CUNA Regulatory Comment Call
March 7, 2002
Proposed and Interim Final Rules on Money Laundering
(MAJOR RULE)
EXECUTIVE SUMMARY
- The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Patriot Act) provides for the sharing of information between government and financial institutions, as well as among financial institutions themselves.
- The Department of the Treasury (Treasury) has issued proposed rules with regard to the sharing of information between government and financial institutions. For the sharing of information among financial institutions, Treasury has issued interim final rules, which are now effective but are also subject to public comment.
- For the sharing of information between government and financial institutions, the Financial Crimes Enforcement Network (FinCen) will act on behalf of government law enforcement and will have the authority to request that a financial institution search its records for information with regard to money laundering or terrorist activities.
- For the sharing of information with other financial institutions, each institution must submit a certification to FinCen that the sharing is in accordance with the interim final rules, including confirmation that the institution will maintain adequate procedures to protect the security and confidentiality of the information.
- Comments are due by April 3, 2002. Please submit your comments to CUNA by March 29, 2002.
Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com and to Assistant General Counsel Jeffrey Bloch at jbloch@cuna.com; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6032, if you would like a copy of the rules, or you may access them on the Internet at the following address: http://www.ustreas.gov/fincen/po1044.htm
BACKGROUND
On October 26, 2001, the President signed the Patriot Act. Among other provisions, the Patriot Act provides for the sharing of information between government and financial institutions, as well as among financial institutions themselves. These provisions primarily refer to information concerning money laundering or terrorist acts.
Treasury is responsible for issuing the rules to carry out these provisions of the Patriot Act. For the provisions on sharing information between government and financial institutions, Treasury has issued proposed rules for the purpose of soliciting comments. For the sharing of information among financial institutions, Treasury has issued interim final rules, which means these rules are now in effect but are open to public comment. Treasury will review the comments to determine if these rules should be changed.
DESCRIPTION OF THE PROPOSED AND INTERIM FINAL RULES
Proposed Rules on Sharing of Information between Government and Financial Institutions
The proposed rules establish a mechanism for federal law enforcement agencies investigating money laundering and terrorist activities to use FinCen as the means of exchanging information with financial institutions about suspected terrorists and those engaged in money laundering. FinCen is a bureau of Treasury that already maintains a government-wide data access service to assist government in efforts to prevent and prosecute money laundering, terrorism, organized crime, and other financial crimes.
Under the proposed rules, FinCen may act on behalf of a federal law enforcement agency investigating money laundering or terrorist activities and request that a financial institution search its records to determine if the institution has maintained accounts for, or engaged in transactions with, certain individuals or entities engaged in such activities. FinCen and the federal law enforcement agency seeking the information will determine and inform the financial institution of the appropriate time period that the search will cover.
The law enforcement agency requesting the search must provide FinCen with a written certification that the search relates to individuals or entities engaged in or suspected of engaging in terrorist or money laundering activities, based on credible evidence. FinCen will determine the manner and form of the certification.
When a request is received from FinCen, the financial institution must search its records to determine whether it has maintained any account for, or engaged in any transaction with, the individual or entity named in the request. The search must cover accounts maintained and transactions engaged in during the time period specified in the request.
If the financial institution identifies a matching account or record, it must report the following to FinCen as soon as possible:
- The identity of the individual or entity.
- The identification of the account or the type of transaction.
- All identifying information, such as date of birth, address, Social Security number, passport number, etc. that was provided by the individual or entity in connection with the account or transaction.
This information should be sent to FinCen via e-mail at patriot@fincen.treas.gov. If the institution does not have e-mail, this information may be provided to FinCen by calling the Financial Institutions Hotline at 1-866-556-3975 or as otherwise requested by FinCen. Although the search will generally apply to accounts and transactions occurring prior to the request from FinCen, the institution will also be expected to report on any named individual or entity that may establish an account or engage in a transaction after the date that the request is received.
The proposed rules will not require a financial institution to take or decline to take any action with respect to an existing account or past transaction with an individual or entity listed by FinCen. These rules also do not prohibit institutions from establishing new accounts or transactions with these individuals or entities, and there may indeed be instances in which this may be the preferred course of action in order to avoid alerting these individuals or entities that they are possible targets of investigation. These rules also require financial institutions to maintain adequate procedures to protect the security and confidentiality of information contained in the requests from FinCen.
FinCen may request that a financial institution designate one person who will receive these requests for information about accounts and transactions. The institution must provide this person’s mailing address, e-mail address, telephone number, and facsimile number. This information may be provided to the FinCen website at www.treas.gov/fincen or by sending the information on credit union letterhead to the following address:
FinCen
PO Box 39
Mail Stop 500
Vienna, VA 22183
The rules also clarify that compliance with these requirements will not violate the Right to Financial Privacy Act, which contains certain restrictions on government access to financial records. The rules also do not limit the existing authority that government agencies or officials currently have to obtain information directly from financial institutions.
To preserve the confidentiality of the information from FinCen, financial institutions will be prohibited from using this information for any purpose other than to respond to FinCen’s request or deciding whether to establish an account or conduct a transaction. Financial institutions also cannot disclose that FinCen has requested or obtained information under these rules, except to the extent necessary to comply with the request. Financial institutions may contract with third parties to assist in the search for records, as long as the contract contains confidentiality provisions similar to those that apply to the institution under these rules.
Interim Final Rules on Sharing of Information Among Financial Institutions
These interim final rules implement the provisions of the Patriot Act that permits financial institutions, upon notification to Treasury, to share information among themselves in order to identify and report to the government information concerning money laundering and terrorist activities. Prior to sharing such information, the institution must submit a certification to FinCen. The rules include a model form that can be used for this purpose, which requires institutions to confirm the following:
- The name of the financial institution.
- That the institution is a financial institution, as defined in these rules.
- The institution intends to engage in information sharing with other financial institutions, as permitted by the Patriot Act and these rules.
- The institution will maintain adequate procedures to protect the security and confidentiality of the information.
- The information will not be used for any purpose other than as permitted by these rules.
- The identity of a contact person at the institution for matters pertaining to information sharing.
This certification process may be completed on the Internet at www.treas.gov/fincen or the certification form may be mailed to the following address:
FinCen
PO Box 39
Mail Stop 100
Vienna, VA 22183
The certification will be effective for one year. The financial institution must submit a new certification if it intends to continue to share information.
Financial institutions must also maintain adequate procedures to protect the security and confidentiality of the information. Any information received by an institution under these interim final rules must only be used to identify and report on activities that may involve terrorist or money laundering activities, or to determine whether to engage in a transaction or to close or maintain an account. Failure to comply with these restrictions on confidentiality or use of the information may result in the revocation or suspension of the institution’s certification.
If, as a result of information sharing, a financial institution suspects that an individual or entity is engaged in money laundering or terrorist activities, the institution should call the FinCen Financial Institutions Hotline (1-866-556-3974) and, if appropriate, file a Suspicious Activity Report. In fact, these rules do not in any manner relieve an institution from current requirements to file a Suspicious Activity Report or to contact a federal agency about individuals or entities suspected of engaging in money laundering or terrorist activities.
QUESTIONS TO CONSIDER REGARDING THE TREASURY’S MONEY LAUNDERING RULES
- In anticipation of possible future requests from FinCen, how long should credit unions be required to maintain records
concerning closed accounts and past transactions?
- With regard to the interim final rule on sharing information among financial institutions, the term “financial institution”
includes broker-dealers, issuers of traveler’s checks or money orders, and operators of a credit card system that is not a money service
business, in addition to traditional financial institutions. Should this list be changed or expanded? Are there other entities with
whom you may want to share this information?
- With regard to the reporting of transactions, the term “transaction” is not defined and could interpreted broadly to include, for
example, payees of share drafts and wire transfers. How can this term be defined less broadly in order to relieve burden on credit
unions without jeopardizing the goal of identifying money laundering or terrorist activities? Should spot checks be sufficient for
complying with these rules? Should the rules state that a “reasonable” or “good faith” effort is sufficient with regard to researching
transactions and accounts?
- Other comments?
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Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com |
