Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity

Monday,
March 4, 2002
Part III
Department of the
Treasury
31 CFR Part 103
Financial Crimes Enforcement Network; Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity; Final Rule and Proposed Rule

1See 31 U.S.C. 5312(a)(2).
2Treasury and FinCEN are proposing to apply
section 314(a) to all BSA financial institutions. See
the proposed rule implementing section 314(a) published elsewhere in this issue of the Federal Register. 3See Act sections 314(b) and (c), which provide protections from federal and State prohibitions on the disclosure of information to financial institutions that engage in information sharing consistent with the requirements of section 314(b) and its implementing regulations. DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AA26 Financial Crimes Enforcement Network; Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activity AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury. ACTION: Interim rule. SUMMARY: FinCEN, a bureau of the Treasury Department, is issuing regulations to implement the provision in the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 that encourages information sharing among financial institutions for purposes of identifying and reporting activities that may involve terrorist acts or money laundering activities. DATES: This rule is effective March 4, 2002. FOR FURTHER INFORMATION CONTACT:
Judith R. Starr, Chief Counsel (FinCEN), (703) 905–3590; William Langford, Senior Counsel for Financial Crimes, Office of the Assistant General Counsel (Enforcement), (202) 622–1932; or Gary W. Sutton, Senior Banking Counsel, Office of the Assistant General Counsel (Banking & Finance), (202) 622–1976 (not toll-free numbers). Financial institutions with questions about their coverage or compliance obligations under this rule should contact their appropriate federal regulator. SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President signed into law the USA PATRIOT Act of 2001 (Public Law 107–56) (the Act). Of the Act’s many goals, the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering is of paramount importance.
Section 314 of the Act furthers this goal
by providing for the sharing of information between the government and financial institutions, and among financial institutions themselves. As with many other provisions of the Act, Congress has charged Treasury with developing regulations to implement these information-sharing provisions.
Section 314(b) of the Act permits
financial institutions, upon providing notice to Treasury, to share information with one another in order to better identify and report to the federal government concerning activities that may involve money laundering or terrorist activities. This interim rule implements section 314(b). The Congress authorized financial institutions to share information to assist in the identification of suspected terrorists and money launderers only after providing notice to Treasury. The notice provision outlined below—a yearly certification to FinCEN that information will be shared and protected from inappropriate disclosure—combined with the requirement that any money laundering or terrorist activities uncovered be reported to FinCEN or other law enforcement, will allow for the sharing of information while protecting the privacy interests of customers of financial institutions. Published elsewhere in this issue of the Federal Register is a notice of proposed rulemaking that solicits comments on proposed provisions that are identical to this interim rule, as well as proposed regulations to implement the provisions of section 314(a) the Act, which concerns enhanced cooperation between financial institutions and federal law enforcement agencies to detect terrorist and money laundering activities. Please refer to the notice of proposed rulemaking for instructions for submitting comments on the proposed provisions that are identical to this interim rule.
II. Analysis of the Interim Rule
A. General Definitions
Section 103.90—Definitions
As noted above, section 314(b) of the Act permits financial institutions, upon providing notice to Treasury, to share information with one another in order to identify and report to the federal government activities that may involve money laundering or terrorist activity. Although section 314 does not define ‘‘money laundering’’ or ‘‘terrorist activity,’’ each of these terms has well￾established definitions. Accordingly, and consistent with the broad intent underlying section 314(b), section 103.90(a) defines ‘‘money laundering’’ to mean any activity described in
section 1956 or 1957 of title 18, United
States Code. Similarly, section 103.90(b) defines ‘‘terrorist activity’’ to mean an act of domestic terrorism or international terrorism as defined in
section 2331 of title 18, United States
Code.
B. Information Sharing Among Financial Institutions
Section 103.110—Voluntary Information
Sharing Among Financial Institutions The Act does not define the term ‘‘financial institution’’ for purposes of the information sharing provisions of 314(b). Under the Bank Secrecy Act (BSA), which is concerned with information reporting to detect and prevent financial crimes, the term ‘‘financial institution’’ is defined broadly.1 Unlike section 314(a), which involves financial institutions responding to requests for information from federal law enforcement agencies,2
section 314(b) involves the sharing of
information among financial institutions and raises issues concerning information privacy.3 For these reasons, Treasury and FinCEN believe that it is appropriate to define the term ‘‘financial institution’’ for purposes of section 314(b) in a manner that is most likely to further the identification of terrorist and money laundering activities while minimizing the likelihood that information sharing will inappropriately intrude on the privacy interests of the customers of those institutions. Accordingly, section 103.110(a)(2) defines ‘‘financial institution’’ for purposes of section 314(b) to mean (1) a financial institution that is subject to SAR reporting that is not a money services business, which includes banks, savings associations, and credit unions; (2) a broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); (3) an issuer of traveler’s checks or money orders, (4) a registered money transmitter, or (5) an operator of a credit card system that is not a money services business. Treasury and FinCEN specifically request comment, in connection with the proposed rule published elsewhere in this issue of the Federal Register, concerning whether these entities should be included within the definition for purposes of section 314(b) of the Act and regulation section 103.110, and whether the definition should be expanded to include other categories of BSA financial institutions.