Customer Identification Programs for Broker-Dealers

1Pub. L. 107–56. they comply with OFAC rules prohibiting transactions with certain foreign countries or their nationals. Dated: July 15, 2002. James F. Sloan, Director, Financial Crimes Enforcement Network. [FR Doc. 02–18193 Filed 7–22–02; 8:45 am] BILLING CODE 4810–02–P SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 240 [Release No. 34–46192, File No. S7–25–02] DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AA32 Customer Identification Programs For Broker-Dealers AGENCIES: Financial Crimes Enforcement Network, Treasury; Securities and Exchange Commission. ACTION: Joint notice of proposed rulemaking. SUMMARY: The Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission are jointly issuing a proposed regulation to implement section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 (the Act).
Section 326 requires the Secretary of the
Treasury to jointly prescribe with the Securities and Exchange Commission a regulation that, at a minimum, requires broker-dealers to implement reasonable procedures to verify the identity of any person seeking to open an account, to the extent reasonable and practicable; maintain records of the information used to verify the person’s identity; and determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the broker-dealer by any government agency. DATES: Written comments on the proposed rule may be submitted to the Treasury Department and the Securities and Exchange Commission on or before September 6, 2002. ADDRESSES: Because paper mail in the Washington area may be subject to delay, commenters are encouraged to e￾mail comments. Comments should be sent by one method only. Treasury: Comments may be mailed to FinCEN, Section 326 Broker-Dealer Rule Comments, P.O. Box 39, Vienna, VA 22183, or sent to Internet address regcomments@fincen.treas.gov with the caption ‘‘Attention: Section 326 Broker￾Dealer Rule Comments’’ in the body of the text. 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). Securities and Exchange Commission:
Comments also should be submitted in triplicate to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549–0609. Comments also may be submitted electronically at the following e-mail address: rulecomments@sec.gov. Comment letters should refer to File No. S7–25–02; this file number should be included on the subject line if e-mail is used. All comments received will be available for public inspection and copying at the Commission’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549–0102. Electronically submitted comment letters will be posted on the Commission’s Internet web site (http// www.sec.gov). Personal identifying information, such as names or e-mail addresses, will not be edited from electronic submissions. Submit only information you wish to make publicly available. FOR FURTHER INFORMATION CONTACT:
Treasury: 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. Securities and Exchange Commission:
Division of Market Regulation, 202/942– 0177 or marketreg@sec.gov. SUPPLEMENTARY INFORMATION:
I. Background
A. Section 326 of the USA PATRIOT Act On October 26, 2001, President Bush signed into law the USA PATRIOT Act.1 Title III of the Act, captioned ‘‘International Money Laundering Abatement and Anti-terrorist Financing Act of 2001,’’ adds several new provisions to the Bank Secrecy Act (BSA). See 31 U.S.C. 5311 et seq. These provisions are intended to facilitate the prevention, detection, and prosecution of international money laundering and the financing of terrorism.
Section 326 of the Act adds a new
subsection (l) to 31 U.S.C. 5318 that requires the Secretary of the Treasury (Secretary) to prescribe regulations setting forth minimum standards for financial institutions and their customers regarding the identity of the customer that shall apply in connection with the opening of an account at the financial institution.
Section 326 applies to all ‘‘financial
institutions.’’ This term is defined very broadly in the BSA to encompass a variety of entities including banks, agencies and branches of foreign banks in the United States, investment companies, thrifts, credit unions, brokers and dealers in securities or commodities, insurance companies, travel agents, pawnbrokers, dealers in precious metals, check-cashers, casinos, and telegraph companies, among many others. See 31 U.S.C. 5312(a)(2). For any financial institution engaged in financial activities described in
section 4(k) of the Bank Holding
Company Act of 1956 (section 4(k) institutions), the Secretary is required to prescribe the regulations issued under
section 326 jointly with each Federal
functional regulator appropriate for such financial institution. The Federal functional regulators include the Securities and Exchange Commission (Commission), the Commodity Futures Trading Commission (CFTC), and the banking agencies (banking agencies), namely, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration. Final regulations implementing section 326 must be effective before October 25,
2002.
Section 326 provides that the
regulations, at a minimum, must require financial institutions to implement reasonable procedures for (1) verifying the identity of any person seeking to open an account, to the extent reasonable and practicable; (2) maintaining records of the information used to verify the person’s identity, including name, address, and other identifying information; and (3) determining whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency. In prescribing these regulations, the Secretary is directed to take into consideration the various types of accounts maintained by various types of financial institutions, the various methods of opening accounts, and the various types of identifying information available.