissection, information obtained pursuantto a request to a foreign bank made priorto [the date that is 30 days after the dateof publication of the final rule in theFederal Register] and received on orbefore [the date that is 90 days after thedate of publication of the final rule]shall be verified in accordance with thedefinitions and requirements of thissection.

(4) Recordkeeping requirement.Paragraph (e) of this section shall applyto any document provided by a foreign

bank, or otherwise relied upon by acovered financial institution, forpurposes of the Interim Guidance.

§ 104.50 [Reserved]

Subpart D—Law Enforcement Accessto Foreign Bank Records

§ 104.60 Summons or subpoena of foreignbank records.

(a) Issuance to foreign banks. TheSecretary or the Attorney General mayissue a summons or subpoena to anyforeign bank that maintains acorrespondent account in the UnitedStates and request records related tosuch correspondent account, includingrecords maintained outside of theUnited States relating to the deposit offunds into the foreign bank. Thesummons or subpoena may be served onthe foreign bank in the United States ifthe foreign bank has a representative inthe United States, or in a foreigncountry pursuant to any mutual legalassistance treaty, multilateralagreement, or other request forinternational law enforcementassistance.

(b) Issuance to covered financialinstitutions. Upon receipt of a writtenrequest from a Federal law enforcementofficer for information required to bemaintained by a covered financialinstitution under § 104.40, the coveredfinancial institution shall provide theinformation to the requesting officer notlater than 7 days after receipt of therequest.

§ 104.70 Termination of correspondentrelationship.

(a) Termination upon receipt ofnotice. A covered financial institutionshall terminate any correspondentrelationship with a foreign bank notlater than 10 business days after receiptof written notice from the Secretary orthe Attorney General (in each case, afterconsultation with the other) that theforeign bank has failed:

(1) To comply with a summons orsubpoena issued under § 104.60(a); or

(2) To initiate proceedings in a UnitedStates court contesting such summonsor subpoena.

(b) Limitation on liability. A coveredfinancial institution shall not be liableto any person in any court or arbitrationproceeding for terminating acorrespondent relationship inaccordance with paragraph (a) of thissection.

(c) Failure to terminate relationship.Failure to terminate a correspondentrelationship in accordance with thissection shall render the coveredfinancial institution liable for a civilpenalty of up to $10,000 per day untilthe correspondent relationship is soterminated.

Subpart E—Cooperative Efforts ToDeter Money Laundering [Reserved]

Appendix A to Part 104—CertificationRegarding Correspondent Accounts

BILLING CODE 4810–25–P



[FR Doc. 01–31849 Filed 12–27–01; 8:45 am]BILLING CODE 4810–25–C


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