(a) Definitions. For purposes of this section:
(1) North Korean banking institution means any bank organized under North Korean law, or any agency,
branch, or office located outside the United States of such a bank.
(2) North Korean financial institution means all branches, offices, or subsidiaries of any foreign financial
institution, as defined at section 1010.605(f), chartered or licensed
by North Korea, wherever located, including any branches, offices,
or subsidiaries of such a financial institution operating in any jurisdiction,
and any branch or office within North Korea of any foreign financial
institution.
(3) Foreign bank has the same meaning as provided in section 1010.100(u).
(4) Correspondent account has the
same meaning as provided in section 1010.605(c)(1)(i).
(5) Covered financial institution has the same meaning as provided in section 1010.605(e)(1).
(6) Subsidiary means a company of
which more than 50 percent of the voting stock or analogous equity
interest is owned by another company.
(b) Prohibition on accounts and due diligence
requirements for covered financial institutions.
(1) Opening
or maintenance of correspondent accounts for a North Korean banking
institution. A covered financial institution shall not open or
maintain in the United States a correspondent account for, or on behalf
of, a North Korean banking institution.
(2) Prohibition
on use of correspondent accounts involving North Korean financial
institutions. A covered financial institution shall take reasonable
steps to not process a transaction for the correspondent account of
a foreign bank in the United States if such a transaction involves
a North Korean financial institution.
(3) Special due diligence of correspondent
accounts to prohibit use.
(i) A covered financial institution
shall apply special due diligence to its foreign correspondent accounts
that is reasonably designed to guard against their use to process
transactions involving North Korean financial institutions. At a minimum,
that special due diligence must include:
(A) Notifying those foreign correspondent
account holders that the covered financial institution knows or has
reason to believe provide services to a North Korean financial institution
that such correspondents may not provide a North Korean financial
institution with access to the correspondent account maintained at
the covered financial institution; and
(B) Taking reasonable steps to identify any use of its foreign correspondent
accounts by a North Korean financial institution, to the extent that
such use can be determined from transactional records maintained in
the covered financial institution’s normal course of business.
(ii) A covered financial
institution shall take a risk-based approach when deciding what, if
any, other due diligence measures it reasonably must adopt to
guard against the use of its foreign correspondent accounts to process
transactions involving North Korean financial institutions.
(iii) A covered financial institution
that knows or has reason to believe that a foreign bank’s correspondent
account has been or is being used to process transactions involving
a North Korean financial institution shall take all appropriate steps
to further investigate and prevent such access, including the notification
of its correspondent account holder under paragraph (b)(3)(i)(A) of
this section and, where necessary, termination of the correspondent
account.
(4) Recordkeeping and reporting.
(i) A covered financial institution
is required to document its compliance with the notice requirement
set forth in paragraph (b)(3)(i)(A) of this section.
(ii) Nothing in this paragraph (b) shall
require a covered financial institution to report any information
not otherwise required to be reported by law or regulation.
