Anti-Money Laundering Programs for Financial Institutions

Monday,
April 29, 2002
Part IV
Department of the
Treasury
31 CFR Part 103
Financial Crimes Enforcement Network; Anti-Money Laundering Programs; Final Rules

1These are defined by reference to section 509 of the Gramm-Leach-Bliley Act (Public Law 106–102) to include the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency (OCC), the Board of Directors of the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the National Credit Union Administration (NCUA), and the Securities and Exchange Commission (SEC), and, pursuant to section 321(c) of the Act, the Commodity Futures Trading Commission (CFTC). DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AA28 Financial Crimes Enforcement Network; Anti-Money Laundering Programs for Financial Institutions AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury. ACTION: Interim final rule. SUMMARY: FinCEN is issuing a series of interim final rules to provide guidance to financial institutions concerning the provision in the Bank Secrecy Act (BSA), added by section 352 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, that requires financial institutions to establish anti-money laundering programs. This interim final rule provides that banks, savings associations, credit unions, registered brokers and dealers in securities, futures commission merchants, and casinos, will be deemed to be in compliance with section 352 if they establish and maintain anti-money laundering programs as required by existing FinCEN regulations, or their respective Federal regulator or self-regulatory organization. The establishment of anti￾money laundering programs by money services businesses, operators of credit card systems, and mutual funds are the subject of separate rules published in this separate part of this issue of the Federal Register. This rule temporarily exempts, pending further analysis and review by Treasury and FinCEN, all other financial institutions (as defined in the BSA) from the requirement in
section 352 that they establish anti￾money laundering programs.
DATES: This interim final rule is effective April 24, 2002. Written comments may be submitted to FinCEN on or before May 29, 2002. ADDRESSES: Submit comments (preferably an original and four copies) to FinCEN, P.O. Box 39, Vienna, VA 22183, Attn: Section 352 AMLP Regulations. Comments may also be submitted by electronic mail to regcomments@fincen.treas.gov with the caption in the body of the text, ‘‘Attention: Section 352 AMLP Regulations.’’ Comments may be inspected at FinCEN between 10 a.m. and 4 p.m. in the FinCEN Reading Room in Washington, DC. Persons wishing to inspect the comments submitted must request an appointment by telephoning (202) 354–6400 (not a toll-free number). FOR FURTHER INFORMATION CONTACT:
Office of the Chief Counsel (FinCEN), (703) 905–3590; Office of the Assistant General Counsel for Enforcement (Treasury), (202) 622–1927; or the Office of the Assistant General Counsel for Banking & Finance (Treasury), (202) 622–0480 (not toll-free numbers). SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President signed into law the USA PATRIOT Act (Public Law 107–56) (the Act). Title III of the Act makes a number of amendments to the anti-money laundering provisions of the BSA, which is codified in subchapter II of
chapter 53 of title 31, United States
Code. These amendments are intended to make it easier to prevent, detect, and prosecute international money laundering and the financing of terrorism. Section 352(a) of the Act, which becomes effective on April 24, 2002, amended section 5318(h) of the BSA. As amended, section 5318(h)(1) requires every financial institution to establish an anti-money laundering program that includes, at a minimum (i) the development of internal policies, procedures, and controls; (ii) the designation of a compliance officer; (iii) an ongoing employee training program; and (iv) an independent audit function to test programs. The definition of ‘‘financial institution’’ in sections 5312(a)(2) and (c)(1) is extremely broad. It includes institutions that are already subject to Federal regulation such as banks, savings associations, credit unions, money services businesses (such as money transmitters and currency exchanges), and registered securities broker-dealers and futures commission merchants. The definition also includes dealers in precious metals, stones, or jewels; pawnbrokers; loan or finance companies; private bankers; insurance companies; travel agencies; telegraph companies; sellers of vehicles, including automobiles, airplanes, and boats; persons engaged in real estate closings and settlements; investment bankers; investment companies; and commodity pool operators and commodity trading advisors that are registered or required to register under the Commodity Exchange Act (7 U.S.C. 1 et seq). Section 5318(h)(1) requires all of these businesses to establish anti-money laundering programs.
Section 5318(h)(2) authorizes
Treasury, after consulting with the appropriate Federal functional regulator,1 to prescribe minimum standards for anti-money laundering programs. This section also authorizes Treasury to exempt from the application of those minimum standards any financial institution that is not subject to the rules implementing the BSA for so long as it is not subject to such rules.
Section 352(c) of the Act directs the
Secretary of the Treasury to prescribe regulations by April 24, 2002 that ‘‘consider the extent to which [the requirements of section 5318(h)(1)] are commensurate with the size, location, and activities’’ of financial institutions. BSA section 5318(a)(6) provides that the Secretary may exempt any financial institution from any BSA statutory requirement. Taken together, these provisions authorize the issuance of regulations that may prescribe different requirements for anti-money laundering programs under, and that may exempt certain financial institutions from the requirements of, section 5318(h)(1). Accordingly, and as described below, this interim final rule prescribes anti￾money laundering program requirements for banks, savings associations, registered brokers and dealers in securities, futures commission merchants, and casinos. The establishment of anti-money laundering programs by money services businesses, operators of credit card systems, and mutual funds are the subject of interim final rules published in this separate part of this issue of the Federal Register. Thus, by virtue of the interim final rules published today, all financial institutions presently subject to FinCEN’s existing BSA regulations are now subject to anti-money laundering program requirements, as are three new types of financial institutions not previously regulated under the BSA:
futures commission merchants, mutual funds, and operators of credit card systems. In order to ensure the issuance of well-considered regulations tailored to the unique money laundering risks associated with the remaining financial institutions, this rule temporarily exempts, until not later than October 24, 2002, all other financial institutions from the requirement that they establish anti-money laundering programs. During the next six months Treasury