89 FR 113 pgs. 49273-49277 - Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions and for Private Banking Accounts
Type: NOTICEVolume: 89Number: 113Pages: 49273 - 49277
Pages: 49273, 49274, 49275, 49276, 49277FR document: [FR Doc. 2024-12728 Filed 6-10-24; 8:45 am]
Agency: Treasury Department
Sub Agency: Financial Crimes Enforcement Network
Official PDF Version: PDF Version
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions and for Private Banking Accounts
AGENCY:
Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION:
Notice and request for comments.
SUMMARY:
As part of its continuing effort to reduce paperwork and respondent burden, FinCEN invites comments on the proposed renewal, without change, of existing information collection requirements related to Bank Secrecy Act regulations that require certain banks, brokers or dealers in securities, futures commission merchants, introducing brokers in commodities, and mutual funds (each a "covered financial institution") to establish and maintain due diligence programs for foreign financial institutions and for private banking accounts. The required due diligence programs include: appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls reasonably designed to enable the covered financial institution to detect and report, on an on-going basis, money laundering conducted through or involving any correspondent accounts established, maintained, administered or managed by such covered financial institution in the United States for a foreign financial institution; and policies, procedures, and controls that are reasonably designed to detect and report any known or suspected money laundering or suspicious activity conducted through or involving any private banking account that is established, maintained, administered, or managed in the United States by such covered financial institution. The due diligence programs are required to be part of covered financial institutions' anti-money laundering programs. This request for comments is made pursuant to the Paperwork Reduction Act of 1995 (PRA).
DATES:
Written comments are welcome and must be received on or before August 12, 2024.
ADDRESSES:
Comments may be submitted by any of the following methods:
• Federal E-rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Refer to Docket Number FINCEN-2023-0011 and Office of Management and Budget (OMB) control number 1506-0046.
• Mail: Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-2023-0011 and OMB control number 1506-0046.
Please submit comments by one method only. Comments will be reviewed consistent with the PRA and applicable OMB regulations and guidance. All comments submitted in response to this notice will become a matter of public record. Therefore, you should submit only information that you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT:
FinCEN's Regulatory Support Section at 1-800-767-2825 or electronically at frc@fincen.gov.
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Provisions
[top] The legislative framework generally referred to as the Bank Secrecy Act (BSA) consists of the Currency and Foreign Transactions Reporting Act of 1970, as amended by the Uniting and
Footnotes:
1 ?USA PATRIOT Act, Public Law 107-56.
2 ?The AML Act was enacted as Division F, sections 6001-6511, of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Public Law 116-283, 134 Stat. 3388 (NDAA).
The BSA authorizes the Secretary of the Treasury (Secretary) to, inter alia, require financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, or regulatory matters, risk assessments or proceedings, or in the conduct of intelligence or counter-intelligence activities to protect against terrorism, and to implement anti-money laundering/countering the financing of terrorism (AML/CFT) programs and compliance procedures. 3 The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN. 4
Footnotes:
3 ?Section 358 of the USA PATRIOT Act expanded the purpose of the BSA by including a reference to reports and records "that have a high degree of usefulness in intelligence or counterintelligence activities to protect against international terrorism." See 12 U.S.C. 1829b(a). Section 6101 of the AML Act further expanded the purpose of the BSA to cover such matters as preventing money laundering, tracking illicit funds, assessing risk, and establishing appropriate frameworks for information sharing. See 31 U.S.C. 5311.
4 ?Treasury Order 180-01 (Jan. 14, 2020).
Section 312 of the USA PATRIOT Act added subsection (i) to 31 U.S.C. 5318 of the BSA. Section 312 mandates that each financial institution that establishes, maintains, administers, or manages a private banking account or a correspondent account in the United States for non-U.S. persons establish appropriate, specific, and, where necessary, enhanced, due diligence policies, procedures, and controls that are reasonably designed to detect and report instances of money laundering through those accounts. The regulations implementing the due diligence requirements for maintaining foreign correspondent accounts and private banking accounts are found at 31 CFR 1010.610 and 31 CFR 1010.620, respectively, and apply to covered financial institutions defined as certain banks, brokers or dealers in securities, futures commission merchants, introducing brokers in commodities, and mutual funds. 5
Footnotes:
5 ?31 CFR 1010.605(e).
A. 31 CFR 1010.610-Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions
Under 31 CFR 1010.610(a), covered financial institutions are required to establish due diligence policies, procedures, and controls that include each of the following for any correspondent account established, maintained, administered, or managed in the United States for a foreign financial institution: (i) determining whether any such correspondent account is subject to enhanced due diligence (EDD) requirements specified in 31 CFR 1010.610(b); (ii) assessing the money laundering risks presented by each such correspondent account based on a consideration of all relevant factors;? 6 and (iii) applying risk-based procedures and controls to each such correspondent account reasonably designed to detect and report known or suspected money laundering activity, including a periodic review of the correspondent account activity sufficient to determine consistency with information obtained about the type, purpose, and anticipated activity of the account.
Footnotes:
6 ?Relevant factors include, as appropriate: (i) the nature of the foreign financial institution's business and the markets it serves; (ii) the type, purpose, and anticipated activity of such correspondent account; (iii) the nature and duration of the covered financial institution's relationship with the foreign financial institution (and any of its affiliates); (iv) the AML and supervisory regime of the jurisdiction that issued the charter or license to the foreign financial institution, and, to the extent that information regarding such jurisdiction is reasonably available, of the jurisdiction in which any company that is an owner of the foreign financial institution is incorporated or chartered; and (v) information known or reasonably available to the covered financial institution about the foreign financial institution's AML record. 31 CFR 1010.610(a)(2).
Under 31 CFR 1010.610(b), covered financial institutions are required to establish EDD policies, procedures, and controls when establishing, maintaining, administering, or managing a correspondent account in the United States for certain foreign banks, as described in 31 CFR 1010.610(c). 7 The EDD shall include procedures designed to ensure that the covered financial institution, at a minimum, takes reasonable steps to:
Footnotes:
7 ?The EDD procedures are required for any correspondent account maintained for a foreign bank that operates pursuant to: (i) an offshore banking license; (ii) a banking license issued by a foreign country that has been designated as non-cooperative with international AML principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the U.S. representative to the group or organization concurs; or (iii) a banking license issued by a foreign country that has been designated by the Secretary as warranting special measures due to money laundering concerns. 31 CFR 1010.610(c).
(1) Conduct enhanced scrutiny of such correspondent account to guard against money laundering and to identify and report any suspicious transactions in accordance with applicable law and regulation. This enhanced scrutiny shall reflect the risk assessment of the account and shall include, as appropriate: (i) obtaining and considering information relating to the foreign bank's AML program to assess the risk of money laundering presented by the foreign bank's correspondent account; (ii) monitoring transactions to, from, or through the correspondent account in a manner reasonably designed to detect money laundering and suspicious activity; (iii) if it is a payable-through account, obtaining information from the foreign bank about the identity of persons with authority to direct transactions through the correspondent account, as well as information about the sources and beneficial owners of funds or other assets in the payable-through account;? 8
Footnotes:
8 ? See 31 CFR 1010.610(b)(1)(iii)(B).
(2) Determine whether the foreign bank for which the correspondent account is established or maintained in turn maintains correspondent accounts for other foreign banks that use the foreign correspondent account established or maintained by the covered financial institution and, if so, take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign bank's correspondent accounts for other foreign banks, including, as appropriate, the identity of those foreign banks; and
(3) Determine, for any correspondent account established or maintained for a foreign bank whose shares are not publicly traded, 9 the identity of each owner? 10 of the foreign bank and the nature and extent of each owner's ownership interest.
Footnotes:
9 ?The term "publicly traded" is defined at 31 CFR 1010.610(b)(3)(ii)(B).
10 ?The term "owner" is defined at 31 CFR 1010.610(b)(3)(ii)(A).
[top] Under 31 CFR 1010.610(d), covered financial institutions are required to establish special procedures when due diligence or EDD cannot be performed, including when the covered financial institution should refuse to open the account, suspend transaction activity, file a suspicious activity report, or close the account.
B. 31 CFR 1010.620-Due Diligence Programs for Private Banking Accounts
Under 31 CFR 1010.620, covered financial institutions are required to establish due diligence policies, procedures, and controls that, at a minimum, are designed to ensure that the covered financial institutions take reasonable steps to: (i) ascertain the identity of all nominal and beneficial owners of a private banking account;? 11 (ii) ascertain whether any nominal or beneficial owner is a senior foreign political figure; (iii) ascertain the source(s) of funds deposited into a private banking account and the purpose and expected use of the account; and (iv) review the activity of the account to ensure that it is consistent with the information obtained about the client's source of funds and with the stated purpose and expected use of the account, as needed to guard against money laundering, and to report in accordance with applicable law and regulation, any known or suspected money laundering or suspicious activity conducted to, from, or through a private banking account.
Footnotes:
11 ?Private banking account means an account (or any combination of accounts) maintained at a covered financial institution that: (i) requires a minimum aggregate deposit of funds or other assets of not less than $1,000,000; (ii) is established on behalf of or for the benefit of one or more non-U.S. persons who are direct or beneficial owners of the account; and (iii) is assigned to, or is administered or managed by, in whole or in part, an officer, employee, or agent of a covered financial institution acting as a liaison between the covered financial institution and the direct or beneficial owner of the account. 31 CFR 1010.605(m).
Under 31 CFR 1010.620(c), in the case of a private banking account for which a senior foreign political figure is a nominal or beneficial owner, covered financial institutions are required to conduct enhanced scrutiny of the account that is reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption. 12
Footnotes:
12 ? See 31 CFR 1010.620(c)(2) for the definition of the term "proceeds of foreign corruption."
Under 31 CFR 1010.620(d), covered financial institutions are required to establish special procedures when appropriate due diligence cannot be performed, including when the covered financial institution should refuse to open the account, suspend transaction activity, file a suspicious activity report, or close the account.
II. Paperwork Reduction Act of 1995? 13
Footnotes:
13 ?Public Law 104-13, 44 U.S.C. 3506(c)(2)(A).
Title: Due diligence programs for correspondent accounts for foreign financial institutions and private banking accounts (31 CFR 1010.610 and 31 CFR 1010.620).
OMB Control Number: 1506-0046.
Form Number: Not applicable.
Abstract: FinCEN is issuing this notice to renew the OMB control number for the regulations that require covered financial institutions to establish and maintain due diligence programs for correspondent accounts for foreign financial institutions and for private banking accounts.
Affected Public: Businesses or other for-profit institutions, and non-profit institutions.
Type of Review: Renewal without change of a currently approved information collection.
Frequency: As required.
Estimated Number of Respondents: 16,232 financial institutions. 14
Footnotes:
14 ?Table 1 below breaks down the types of financial institutions covered by this notice.
Estimated Recordkeeping Burden:
In Part 1 of this notice, FinCEN describes the distribution of the estimated number of covered financial institutions, by type. In Part 2, FinCEN proposes for review and comment a renewal of the calculation of the annual PRA burden that includes a scope and methodology similar to that used in the 2020 notice to renew this information collection. 15
Footnotes:
15 ? See FinCEN, Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of Anti-Money Laundering Programs; Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions and for Private Banking Accounts, 85 FR 61104 (Sept. 29, 2020).
Part 1. Distribution of the Financial Institutions Covered by This Notice
The distribution of financial institutions, by type, covered by this notice is reflected in table 1 below:
| Type of institution | Count |
|---|---|
| Banks with a Federal functional regulator (FFR)? a | 9,800 |
| Banks lacking an FFR? b | 600 |
| Brokers or dealers in securities? c | 3,478 |
| Mutual funds? d | 1,400 |
| Futures commission merchants and introducing brokers in commodities? e | 954 |
| Total | 16,232 |
| a ?This estimate is based on call report data, as publicly available for download at the end of June 2023, from the Federal Financial Institutions Examination Council (FFIEC) for certain types of banks, savings associations, thrifts, trust companies ( https://cdr.ffiec.gov/public/pws/downloadbulkdata.aspx ) and from the NCUA for credit unions ( https://www.ncua.gov/analysis/credit-union-corporate-call-report-data ). | |
| b ?This estimate of active entries as of year-end 2023 incorporates data from both public and non-public sources, including: Call Reports; various State banking/financial institution regulators' websites and directories; the Federal Reserve Board of Governors' Master Account and Services database ( https://federalreserve.gov/paymentsystems/master-account-and services-database-exisiting-access.htm ); and data from the OCIF (Oficina del Comisionado de Instituciones Financieras); and was derived in consultation with staff from the Internal Revenue Service's Small Business/Self-Employed Division. | |
| c ?Estimate based on December 2023 file downloaded from data maintained by the U.S. Securities and Exchange Commission's (SEC). SEC, Company Information About Active Broker-Dealers available at https://www.sec.gov/help/foiadocsbdfoia (accessed on Feb. 28, 2024). | |
| d ?This estimate of the number of active mutual funds as of year-end 2023 is based on Form N-CEN filings received by the SEC through January 20, 2023, as represented by data downloaded from SEC Open Data. SEC, Open Data, available at https://www.sec.gov/dera/data/form-ncen-data-sets (accessed Feb. 29, 2024). | |
| e ?The number of futures commissions merchants as of December 31, 2023, was obtained from data available through the Commodity Futures Trading Commission (CFTC). CFTC, Financial Data for Futures Commission Merchants, available at https://www.cftc.gov/MarketReports/financialfcmdata/index.htm (accessed Mar. 1, 2024). To prevent double counting in burden estimates, 35 covered financial institutions that are also affected entities as broker-dealers were removed from the count; the count of introducing brokers in commodities as of year-end 2023 was provided by the CFTC. | |
In connection with a variety of initiatives FinCEN is undertaking to implement the AML Act, FinCEN intends to conduct, in the future, additional assessments of the PRA burden associated with BSA requirements.
Part 2. Annual PRA Burden and Cost
[top] The scope of the annual PRA burden and cost estimates in this renewal is limited to maintaining and updating the due diligence programs as part of current AML program requirements for covered financial institutions. Due to the practical challenges of obtaining the total number of correspondent accounts maintained by covered financial
FinCEN continues estimating the annual hourly burden of maintaining and updating the due diligence program for foreign correspondent accounts and private banking accounts at two hours per covered financial institution. This estimate covers the burden of (i) maintaining and updating the due diligence program to take into consideration any regulatory changes and any potential modifications required by changes in the types of foreign correspondent accounts or private banking accounts maintained, or by changes in the operations or organizational structure of the foreign financial institutions for which a covered financial institution maintains accounts, as well as changes to the organizational structure of private banking accounts (one hour), and (ii) presenting the updated due diligence program to the appropriate level of senior management of the financial institution for approval (one hour).
FinCEN's estimate of the annual PRA burden, therefore, is 32,464 hours, as detailed in table 2 below:
| Type of financial institution | Number of financial institutions (see table 1) | Time per financial institution (hours) | Maintenance | Approval | Aggregate burden hours per step | Maintenance | Approval | Total burden hours |
|---|---|---|---|---|---|---|---|---|
| Banks with an FFR | 9,800 | 1 | 1 | 9,800 | 9,800 | 19,600 | ||
| Banks without an FFR | 600 | 1 | 1 | 600 | 600 | 1,200 | ||
| Brokers or dealers in securities | 3,478 | 1 | 1 | 3,478 | 3,478 | 6,956 | ||
| Mutual funds | 1,400 | 1 | 1 | 1,400 | 1,400 | 2,800 | ||
| Futures commission merchants and introducing brokers in commodities | 954 | 1 | 1 | 954 | 954 | 1,908 | ||
| Total Burden Hours | 16,232 | 16,232 | 32,464 |
FinCEN is utilizing the same fully-loaded composite hourly wage rate of $106.30 utilized in the notice of proposed rulemaking (NPRM) entitled Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Companies, which was published on May 21, 2024. 16
Footnotes:
16 ? See FinCEN and SEC, NPRM Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers, 89 FR 44571 (May 21, 2024). Specifically, as set out on 89 FR 44590, table 1, footnote 1, the wage rate applied here is a general composite hourly wage ($74.86), scaled by a private-sector benefits factor of 1.42 ($106.30 = $74.86 × 1.42), that incorporates the mean wage data (available for download at https://www.bls.gov/oes/tables.htm, "May 2022-National industry-specific and by ownership") associated with the six occupational codes (11-1010: Chief Executives; 11-3021: Computer and Information Systems Managers; 11-3031: Financial Managers; 13-1041: Compliance Officers; 23-1010: Lawyers and Judicial Law Clerks; 43-3099: Financial Clerks, All Other) for each of the nine groupings of NAICS industry codes that FinCEN determined are most directly comparable to its eleven categories of covered financial institutions as delineated in 31 CFR parts 1020 to 1030. The benefit factor is 1 plus the benefit/wages ratio, where as of Dec. 2023, Total Benefits = 29.6 and Wages and salaries = 70.4 (29.6/70.4 = 0.42) based on the private industry workers series data downloaded from https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx, accessed Mar. 22, 2024.
The total estimated cost of the annual PRA burden is $3,450,923.20, as reflected in table 3 below:
| Steps | Hourly burden | Hourly cost | Total cost |
|---|---|---|---|
| Maintaining and updating the program | 16,232 | $106.30 | $1,725,461.60 |
| Board of directors/senior management approval of the program | 16,232 | 106.30 | 1,725,461.60 |
| Total Cost | 3,450,923.20 |
Estimated Recordkeeping Burden: The average estimated annual PRA burden, measured in hours per respondent, is two hours (one burden hour to annually maintain and update the due diligence program, and one hour to annually obtain senior management approval of the due diligence program).
Estimated Number of Respondents: 16,232, as set out in table 1.
Estimated Total Annual Responses: 16,232 revised due diligence programs for foreign correspondent accounts and private banking accounts annually; and 16,232 due diligences programs for foreign correspondent accounts and private banking accounts approved by senior management each year, as set out in table 2.
Estimated Total Annual Recordkeeping Burden: The estimated total annual PRA burden is 32,464 hours, as set out in table 2.
Estimated Total Annual Recordkeeping Cost: The estimated total annual PRA cost is $3,450,923.20, as set out in table 3.
An Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Records required to be retained under the BSA must be retained for five years.
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Request for Comments: Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: (i) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (ii) the accuracy of the agency's estimate of the burden of the collection of information; (iii) ways to enhance the quality, utility, and clarity of the information to be collected; (iv) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (v) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-12728 Filed 6-10-24; 8:45 am]
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