[Federal Register Volume 75, Number 27 (Wednesday, February 10, 2010)]
[Rules and Regulations]
[Pages 6560-6570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2928]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AB04
Financial Crimes Enforcement Network; Expansion of Special
Information Sharing Procedures To Deter Money Laundering and Terrorist
Activity
AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.
ACTION: Final rule.
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SUMMARY: FinCEN is issuing this final rule to amend the relevant Bank
Secrecy Act (``BSA'') information sharing rules to allow certain
foreign law enforcement agencies, and State and local law enforcement
agencies, to submit requests for information to financial institutions.
The rule also clarifies that FinCEN itself, on its own behalf and on
behalf of other appropriate components of the Department of the
Treasury (``Treasury''), may submit such requests. Modification of the
information sharing rules is a part of Treasury's continuing effort to
increase the efficiency and effectiveness of its anti-money laundering
and counter-terrorist financing policies.
DATES: Effective Date: February 10, 2010.
FOR FURTHER INFORMATION CONTACT: The FinCEN regulatory helpline at
(800) 949-2732 and select Option 2.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (``USA PATRIOT ACT''),
Public Law 107-56 (``the Act''). Title III of the Act amends the anti-
money laundering provisions of the BSA, codified at 12 U.S.C. 1829b and
1951-1959 and 31 U.S.C. 5311-5314 and 5316-5332, to promote the
prevention, detection, and prosecution of international money
laundering and the financing of terrorism. Regulations implementing the
BSA appear at 31 CFR Part 103. The authority of the Secretary of the
Treasury (``the Secretary'') to administer the BSA has been delegated
to the Director of FinCEN.
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 promulgating regulations
to implement these information-sharing provisions.
Subsection 314(a) of the Act states in part that:
[t]he Secretary shall * * * adopt regulations to encourage further
cooperation among financial institutions, their regulatory
authorities, and law enforcement authorities, with the specific
purpose of encouraging regulatory authorities and law enforcement
authorities to share with financial institutions information
regarding individuals, entities, and organizations engaged in or
reasonably suspected based on credible evidence of engaging in
terrorist acts or money laundering activities.
B. Overview of the Current Regulatory Provisions Regarding the 314(a)
Program
On September 26, 2002, FinCEN published a final rule implementing
the authority contained in section 314(a) of the Act.\1\ That rule
(``the 314(a) rule'') allows FinCEN to require financial institutions
to search their records to determine whether they have maintained an
account or conducted a transaction with a person that a Federal law
enforcement agency has certified is suspected based on credible
evidence of engaging in terrorist activity or money laundering.\2\
Before processing a request from a Federal law enforcement agency,
FinCEN also requires the requesting agency to certify that, in the case
of money laundering, the matter is significant, and that the requesting
agency has been unable to locate the information sought through
traditional methods of investigation and analysis before attempting to
use this authority (``the 314(a) program'').
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\1\ Special Information Sharing Procedures to Deter Money
Laundering and Terrorist Activity, 67 FR 60,579 (Sept. 26, 2002).
\2\ 31 CFR 103.100.
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Since its inception, the 314(a) program has yielded significant
investigative benefits to Federal law enforcement users in terrorist
financing and major money laundering cases. Feedback from the
requesters and illustrations from sample case studies consistently
demonstrate how useful the program is in enhancing the scope and
expanding the universe of investigations. In view of the proven success
of the 314(a) program, FinCEN is broadening access to the program as
outlined in the following paragraphs.
C. Objectives of Changes
1. Allowing Certain Foreign Law Enforcement Agencies To Initiate 314(a)
Queries
In order to satisfy the United States' treaty obligation with
certain foreign governments, FinCEN is extending the use of the 314(a)
program to include foreign law enforcement agencies. On June 25, 2003,
the Agreement on Mutual Legal Assistance between the United States and
the European Union (``EU'') (hereinafter, the ``U.S.-EU MLAT'') was
signed. In 2006, the U.S.-EU MLAT, along with twenty-five bilateral
instruments, were submitted to the U.S. Senate for its advice and
consent for
[[Page 6561]]
ratification. The U.S.-EU MLAT and all twenty-seven bilateral
instruments were ratified by the President on September 23, 2008, upon
the advice and consent of the U.S. Senate.\3\
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\3\ An additional two bilateral instruments, with Romania and
Bulgaria, were concluded and submitted to the Senate in 2007,
following those countries' accession to the EU.
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Article 4 of the U.S.-EU MLAT (entitled ``Identification of Bank
Information'') obligates a requested Signatory State to search on a
centralized basis for bank accounts within its territory that may be
important to a criminal investigation in the requesting Signatory
State. Article 4 also contemplates that Signatory States may search for
information in the possession of a non-bank financial institution.
Under Article 4, a Signatory State receiving a request may limit the
scope of its obligation to provide assistance to terrorist activity and
money laundering offenses, and many did so in their respective
bilateral instruments with the United States.\4\ In negotiating the
terms of Article 4, the United States expressly envisioned that EU
member States would be able to access the 314(a) program. Expanding
that process to include certain foreign law enforcement requesters will
greatly benefit the United States by granting law enforcement agencies
in the United States reciprocal rights to obtain information about
matching accounts in EU member States.
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\4\ In addition, Article 4 makes clear that the United States
and the EU are under an obligation to ensure that the application of
Article 4 does not impose extraordinary burdens on States that
receive search requests.
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Foreign law enforcement agencies will be able to use the 314(a)
program in a way analogous to how Federal law enforcement agencies
currently access the program. Thus, a foreign law enforcement agency,
prior to initiating a 314(a) query, will have to certify that, in the
case of a money laundering investigation, the matter is significant,
and that it has been unable to locate the information sought through
traditional methods of investigation and analysis before attempting to
use the 314(a) program. A Federal law enforcement official serving as
an attach[eacute] to the requesting jurisdiction will be notified of
and will review the foreign request prior to its submission to FinCEN.
The application of these internal procedures will help ensure that the
314(a) program is utilized only in significant situations, thereby
minimizing the cost to reporting financial institutions. Comments
addressed to the expansion of the 314(a) program to include foreign law
enforcement agencies will be discussed below.
2. Allowing State and Local Law Enforcement Agencies To Initiate 314(a)
Queries
Money laundering and terrorist-related financial crimes are not
limited by jurisdiction or geography. Detection and deterrence of these
crimes require information sharing across all levels of investigative
authorities, to include State and local law enforcement, to ensure the
broadest U.S. Government defense.
Access to the 314(a) program by State and local law enforcement
agencies will provide them a platform from which they can more
effectively and efficiently fill information gaps, including those
connected with multi-jurisdictional financial transactions, in the same
manner as Federal law enforcement agencies. This expansion of the
314(a) program, in certain limited circumstances, to include State and
local law enforcement authorities, will benefit overall efforts to
ensure that all law enforcement resources are made available to combat
money laundering and terrorist financing.
As is the case currently with requesting Federal law enforcement
agencies, State and local law enforcement, prior to initiating a 314(a)
query, will have to certify that, in the case of a money laundering
investigation, the matter is significant, and that it has been unable
to locate the information sought through traditional methods of
investigation and analysis before attempting to use the 314(a) program.
The application of these internal procedures will help ensure that the
314(a) program will be utilized only in the most compelling situations,
thereby minimizing the cost incurred by reporting financial
institutions. Comments addressed to the expansion of the 314(a) program
to allow State and local law enforcement participation will be
discussed below.
3. Clarifying That FinCEN, on Its Own Behalf and on Behalf of
Appropriate Components of the Department of the Treasury, May Initiate
314(a) Queries
FinCEN's statutory mandate includes working to identify possible
criminal activity to appropriate Federal, State, local, and foreign law
enforcement agencies, and to support ongoing criminal financial
investigations and prosecutions.\5\ FinCEN also routinely assists the
law enforcement community through proactive analyses to discover
trends, patterns, and common activity in the financial information
contained in BSA reports. FinCEN's use of the 314(a) program will
enhance the scope and utility of its case support efforts, including
insights provided from BSA data, thereby delivering critical
information about significant criminal activity on a timelier basis.
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\5\ See 31 U.S.C. 310.
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FinCEN assists law enforcement by providing advanced or specialized
analysis of BSA data on significant investigations involving offenses
of money laundering or terrorist financing. These investigations often
involve multiple locations or are otherwise linked to other
investigations. A single 314(a) request issued by FinCEN can more
efficiently coordinate and simultaneously support several
investigations, thereby eliminating the need for separate requests from
each investigating agency or jurisdiction.
There also are instances in which FinCEN's analytical products will
benefit from access to the 314(a) program by providing a more complete
picture of financial transactions and mechanisms, as well as
interrelationships among investigative subjects and financial
transactions or entities. In addition, other appropriate components of
Treasury that provide analytical support in areas such as Treasury's
counter-terrorist financing and anti-money laundering efforts will be
better equipped to fulfill their missions with access to the 314(a)
program. It is anticipated that the findings from the use of the 314(a)
program will reveal additional insights and overall patterns of
suspicious financial activities. Comments addressed to the expansion of
the 314(a) program to allow FinCEN to self-initiate requests will be
discussed below.
II. Notice of Proposed Rulemaking
The final rule contained in this document is based on the Notice of
Proposed Rulemaking published in the Federal Register on November 16,
2009 (``Notice'').\6\ With the intent of broadening access to the
314(a) program, the Notice proposed to allow certain foreign law
enforcement agencies, and State and local law enforcement agencies, to
initiate 314(a) queries. In addition, the Notice proposed to clarify
that FinCEN, on its own behalf and on behalf of appropriate components
of Treasury, may initiate 314(a) queries.
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\6\ See 74 FR 58926 (Nov. 16, 2009).
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III. Comments on the Notice--Overview and General Issues
The comment period for the Notice ended on December 16, 2009. We
[[Page 6562]]
received a total of 13 comment letters from 14 entities and
individuals.\7\ Of these, 7 were submitted by trade groups or
associations, 4 were submitted by individuals, 2 were submitted by
Federal law enforcement agencies, and 1 was submitted by an individual
financial institution.\8\
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\7\ All comments to the Notice are available for public viewing
at www.regulations.gov.
\8\ One comment letter was submitted on behalf of two entities.
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Comments on the Notice focused on the following matters: (1)
Requirements for foreign, State, and local law enforcement 314(a)
requests; (2) Confidentiality and privacy concerns regarding
information provided to foreign, State, and local law enforcement; (3)
Requirements for FinCEN self-initiated 314(a) requests; (4) FinCEN's
authority to expand the 314(a) rule; (5) The 314(a) statutory goal of
sharing information with financial institutions; and (6) Estimate of
burden.
A. Requirements for Foreign, State, and Local Law Enforcement 314(a)
Requests
Some commenters requested that FinCEN clarify what the requirements
are for foreign, State, and local law enforcement to submit 314(a)
requests. In addition, those commenters asked FinCEN to clarify how the
requests will be monitored to ensure that regulatory and procedural
requirements are met. For example, some commenters requested
clarification as to how FinCEN will determine whether a money
laundering investigation is ``significant'' and that more traditional
means of investigation have been exhausted. FinCEN will require these
law enforcement agencies to certify that each individual, entity, or
organization about which the law enforcement agency is seeking
information is engaged in, or is reasonably suspected based on credible
evidence of engaging in, terrorist financing, or money laundering. As
discussed above, FinCEN will require these law enforcement agencies to
certify that, in the case of money laundering, the matter is
significant, and the requesting agency has been unable to locate the
information sought through traditional methods of investigation before
attempting to make a 314(a) request. In addition, foreign, State, and
local law enforcement agencies making 314(a) requests are required to
include the following information in their certification request: A
citation of the relevant statutory provisions; a description of the
suspected criminal conduct; for money laundering cases, a description
as to why the case is significant, and a list of the traditional
methods of investigation and analysis which have been conducted prior
to making the request. Factors that contribute towards evaluating the
significance of a money laundering case include, for example: The
seriousness and magnitude of suspected criminal conduct; the dollar
amount involved; whether the analysis is being conducted as part of a
multi-agency task force; the importance of analysis to agency program
goals; criminal organization involvement; and multi-regional and/or
cross border implications.
All requests made by foreign, State, and local law enforcement
agencies will be submitted to FinCEN for review and approval. With
regard to a request made by a foreign law enforcement agency, the
request will be submitted to a Federal law enforcement attach[eacute].
The attach[eacute] will review the request to ensure that the request
is from a legitimate entity. The attach[eacute] will then forward the
request to FinCEN for review. Following FinCEN's approval, the request
will be made available to financial institutions via the 314(a) Secure
Information Sharing System. The financial institutions may contact
FinCEN's 314 Program Office with any questions regarding a foreign law
enforcement request. With regard to a State or local law enforcement
request, the financial institution may contact FinCEN, or the State or
local law enforcement agency with any questions regarding its request.
FinCEN's determination to subject foreign, State, and local law
enforcement requests to the same procedural review and vetting process
imposed upon Federal law enforcement requests goes directly to the
recommendations offered by many commenters.
One commenter asked whether foreign, State, or local law
enforcement will be identified as the requester on 314(a) requests sent
by FinCEN to financial institutions. Currently, in a request made by a
Federal law enforcement agency, the request made available by FinCEN to
financial institutions only includes the name and contact number of the
agency representative making the request. The Federal law enforcement
agency making the request is not identified on 314(a) requests sent by
FinCEN to financial institutions. For a request made by a State or
local law enforcement agency, the request made available by FinCEN to
financial institutions also will include the name and contact number of
the agency representative making the request. For a request made by a
foreign law enforcement agency, the request made available by FinCEN to
financial institutions will include the contact number for FinCEN's 314
Program Office. This decision was made to alleviate the need for
financial institutions to call overseas.
One commenter asked for clarification as to whether foreign, State,
and local law enforcement requests could be made independent of a
Federal investigation. There is no obligation that requests from these
agencies be linked to a Federal investigation. However, with regard to
State and local law enforcement requests, the law enforcement agency
must include in the certification the identity of any Federal law
enforcement agency with whom they have consulted. In addition, for
terrorism cases FinCEN will review the request with the FBI liaison to
FinCEN prior to further processing the request.
A few commenters suggested that FinCEN should limit access to those
countries that cooperate with the United States via a treaty or other
bilateral agreement. As we discuss above, only foreign law enforcement
agencies with criminal investigative authority that are from a
jurisdiction that is a party to a treaty that provides for, or in the
determination of FinCEN is from a jurisdiction that otherwise allows,
law enforcement agencies in the United States reciprocal access to
information comparable to that obtainable under section 103.100 will be
allowed to access the 314(a) program. Some commenters suggested that
FinCEN should clarify which State and local law enforcement agencies
will be allowed to access the 314(a) program. All State and local law
enforcement agencies with criminal investigative authority will be
allowed to access the 314(a) program.
One association suggested that before any expansion in the proposal
is considered, the current internal controls over the 314(a) program
should be incorporated into the rule. FinCEN is not inclined to
incorporate its internal operating procedures into the regulation, as
this would not allow us sufficient latitude to revise our internal
operating procedures as needed.
A few commenters asked for clarification as to what steps foreign,
State, and local law enforcement will be required to take to obtain
information from a financial institution if a match to their request is
identified. The steps required to be taken by one of these law
enforcement agencies to obtain information from a financial institution
once a match has been confirmed is not addressed within the 314(a)
rule. These law enforcement agencies will have to follow the standard
procedures that they currently follow in order to obtain financial
information from financial
[[Page 6563]]
institutions, for example through issuance of a subpoena, a letter
rogatory, or national security letter.
Two commenters noted that Federal law enforcement is required to
track their use of the 314(a) data to provide feedback, demonstrate
program value, and maintain accountability. FinCEN routinely provides
feedback and data to the regulated public as to the effectiveness of
the 314(a) program (e.g., SAR Activity Review articles \9\) and will
continue to do so in the future. The commenters suggested that the data
reporting requirements be made explicit in the implementing regulations
and the same data reporting requirements should apply to foreign,
State, and local law enforcement. As noted above, FinCEN is not
inclined to incorporate its internal operating procedures into the
regulation. However, the same data reporting requirements will apply to
foreign, State, and local law enforcement.
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\9\ See, e.g., ``BSA Records, 314(a) Request Assists
Investigation of International Money Laundering Using Stored Value
Cards,'' SAR Activity Review--Trends, Tips & Issues, Issue 12,
October 2007, http://www.fincen.gov/law_enforcement/ss/html/008.html.
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One commenter asked how FinCEN would address overlapping interests
of different law enforcement agencies pursuing the same subject. With
regard to foreign requests, while processing the request, any existing
cases the 314(a) subject(s) hits against will be brought to the
immediate attention of FinCEN's 314 Team Leader to determine what
further action will take place. FinCEN will automatically network
(i.e., notify) all international terrorism-related requests with the
FBI only, and will automatically network all international money
laundering requests with both Federal and non-Federal law enforcement
agencies, as applicable. With regard to State and local law enforcement
requests, the law enforcement agency must include in the certification
the identity of any Federal law enforcement agency with whom they have
consulted. For State and local law enforcement requests related to
terrorism cases, FinCEN will review the request with the FBI liaison to
FinCEN prior to further processing the request. In addition, it is
FinCEN's policy to network different requesters that have submitted
requests for information to FinCEN on the same subject. Networking
gives requesters the opportunity to coordinate their efforts with U.S.
law enforcement and other international entities on matters of mutual
interest. Networking will apply to requests made by foreign, State, and
local law enforcement.
A few commenters suggested that FinCEN provide training to foreign,
State, and local law enforcement regarding the proper procedures for
utilizing the 314(a) program. While a formal process has not been
instituted at this point, FinCEN's intention is to provide outreach to
the new law enforcement users.
Another commenter suggested that instead of allowing all State and
local law enforcement agencies to access the 314(a) program, a 2-year
pilot program allowing access to two or three large State and local law
enforcement agencies be implemented instead. The commenter noted that
FinCEN could monitor the results of the pilot program and report the
results to Congress and the public. While FinCEN will monitor the
effectiveness of the program's expansion, arbitrarily limiting access
to certain large local jurisdictions would deny potential access to
smaller communities confronting serious criminal threats.
One commenter suggested that local law enforcement agencies be
required to enter into a memorandum of understanding with FinCEN in
order to access the 314(a) program. FinCEN has an active cooperative
relationship with law enforcement at every level in the country, and
expanding the 314(a) program to allow local law enforcement access is
part of the ongoing support FinCEN provides to law enforcement. This
support includes, for example, providing access to BSA data, fostering
information exchange with international counterparts, and offering
financial subject matter knowledge in key realms.
B. Confidentiality and Privacy Concerns Regarding Information Provided
to Foreign, State, and Local Law Enforcement
A few commenters expressed concern about the confidentiality of
information that financial institutions would provide to FinCEN as a
result of the rule, particularly when such information is shared by
FinCEN with requesting foreign, State and local law enforcement
agencies. At least one commenter drew an analogy between section 314(a)
``hit'' information and information in suspicious activity reports
(``SARs'') to argue that section 314(a) information should be accorded
the same protections and assurances of confidentiality when such
information is shared with foreign law enforcement agencies.
FinCEN believes these concerns are unfounded. Section 314(a)
information is extremely limited. Unlike SAR information, section
314(a) information will continue to consist of only a confirmation that
a matching account or transaction exists. Also unlike the documentation
supporting the filing of a SAR, the underlying account and transaction
information relating to a 314(a) hit that contains sensitive customer
financial information is not deemed to be part of the 314(a) response,
and can only be obtained by the requesting agency through appropriate
legal process, such as a subpoena. FinCEN is not part of that legal
process to obtain the underlying information; its involvement ends at
informing requesting agencies that a match exists. In addition, unlike
with SARs, the personally-identifiable information (e.g., subject
names, aliases, dates of birth, and social security numbers) that a
financial institution uses to conduct a section 314(a) search is
provided not by the institution, but by the requesting agency.
Another commenter questioned whether sharing section 314(a)
information with foreign law enforcement agencies may run afoul of the
Right to Financial Privacy Act (``RFPA''), 12 U.S.C. 3401 et seq., or
any other Federal or state privacy law. Because any hit information
provided to FinCEN would be reported pursuant to a Federal rule, the
reporting of such information to FinCEN would fall within an exception
to the RFPA.\10\ FinCEN is not aware of any other Federal or state law
that would prohibit a financial institution from reporting section
314(a) information to FinCEN in response to a foreign law enforcement
agency's request or that would prevent FinCEN from sharing such
information with the foreign requester.
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\10\ 12 U.S.C. 3413(d).
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C. Requirements for FinCEN Self-Initiated 314(a) Requests
Some commenters requested that FinCEN clarify the reason FinCEN
needs access to expand the 314(a) program to allow it to make self-
initiated requests, how FinCEN will use the information, the procedures
that will apply to initiating the requests, the parties who will screen
such requests, and any limitations that will apply to FinCEN's self-
initiated requests. FinCEN self-initiated requests will be for the
purpose of conducting analysis to deter and detect terrorist financing
activity or money laundering. These requests will be made in order to
increase the value of analytical support to law enforcement. FinCEN or
the appropriate Treasury component making the request shall certify in
writing in the same manner as a requesting law enforcement agency that
each individual, entity or
[[Page 6564]]
organization about which FinCEN or the appropriate Treasury component
is seeking information is engaged in, or is reasonably suspected based
on credible evidence of engaging in, terrorist activity or money
laundering. FinCEN or the other appropriate Treasury component making
the request shall also certify that, in the case of money laundering,
the matter is significant, and the requesting agency has been unable to
locate the information sought through traditional methods of analysis
before attempting to make a 314(a) request. In addition, FinCEN or the
appropriate Treasury component making the 314(a) request is required to
include information such as the following in their certification
request: For money laundering cases, a description as to why the case
is significant, and a list of the traditional methods of analysis which
have been conducted prior to making the request. If FinCEN uses the
314(a) process in support of proactive target development, FinCEN will
first brief law enforcement to ensure that the analysis is of interest
to law enforcement and to ensure de-confliction with any ongoing
investigation. In addition, FinCEN self-initiated 314(a) requests will
be independently reviewed and approved by multiple offices within
FinCEN.
In addition, some commenters requested that FinCEN clarify the
components of Treasury that will have access to the 314(a) program and
under what circumstances. The components of Treasury that will have
access to the 314(a) program will be those components that provide
analytical support, such as those providing support to Treasury's
counter-terrorist financing and anti-money laundering efforts. The
components of Treasury which submit 314(a) requests will be required to
comply with the same procedures and certification requirements as
FinCEN self-initiated requests.
Two commenters noted that permitting FinCEN and other components of
Treasury to self-initiate 314(a) requests may be detrimental to law
enforcement and may cause many unnecessary searches by banks. The same
commenters noted that it appears that FinCEN is lowering the threshold
as to when FinCEN can initiate 314(a) requests. The commenters
explained that law enforcement must exhaust all traditional methods of
investigation before they can initiate a 314(a) request. Because FinCEN
is not a law enforcement agency, FinCEN cannot exhaust all traditional
methods of investigation, and therefore FinCEN will be held to a much
lower threshold than law enforcement. In addition, the commenters are
concerned that law enforcement may be precluded from making a 314(a)
request on a subject, at a crucial point of an investigation, if FinCEN
has previously conducted a self-initiated request on the same subject,
because this would create a duplicative search, something that has been
discouraged by FinCEN. The commenters also are concerned that a FinCEN
or Treasury 314(a) request may be submitted on a subject who is already
under investigation by law enforcement, because the broad audience that
receives these requests could cause operational concerns for the
investigation. In addition, the commenters noted that it is not clear
what FinCEN will do with the information once it learns of a previously
unknown bank account through the 314(a) process if FinCEN does not have
subpoena or summons authority to pursue the lead any further. Finally
these commenters noted that FinCEN's requests will be competing with
law enforcement for access to the limited number of 314(a) requests
that can be made, due to the need not to overburden financial
institutions.
FinCEN will be implementing review procedures to ensure that any
request it intends to make will not conflict with ongoing law
enforcement efforts. As noted above, in the certification FinCEN or
other components of Treasury will submit for a 314(a) request, they
must certify that to ensure de-confliction with any possible on-going
investigation within the Federal law enforcement community, they have
consulted with FinCEN's Federal law enforcement liaisons. In addition,
FinCEN must also certify that they have been unable to locate the
information sought through traditional methods of analysis, and they
must list the type of analysis they have conducted. It is anticipated
that any direct use by FinCEN of the 314(a) program will not cause any
significant increase in the amount of case requests going to the
industry. The primary scenarios in which we would envision FinCEN
making a 314(a) request are as follows: (1) A request could be made for
FinCEN to serve as a conduit in issuing a consolidated 314(a) request
on behalf of a multi-agency task force investigation. In this instance,
it might actually reduce/preclude an otherwise larger number of
separate requests emanating from individual agencies. FinCEN would
request that these agencies conduct the subpoena/investigative followup
on any positive hits received from the industry. (2) FinCEN may
occasionally develop significant, multi-state proactive targets/leads
which might be appropriate for a 314(a) request. These are typically
long-term selective efforts and therefore not likely to constitute any
significant increase in the number of 314(a) requests. In addition,
FinCEN would first brief the law enforcement community on the target
package before deciding to issue a 314(a) request to ensure it is of
substantial interest to law enforcement agencies and also to ensure an
opportunity for de-confliction. If positive hits occur, FinCEN would
collaborate with law enforcement on any subpoena/investigative follow-
up. Furthermore, for any FinCEN self-initiated 314(a) requests, the
same parameters will exist for justifying the significance of the `case
request' which, in turn, will also likely limit the number of such
requests.
D. FinCEN's Authority To Expand the 314(a) Rule
A few commenters questioned FinCEN's authority to expand the
section 314(a) program to include requesters other than Federal law
enforcement agencies. Section 314(a) authorizes Treasury to adopt
regulations to encourage further cooperation among ``financial
institutions, their regulatory authorities, and law enforcement
authorities.'' Nowhere in section 314(a) is the term ``law
enforcement'' limited to just Federal law enforcement agencies. That
FinCEN initially included only Federal law enforcement agencies when it
first established the section 314(a) program in 2002 was never meant to
suggest a limitation on FinCEN's authority. On the contrary, the
section 314(a) program began with Federal law enforcement because of
uncertainty about how the program would work in practice and
uncertainty about the resulting burden to financial institutions.
FinCEN has had almost eight years of experience in administering the
section 314(a) program, and for the reasons outlined elsewhere in this
rulemaking, believes that its expansion to include other requesters
will reap benefits that far outweigh the additional obligations on
financial institutions. This is particularly true in the case of
foreign requesters because law enforcement agencies in the United
States, as a result of FinCEN accommodating foreign requesters, now
will have the opportunity to obtain information about matching accounts
and transactions in those EU jurisdictions that have signed the U.S.-EU
MLAT. FinCEN therefore believes that its expansion of the section
314(a) program is entirely consistent with the stated goals of section
314(a) of
[[Page 6565]]
encouraging cooperation between financial institutions and law
enforcement agencies.
FinCEN received another comment questioning its ``expansion'' of
the term ``money laundering,'' as that term is used in the rule.
Currently, that term is defined to mean activity criminalized by 18
U.S.C. 1956 or 1957. The one change to the definition of the term
``money laundering'' would be to clarify that the term includes
activity that would be criminalized by 18 U.S.C. 1956 or 1957 if such
activity occurred in the United States. The change is necessary because
of the addition of foreign law enforcement agencies as an authorized
requester. Aside from making the provisions of the rule relevant to
foreign requesters, the change is not intended and should not be viewed
as expanding the scope of activity for which the section 314(a) program
may be used.
One commenter also expressed concern about the pace at which FinCEN
is seeking to amend the section 314(a) process, given its belief that
section 314(a) information may be obtained through existing processes.
As was explained in the Notice and elsewhere in this rulemaking, FinCEN
is seeking to finalize a rule as quickly as possible so that the U.S.
Government can comply with its obligations under the U.S.-E.U. MLAT and
related bilateral instruments. Those treaties enter into force on
February 1, 2010. Contrary to that commenter's belief, there is no
current mechanism available to State, local and foreign law enforcement
agencies that would allow those agencies to ascertain quickly whether
financial institutions throughout the United States have established an
account or conducted a transaction for a particular person or entity.
E. 314(a) statutory goal of sharing information with financial
institutions
A few commenters noted that the proposed rule sets forth additional
reporting requirements for the industry, but does not address how this
furthers the statutory goal of sharing information with financial
institutions. One of these commenters noted that FinCEN should develop
mechanisms, in addition to its bi-annual SAR Activity Review
publication, that will help share information with financial
institutions. The overarching policy directive of the Act generally,
and section 314 in particular, is that more information sharing will
better enable the Federal Government and financial institutions to
guard against money laundering and terrorist financing. This rule
supports the policy directive of the Act. FinCEN recognizes the
importance of providing financial institutions information to assist
them in identifying and reporting suspected terrorist activity and
money laundering. For this reason, FinCEN regularly provides sample
case feedback studies to the industry which illustrate how the use of
314(a) has often made a `breakthrough' difference in terrorist
financing and significant money laundering cases. The studies also
convey insight on related trends and patterns. FinCEN also has posted
several Federal law enforcement informational alerts on the 314(a)
Secure Information Sharing System, which has provided for enhanced
sharing of information between the financial industry and law
enforcement in a secure environment. In addition, the final rule does
not preclude law enforcement, when submitting a list of suspects to
FinCEN, from providing additional information relating to suspicious
trends and patterns, and FinCEN specifically will encourage law
enforcement to share such information with the financial community.
F. Estimate of burden
Refer to section V-Administrative Matters, item D--Paperwork
Reduction Act for details regarding comments on the estimate of burden.
IV. Section-by-Section Analysis
A. Section 103.90(a)
FinCEN proposed to amend 31 CFR 103.90(a) by changing the
definition of the term ``money laundering'' to include activity that
would be criminalized by 18 U.S.C. 1956 or 1957 if such activity
occurred in the United States.\11\ The change will allow the term to be
applied to information requests by foreign law enforcement agencies.
State and local law enforcement requesters will be subject to the same
definition of money laundering that currently applies to Federal law
enforcement agencies--i.e., activity that is criminalized by 18 U.S.C.
1956 or 1957. Thus, in the case of a significant money laundering
matter, a State or local law enforcement agency seeking information
under the section 314(a) program will have to certify that it is
investigating activity that would be criminalized under 18 U.S.C. 1956
or 1957. Such activity could include, for example, conducting a
financial transaction with proceeds of murder, kidnapping, or dealing
in a controlled substance (as defined in section 102 of the Controlled
Substances Act), which is punishable as a felony under State law.\12\
FinCEN is adopting this amendment as proposed.
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\11\ Two commenters noted that they are opposed to redefining
what constitutes money laundering for 314(a) information sharing
purposes by incorporating guidance that was issued in 2009 under the
companion statutory provision, section 314(b), that allows U.S.
financial institutions to share information. The commenters noted
that broadening the scope improperly sends a signal that serious
money-laundering and terrorist financing crimes have no greater
priority than standard financial fraud or other criminal cases.
FinCEN has not expanded the definition of the term ``money
laundering'' beyond the change noted above.
\12\ See 18 U.S.C. 1956(c)(7) (defining the term ``specified
unlawful activity'' to include, inter alia, an offense listed in 18
U.S.C. 1961(1)).
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B. Section 103.100(a)(4)
FinCEN proposed to add 31 CFR 103.100(a)(4), which will define a
``law enforcement agency'' to include a Federal, State, local, or
foreign law enforcement agency with criminal investigative authority,
provided that the foreign law enforcement agency is from a jurisdiction
that is a party to a treaty that provides, or in the determination of
FinCEN is from a jurisdiction that otherwise allows, law enforcement
agencies in the United States with reciprocal access to information
comparable to that obtainable under section 103.100. The addition of
foreign law enforcement agencies will enable the United States to be
compliant with its obligations under the U.S.-EU MLAT, thereby
providing law enforcement agencies in the United States with the
benefit of reciprocal access to information in EU member States.\13\
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\13\ The U.S.-EU MLAT, and 27 bilateral instruments with EU
Member States implementing its terms, require each EU member State
to be able to search for the kind of information covered by 31 CFR
103.100 and to report to the requesting State the results of such a
search promptly.
---------------------------------------------------------------------------
The addition of State and local law enforcement agencies, as
discussed above, will provide a platform for such agencies to deal more
effectively with multi-jurisdictional financial transactions in the
same manner as Federal law enforcement agencies. Access to the 314(a)
program will provide State and local law enforcement agencies with
another resource to aid in discovering the whereabouts of stolen
proceeds. FinCEN is adopting these amendments as proposed.
C. Section 103.100(b)(1)
FinCEN proposed, for the reasons discussed above, to amend section
103.100(b)(1) to make conforming changes to reflect the addition of
State and local law enforcement agencies, and foreign law enforcement
agencies, as potential requesters of information.\14\
[[Page 6566]]
FinCEN adopts this amendment as proposed.
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\14\ Two Federal law enforcement agencies noted that the NPRM's
appeal to add the EU countries as well as state and local law
enforcement to the 314(a) program is understandable, because these
elements are all law enforcement entities.
---------------------------------------------------------------------------
D. Section 103.100(b)(2)
FinCEN proposed to add a new 31 CFR 103.100(b)(2) which will
clarify that FinCEN may request directly, on its own behalf and on
behalf of appropriate components of Treasury, whether a financial
institution or a group of financial institutions maintains or has
maintained accounts for, or has engaged in transactions with, specified
individuals, entities, or organizations. Comments directed to this
amendment were discussed above and FinCEN has reviewed and weighed the
concerns expressed by some commenters. FinCEN, however, continues to
hold that expanding the 314(a) program to allow itself, and acting on
behalf of other appropriate Treasury components, to initiate search
requests for the purpose of conducting analyses to deter and detect
terrorist financing activity or money laundering will enhance
Treasury's ability to fulfill its collective mission. FinCEN,
therefore, adopts the amendments as proposed.
V. Administrative Matters
A. Executive Order 12866
It has been determined that this rule is a significant regulatory
action for purposes of Executive Order 12866 because it raises a novel
policy issue. However, a regulatory impact analysis was not required.
B. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an
agency prepare a budgetary impact statement before promulgating a rule
that may result in expenditure by that State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 202 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. FinCEN has determined that it
is not required to prepare a written statement under section 202.
C. Regulatory Flexibility Act
When an agency issues a final rule, the Regulatory Flexibility Act
(``RFA'') (5 U.S.C. 601 et seq.), requires the agency to prepare either
a final regulatory flexibility analysis, which will ``describe the
impact of the rule on small entities,'' or to certify that the final
rule is not expected to have a significant economic impact on a
substantial number of small entities. For the reasons stated below,
FinCEN certifies that the final rule will not have a significant
economic impact on a substantial number of small entities.
Estimate of the number of small entities to which the rule will
apply:
The proposed rule applies to all financial institutions of which
FinCEN estimates there are 55,000. However, FinCEN has limited its
inquiries to banks,\15\ broker-dealers in securities, future commission
merchants, trust companies, and life insurance companies (``Covered
Institutions''). Because entities of all sizes are vulnerable to abuse
by money launderers and financers of terrorism, the final rule will
apply to all Covered Institutions regardless of size. As discussed
below, FinCEN acknowledges that the final rule will affect a
substantial number of small entities.
---------------------------------------------------------------------------
\15\ 31 CFR 103.11(c).
---------------------------------------------------------------------------
For purposes of the RFA, both banks and credit unions are
considered small entities if they have less than $175 million in
assets.\16\ Of the estimated 8,000 banks, 80% have less than $175
million in assets and are considered small entities.\17\ Of the
estimated 7,000 credit unions, 90% have less than $175 million in
assets.\18\ A broker-dealer is considered a small entity if its total
capital is less than $500,000, and it is not affiliated with a broker-
dealer that has $500,000 or more in total capital.\19\ Of the estimated
5,000 broker-dealers, 15% are small entities.\20\ FinCEN estimates that
the majority of the remaining 250 affected Covered Institutions are
small entities. Therefore, FinCEN acknowledges that the rule will
affect a substantial number of small entities.
---------------------------------------------------------------------------
\16\ U.S. Small Business Administration, ``Table of Small
Business Size Standards Matched to North American Industry
Classification System Codes'' at 28 (Aug. 22, 2008).
\17\ See FDIC, Bank Find (Number of Banks), http://www2.fdic.gov/idasp/main_bankfind.asp (last visited Mar. 24, 2009).
\18\ See also NCUA, Credit Union Data (Number of Credit Unions),
http://webapps.ncua.gov/customquery/ (last visited Mar. 24, 2009).
\19\ 17 CFR 240.0-10.
\20\ See 73 FR 13692, 13704 (Mar. 13, 2008) (The Securities and
Exchange Commission (``SEC'') reports from commission records that
there are 6016 broker-dealers, 894 of which are small businesses.
FinCEN only sends 314(a) requests to an estimated 5,000 broker-
dealers; however we rely on the SEC numbers to estimate that 15% are
small businesses).
---------------------------------------------------------------------------
Description of the projected reporting and recordkeeping
requirements of the rule:
Currently, Covered Institutions are already subject to the
reporting requirements of section 314 of the USA PATRIOT Act and
FinCEN's implementing regulation.\21\ However, FinCEN estimates that
the final amendment may potentially increase the cost of reporting.
Under the 314(a) program, Covered Institutions are provided a list of
individuals and entities that are subjects of significant money
laundering or terrorist financing investigations. The list is primarily
provided bi-weekly. Covered Institutions are required to review their
records to determine whether the institutions currently maintain, or
have maintained, an account for a named subject during the preceding 12
months, or have conducted any transactions involving any named subjects
during the previous six months.\22\ Covered Institutions are required
to report any positive matches to FinCEN.\23\ Currently, only Federal
law enforcement agencies participate in the 314(a) program. The final
rule will allow State and local law enforcement, as well as certain
foreign law enforcement agencies, and FinCEN, as well as other Treasury
components, to add subjects to this list. This expansion will most
likely result in additional requests for information from Covered
Institutions.
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\21\ 31 CFR 103.100.
\22\ 31 CFR 103.100(b)(2).
\23\ 31 CFR 103.100(b)(2)(ii).
---------------------------------------------------------------------------
As discussed in the Paperwork Reduction Act analysis below, FinCEN
estimates 120 search requests \24\ per year associated with the
recordkeeping requirement in this rule and 9 subjects (including
aliases) per request, resulting in an estimated 1,080 subjects per
year. The estimated burden associated with searching and identifying
each subject is 4 minutes per subject.\25\ FinCEN
[[Page 6567]]
therefore estimates that each recordkeeper will, on average, spend
approximately 4,320 minutes, or roughly 72 hours per year to comply
with the recordkeeping requirement in this rule. According to the
Bureau of Labor Statistics, a compliance officer's mean hourly wage is
$24.47. This would equate to a cost of $1,761.84 per year for a
financial institution to comply with this recordkeeping
requirement.\26\ Because this is a minimal increase to the annual
payroll of small businesses within the regulated industries, FinCEN
does not expect the impact of the rule to be significant. FinCEN was
unable to quantify an exact number of this effect due to a lack of
available information specific to the regulated industries.
---------------------------------------------------------------------------
\24\ Estimated requests per annum subject to the Paperwork
Reduction Act include 10 from FinCEN, 50 from State/local law
enforcement, and 60 from foreign law enforcement agencies, for a
total of 120 requests.
\25\ FinCEN based its estimate on experience and contact with
the regulated industries. However, due to one of the comments
received on the proposed rule, FinCEN re-assessed this original
estimate. For example, FinCEN considered the time necessary for a
depository institution to process basic customer transactions. These
types of transactions are similar to searching and identifying the
subject of a 314(a) request because, in order to process a
transaction for a customer, a depository institution teller must
confirm that a customer maintains an account with the depository
institution. In many cases, this requires the customer to provide
some sort of identifying information to the depository institution
teller, such as a driver's license, which contains specific
identifying information, including name, address, and date of birth.
When a 314(a) request is submitted to a Covered Institution, the
request includes the following identification information for a
subject: name, address, date of birth, and social security number.
Therefore, an employee of a Covered Institution researching the
subject of a 314(a) request, has the same type of information
available to them, as a depository institution teller processing a
customer transaction. In addition, they both, most likely, will be
accessing similar systems to confirm whether the individual
maintains an account with the depository institution. These types of
depository institution transactions can be processed in a matter of
a few minutes regardless of institution size.
\26\ See Bureau of Labor Statistics, ``Occupational Employment
and Wages, May 2006,'' http://www.bls.gov/oes/2006/may/oes131041.htm.
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In the proposed rule, FinCEN requested comment on whether 4 minutes
to search and identify each subject that is part of a 314(a) request
was an accurate estimate. A few commenters stated that this estimate
may be low, however only one association offered an alternative
estimate. The association suggested that the estimate of time to search
and identify each subject be increased to more than 30 minutes per
subject. In describing this estimate, the association explained that it
included the time required to verify a positive match and to determine
whether a Covered Institution should file a SAR. FinCEN disagrees with
the reasoning behind the association's increased estimate. Including
the time necessary to conduct additional due diligence to confirm a
positive match in the estimate of researching each subject overstates
the time required to search and identify a positive match. Based upon
the experience of FinCEN's 314(a) program office, the average Covered
Institution will experience a positive hit on a subject only a handful
of times per year. In addition, incorporating the time necessary to
conduct due diligence on a positive match to a subject to determine
whether filing a SAR is necessary also overstates the time required to
search and identify a positive match. Conducting research to determine
whether to file a SAR on a customer who is a positive match to a 314(a)
request is not required by this rule. A financial institution's
determination as to whether to research a customer and file a SAR is
based upon its own policies and procedures to identify suspicious
activity. Additionally, this time is already reflected in FinCEN's
burden estimates for filing a SAR. The association's estimate relies on
time spent outside the scope of the regulation, and the association did
not provide a breakdown of the time required to search and identify a
match to a 314(a) request in their suggested estimate of over 30
minutes. For these reasons, along with the fact that FinCEN received no
other comments providing an alternative estimate to 4 minutes per
subject, FinCEN will continue to rely on this estimate.
Certification
As acknowledged above, the final rule will impact a substantial
number of small entities. However, as also discussed above, FinCEN
estimates that the impact from these requirements will not be
significant. Accordingly, FinCEN certifies that the final rule will not
have a significant economic impact on a substantial number of small
entities.
D. Paperwork Reduction Act
The collection of information contained in this rule has been
approved by the Office of Management and Budget in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control
number 1506-0049. The collection of information in this final rule is
in 31 CFR 103.100. The information will be used by Federal \27\ and
State and local law enforcement agencies, as well as certain foreign
law enforcement agencies, and FinCEN and other appropriate components
of Treasury, in the conduct of investigating money laundering and
terrorist financing activity. The collection of information is
mandatory.
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\27\ The Paperwork Reduction Act does not apply to the
requirement in section 103.100(b)(2) concerning reports by financial
institutions in response to a request from FinCEN on behalf of a
Federal law enforcement agency. See 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------
International Requests: FinCEN estimates that there will be no more
than 60 requests for research submitted to the 314(a) program by
foreign law enforcement agencies annually.\28\
---------------------------------------------------------------------------
\28\ These calculations were based on previous requests for
information. A review of incoming requests from European Union
countries revealed an average of about 350 cases per year from 2006-
2008. Of these, approximately 75% (an average of 269) were money
laundering and/or terrorism related, however, the majority were not
identified as complex cases. Conversations with FinCEN personnel
responsible for European Union countries indicated not more than 10%
of the money laundering and/or terrorism related cases will be
significant enough to meet 314(a) use criteria, however, it is
anticipated that there may be additional requests that will be
submitted outside of the normal Financial Intelligence Unit
channels.
---------------------------------------------------------------------------
State and Local Requests: While there are more than 18,000 State
and local law enforcement agencies, FinCEN estimates that the number of
cases that will meet the stringent 314(a) submission criteria will be
relatively few. The majority of significant money laundering and
terrorist financing related cases are worked jointly with Federal
investigators and are thus already eligible for 314(a) request
submission. FinCEN estimates that there will be no more than 50 State
and local cases per annum of 314(a) requests that meet submission
criteria.
FinCEN and appropriate components of Treasury Requests: FinCEN
estimates that the 314(a) program will be used by FinCEN and other
appropriate Treasury components in fewer than 10 cases per annum.
Taking into consideration the estimated number of potential use cases
that will fit recommended internal 314(a) criteria, FinCEN does not
believe that this expansion will be a significant strain on existing
program resources.
Description of Recordkeepers: Covered financial institutions as
defined in 31 CFR 103.100.
Estimated Number of Recordkeepers: On an annual basis, there are
approximately 20,134 covered financial institutions, consisting of
15,106 commercial banks, savings associations, and credit unions, 4,793
securities broker-dealers, 139 future commission merchants, 79 trust
companies, and 17 life insurance companies.
Estimated Average Annual Burden Hours per Recordkeeper: FinCEN
estimates 120 search requests \29\ per year associated with the
recordkeeping requirement in this rule and 9 subjects (including
aliases) per request, resulting in an estimated 1,080 subjects per
year. The estimated average burden associated with searching each
subject is 4 minutes per subject. FinCEN therefore estimates that each
recordkeeper will, on average, spend approximately 4,320 minutes, or
roughly 72 hours per year to comply with the recordkeeping requirement
in this rule.
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\29\ Estimated requests per annum subject to the Paperwork
Reduction Act include 10 from FinCEN, 50 from State/local law
enforcement, and 60 from foreign law enforcement agencies, for a
total of 120 requests.
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Estimated Total Annual Recordkeeping Burden: 1,449,648 annual
burden hours (20,134
[[Page 6568]]
recordkeepers x 72 average annual burden hours per recordkeeper).
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.
In the Notice, FinCEN specifically invited comments on: (a) Whether
the recordkeeping requirement is necessary for the proper performance
of the mission of the Financial Crimes Enforcement Network, and whether
the information shall have practical utility; (b) the accuracy of our
estimate of the burden of the recordkeeping requirement; (c) ways to
enhance the quality, utility, and clarity of the information required
to be maintained; (d) ways to minimize the burden of the recordkeeping
requirement, including through the use of automated collection
techniques or other forms of information technology; and (e) estimates
of capital or start-up costs and costs of operation, maintenance, and
purchase of services to maintain the information. With regard to item
(a), two commenters noted that this recordkeeping requirement does
further the mission and goals of FinCEN. With regard to item (c), two
commenters suggested that it would be helpful if financial institutions
had a standardized form to complete when sharing information with law
enforcement. The same process by which a financial institution confirms
a positive match to a 314(a) request, made by a Federal law enforcement
agency, via the 314(a) Secure Information Sharing System, will apply to
requests made by all other requesting agencies. In addition, the same
commenters suggested that law enforcement utilize a standardized form
to request information from financial institutions when a match to a
314(a) request is identified. The underlying account and transaction
information related to a positive 314(a) match is not deemed to be part
of the 314(a) response, and can only be obtained by the requesting
agency through appropriate legal processes, such as a subpoena. FinCEN
is not part of that legal process to obtain the underlying information;
its involvement ends at informing requesting agencies that a match
exists. Therefore, each requesting agency is responsible for
determining the method by which they will request additional
transaction information related to a 314(a) match. With regard to items
(d) and (e), two commenters noted that the recordkeeping requirement
should not place any additional burden or start-up costs on financial
institutions, because the 314(a) program is already in place and
financial institutions should have procedures in place to process these
requests.
With regard to our request for comment on the accuracy of our
estimate of the burden of the recordkeeping requirement, we received a
variety of different comments. A few commenters suggested that
expanding access to the 314(a) program would increase the volume of
inquiries to an unmanageable level for financial institutions, which
would be disproportionate to the benefits obtained by law enforcement.
Other commenters suggested that increasing the volume of 314(a)
requests would substantially increase financial institutions' employee-
hours required to complete searches, increase the cost to financial
institutions, and may lead to the inability of financial institutions
conducting manual searches to provide timely responses. Other
commenters noted that the proposal would exponentially increase the
burden on financial institutions, FinCEN, and the 314(a) program.
However, these commenters did not provide any alternative estimates of
the increase in the volume of inquiries to support their concerns. On
the other hand, as noted above, two other commenters noted that the
recordkeeping requirement should not place any additional burden or
start-up costs on financial institutions, because the 314(a) program is
already in place, and financial institutions should have procedures in
place to process these requests. Two commenters suggested that FinCEN
engage in additional industry outreach beyond the comment period to
better gauge the impact on the industry.
Some commenters felt that the estimates that only 60 foreign law
enforcement requests, 50 State and local law enforcement requests, and
10 FinCEN requests would occur annually were low estimates. FinCEN's
estimates are extrapolated from an analysis of the volume and type of
information requests it has received in past years from foreign as well
as State and local law enforcement agencies. Additionally, FinCEN's
internal review process is stringent and also will serve as a buffer to
an unreasonable increase in the volume of 314(a) requests. Other
commenters suggested that FinCEN should track the increase in requests
in order to verify the estimates in the proposal. FinCEN already
monitors the volume of requests and will continue to do so after this
final rule goes effective. Another commenter asked how FinCEN would
control the number of requests from foreign, State, and local law
enforcement if they exceed the estimates in the proposal. As discussed
above, FinCEN has internal procedures that will help ensure that the
314(a) program will be utilized only in compelling situations, thereby
minimizing the burden on financial institutions.
A few commenters noted that they felt FinCEN's estimate of 4
minutes to research each subject was low, but only one commenter
offered an alternative figure for us to consider, as noted above. The
commenters explained that some small financial institutions conduct
searches manually. In addition, although most larger financial
institutions are likely to conduct automated searches, there is still a
manual element to their research. Further, financial institutions have
to access a variety of internal systems to research subjects, such as
commercial and consumer loan systems. Also, financial institutions of
all sizes manually review matches to ensure accuracy. As described
above, one of these commenters suggested that to reflect the time
needed to research a subject more accurately, the estimate be increased
to more than 30 minutes per subject. The commenter did not offer
sufficient evidence to support the suggestion. The same commenter noted
that the estimate misses the most burdensome element, which is
responding to law enforcement requests when there has been a data match
to a 314(a) request. The commenter noted that while an accurate
estimate of this aspect of the research is difficult to identify, it
should be factored into the estimate of burden. As noted above, section
314(a) information will continue to consist of only a confirmation that
a matching account or transaction exists. The underlying account and
transaction information relating to a 314(a) match is not deemed to be
part of the 314(a) response, and can only be obtained by the requesting
agency through appropriate legal process, such as a subpoena. FinCEN is
not part of that legal process to obtain the underlying information;
its involvement ends at informing requesting agencies that a match
exists. Any interaction between a requesting law enforcement agency and
a financial institution subsequent to a 314(a) match occurs outside the
context of this rule and this analysis and should not be factored into
our burden estimates.
One commenter suggested that requests from foreign, State, and
local law enforcement be submitted to financial institutions on the
same schedule as requests from Federal law enforcement currently are,
in order to keep the number of searches to a
[[Page 6569]]
minimum. FinCEN intends to submit requests from all agencies on the
same schedule. Another commenter suggested that 314(a) requests made by
foreign, State, and local law enforcement be limited to terrorist
financing investigations, initially, in order to minimize the number of
requests. While FinCEN will monitor the effectiveness of the program's
expansion, limiting access to terrorist financing investigations would
deny these law enforcement agencies the ability to confront serious
money laundering investigations which they are pursuing.
E. Effective Date
Publication of a substantive rule not less than 30 days before its
effective date is required by the Administrative Procedure Act except
as otherwise provided by the agency for good cause.\30\ In order to
satisfy the United States' treaty obligation with certain foreign
governments to provide access to the 314(a) program within the deadline
to comply with the U.S.-EU MLAT, FinCEN finds that there is good cause
for making this amendment effective on February 10, 2010. In finding
good cause, FinCEN considered the possible effect of providing less
than 30 days notice to affected persons. FinCEN determined that
immediate implementation would not unfairly burden these persons
because, as explained above, persons affected by the rule have already
implemented the procedures necessary to comply with the 314(a) rule
since its original implementation on September 26, 2002.
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\30\ 5 U.S.C. 553(d).
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List of Subjects in 31 CFR Part 103
Administrative practice and procedure, Authority delegations
(Government agencies), Banks and banking, Currency, Foreign banking,
Foreign currencies, Gambling, Investigations, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Securities, Taxes.
Authority and Issuance
For the reasons set forth above, FinCEN is amending 31 CFR Part 103
as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FINANCIAL TRANSACTIONS
0
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, sec. 314, Pub. L. 107-56, 115 Stat. 307.
0
2. Section 103.90(a) is revised to read as follows:
Sec. 103.90 Definitions.
* * * * *
(a) Money laundering means an activity criminalized by 18 U.S.C.
1956 or 1957, or an activity that would be criminalized by 18 U.S.C.
1956 or 1957 if it occurred in the United States.
* * * * *
0
3. Section 103.100 is amended by--
0
a. Adding new paragraph (a)(4);
0
b. Revising paragraph (b)(1);
0
c. Redesignating paragraphs (b)(2) through (4) as paragraphs (b)(3)
through (5);
0
d. Adding new paragraph (b)(2);
0
e. Revising newly redesignated paragraph (b)(3)(i) introductory text;
0
f. Revising newly redesignated paragraph (b)(3)(iv)(B)(1);
0
g. Revising newly redesignated paragraph (b)(3)(iv)(B)(2);
0
h. Revising newly redesignated paragraph (b)(3)(iv)(C);
0
i. Revising newly redesignated paragraph (b)(4); and
0
j. Revising newly redesignated paragraph (b)(5).
The revisions and additions read as follows:
Sec. 103.100 Information sharing between government agencies and
financial institutions.
(a) * * *
(4) Law enforcement agency means a Federal, State, local, or
foreign law enforcement agency with criminal investigative authority,
provided that in the case of a foreign law enforcement agency, such
agency is from a jurisdiction that is a party to a treaty that
provides, or in the determination of FinCEN is from a jurisdiction that
otherwise allows, law enforcement agencies in the United States
reciprocal access to information comparable to that obtainable under
this section.
(b) Information requests based on credible evidence concerning
terrorist activity or money laundering--(1) In general. A law
enforcement agency investigating terrorist activity or money laundering
may request that FinCEN solicit, on the investigating agency's behalf,
certain information from a financial institution or a group of
financial institutions. When submitting such a request to FinCEN, the
law enforcement agency shall provide FinCEN with a written
certification, in such form and manner as FinCEN may prescribe. At a
minimum, such certification must: state that each individual, entity,
or organization about which the law enforcement agency is seeking
information is engaged in, or is reasonably suspected based on credible
evidence of engaging in, terrorist activity or money laundering;
include enough specific identifiers, such as date of birth, address,
and social security number, that would permit a financial institution
to differentiate between common or similar names; and identify one
person at the agency who can be contacted with any questions relating
to its request. Upon receiving the requisite certification from the
requesting law enforcement agency, FinCEN may require any financial
institution to search its records to determine whether the financial
institution maintains or has maintained accounts for, or has engaged in
transactions with, any specified individual, entity, or organization.
(2) Requests from FinCEN. FinCEN may solicit, on its own behalf and
on behalf of appropriate components of the Department of the Treasury,
whether a financial institution or a group of financial institutions
maintains or has maintained accounts for, or has engaged in
transactions with, any specified individual, entity, or organization.
Before an information request under this section is made to a financial
institution, FinCEN or the appropriate Treasury component shall certify
in writing in the same manner as a requesting law enforcement agency
that each individual, entity or organization about which FinCEN or the
appropriate Treasury component is seeking information is engaged in, or
is reasonably suspected based on credible evidence of engaging in,
terrorist activity or money laundering. The certification also must
include enough specific identifiers, such as date of birth, address,
and social security number, that would permit a financial institution
to differentiate between common or similar names, and identify one
person at FinCEN or the appropriate Treasury component who can be
contacted with any questions relating to its request.
(3) Obligations of a financial institution receiving an information
request--(i) Record search. Upon receiving an information request from
FinCEN under this section, a financial institution shall expeditiously
search its records to determine whether it maintains or has maintained
any account for, or has engaged in any transaction with, each
individual, entity, or organization named in FinCEN's request. A
financial institution may contact the law enforcement agency, FinCEN or
requesting Treasury component representative, or U.S. law enforcement
attach[eacute] in the case of a request by a foreign law enforcement
agency, which
[[Page 6570]]
has been named in the information request provided to the institution
by FinCEN with any questions relating to the scope or terms of the
request. Except as otherwise provided in the information request, a
financial institution shall only be required to search its records for:
* * * * *
(iv) * * *
(B)(1) A financial institution shall not disclose to any person,
other than FinCEN or the requesting Treasury component, the law
enforcement agency on whose behalf FinCEN is requesting information, or
U.S. law enforcement attach[eacute] in the case of a request by a
foreign law enforcement agency, which has been named in the information
request, the fact that FinCEN has requested or has obtained information
under this section, except to the extent necessary to comply with such
an information request.
(2) Notwithstanding paragraph (b)(3)(iv)(B)(1) of this section, a
financial institution authorized to share information under Sec.
103.110 may share information concerning an individual, entity, or
organization named in a request from FinCEN in accordance with the
requirements of such section. However, such sharing shall not disclose
the fact that FinCEN has requested information concerning such
individual, entity, or organization.
(C) Each financial institution shall maintain adequate procedures
to protect the security and confidentiality of requests from FinCEN for
information under this section. The requirements of this paragraph
(b)(3)(iv)(C) shall be deemed satisfied to the extent that a financial
institution applies to such information procedures that the institution
has established to satisfy the requirements of section 501 of the
Gramm-Leach-Bliley Act (15 U.S.C. 6801), and applicable regulations
issued thereunder, with regard to the protection of its customers'
nonpublic personal information.
* * * * *
(4) Relation to the Right to Financial Privacy Act and the Gramm-
Leach-Bliley Act. The information that a financial institution is
required to report pursuant to paragraph (b)(3)(ii) of this section is
information required to be reported in accordance with a federal
statute or rule promulgated thereunder, for purposes of subsection
3413(d) of the Right to Financial Privacy Act (12 U.S.C. 3413(d)) and
subsection 502(e)(8) of the Gramm-Leach-Bliley Act (15 U.S.C.
6802(e)(8)).
(5) No effect on law enforcement or regulatory investigations.
Nothing in this subpart affects the authority of a Federal, State or
local law enforcement agency or officer, or FinCEN or another component
of the Department of the Treasury, to obtain information directly from
a financial institution.
Dated: February 4, 2010.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2010-2928 Filed 2-9-10; 8:45 am]
BILLING CODE 4810-02-P