[Federal Register: January 11, 2008 (Volume 73, Number 8)]
[Rules and Regulations]
[Page 1975-1976]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11ja08-7]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA88
Financial Crimes Enforcement Network; Amendment Regarding
Financial Institutions Exempt from Establishing Anti-Money Laundering
Programs
AGENCY: Financial Crimes Enforcement Network, Department of the
Treasury.
ACTION: Final rule.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
amending the provision in its regulations that defers, for certain
categories of financial institutions, the application of the anti-money
laundering program requirements in section 352 of the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (``USA PATRIOT'') Act of 2001. Two of
the categories of financial institutions specifically exempted from
having to establish an anti-money laundering program subsequently have
been required by regulation to establish such programs, and this
rulemaking will amend the regulations to reflect those changes.
DATES: Effective Date: January 11, 2008.
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division (FinCEN), (800) 949-2732 (toll-free).
SUPPLEMENTARY INFORMATION:
I. Background
A. USA PATRIOT Act Section 352
On October 26, 2001, the President signed into law the USA PATRIOT
Act (Pub. L. 107-56). Title III of the USA PATRIOT Act makes a number
of amendments to the anti-money laundering provisions of the Bank
Secrecy Act (``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 money laundering and the
financing of terrorism. Section 352(a) of the USA PATRIOT Act, amended
section 5318(h) of the BSA, effective April 24, 2002, to require 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) of the BSA is broad. It includes categories of institutions
that were already subject to some federal anti-money laundering
regulations at the time the USA PATRIOT Act was passed, such as banks,
savings associations, credit unions, and money services businesses
(such as money transmitters and currency dealers or exchangers). The
definition also includes: Registered securities broker-dealers; futures
commission merchants; dealers in precious metals, stones, or jewels;
pawnbrokers; loan or finance companies; trust 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 require to register
under the Commodity Exchange Act (7 U.S.C. 1 et seq.). Section 352 of
the USA PATRIOT Act requires all of these businesses to establish anti-
money laundering programs.
Section 5318(h)(2) of the BSA, however, also grants the Secretary
of the Treasury, and by extension his delegate FinCEN, the authority to
exempt certain financial institutions from the requirement to institute
anti-money laundering programs. In April 2002, FinCEN issued a series
of interim final rules implementing section 352 of the USA PATRIOT
Act.\1\ At the same time, FinCEN also exempted certain financial
institutions, including dealers in precious metals, stones, or jewels,
and insurance companies, from having to comply with section 352 of the
USA PATRIOT Act for a six month period.\2\ In November 2002, FinCEN
replaced this six month exemption from the application of the anti-
money laundering program requirements in section 352 with an open-ended
exemption (``Temporary Exemption Rule'').\3\
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\1\ These rules prescribed requirements for anti-money
laundering programs for banks, savings associations, credit union,
registered securities broker-dealers, futures commission merchants,
and introducing brokers that are regulated by a federal functional
regulator or a self-regulatory organization, and casinos. 67 FR
21110 (Apr. 29, 2002) (interim final rules). At the same time,
FinCEN also issued interim final rules that required money services
businesses (67 FR 21114 (Apr. 29, 2002)), mutual funds (67 FR 21117
(Apr. 29, 2002)), and operators of credit card systems (67 FR 21121
(Apr. 29, 2002)) to establish anti-money laundering programs.
\2\ Id.
\3\ 31 CFR 103.170, 67 FR 67547 (Nov. 6, 2002), corrected at 67
FR 68953 (Nov. 14, 2002).
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B. Updating 31 CFR Section 103.170
In the years since the Temporary Exemption Rule was published,
FinCEN has promulgated a number of rules that require two previously
exempted categories of financial institutions (dealers in precious
metals, stones, or jewels,\4\ and insurance companies \5\) to establish
anti-money laundering programs.\6\ Although FinCEN has, through the
publication of the above-mentioned rules, ipso jure revoked the
exemptions previously issued to those categories of financial
institutions,\7\ the Temporary Exemption Rule is being amended to
reflect these revocations and eliminate possible confusion.
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\4\ 31 CFR 103.170(b)(i)
\5\ 31 CFR 103.170(b)(ix). Only those insurance companies
falling within the definition contained in 31 CFR 103.137(a)(9) are
required to have an anti-money laundering program. The removal of
the entire category of ``insurance companies'' from the exempted
list should not be read to limit the breadth of the definition for
purposes of the availability of the safe harbor under 31 U.S.C.
5318(g)(3) for voluntary reports of suspicious activities. See 70 FR
66755 (Nov. 3, 2005), fn 4.
\6\ FinCEN issued rules in 2005 requiring dealers in precious
stones, metals, and jewels ((See 70 FR 33702 (June 9, 2005) (interim
final rule)), and certain insurance companies (See 70 FR 66754 (Nov.
3, 2005) (final rule)) to establish anti-money laundering programs.
\7\ The removal of the temporary exemption occurs automatically
pursuant to 31 CFR section 103.170(c), which states that ``[t]he
exemptions described in paragraphs (a)(2) and (b) of [this rule]
shall not apply to any financial institution that is otherwise
required to establish an anti-money laundering program by this
subpart I.''
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[[Page 1976]]
II. Administrative Procedure Act
Under the Administrative Procedure Act (``APA''), notice of a
proposed rulemaking is not required when the agency, for good cause,
finds ``that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.'' \8\ FinCEN is making
technical amendments to the Temporary Exemption Rule to ensure that the
list of temporarily exempted financial institutions is accurate and not
confusing. FinCEN, therefore, finds that publishing the amendments for
comment is unnecessary.
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\8\ 5 U.S.C. 553(b).
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In addition, publication of a substantive rule not less than 30
days before its effective date is required by the APA except as
otherwise provided by the agency for good cause.\9\ For the same
reasons described above with respect to notice and opportunity for
comment, FinCEN finds that there is good cause for making these
technical amendments effective on January 11, 2008.
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\9\ 5 U.S.C. 553(d).
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III. Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for this final
rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) do not apply.\10\
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\10\ See 5 U.S.C. 601(2) (for purposes of Regulatory Flexibility
Act analyses, the term ``rule'' means any rule for which the agency
publishes a general notice of proposed rulemaking).
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IV. Executive Order 12866
This final rule is not a ``significant regulatory action'' as
defined in Executive Order 12866. Accordingly, a regulatory assessment
is not required.
List of Subjects in 31 CFR Part 103
Banks and banking, Brokers, Counter money laundering, Counter-
terrorism, Currency, Foreign banking, Reporting and recordkeeping
requirements.
Authority and Issuance
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For the reasons set forth above, FinCEN is amending 31 CFR part 103 as
follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
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1. The authority citation for part 103 continues to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314
and 5316-5332; title III, secs. 311, 312, 313, 314, 319, 326, 352,
Pub. L. 107-56, 115 Stat. 307.
Subpart I--Anti-Money Laundering Programs
Sec. 103.170 [Amended]
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2. Section 103.170 is amended by:
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a. Removing paragraphs (b)(1)(i) and (b)(1)(ix); and
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b. Redesignating paragraphs (b)(1)(ii) as (b)(1)(i); (b)(1)(iii) as
(b)(1)(ii); (b)(1)(iv) as (b)(1)(iii); (b)(1)(v) as (b)(1)(iv);
(b)(1)(vi) as (b)(1)(v); (b)(1)(vii) as (b)(1)(vi); (b)(1)(viii) as
(b)(1)(vii); (b)(1)(x) as (b)(1)(viii); (b)(1)(xi) as (b)(1)(ix); and
(b)(1)(xii) as (b)(1)(x).
Dated: December 20, 2007.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. E8-315 Filed 1-10-08; 8:45 am]
BILLING CODE 4810-02-P