(a) In general. A covered financial institution shall establish a due diligence
program that includes appropriate, specific, risk-based, and, where
necessary, enhanced policies, procedures, and controls that are reasonably
designed to enable the covered financial institution to detect and
report, on an ongoing basis, any known or suspected money laundering
activity conducted through or involving any correspondent account
established, maintained, administered, or managed by such covered
financial institution in the United States for a foreign financial
institution. The due diligence program required by this section shall
be a part of the anti-money laundering program otherwise required
by this chapter. Such policies, procedures, and controls shall include:
(1) Determining whether any
such correspondent account is subject to paragraph (b) of this section;
(2) Assessing the money laundering
risk presented by such correspondent account, based on a consideration
of all relevant factors, which shall 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 anti-money laundering 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 anti-money laundering
record; and
(3) 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.
3-1705.21
(b) Enhanced
due diligence for certain foreign banks. In the case of a correspondent
account established, maintained, administered, or managed in the United
States for a foreign bank described in paragraph (c) of this section,
the due diligence program required by paragraph (a) of this section
shall include enhanced due diligence procedures designed to ensure
that the covered financial institution, at a minimum, takes reasonable
steps to:
(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 anti-money laundering 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;
and
(iii) (A) Obtaining
information from the foreign bank about the identity of any person
with authority to direct transactions through any correspondent account
that is a payable-through account, and the sources and beneficial
owner of funds or other assets in the payable-through account.
(B) For purposes of paragraph (b)(1)(iii)(A)
of this section, a payable-through account means a correspondent account
maintained by a covered financial institution for a foreign bank by
means of which the foreign bank permits its customers to engage, either
directly or through a subaccount, in banking activities usual in connection
with the business of banking in the United States.
(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.
(3) (i) Determine, for any correspondent account established or maintained
for a foreign bank whose shares are not publicly traded, the identity
of each owner of the foreign bank and the nature and extent of each
owner’s ownership interest.
(ii)
For purposes of paragraph (b)(3)(i) of this section:
(A) Owner means any person who directly
or indirectly owns, controls, or has the power to vote 10 percent
or more of any class of securities of a foreign bank. For purposes
of this paragraph (b)(3)(ii)(A):
(1)
Members of the same family shall be considered to be one person; and
(2) Same family has the meaning
provided in section 1010.605(j)(2)(ii).
(B) Publicly traded means shares that are
traded on an exchange or an organized over-the-counter market that
is regulated by a foreign securities authority as defined in section
3(a)(50) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(50)).
3-1705.22
(c) Foreign banks to be accorded enhanced due diligence. The due diligence procedures described in paragraph (b) of this
section are required for any correspondent account maintained for
a foreign bank that operates under:
(1) An offshore banking license;
(2) A banking license issued by a foreign
country that has been designated as non-cooperative with international
anti-money laundering 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
(3) A banking license issued
by a foreign country that has been designated by the Secretary as
warranting special measures due to money laundering concerns.
(d) Special procedures when due diligence
or enhanced due diligence cannot be performed. The due diligence
program required by paragraphs (a) and (b) of this section shall include
procedures to be followed in circumstances in which a covered financial
institution cannot perform appropriate due diligence or enhanced due
diligence with respect to a correspondent account, including when
the covered financial institution should refuse to open the account,
suspend transaction activity, file a suspicious activity report, or
close the account.
3-1705.23
(e) Applicability
rules for general due diligence. The provisions of paragraph
(a) of this section apply to covered financial institutions as follows:
(1) General rules.
(i) Correspondent accounts established
on or after July 5, 2006. Effective July 5, 2006, the requirements
of paragraph (a) of this section shall apply to each correspondent
account established on or after that date.
(ii) Correspondent
accounts established before July 5, 2006. Effective October 2,
2006, the requirements of paragraph (a) of this section shall apply
to each correspondent account established before July 5, 2006.
(2) Special rules for certain banks. Until
the requirements of paragraph (a) of this section become applicable
as set forth in paragraph (e)(1) of this section, the due diligence
requirements of 31 U.S.C. 5318(i)(1) shall continue to apply to any
covered financial institution listed in section 1010.605(e)(1)(i)
through (vi).
(3) Special rules for all other covered financial
institutions. The due diligence requirements of 31 U.S.C. 5318(i)(1)
shall not apply to a covered financial institution listed in section
1010.605(e)(1)(vii) through (x) until the requirements of paragraph
(a) of this section become applicable as set forth in paragraph (e)(1)
of this section.
3-1705.24
(f) Applicability rules for enhanced due diligence. The provisions of paragraph (b) of this section apply to covered
financial institutions as follows:
(1) General rules.
(i) Correspondent accounts established on or after
February 5, 2008. Effective February 5, 2008, the requirements
of paragraph (b) of this section shall apply to each correspondent
account established on or after such date.
(ii) Correspondent
accounts established before February 5, 2008. Effective May 5,
2008, the requirements of paragraph (b) of this section shall apply
to each correspondent account established before February 5, 2008.
(2) Special rules for certain banks. Until
the requirements of paragraph (b) of this section become applicable
as set forth in paragraph (f)(1) of this section, the enhanced due
diligence requirements of 31 U.S.C. 5318(i)(2) shall continue to apply
to any covered financial institutions listed in section 1010.605(e)(1)(i)
through (vi).
(3) Special rules for all other covered financial
institutions. The enhanced due diligence requirements of 31 U.S.C.
5318(i)(2) shall not apply to a covered financial institution listed
in section 1010.605(e)(1)(vii) through (x) until the requirements
of paragraph (b) of this section become applicable, as set forth in
paragraph (f)(1) of this section.
(g) Exemptions.
(1) Exempt financial
institutions. Except as provided in this section, a financial
institution defined in 31 U.S.C. 5312(a)(2) or (c)(1), or section
1010.100(t) is exempt from the requirements of 31 U.S.C. 5318(i)(1)
and (i)(2) pertaining to correspondent accounts.
(2) Other compliance
obligations of financial institutions unaffected. Nothing in
paragraph (g) of this section shall be construed to relieve a financial
institution from its responsibility to comply with any other applicable
requirement of law or regulation, including title 31, United States
Code, and this chapter.
