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Federal R eserve Bank
OF DALLAS
T O N Y J . SA L V A G G IO
FIR S T V IC E PR ES ID EN T
September 10, 1993
DALLAS, TEXAS 75222
Notice 93-94
TO:
The Chief Operating Officer of
each financial institution in the
Eleventh Federal Reserve District
SUBJECT
Request for Public Comment
on Proposed Amendments to Regulation S
(Reimbursement to Financial Institutions for Assembling
or Providing Financial Records)
DETAILS
The Federal Reserve Board has requested public comment on proposed
amendments to Regulation S (Reimbursement to Financial Institutions for
Assembling or Providing Financial Records) regarding enhanced recordkeeping
requirements for certain wire transfers by financial institutions. These
amendments would incorporate by reference certain proposed provisions of 31
CFR 103.33(e), (f), and (g).
The proposed amendments are developed jointly with the Department of
the Treasury to implement revisions to the Bank Secrecy Act as required bythe
Annunzio-Wylie Anti-Money Laundering Act of 1992.
The recordkeeping amendments are divided into three sections:
•
requirements for depository institutions;
•
requirements for nonbank financial institutions that
do not generally maintain accounts for their custom
ers;
•
requirements for securities broker/dealers that
generally maintain account relationships with their
customers.
Generally, institutions are required to maintain records of funds
transfers that they process. To the extent that an institution handles a
funds transfer for a party that does not hold an account with the institution,
the institution is required to document proof of the identity of the party of
the transfer and retain pertinent information. To the extent that a bank or
broker/dealer holds an account for its customer, it is presumed to have
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastale (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
information that identifies the customer and, therefore, need not obtain and
retain this information under this proposal.
This notice also proposes to amend the existing regulation that
allows the Department of the Treasury to require reports of certain transac
tions with targeted foreign financial institutions to permit the Treasury to
require reports of all wire transfers by financial institutions. The record
keeping requirements applicable to international wire transfers are required
by statute to be effective before January 1, 1994.
For ease of implementa
tion, the Treasury and the Board intend to make the proposed recordkeeping
requirements (applicable to both domestic and international wire transfers)
effective on December 31, 1993.
Each comment on the provisions of this proposed notice should be
sent separately to both the Department of the Treasury and the Board of
Governors.
Comments must be received by October 4, 1993. Comments to the
Board should be addressed to William W. Wiles, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue, N.W.,
Washington, D.C. 20551 and should refer to Docket No. R-0807.
Comments to the
Treasury should be addressed to Peter Djinis, Director, Office of Financial
Enforcement, Department of the Treasury, Room 5000 Annex, 1500 Pennsylvania
Avenue, N.W., Washington, D.C. 20220.
ATTACHMENT
Copies of the Bo a r d ’s and the T r e a s u r y ’s notices as they appear on
pages 46014-27, Vol. 58, No. 167, of the Federal Register dated August 31,
1993, are attached.
MORE INFORMATION
For more information, please contact James Dean at (214) 922-6237.
For additional copies of this B a n k ’s notice, please contact the Public Affairs
Department at (214) 922-5254.
Sincerely,
Tuesday
August 31, 1993
Part IV
Federal Reserve
System
12 CFR Part 219
Department of the
Treasury
31 CFR Part 103
Transmittal of Funds by Financial
Institutions; Proposed Rules
46014
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
FEDERAL RESERVE SYSTEM
[Docket No. R-0807]
DEPARTMENT OF THE TREASURY
31 CFR Part 103
Proposed Amendment to the Bank
Secrecy Act Regulations Relating to
Recordkeeping for Funds Transfers
and Transmittals of Funds by Financial
Institutions
AGENCIES: Department of the Treasury;
Board of Governors of the Federal
Reserve System.
ACTION: Notice of proposed rulemaking.
SUMMARY: This notice is published
jointly by the Department of the
Treasury (Treasury) and the Board of
Governors of the Federal Reserve
System (Board). It proposes enhanced
recordkeeping requirements relating to
certain wire transfers (which include
funds transfers and transmittals of
funds) by financial institutions. Each
domestic financial institution involved
in a wire transfer will have to collect
and retain certain information. The
amount and type of information
collected and retained will depend
upon the nature of the financial
institution, its role in the particular wire
transfer, and the relationship of the
parties to the transaction with the
financial institution. This notice also
proposes to amend the existing
regulation that permits Treasury to
require reports of certain transactions
with targeted foreign financial
institutions to permit Treasury to
require reports of all wire transfers by
financial institutions. A companion
Notice of Proposed Rulemaking
(Companion Notice), also published
elsewhere in this issue of the Federal
Register by Treasury, proposes to
require a financial institution that sends
a transmittal order to a receiving
financial institution to include certain
information in the order. The
recordkeeping requirements applicable
to international wire transfers are
required by statute to be effective before
January 1,1994. For ease of
implementation, Treasury and the Board
propose to make the proposed
recordkeeping requirements (applicable
to both domestic and international wire
transfers) effective on December 31,
1993.
DATES: Comments are due on or before
October 4, 1993.
ADDRESSES: Each comment should be
sent separately to both the Treasury and
the Board at the following addresses;
Treasury: Mr. Peter Djinis, Director,
Office of Financial Enforcement,
Department of the Treasury, room 5000
Annex, 1500 Pennsylvania Avenue,
NW., Washington, DC 20220;
Board: Mr. William W. Wiles,
Secretary, Board of Governors of the
Federal Reserve System, 20th and
Constitution Avenue, NW., Washington,
DC 20551. Comments addressed to Mr.
Wiles, Secretary, Board of Governors of
the Federal Reserve System, should
refer to Docket No. R-0807. Comments
may also be delivered to the Board’s
mail room between 8:45 a.m. and 5:15
p.m., and to the security control room
outside of those hours. Both the mail
room and the security control room are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, NW.
Submission o f Comments: All
comments received before the closing
date will be carefully considered. Oral
comments must be reduced to writing
and submitted to the Board and/or
Treasury to receive consideration.
Comments received after the closing
date and too late for consideration will
be treated as possible suggestions for
future action. Neither the Board nor
Treasury will recognize as confidential
any materials or comments, including
the name of any person submitting
comments. Any material not intended to
be disclosed to the public should not be
included in the comments.
Inspection of Comments: Comments
may be inspected at the Federal Reserve
Board, 20th and Constitution Avenue,
NW., Washington, DC, in room B-1122
between 9 a.m. and 5 p.m., as provided
in part 261 of the Board's Rules
Regarding Availability of Information,
12 CFR 261.8. Comments may also be
inspected at the Department of Treasury
between 10 a.m. and 4 p.m. in the
Treasury Library, which is located in
room 5030,1500 Pennsylvania Avenue,
NW., Washington, DC. Persons wishing
to inspect the comments submitted
should request an appointment at the
Treasury Library at (202) 622-0990.
FOR FURTHER INFORMATION CONTACT:
Treasury: A. Carlos Correa, Assistant
Director, Rules and Regulations Section,
Office of Financial Enforcement,
Department of the Treasury, (202) 6220400.
Board: Gayle Brett, Manager, Fedwire,
Division of Reserve Bank Operations
and Payment Systems (202) 452-2934;
Oliver Ireland, Associate General
Counsel (202) 452-3625, or Elaine M.
Boutilier, Senior Attorney, Legal
Division, (202) 452-2418, Board of
Governors of the Federal Reserve
System. For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Dorothea Thompson (202) 4523544.
SUPPLEMENTARY INFORMATION: The
statute generally referred to as the Bank
Secrecy Act (Pub. L. 91-508, codified at
12 U.S.C. 1829b and 1951-1959, and 31
U.S.C. 5311-5328) authorizes the
Secretary of the Treasury to require
financial institutions to keep records
and file reports that the Secretary
determines have a high degree of
usefulness in criminal, tax and
regulatory matters. The primary purpose
of the Bank Secrecy Act is to identify
the source, volume and movement of
funds into and out of the country and
through domestic financial institutions.
The Bank Secrecy Act was amended last
year in the Annunzio-Wylie Anti-Money
Laundering Act of 1992, title XV of the
Housing and Community Development
Act of 1992, Public Law 102-550
(referred to hereafter as the 1992
Amendment) to specifically authorize
the Treasury and the Board jointly to
prescribe regulations to require
maintenance of records regarding
domestic and international funds
transfers.
To enable the Board to participate in
the joint promulgation of the funds
transfer regulations as required under
the unique statutory scheme established
by the 1992 Amendment, title 31 is
proposed to be amended with the
concurrence of the Board. In
conjunction with this action, the Board
also publishes elsewhere in this issue of
the Federal Register a proposed rule
document that cross-references these
regulations in title 12 of the CFR.
The 1992 Amendment authorizes the
Board and the Treasury to promulgate
recordkeeping requirements for
domestic wire transfers by insured
depository institutions whenever the
agencies determine that such records
have a high degree of usefulness in
criminal tax or regulatory investigations
or proceedings. In addition, the 1992
Amendment requires the Treasury and
the Board to issue final regulations with
regard to international transactions to be
effective before January 1, 1994. The
recordkeeping requirements for
international transactions will apply to
financial institutions as defined in 31
CFR 103.11(i), which includes insured
depository institutions, brokers and
dealers in securities, as well as
businesses that provide check cashing
services, money transmitting businesses,
and businesses that issue or redeem
money orders, travelers’ checks or other
similar instruments (collectively
referred to as check cashing and money
transmitting businesses). In prescribing
these required regulations, the Board
and the Treasury must take into
consideration the usefulness of these
records in criminal, tax, or regulatory
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
investigations or proceedings and the
effect the recordkeeping will have on
the cost and efficiency of the payment
system. The Board and the Treasury
have decided that it would be simpler
to issue proposed regulations for both
domestic and international funds
transfers simultaneously, because the
recordkeeping requirements will be the
same.
Additionally, issuing proposed
regulations for both domestic and
international funds transfers at this time
coincides with a separate but related
Treasury initiative. As noted in
testimony before the House Banking
Committee on May 25,1993, by
Assistant Secretary Noble
(Enforcement), the Department of the
Treasury would be, and is now,
conducting a comprehensive
examination of its anti-money
laundering programs, including the
Bank Secrecy Act regulations.
Comments received in response to this
Notice and the Companion Notice will
be carefully considered as part of this
comprehensive examination.
The number of wire transfers
completed daily is substantial. For
example, the daily average number of
wire transfers made over Fedwire in
1992 was 270,000, with average
aggregate daily dollar amount of $800
billion and a peak aggregate daily dollar
amount of over $1 trillion.
Money laundering is a vital
component of drug trafficking and other
criminal activity throughout the world,
and federal law enforcement agencies
believe that a significant amount of the
money laundered involves wire
transfers. Proceeds from illegal activities
may be processed through money
laundering schemes involving domestic
and/or international payments by wire
transfers. Such activity has been
documented in several recent
investigations conducted by Treasury
and other federal law enforcement
agencies. The Board and the Treasury
believe that the records to be retained
under this proposed rulemaking will be
particularly useful in tracing the
proceeds of illegal activities and will
assist in the identification and
prosecution of individuals involved in
such illegal activities. Accordingly,
Treasury and the Board believe that
maintenance of these records will have
a high degree of usefulness in criminal,
tax, or regulatory investigations of
money laundering operations. Further,
the Treasury and the Board believe that
these recordkeeping requirements will
not have a significant adverse impact on
the cost or the efficiency of the
payments system.
46015
In addition to retention of records
covered by the proposed rule, federal
law enforcement agencies have
indicated that having certain customer
identity information (i.e., the
originator’s and beneficiary’s name,
address and account number) included
in the payment order has a high degree
of usefulness for law enforcement
purposes. This issue is being addressed
by the Companion Notice published
today by Treasury elsewhere in this
issue of the Federal Register. As an
interim measure, the Federal Financial
Institutions Examination Council
(FFIEC) has adopted a policy statement
encouraging all financial institutions to
include, to the extent practical,
complete originator and beneficiary
information when sending payment
orders, including payment orders sent
through Fedwire, Clearinghouse
Interbank Payment System (CHIPS) and
Society for Worldwide Interbank
Financial Telecommunications
(SWIFT). (See FFIEC Press Release
dated March 11,1993, 58 FR 14400,
March 17,1993.)
Although at present there is
insufficient space in the Fedwire format
to include complete originator and
beneficiary information, the Board
encourages users of the Fedwire system
to use available optional fields in the
Fedwire format to include such
information. For example, in a thirdparty transfer, the originator (ORG=) and
beneficiary (BNF=) fields must contain
data in order to be accepted by the
Fedwire system. While these fields
contain enough space to identify the
originator and beneficiary by name and
account number, sufficient space is
generally not available for including
address information. If optional fields,
such as the “Originator to Beneficiary
Information” (OBI=) or “Bank to Bank
Information” (BBI=) fields, are not being
used for payment-related information,
these fields could be used to convey the
address information. No specific
optional field is recommended for
including address information as
different optional fields may be
available for use in any given wire
transfer.
The Federal Reserve System is
currently studying possible revisions to
the Fedwire format and expects to
publish a Federal Register notice in the
future inviting comment on proposed
requirements that specific originator
and beneficiary information be included
in Fedwire funds transfers.
of the international funds transfer
system by money launderers. 54 FR
45769. The Advance Notice suggested
seven regulatory initiatives, including
enhanced recordkeeping, routine
reporting of funds transfers and
transmittals, and enhanced
identification of suspicious transactions.
After review of the comments submitted
in response to the Advance Notice,
Treasury published a Notice of
Proposed Rulemaking on October 15,
1990, setting forth specific proposed
amendments to the Bank Secrecy Act
regulations, and proposing enhanced
record collection and recordkeeping by
all financial institutions engaged in
domestic and international funds
transfers. 55 FR 41696. Treasury
received a total of 333 comments on the
October 15,1990, proposal. The vast
majority of comments were received
from financial institutions, particularly
from banks. While most of the
commenters generally opposed the
proposal, many discussed the specific
effects the various proposals would
have on their institutions, explained
what information concerning funds
transfers is currently maintained by
their institutions, and presented
alternative means of effecting Treasury’s
objectives of ensuring the availability of
necessary information without
disrupting the current funds transfer
system. All comments received in
response to the Advance Notice and the
Notice are on file at the Treasury, at the
address indicated above, and are
available for public inspection during
regular business hours.
After enactment of the 1992
Amendment, which includes the Board
in the rule making process, Treasury
and the Board agraed to revise the
proposed rule and jointly publish a new
proposed rule. The Treasury and the
Board believe that, in many cases, the
information required to be retained by
this proposal is already maintained by
financial institutions. The Treasury
believes that the proposal is responsive
to many of the concerns raised in the
comments on the 1990 proposal.
Moreover, in view of Treasury’s
comprehensive review of its anti-money
laundering programs and formation of
its Bank Secrecy Act Advisory Group, it
seemed appropriate to renotice this
proposal rather than to issue a final rule
at this time.
Summary Description of the Revised
Proposed Rule
Regulatory Background
On October 31,1989, Treasury
published an Advance Notice of
Proposed Rulemaking to address the use
General Overview
The proposed rule is divided into
three components: requirements for a
bank; requirements for a nonbank
46016
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
banks are encouraged to collect from the
originator complete information
regarding the beneficiary of a payment
order.) If the originator does not have a
deposit account or loan with the
originator’s bank, then the originator’s
bank will be required to verify the
originator’s name and address before
accepting the payment order, and must
retain a record of that verified
information as well as a record of the
originator’s social security number,
alien identification number, or
employer identification number, or note
the lack of such a number in the record.
An intermediary bank that accepts a
payment order must retain either the
original or a duplicate of the payment
order.
A beneficiary’s bank that accepts a
payment order must retain either the
original or a duplicate of the payment
order. If the beneficiary has a deposit
account or loan with the bank, then the
bank is expected to have the
beneficiary’s name and address already
in its records in a retrievable form. If the
payment order is for a beneficiary that
does not have a deposit account or a
Eetention o f Records by Banks
loan with the bank, then the
beneficiary’s bank must obtain and
This proposed rule would require
retain a record of the beneficiary’s name
banks to retain information on funds
and address, and social security
transfers that is likely to be in the
number, alien identification number, or
records of the bank in the case of bank
customers who have deposit accounts or employer identification number, or note
loans with the bank, or which can be
the lack of such a number in the record.
easily obtained from noncustomers.
Furthermore, the beneficiary’s bank
This information need not be retained
must verify the beneficiary's name and
alphabetically by name or numerically
address whenever it delivers the
by account number; but the bank must
proceeds of the funds transfer in person
Definitions
be able to access the funds transfer
to a beneficiary who does not have a
Several new definitions are proposed
records readily by name or account
deposit account or loan with the bank.
in section § 103.11. The following new
number of the originator or beneficiary,
If the proceeds are not delivered in
definitions are intended to be identical
as the case may be, and may do so
person, then a copy of the instrument
to the same terms used for banks in
through reference to some other record
(e.g., check) used to send the proceeds
Uniform Commercial Code (UCC)
maintained by the bank, Existing
must be retained.
Article 4A: “beneficiary”, “beneficiary’s § 103.38(d) would be applicable to these
The following funds transfers are
bank”, “intermediary bank”,
records, and requires retention for five
exempt from these recordkeeping
“originator”, “originator’s bank”,
years from the execution date of the
requirements:
“payment order”, and “receiving bank”. payment/transmittal order.
(i) Funds transfers where both the
Other definitions referring to
An originator’s bank will be required
originator and the beneficiary are
transactions by nonbank financial
to retain the following information for a
domestic banks;
institutions would be added, and these
payment order that it accepts; (A) The
(ii) Funds transfers where both the
are intended to parallel the equivalent
name and address of the originator; (B)
originator and beneficiary are the same
definitions in UCC Article 4A:
the amount of the funds transfer; (C) the
“intermediary financial institution”,
execution date of the payment order; (D) domestic bank or one is the wholly“receiving financial institution”,
any payment instructions received from owned domestic subsidiary of the other;
(iii) Funds transfers where both the
“recipient”, "recipient’s financial
the originator; (E) the identity of the
originator and the beneficiary are the
institution”, “transmittal of funds”,
beneficiary’s bank; and (F) either the
same person and the originator’s bank
“transmittal order”, “transmittor”, and
name and address or the account
and the beneficiary’s bank are the same
“transmitter’s financial institution”.
number of the beneficiary of the
domestic bank; and
Because “financial institution” is
payment order, if such information is
already defined to include “bank”, the
received with the payment order. It is
(iv) Funds transfers where both the
new terms used for nonbank financial
expected that an originator’s bank
originator and the beneficiary are either
institutions are written to include
accepting a payment order from a
a domestic bank, the United States, any
transactions by banks. For example, the customer will have most of the required state or local government, or a federal,
definition of the term "transmittal
information either in its account records State or local government agency or
order” includes a “payment order”.
instrumentality.
or in the payment order. (Originator’s
financial institution other than a broker
or dealer in securities that has an
account for the transmittor/recipient;
and requirements for a broker or dealer
in securities that has an account for the
transmittor/recipient. The
recordkeeping requirements for these
three types of institutions are generally
parallel, but additional collection
requirements are proposed for
transactions involving persons who do
not maintain an account with the bank
or other financial institution involved.
This distinction is based on the Board’s
and Treasury’s belief that banks and
brokers or dealers in securities already
retain most of the desired information in
their customer records and will not
need to gather duplicate information.
The recordkeeping requirements are
designed to facilitate tracing of funds
through the wire transfer process. At
financial institutions that are acting on
behalf of an account holder, the
required information will usually be
included in the payment order and in
the customer account records. In such
cases retention of the payment order
with the customer account records will
satisfy the proposed recordkeeping
requirements.
Comments on all aspects of the
proposed regulation are welcome. The
Treasury and the Board specifically
request comment on the usefulness of
the records covered by the proposed
rule for law enforcement purposes and
the effects that the proposed rule might
have on the cost and efficiency of the
payment system.
Separate definitions specifically for
bank transactions have been added for
clarity and conformity with the UCC.
Other terms, such as “execution date”,
“payment date” and “sender”, have
been modified slightly from the UCC
Article 4A definition to specifically
include transactions by nonbank
financial institutions as well as banks.
The proposed definition of the term
“funds transfer” differs from the same
term in UCC Article 4A in that it
excludes all automated clearinghouse
(ACH) transfers or funds transfers
governed in any part by the Electronic
Funds Transfer Act of 1978 (15 U.S.C.
1693, et seq ). The term “accept” differs
from the definition of “acceptance” in
UCC Article 4A. It includes transactions
by nonbank financial institutions, and it
does not spell out the rights and
obligations of the parties to the
transaction upon acceptance or rejection
of a payment order.
In addition, the words, “For purposes
of § 103.29 of this part,” that appear in
§ 103.11(g), have been deleted to allow
the term “deposit account” to be used
in the amendments to § 103.33.
Federal Register
1 Vol.
Retention o f Records by Nonbank
Financial Institutions
H ie proposed record retention
requirements for nonbank financial
institutions differ depending on
whether the nonbank financial
institution is a broker or dealer in
securities. A special category of
requirements is being proposed for a
broker or dealer in securities that
maintains an account for the transmitter
or recipient. Accordingly, no
verification requirements are proposed
for transmittals of funds by a broker or
dealer in securities which makes or
receives transmittals of funds for an
account holder.
Nonbank Financial Institutions That
Are Not Brokers or Dealers
These nonbank financial institutions
are more likely than banks or brokers or
dealers to send or receive transmittals of
funds for persons with whom they have
no regular account relationship and
therefore, no existing records.
Accordingly, these nonbank financial
institutions must collect, verily and
retain information that may not be in
their existing records. The retained
information must be retrievable by the
name of the. transmitter. (These
requirements also apply to brokers and
dealers in securities that send or receive
transmittals of funds on behalf of
persons for which they do not maintain
an account.)
A transmitter's nonbank financial
institution must verify the transmitter's
name and address prior to accepting a
transmittal order, and it shall maintain
a record of that information, in addition,
the nonbank financial institution shall
obtain and retain:
(A) The transmitter’s social security
number, alien identification number, or
employer identification number; or, if
the transmittal of funds is on the
nonbank financial institution’s own
behalf, a statement to that effect;
(B) The amount of the transmittal
order;
(Q The execution date of the
transmittal order;
(D) Any payment instructions
received from the transmittor with the
transmittal order;
(E) The name and address of the
recipient of the transmittal of funds; and
(F) Any form completed by the person
or the nonbank financial institution
relating to the transmittal of funds.
An intermediary nonbank financial
institution that accepts a transmittal
order shall retain either the original or
a duplicate of the transmittal order.
A recipient’s nonbank financial
institution that accepts a transmittal
58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
order shall retain the original or a
duplicate of the transmittal order, as
well as the name, address, and social
security number, alien identification
number or employer identification
number of the recipient. If the
recipient’s nonbank financial institution
delivers the proceeds of a transmittal of
funds in person to the recipient, it shall
verify the name and address of the
recipient and retain a record of that
information. If the recipient’s nonbank
financial institution sends the proceeds
of a transmittal of funds by written
instrument (e.g., check, draft), it shall
retain a copy of the instrument or the
information contained thereon, and the
name and address of the person to
whom it was sent.
Retention o f Records by Brokers and
Dealers
These requirements apply only to
transmittals of funds that a broker or
dealer in securities (which is also a type
of nonbank financial institution) sends
or receives for a person for which it has
an account. The retained records must
be readily retrievable by either the name
or account number of the broker/
dealer’s account holder.
A transmitter's broker/dealer must
retain the following information for a
transmittal order that it accepts:
(A) The name of the transmittor;
(B) The amount of the transmittal of
funds;
(C) The execution date of the
transmittal order;
(D) Any payment instructions
received from the transmittor;
(E) The identity of the recipient’s
financial institution; and
(F) Either the name and address or the
account number of the recipient, if
received with the transmittal order.
An intermediary broker/dealer must
retain either the original or a duplicate
of each transmittal order that it accepts.
A recipient’s broker/dealer must
retain either the original or a duplicate
of each transmittal order that it accepts.
The following transactions are exempt
from these requirements: Transmittals of
funds where both the transmittor and
the recipient are each a domestic broker
or dealer in securities transmitting on its
own behalf; transmittals of funds on
their own accounts between a domestic
broker or dealer in securities and its
bank or the broker dealer’ wholly
s
owned subsidiary; transmittals of funds
between domestic accounts at the same
domestic broker or dealer where both
the transmittor and the recipient are the
same person; and transmittals of funds
between a domestic broker or dealer and
a governmental agency.
46017
Executive Order 12291
In response to its October 15,1990
Notice of Proposed Rulemaking,
Treasury received many detailed
comments on the projected costs of the
proposed rule. Many of the provisions
identified in those comments as
imposing undue costs or burdens on the
financial services community have been
either revised, clarified or eliminated. In
particular, today’s proposed rule would
allow many financial institutions to rely
upon information systems already in
place without diminishing the nature
and quality of the information required
to be maintained. This modification
significantly reduces the resources and
effort required of financial institutions
to comply with the terms of today’s
proposed rule. As a result of these
significant cost reductions, today’s
proposed rule is categorized as non
major for purposes of Executive Order
12291. Today’s proposal, if adopted as
a final rule, will not have an annual
effect on the economy of $100 million
or more. Nor will it result in a major
increase in costs or prices for
consumers; individual industries;
federal, state, or local government
agencies; or geographic regions. It will
not have any significant adverse effect
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreignbased enterprises in domestic or foreign
markets. Therefore, a regulatory impact
analysis is not required.
Initial Regulatory Flexibility Analysis
As required by 5 U.S.C. 603(b), a
"description of the reasons why action
by the agency is being considered” and
a "succinct statement of the objectives
of, and legal basis for, the proposed
rule” era found elsewhere in this
preamble.
The Board and the Treasury propose
that the requirements in this rule be
applicable to all financial institutions
subject to the Bank Secrecy Act, as
implemented, regardless of their size.
An exemption for small entities would
not be appropriate because it would
permit money laundering operations to
evade the recordkeeping process by
using small financial institutions. This
would significantly diminish the
usefulness of these records for criminal,
tax or regulatory investigations.
The small entities that will be affected
by this proposed rule include small
banks and many check cashing and
money transmitting businesses. In order
to minimize the economic impact on
small entities, the rule would allow
financial institutions that send o r
46018
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
receive transmittal orders for account
holders to use existing records to satisfy
some of the recordkeeping
requirements. The Board and the
Treasury do not believe that the
proposed rule would impose reporting
or recordkeeping burdens on small
entities that require specialized
professional skills not available to them.
Paperwork Reduction Act
The collection of information
contained in this Notice of Proposed
Rulemaking has been submitted to the
Office of Management and Budget in
accordance with the requirements of the
Paperwork Reduction Act (44 U.S.C.
3504(h)) under control number 15050063. Comments on the collection of
information and the burden estimate
should be directed to the Office of
Management and Budget, Paperwork
Reduction Project (1505-0063),
Washington, DC 20503, and to the
Treasury and the Board at the addresses
noted above.
The collections of information in this
proposed regulation are authorized by
12 U.S.C. 1829b and 1951-1959 and 31
U.S.C. 5311-5328. The likely
recordkeepers are financial institutions
that perform funds transfers.
Estimated number of respondents
and/or recordkeepers: 60,000.
Estimated total annual recordkeeping
burden: 6.5 million hours.
Estimated average annual burden per
respondent and/or recordkeeper: 108.3
hours.
Estimated annual frequency of
responses: Upon request.
List of Subjects in 31 CFR Part 103
Authority delegations (Government
agencies), Banks, banking, Currency,
Foreign banking, Investigations, Law
enforcement, Reporting and
recordkeeping requirements, Taxes.
Proposed Amendment
For the reasons set forth in the
preamble, 31 CFR part 103 is proposed
to be amended as set forth below:
PART 103—FINANCIAL
RECORDKEEPING AND REPORTING
OF CURRENCY AND FOREIGN
TRANSACTIONS
1. The authority citation for part 103
is revised to read as follows:
A uthority: Pub. L. 91-508, Title I, 84 Stat.
1114 (12 U.S.C 1829b and 1951-1959); and
Pub. L. 91-508, title II, 84 Stat. 1118, as
amended (31 U.S.C. 5311-5328).
2. Section 103.11 is amended by
redesignating paragraphs (a), (b), (c)
through (h), (i) through (k), (1), (m), (n),
(o), (p) through (r), and (s) through (u)
as paragraphs (b), (c), (f) through (k), (m)
through (o), (s), (t), (y), (dd), (ff) through
(hh), and (mm) through (oo),
respectively; by removing the words
"For purposes of § 103.29 of this part,
deposit” and adding in their place,
“Deposit” in newly designated
paragraph (j); and adding new
paragraphs (a), (d), (e), (1), (p), (q), (r),
(u), (v), (w), (x), (z), (aa), (bb), (cc), (ee),
(ii), (jj). (kk), and (11) to read as follows:
Stat. 3728,15 U.S.C. 1693 et seq.) are
excluded from this definition.
(q) Intermediary bank. A receiving
bank other than the originator’s bank or
the beneficiary’s bank.
(r) Intermediary financial institution.
A receiving financial institution, other
than a bank, the transmittor’s financial
institution or the recipient’s financial
institution.
*
*
*
*
*
(u) Originator. The sender of the first
§ 103.11 Meaning of term s.
payment order in a funds transfer.
*
*
*
*
*
(v) Originator’s bank. The receiving
(a) Accept. A receiving financial
bank to which the payment order of the
institution, other than the recipient’s
originator is issued if the originator is
financial institution, accepts a
not a bank, or the originator if the
transmittal order by executing the
originator is a bank.
transmittal order. A recipient’s financial
(w) Payment date. The day on which
institution accepts a transmittal order by the amount of the transmittal order is
paying the recipient, by notifying the
payable to the recipient by the
recipient of the receipt of the order or
recipient’s financial institution. The
by otherwise becoming obligated to
payment date may be determined by
carry out the order.
instruction of the sender, but cannot be
* * * * *
earlier than the day the order is received
(d) Beneficiary. The person to be paid by the recipient’s financial institution
by the beneficiary’s bank.
and, unless otherwise prescribed by
(e) Beneficiary's bank. The bank
instruction, is the date the order is
identified in a payment order in which
received by the recipient’s financial
an account of the beneficiary is to be
institution.
credited pursuant to the order or which
(x) Payment order. An instruction of
otherwise is to make payment to the
a sender, to a receiving bank,
beneficiary if the order does not provide transmitted orally, electronically, or in
for payment to an account.
writing, to pay, or to cause another bank
* * * * *
to pay, a fixed or determinable amount
(1) Execution date. The day on which of money to a beneficiary if:
(1) The instruction does not state a
the receiving financial institution may
properly issue a transmittal order in
condition to payment to the beneficiary
other than time of payment;
execution of the sender’s order. The
(2) The receiving bank is to be
execution date may be determined by
reimbursed by debiting an account of, or
instruction of the sender but cannot be
earlier than the day the order is
otherwise receiving payment from, the
sender; and
received, and, unless otherwise
(3) The instruction is transmitted by
determined, is the day the order is
the sender directly to the receiving bank
received. If the sender’s instruction
or to an agent, funds transfer system, or
states a payment date, the execution
communication system for transmittal to
date is the payment date or an earlier
the receiving bank.
date on which execution is reasonably
* * * * *
necessary to allow payment to the
recipient on the payment date.
(z) Receiving bank. The bank to which
*
*
*
*
*
the sender’s instruction is addressed.
(aa) Receiving financial institution.
(p) Funds transfer. The series of
transactions, beginning with the
The financial institution to which the
originator’s payment order, made for the sender’s instruction is addressed. The
term receiving financial institution
purpose of making payment to the
beneficiary of the order. The term
includes a receiving bank.
(bb) Recipient. The person to be paid
includes any payment order issued by
the originator’s bank or an intermediary by the recipient’s financial institution.
The term recipient includes a
bank intended to carry out the
beneficiary.
originator’s payment order. A funds
(cc) Recipient’s financial institution.
transfer is completed by acceptance by
The financial institution identified in a
the beneficiary’s bank of a payment
transmittal order in which an account of
order for the benefit of the beneficiary
the recipient is to be credited pursuant
of the originator’s payment order.
to the transmittal order or which
Automated clearinghouse transfers or
otherwise is to make payment to the
funds transfers governed in any part by
recipient if the order does not provide
the Electronic Funds Transfer Act of
1978 (title XX, Public Law 95-630, 92
for payment to an account. The term
Federal Register / Vol. 58, No. 16 TJ Tuesday, August 31, 1993 / Proposed Rules
recipient's financial institution includes
a beneficiary’s bank.
* * * * *
§103.25
*
R eports of tran sac tio n s w ith
* * * *
(bj * * *
(ee) Sender. H ie person giving the
(2) Transmittal orders received by a
instruction to the receiving bank or
respondent financial institution from a
receiving financial institution.
foreign financial agency or sent by
* * * * *
respondent financial institution to a
(ii) Transmittal o f funds. A aeries of foreign financial agency, including all
transactions beginning with the
information maintained by that
transmittor’s transmittal order, made for institution pursuant to § 103.33.
the purpose of making payment to the
* * * * *
recipient of the order. The term includes
4.
Section 103.33 is amended by
any transmittal o rd e r issued by the
adding new paragraphs (e), (f) and (g),
transmittor’ financial institution or an
s
to read as follows:
intermediary financial institution
§10X 33 R eco rds to b e m ade a n d retain ed
intended to carry out the transmittor’®
transmittal order. A transmittal of funds by financial Institutions.
* * * * *
is completed by acceptance by the
(a) With respect to funds transfers:
recipient’s financial institution of a
(1)(i) For each payment order that it
transmittal order for the benefit of the
recipient of the transmitter's transmittal accepts as an originator’s bank, a bank
shall retain either the original, a
order. Automated clearinghouse
microfilm or other copy, record, or
transfers and funds transfers governed
reproduction of the following
in any part by the Electronic Funds
information relating to the payment
Transfer Act of 1978 (title XX, Pub. L.
95—
630, 92 Stat. 3728,15 U.S.C. 1693 et. order:
(A) The name and address of the
seq.) are excluded from this definition.
originator of the payment order;
The term transmittal of funds includes
(BJ The amount of the funds transfer;
a funds transfer.
(C) The execution date of the payment
(jj) Transmittal order. The term
order;
transmittal order indudes a payment
(D) Any payment instructions
order and is an instruction of a sender
received from the originator with the
to a receiving financial institution,
payment order;
transmitted orally, electronically, or in
(E) The identity of the beneficiary’s
writing, to pay, or to cause another
bank; and
financial institution to pay, a fixed or
(F) Either the name and address or the
determinable amount of money to a
account number of the beneficiary of the
recipient if:
payment order, if received with the
(1) The instruction does not state a
payment order.
condition to payment to the recipient
(ii) For each payment order that it
other than time of payment;
accepts as an intermediary bank, a bank
(2) The receiving financial institution shall retain either the original, a
is to be reimbursed by debiting an
microfilm, or other copy, record, or
account of, or otherwise receiving
reproduction of the payment order.
payment from, the sender; and
(iii) For each payment order that it
accepts as a beneficiary’ bank, a bank
s
(3) The instruction is transmitted by
shall retain either the original, a
the sender directly to the receiving
microfilm, or other copy, record, or
financial institution or to an agent or
communication system for transmittal to reproduction of the payment order.
(2)(i) Prior to accepting a payment
the receiving financial institution.
order from an originator that does not
(kk) Transmittor. The sender of the
first transmittal order in a transmittal of have a deposit account or loan with the
funds. The term transmittor includes an bank, an originator’s bank shall verify
the originator’s name and address by
originator.
examination of a document that
(11) Transmittor’s financial institution. contains such information; and, if it
The receiving financial institution to
accepts the payment order, record and
which the transmittal order n f the
retain a record o f that information, the
transmittor is issued if the transmittor is type of identification reviewed, and the
not a financial institution, or the
number of the identification document
transmittor if the transmittor is a
(e.g., driver’s license). In addition to the
financial institution. H ie term
information required in paragraph
transmittor’s financial institution
(e)(l)(i) of this section, the hank shell
includes an alien ator’s bank.
obtain and retain a record of the
* * * * *
originator’s social security number,
3.
Paragraph (b)(2) of § 103.25 is
aHen identification number, or
revised to read as follows:
employer identification number.
46019
(ii) Verification of the name and
address of an individual who indicates
that he car she is an alien ta is not a
resident of the United States must be
made by passport, alien identification
card, or other official document
evidencing nationality or residence (eg.,
a Provincial driver’s license with
indication of home address).
Verification of name and address in any
other case shall be made by examination
of a document, other than a bank
signature card, that is normally
acceptable within the banking
community as a means of identification
when cashing checks for nondepositors
(e.g., a drivers license).
(iii) If the originator does not have a
social security number, alien
identification number, or employer
identification numbeT, the lack of such
a num ber shall be noted in the record.
(3)(i) For each payment order that it
accepts as a beneficiary’s bank for a
beneficiary that does not have a deposit
account or loan with that bank, in
addition to maintaining the information
required in paragraph (e)(lKiii) «f this
section, a beneficiary’s bank shall obtain
and retain a record of the beneficiary’s
name and address, and social security
number, alien identification number, or
employer identification number. If the
beneficiary does not have a social
security number, alien identification
number, or employer identification
number, the lack of such a number shall
be noted in the record.
(ii) If a beneficiary’s bank delivers the
proceeds of a funds transfer, in person,
to a beneficiary that does not have a
deposit account or loan account with
that bank, a beneficiary’s bank shall
verify the beneficiary’s name and
address by examination of a document
that contains such information, and
retain a record of that information, the
type of identification reviewed, and the
number of the identification document
(eg., drivers license).
(iii) Verification of fee name and
address of an individual who indicates
that he or she is an alien or is not a
resident of the United States must be
made by passport, alien identification
card, or other official document
evidencing nationality or residence Ie.g.,
a Provincial driver’s license with
indication of home address).
Verification of identity in any other case
shall be made by ^examination of a
document, other than a bank signature
card, that is normally acceptable within
the banking community as a means of
identification when cashing checks for
nondepositors le g ., a drivers license). If
a beneficiary’s bank sends fee proceeds
of a funds transfer in the form of * check
or other written instrument to a
46020
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
beneficiary that does not have a deposit
account or loan account with that bank,
that bank shall retain a copy of the
check or other written instrument, or
the information contained thereon, and
the name and address of the person to
whom it was sent.
(4) The information that an
originator’s bank must retain under
paragraphs (e)(l)(i) and (e)(2)(i) of this
section shall be readily retrievable by
the originator’s bank by reference to
either the name or account number of
the originator. The information that a
beneficiary’s bank must retain under
paragraphs (e)(l)(iii) and (e}(3)(i) of this
section shall be readily retrievable by
the beneficiary’s bank by reference to
either the name or account number of
the beneficiary.
(5) The following funds transfers are
not subject to the requirements of this
paragraph:
(i) Funds transfers where both the
originator and the beneficiary are
domestic banks;
(ii) Funds transfers where both the
originator and beneficiary are the same
domestic bank or one is the whollyowned domestic subsidiary of the other;
(iii) Funds transfers where both the
originator and the beneficiary are the
same person and the originator's bank
and the beneficiary’s bank are the same
domestic bank; and
(iv) Funds transfers where both the
originator and the beneficiary are either
a domestic bank, the United States, any
state or local government, or a Federal,
state or local government agency or
instrumentality.
(f) With respect to a transmittal of
funds:
(1) Prior to accepting a transmittal
order from a transmittor, a transmittor’s
financial institution, other than a bank
or a broker or dealer in securities that
has an account for the transmittor, shall
verify the transmittor’s name and
address by examination of a document
that contains such information; and, if
it accepts such transmittal order, record
and retain a record of that information,
the type of identification reviewed, and
the number of the identification
document (e.g., drivers license no.),
Verification of the identity of an
individual who indicates that he or she
is an alien or is not a resident of the
United States must be made by passport,
alien identification card, or other
official document evidencing
nationality or residence (e.g., a
Provincial driver’s license with
indication of home address).
Verification of identity in any other case
shall be made by examination of a
document, other than a bank signature
card, that is normally acceptable within
institution, other than a bank or a broker
the banking community as a means of
or dealer in securities that has an
identification when cashing checks for
nondepositors (e.g., a drivers license). In account for the recipient, sends the
proceeds of a transmittal of funds to the
addition, the financial institution shall
recipient in the form of a check or other
obtain and retain the original, or a
written instrument, the financial
microfilm or other copy, record, or
institution shall retain a copy of the
reproduction of the following
check or other written instrument, or
information relating to the transmittal
the information contained thereon, and
order:
(1)(A) The transmittor’s social security the name and address of the person to
number, alien identification number, or whom it was sent.
employer identification number, if the
(4) The information that a
transmittor has any such numbers or a
transmittor’s financial institution must
notation in the record of the lack
retain under paragraph (f)(1) of this
thereof; or
section shall be readily retrievable by
(B) If the transmittal of funds is by thethe transmittor’s financial institution by
financial institution on its own behalf,
reference to the name of the transmittor.
a statement to that effect;
The information that a recipient’s
(ii) The amount of the transmittal
financial institution must retain under
order;
paragraph (f)(3) of this section shall be
(iii) The execution date of the
readily retrievable by the recipient’s
transmittal order;
financial institution by reference to the
(iv) Any payment instructions
name of the recipient. This information
received from the transmittor with the
need not be retained alphabetically by
transmittal order;
name, but the financial institution must
(v) The name and address of the
be able to access the transmittal of funds
recipient of the transmittal of funds; and records readily by name of the
(vi) Any form completed by the
transmittor or recipient, as the case may
person or the financial institution
be, and may do so through reference to
relating to the transmittal of funds.
(2) For each transmittal order that it some other record maintained by the
financial institution.
accepts as an intermediary financial
(g) With respect to a transmittal of
institution, a financial institution, other
funds:
than a bank or broker or dealer in
(1) For each transmittal order that it
securities, shall retain either the
accepts as a transmittor’s financial
original, a microfilm, or other copy,
institution, a broker or dealer in
record, or reproduction of the
securities that has an account for the
transmittal order.
(3)(i) For each transmittal order that it transmittor shall retain either the
original, a microfilm or other copy,
accepts as a recipient’s financial
institution, a financial institution, other record, or reproduction of the following
information relating to the transmittal
than a bank or a broker or dealer in
order:
securities that has an account for the
(1) The name and address of the
recipient, shall retain the original or a
transmittor of the transmittal order;
microfilm, or other copy, record, or
(ii) The amount of the transmittal of
reproduction of the transmittal order;
funds;
and the name, address, and the social
(iii) The execution date of the
security number, alien identification
transmittal order;
number or employer identification
(iv) Any payment instructions
number of the recipient. If the recipient
received from the transmittor with the
does not have a social security number,
transmittal order;
alien identification number, or
(v) The identity of the recipient’s
employer identification number, the
financial institution; and
lack of such a number shall be noted in
(vi) Either the name and address or
the record.
the account number of the recipient of
(ii)
If a recipient’s financial
the transmittal of funds, if received with
institution, other than a bank or broker
the transmittal order.
or dealer in securities that has an
(2) For each transmittal order that it
account for the recipient, delivers the
accepts as an intermediary financial
proceeds of a transmittal of funds in
institution, a broker or dealer in
person to the recipient, the financial
securities shall retain either the original,
institution shall verify the name and
address of the recipient by examination a microfilm, or other copy, record, or
reproduction of the transmittal order.
of a document that contains such
information and shall retain a record of
(3) For each transmittal order that it
that information, the type of
accepts as a recipient’s financial
identification reviewed, and the number institution, a broker or dealer in
securities that has an account for the
of the identification document (e.g.,
drivers license). If a recipient’s financial recipient shall retain either the original,
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
a microfilm, or other copy, record, or
reproduction of the transmittal order.
(4) The information that a
transmittor’s financial institution must
retain under paragraph (g)(1) of this
section shall be readily retrievable by
the transmittor’s financial institution by
reference to either the name or account
number of the transmittor. The
information that a recipient’s financial
institution must retain under paragraph
(g)(3) of this section shall be readily
retrievable by the recipient’s financial
institution by reference to either the
name or account number of the
recipient. This information need not be
retained alphabetically by name or
numerically by account number; but the
financial institution must be able to
access the transmittal of funds records
readily by name or account number of
the transmittor or recipient, as the case
may be, and may do so through
reference to some other record
maintained by the financial institution.
(5) The following transmittals of
funds are not subject to the
requirements of this paragraph:
(i) A transmittal of funds where both
the transmittor and the recipient of the
funds are domestic brokers or dealers in
securities;
(ii) A transmittal of funds where both
the transmittor and recipient are the
same domestic broker or dealer in
securities or one is the wholly-owned
domestic subsidiary of the other, or a
bank;
(iii) Transmittals of funds where both
the transmittor and recipient are the
same person and the transmittor’s
financial institution and the recipient’s
financial institution are the same
domestic broker or dealer in securities;
and
(iv) Transmittals of funds where both
the transmittor and the recipient are
either a domestic broker or dealer in
securities, the United States, any state or
local government, or a federal, state, or
local government agency or
instrumentality.
Dated: August 19,1993.
In concurrence:
By the Board of Governors of the Federal
Reserve System.
W illiam W. Wiles,
Secretary.
Dated: August 11,1993.
By the Department of the Treasury.
R onald K. Noble,
Assistant Secretary (Enforcement).
[FR Doc. 93-20870 Filed 8-30-93; 8:45 ami
BILLING CODE 8210-01-P 4810-2S-P
46021
domestic financial institutions. See H.R.
Rep. No. 975, 91st. Cong., 2nd. Sess.,
31 CFR Part 103
11-13 (1970). The BSA was amended
last year by the Annunzio-Wylie AntiProposed Amendment to the Bank
Money Laundering Act of 1992, title XV
Secrecy Act Regulations Relating to
of the Housing and Community
Transmittal Orders for Funds Transfers Development Act of 1992, Public Law
and Transmittals of Funds By Financial 102-550 (the 1992 Amendment). Among
Institutions
other things, section 1517 of the 1992
AGENCY: Departmental Offices, Treasury. Amendment authorizes the Secretary of
ACTION: Notice of Proposed Rulemaking. the Treasury to require financial
institutions to carry out anti-money
SUMMARY: In this notice Treasury
laundering programs, including the
proposes to amend the regulations that
development of internal policies,
procedures and controls.
implement the Bank Secrecy Act (BSA)
This notice of proposed rulemaking is
to require a bank or non-bank financial
the Department of the Treasury’s first
institution that acts as a transmittor’s
step toward full implementation of
financial institution in a transmittal of
section 1517 of the 1992 Amendment,
funds to include certain information in
the transmittal order when sending it to and it coincides with a separate but
related Treasury initiative. As noted in
the receiving financial institution. A
testimony before the House Banking
companion notice of proposed
Committee on May 25,1993, by
rulemaking (companion notice) also
published elsewhere in this issue of the Assistant Secretary Noble
(Enforcement), Treasury would be, and
Federal Register proposes enhanced
is now conducting a comprehensive
recordkeeping requirements relating to
examination of its anti-money
certain transmittals of funds by these
laundering programs, including the
same financial institutions.
Bank Secrecy Act regulations.
As set forth in the companion notice,
domestic financial institutions involved Comments received in response to this
notice and the companion notice will be
in a transmittal of funds will have to
carefully considered as part of this
collect and retain certain information.
comprehensive examination.
The amount and type of information
The 1992 Amendment also authorizes
collected and retained will depend
the Board of Governors of the Federal
upon the financial institution’s role in
Reserve System and the Treasury to
the particular transmittal, and whether
require financial institutions to retain
or not the parties to the transactions
records of domestic and international
have a deposit account or a loan with
funds transfers and transmittals. The
the financial institution. The reader is
companion notice of proposed
encouraged to review the companion
rulemaking published elsewhere in this
notice before reviewing this notice in
issue of the Federal Register proposes
order to ensure a full understanding.
enhanced recordkeeping requirements
DATES: Comments are due on or before
relating to certain transmittals of funds
October 4,1993.
by financial institutions. In this notice,
ADDRESSES: Comments should be sent to
Treasury proposes that certain
Peter G. Djinis, Director, the Office of
information required to be maintained
Financial Enforcement, Office of the
by the companion notice of proposed
Assistant Secretary (Enforcement),
rulemaking also be included in the
Department of the Treasury, room 5000
transmittal order, at the time of
Annex, 1500 Pennsylvania Avenue,
transmittal, by whatever means
NW., Washington DC 20220.
including any funds transfer system
FOR FURTHER INFORMATION CONTACT: A.
(e.g., FedWire, SWIFT, and CHIPS) or
Carlos Correa, Chief, Regulations and
similar system for transmittals of funds
Rulings, Office of Financial
(e.g., Western Union and TELEX), to a
Enforcement, (202) 622-0400.
financial institution.
SUPPLEMENTARY INFORMATION: The Bank
The number of transmittals of funds
Secrecy Act (BSA), Public Law 91-508
completed daily is quite substantial. For
(codified at 12 U.S.C. 1829b and 1951example, the daily average number of
59, and 31 U.S.C. 5311-28), enacted in
funds transfers made over FedWire in
1970, authorizes the Secretary of
1992 was 270,000, with an average
Treasury to require financial institutions aggregate daily dollar amount of $800
to file reports and keep records that the
billion and a peak aggregate daily dollar
Secretary determines have a high degree amount of over $1 trillion.
Proceeds from illegal activities may be
of usefulness in criminal, tax and
regulatory matters. The primary purpose processed through money laundering
schemes involving domestic and/or
of the BSA is to identify the source,
international payment by transmittals of
volume and movement of money into
funds. Money laundering is a vital
and out of the country and through
DEPARTMENT OF THE TREASURY
46022
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
component of drug trafficking and other
criminal activity throughout the world,
and federal law enforcement agencies
believe that a significant volume of the
money laundered involves transmittals
of funds.
Such illegal activity has been
documented in several recent money
laundering operations conducted by
federal law enforcement agencies.
Among the operations which exposed
large scale money laundering through
transmittals of funds are Operations
Green Ice, Polar Cap and C-Chase. The
success of these and other law
enforcement operations would have
been greatly enhanced and facilitated
had the transmittal orders involved in
those cases included data identifying
the transmittors and recipients of the
transmittals of funds.
Recently the CHIPS and SWIFT funds
transfer systems have adopted new
formats/procedures that provide for the
inclusion of the name and address of
transmittors and recipients in
transmittal orders. In a July 30,1992,
message to SWIFT participants, SWIFT
recognized the fact that many countries
are involved in initiatives to prevent the
use of the banking system and other
financial institutions for money
laundering. In this broadcast SWIFT
strongly encouraged its users to include
in the existing field in the SWIFT
message the transmittor’s name and
address or account number, and to
complete the existing fields for the
recipient’s name, address and (where
possible) account number. CHIPS issued
a similar broadcast to its users dated
September 14,1992. In statements
issued by the Federal Reserve Board (the
Board), the Federal Deposit Insurance
Corporation (FDIC), the National Credit
Union Administration (NCUA), the
Office of the Comptroller of the
Currency (OCC), and the Office of Thrift
Supervision (OTS), these agencies
encouraged financial institutions to
include in payment orders complete
information on the originator and
beneficiary of such orders, including
those sent through FedWire (using
optional fields where possible), CHIPS,
SWIFT, and other proprietary funds
transfer systems. A similar statement
was issued by the Federal Financial
Institutions Examination Council
(FFIEC). (See, FFIEC Statement dated
March 11,1993, 58 FR 14400, March 17,
1993.)
Because at present there are no
designated fields in the FedWire format
in which to include complete originator
and beneficiary information, the Board
encourages users of the FedWire system
to use all available optional fields to
include such information. The Federal
Reserve System is currently studying
and expects to publish a Federal
Register notice inviting comment on
possible revisions to that format.
Summary Description of the Proposed
Rule
General Overview
The proposed rule is divided into
three components:
(1) A requirement that a transmittor’s
financial institution include certain
information in any transmittal order
prior to sending it to a receiving
financial institution;
(2) A requirement that any receiving
financial institution acting as an
intermediary bank forward, with its
transmittal order, certain information it
receives from a transmittor’s financial
institution as well as the identity of the
transmittor’s financial institution in the
corresponding transmittal order; and,
(3) A requirement that any receiving
financial institution that acts as an
intermediary financial institution
forward, with its transmittal order,
certain information that it receives from
a transmittor’s financial institution, as
well as the identity of the transmittor’s
financial institution in the
corresponding transmittal order.
banks and non-bank financial
institutions engaging in transmittals of
funds. Accordingly, in this notice we
have used the broader, generic terms
described above which apply to all
financial institutions, and which are
defined in the companion notice.
Forwarding Information Received With
a Transmittal Order
This proposed rule will ensure that
certain information the transmittor’s
financial institution gathers when
engaging in a transmittal of funds will
travel with the corresponding
transmittal order to any receiving
financial institution. Receiving financial
institutions include intermediary banks,
intermediary financial institutions, and
recipient’s financial institutions. While
the companion notice does not require
the transmittor’s financial institution to
obtain specific information about the
recipient from the transmittor, it is
expected that a transmittor’s financial
institution will receive from the
transmittor information identifying the
recipient. Without this information, the
recipient’s financial institution would
not be able to pay properly the proceeds
of the transmittal of funds it receives.
Thus, pursuant to this proposed rule, it
is expected that:
Definitions
(1) A transmittor’s financial
institution will obtain and record the
This notice of proposed rulemaking
uses terms proposed to be defined in the information required by the Companion
Notice and include certain prescribed
companion notice of proposed
portions of that information in the
rulemaking, published elsewhere in
resulting transmittal order.
today’s Federal Register. The
(2) Any receiving financial institution
definitions of certain terms are intended
acting either as an intermediary bank or
to be identical to the same terms used
intermediary financial institution, upon
for banks in Uniform Commercial Code
acceptance of the transmittal order, will
(UCC) Article 4A: “beneficiary”,
forward with its corresponding
“beneficiary’s bank”, “intermediary
bank”, “originator”, “originator’s bank”, transmittal order all required
“payment order”, and “receiving bank”. information it receives.
The following examples serve to
Other definitions which refer to
illustrate the operation of the rule
transactions by nonbank financial
proposed in this notice.
institutions are included in the
Example #1: Domestic Transmittal of
companion notice, are intended to
Funds—Non-bank to bank. John Doe—
parallel the equivalent definitions in
transmittor.
UCC Article 4A, and are also used in
Broker/Dealer—transmittor’s financial
this proposed rule: “recipient” (which
institution/originator.
includes a “beneficiary”), “recipient’s
Bank A—originator’s bank/intermediary
financial institution” (which includes a financial institution.
“beneficiary’s bank”), "receiving
FedWire—Federal Reserve Bank.
financial institution" (which includes a
Bank B—recipient’s financial institution/
“receiving bank”), "transmittal order”
beneficiary’s bank.
Sally Jones—recipient/beneficiary.
(which includes a “payment 0 {der”),
John Doe is sending $7,000 to his aunt,
“transmittal of funds” (which includes
Sally Jones, who has an account at Bank B.
a “funds transfer”), and “transmittor”
(which includes an “originator”). Other His aunt requests that he include payment
instructions for her bank to call her when the
terms proposed to be defined in the
money is received. John decides to send the
companion notice and used in this
money from his money market mutual fund
Notice include: "intermediary bank”
at Broker/Dealer. John requests his account
and "intermediary financial
officer at Broker/ Dealer send the money to
institution”. The requirements of this
his aunt at Bank B. The account officer has
proposed rule would apply equally to * John’s name, address, and account number
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
on file, and requests John provide him with
the same information for his aunt. }ohn
provides his aunt’s name and address, but is
unaware of her account number. The Broker/
Dealer prepares a transmittal order to its
Bank, Bank A, containing John’s name,
address, and account number, his aunt's
name and address, the amount of the
transmittal order, the execution date (today’s
date), the name of his aunt’s bank (Bank B),
and payment instructions asking Bank B to
notify aunt Sally Jones when the money is
received. The Broker/Dealer also includes
payment instructions for its bank (Bank A) to
use FedWire to make the payment.
Bank A, upon accepting the transmittal
order from Broker/Dealer, prepares a
corresponding transmittal order to send over
FedWire that includes: John’s name, address
and account number; Sally's name and
address; Bank B’s identifying number
(FedWire routing number); the amount of the
transmittal; instructions to call Sally Jones
upon receipt; and the name and address of
Broker/Dealer. Bank A does not include the
instruction to use FedWire to make the
payment.
FedWire, upon acceptance of the
transmittal order, prepares a corresponding
transmittal order that it sends to Bank B that
includes: John's name, address and account
number; Sally Jones’ name and address; Bank
A’s identifying (routing) number [not
required by the rule, but included as part of
a standard FedWire funds transfer]; Bank B’s
identifying (routing) number, the amount of
the transmittal; instructions to call Sally
upon receipt; and the name and address of
Broker/Dealer.
Bank B, upon acceptance of the transmittal
order, cross-references its customer
identification system to determine Sally
Jones’ account number and telephone
number, credits the funds to Sally Jones’
account, and calls her to notify her of receipt
of the funds.
Example #2: International Transmittal of
Funds—Swift to FedWire.
Franz Mobius—transmittor.
First Black Forest Munich—transmitter's
financial institution.
SWIFT
*.*—Effective point of the proposed rule.
First NY, Bronx—Receiving financial
institution/intermediary bank.
FedWire—Federal Reserve Bank
Cowboy Trust—Dallas—Recipient's bank/
beneficiary bank.
Tyler "Tex" Edwards—Recipient/
beneficiary.
For his new "T-Bone Palace” restaurant,
Franz has purchased a supply of Billy-Bob
Bar-B-Q sauce and is paying a franchise fee
for use of Tex’s special recipe for ribs. In
payment for the former, Franz must remit
$24,000 to Tex. In order for the franchise to
be effective by the restaurant’s opening date,
Tex must receive the funds by close of
business today. Tex has requested that Franz
send the money to his account (#123) at
Cowboy Trust in Dallas. Franz goes to his
bank (First Black Forest Munich) and
requests that the funds be sent immediately.
First Black Forest Munich sends a SWIFT
message to its NY correspondent (First NY
Bronx). This message includes: Franz name,
address, and account number, Tex’s name,
address and account number; instructions to
pay Tex’s account (#123) at Cowboy Trust;
the amount of the transmittal order, invoice
information on the Bar-B-Q sauce that
includes the invoice number and product
description/quantity; and other information'
related to the franchise arrangement.
First NY Bronx, upon acceptance of the
transmittal order via SWIFT, prepares a
corresponding transmittal order to be sent via
FedWire. Realizing that the information
provided by SWIFT exceeds available space
in the FedWire format, First NY Bronx,
decides to truncate some of the invoice
information to create additional space to
accommodate transmittor and recipient
information. First NY Bronx, decides not to
truncate any franchise information as it is not
in a position to know what information is
critical. However, First NY Bronx decides to
truncate the product description and
quantity, transmitting only the invoice
number and payment amount for this
product (which is a portion of the total
payment amount of the transmittal order).
Even after truncating this information, all
necessary transmittal information can not be
accommodated by the FedWire format. Thus,
First NY Bronx, includes in its transmittal
order: The amount of the transmittal order;
Franz name, address, and account number;
Tex’s name and account number (but, omits
his address); the invoice number and
payment amount; all of the franchise
information; the name and address of the
transmitter's financial institution; and the
identifier of the recipient’s bank (Cowboy
Trust).
Proposed Effective Date
As discussed above, at present there
are no designated fields in the FedWire
format in which to include complete
originator and beneficiary information.
However, this information can be
included in optional fields not being
used for other required information. As
previously noted, the Federal Reserve
System is currently studying and
expects to publish a Federal Register
notice inviting comment on possible
revisions to the FedWire format. Any
such changes to the FedWire format and
to other proprietary funds transmittal
systems would require time to
implement.
Recently the CHIPS and SWIFT funds
transfer systems have adopted new
formats/procedures that provide for the
inclusion of the name and address of
transmittors and recipients in payment
orders. The Federal Reserve, SWIFT,
CHIPS, and the banking regulatory
agencies have encouraged, and Treasury
joins in encouraging, users of FedWire,
SWIFT, CHIPS and all other proprietary
funds transfer systems to include such
data in payment orders.
In view of the foregoing, Treasury
proposes that the effective date of the
requirements of this Notice of Proposed
Rulemaking be twelve (12) months from
46023
the date of publication of the final rule.
In the interim, Treasury strongly
encourages financial institutions to
include in any transmittal order, to the
extent possible, complete transmittor
and recipient information when sending
transmittal orders through FedWire,
CHIPS, SWIFT and any other
proprietary system.
Submission of Comments
Treasury requests comments from all
interested persons concerning the
proposed amendments. While
comments on all aspects of the
regulation are welcome, Treasury is
particularly interested in receiving
comments on: The extent to which
financial institutions using funds
transfers systems such as FedWire
(which is owned and operated by the
Federal Reserve Banks), the
Clearinghouse Interbank Payments
System (CHIPS), the Society for
Worldwide Interbank Financial
Telecommunications (SWIFT), Western
Union and TELEX already include in
transmittal orders the information
proposed to be required; and, the
additional burden measured in time and
costs the proposed requirement will
impose on financial institutions. All
comments received before the closing
date will be carefully considered. Only
written and timely comments submitted
to Treasury will receive consideration.
Comments received after the closing
date will be treated as suggestions for
future action. The Treasury Department
will not recognize as confidential any
submitted materials or comments,
including the name of any person
submitting same. Any material hot
intended to be disclosed to the public
should not be included in the
comments. All comments will be
available for public inspection during
the hours that the Treasury Library is
open to the public. The Treasury Library
is located in room 5030,1500
Pennsylvania Avenue, NW„
Washington, DC 20220. Appointments
must be made to view the comments.
Persons wishing to view the comments
submitted should contact the Office of
Financial Enforcement at (202) 6220400.
Executive Order 12291
This proposed rule, if adopted as a
final rule, is not a major rule for
purposes of Executive Order 12291. It is
not anticipated to have an annual effect
on the economy of $100 million or
more. It will not result in a major
increase in costs or prices for
consumers, individual industries,
federal, state or local government
agencies, or geographic regions. It will
46024
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
not have any significant adverse effects
on competition, employment,
investment, productivity, innovation or
on the ability of United States-based
enterprises to compete with foreignbased enterprises in domestic or foreign
markets. A regulatory impact analysis,
therefore, is not required.
Regulatory Flexibility Act
It is hereby certified under section
605(b) of the Regulatory Flexibility Act,
5 U.S.C. 601, et seq., that this proposed
rule, if adopted, will not have a
significant economic impact on a
substantial number of small entities.
Paperwork Reduction A-.:t
The collection of information
requirements contained in this Notice of
Proposed Rulemaking have been
submitted to the Office of Management
and Budget for review in accordance
with the Paperwork Reduction Act of
1980 (44 U.S.C. 3504(h)). Comments on
the collection of information a«d the
burden estimate should be directed to
the Office of Financial Enforcement at
the address noted above or to the Office
of Management and Budget, Paperwork
Reduction Project (1505-0063),
Washington, DC 20503. The collections
of information in this proposed
regulation are authorized by 12 U.S.C.
1829b and 1951-1959 and 31 U.S.C.
5311-5328. The likely recordkeepers are
financial institutions (as defined in 31
CFR 103.11(i)).
Estimated number o f respondents
and/or recordkeepers: 60,000.
Estimated total annual recordkeeping
burden: 9.9 million hours.
Estimated average annual burden per
respondent and/or recordkeeper. 165.4
hours.
Estimated annual frequency o f
responses: Upon request.
Drafting Information
The principal author of this document
is the Office of Financial Enforcement.
However, other offices at the
Department of the Treasury assisted in
its development. Technical assistance
was also provided by the staff of the
Board of Governors of the Federal
Reserve and the staff of the Money
Laundering Section of the Department
of Justice.
List of Subjects in 31 CFR Part 103
Authority delegations (Government
agencies), Banks and banking, Currency,
Foreign banking, Investigations, Law
enforcement, Reporting and
recordkeeping requirements, Taxes.
Proposed Amendment
For the reasons set forth in the
preamble, 31 CFR part 103 is proposed
to be amended as set forth below:
PART 103—FINANCIAL
RECORDKEEPING AND REPORTING
OF CURRENCY AND FOREIGN
TRANSACTIONS
1. The authority citation for part 103
continues to read as follows:
A uthority: Pub. L 91-508. Title I, 84 Stat
1114 (12 U.S.C. 1829b and 1951-1959); and
Pub. L. 91-508, Title II. 84 Stat. 1118, as
amended (31 U.S.C. 5311-5328).
2. It is proposed to amend § 103.33 by
adding new paragraph (h) to read as
follows:
§ 103.33 R ecords to b e m ade and retained
by financial institutions.
*
* * * *
(h) With respect to transmittals of
funds:
(l)(i) A transmittor’s financial
institution shall include in any
transmittal order, at the time it is sent
to a receiving financial institution, the
following information:
(A) The name and address of the
transmittor of the transmittal order;
(B) The amount of the transmittal of
funds;
(C) The execution date of the
transmittal order;
(D) The identity of the recipient’s
financial institution; and
(E) Either the name and address or the
account number of the recipient of the
transmittal order, if received with the
transmittal order.
(ii) Any receiving financial institution
that acts as an intermediary bank, if it
accepts a transmittal order, shall
include in a corresponding transmittal
order at the time it is sent to the next
receiving financial institution, the
following information, if received from
the sender:
(A) The name and address of the
transmittor of the transmittal order;
(B) The amount of the transmittal of
funds;
(C) The execution date of the
transmittal order;
(D) The identity of the recipient’s
financial institution;
(E) Either the name and address or the
account number of the recipient of the
transmittal order, if received with the
transmittal order; and
(F) Either the name and address or
numerical identifier of the transmittor’s
financial institution.
(iii) Any receiving financial
institution that acts as an intermediary
financial institution, if it accepts a
transmittal order, shall include in a
corresponding transmittal order at the
time it is sent to the next receiving
financial institution, the following
information, if received from the sender:
(A) The name and address of the
transmittor of the transmittal order,
(B) The amount of the transmittal of
funds;
(C) The execution date of the
transmittal order;
(D) The identity of the recipient’s
financial institution;
(E) Either the name and address or the
account number of the recipient of the
transmittal order, if received with the
transmittal order; and
(F) Either the name and address or
numerical identifier of the transmittor’s
financial institution.
Dated: August 11,1993.
Ronald K. Noble,
Assistant Secretary (Enforcement).
[FR Doc. 93-20871 Filed 8-30r93; 8:45 am]
BILUNG CODE 4810-2 5-P
FEDERAL RESERVE SYSTEM
12 CFR Part 219
[Regulation S; D ocket No. R-0807]
Reimbursement for Providing Financial
Records; Recordkeeping
Requirements for Certain Financial
Records
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed rulemaking.
SUMMARY: The Board of Governors of the
Federal Reserve System (Board) is
requesting comments on enhanced
recordkeeping requirements relating to
certain wire transfers by financial
institutions. These proposed
recordkeeping requirements are being
promulgated jointly by the Board and
the Department of Treasury (Treasury).
A companion notice of proposed
rulemaking, published elsewhere in this
issue of the Federal Register by
Treasury and the Board (joint notice)
sets forth the substantive provisions of
the proposed recordkeeping
requirements. This notice sets forth a
proposed regulation for codification at
12 CFR part 219, subpart B, which
extensively cross-references the
substantive provisions set forth in the
joint notice.
Under the joint notice, each domestic
financial institution involved in either a
domestic or international wire transfer
will have to collect and retain certain
information. The amount and type of
information collected and retained will
depend upon the nature of the financial
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
institution, its role in the particular wire
transfer, and the relationship of the
parties to the transaction with the
financial institution. The recordkeeping
requirements applicable to international
wire transfers are required by statute to
be effective before January l, 1994. For
ease of implementation. Treasury and
the Board propose to make the proposed
recordkeeping requirements applicable
to both domestic and international wire
transfers effective on December 31,
1993.
DATES: Comments a re d u e on or before
October 4,1993.
ADDRESSES: Each comment on the
provisions of this proposed notice (as
supplemented by the joint notice)
should be sent separately to both the
Treasury and the Board at the following
addresses:
Treasury: Mr. Peter Djinis, Director,
Office of Financial Enforcement,
Department of the Treasury, room 5000
Annex, 1500 Pennsylvania Avenue,
NW, Washington, DC 20220;
Board: Mr. William W. Wiles,
Secretary, Board of Governors of the
Federal Reserve System, 20th and
Constitution Avenue, NW, Washington,
DC 20551. Comments addressed to Mr.
Wiles, Secretary, Board of Governors of
the Federal Reserve System, should
refer to Docket No. R-0807. Comments
may also be delivered to the Board's
mailroom between 8:45 a.m. and 5:15
p.m., and to the security control room
outside of those hours. Both the
mailroom and the security control room
are accessible from the courtyard
entrance on 20th Street between
Constitution Avenue and C Street, NW.
Inspection o f Comments: Comments
may be inspected at the Federal Reserve
Board, 20th and Constitution Avenue,
NW, Washington, DC, in room B-1122
between 9 a.m. and 5 p.m., as provided
in part 261 of the Board’s Rules
Regarding Availability of Information,
12 CFR 261.8. Comments may also be
inspected at the Department of Treasury
between 10 a.m. and 4 p.m. in the
Treasury Library, which is located in
room 5030,1500 Pennsylvania Avenue,
NW, Washington, DC. Persons wishing
to inspect the comments submitted
should request an appointment at the
Treasury Library at (202) 622-0990.
FOR FURTHER INFORMATION CONTACT:
Treasury: A. Carlos Correa, Assistant
Director, Rules and Regulations Section,
Office of Financial Enforcement,
Department of the Treasury, (202) 6220400.
Board: Gayle Brett, Manager,
FedWlre, Division of Reserve Bank
Operations and Payment Systems (292)
452-2934; Oliver Ireland, Associate
General Counsel (202) 452-3625, or
Elaine M. Boutilier, Senior Attorney,
Legal Division, (202) 452-2418, Board of
Governors of the Federal Reserve
System. For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Dorothea Thompson (202) 4523544.
SUPPLEMENTARY INFORMATION: The
statute generally referred to as the Bank
Secrecy Act (Pub. L. 91-508, codified at
12 U.S.C. 1829b and 1951-1959, and 31
U.S.C. 5311-5328) authorizes the
Secretary of the Treasury to require
financial institutions to keep records
and file reports that the Secretary
determines have a high degree of
usefulness in criminal, tax and
regulatory matters. The primary purpose
of the Bank Secrecy Act is to identify
the source, volume and movement of
funds into and out of the country and
through domestic financial institutions.
The Bank Secrecy Act was amended last
year in the Annunzio-Wylie Anti-Money
Laundering Act of 1992, Title XV of the
Housing and Community Development
Act of 1992, Public Law 102-550
(referred to hereafter as the 1992
Amendment) to specifically authorize
the Treasury and the Board jointly to
prescribe regulations to require
maintenance of records regarding
domestic and international funds
transfers.
The 1992 Amendment authorizes the
Board and the Treasury to promulgate
recordkeeping requirements for
domestic wire transfers by insured
depository institutions whenever the
agencies determine that such records
have a high degree of usefulness in
criminal tax or regulatory investigations
or proceedings. In addition, the 1992
Amendment requires the Treasury and
the Board to issue final regulations with
regard to the international transactions
to be effective before January 1,1994.
The recordkeeping requirements for
international transactions will apply to
financial institutions as defined in 31
CFR 103.11(i), which include insured
depository institutions and brokers and
dealers in securities, as well as
businesses that provide check cashing
services, money transmitting businesses,
and businesses that issue or redeem
money orders, travelers’ checks or other
similar instruments (collectively
referred to as check cashing and money
transmitting businesses). In prescribing
these required regulations, the Board
and the Treasury must take into
consideration the usefulness of these
records in criminal, tax, or regulatory
investigations or proceedings and the
effect the recordkeeping will have on
the cost and efficiency of the payment
46025
system. The Board and the Treasury
have decided that it would be simpler
to issue proposed regulations for both
domestic and international funds
transfers simultaneously, because the
recordkeeping requirements will be
substantially the same.
The number of wire transfers
completed daily is substantial. For
example, the daily average number of
wire transfers made over FedWire in
1992 was 270,000, with average
aggregate daily dollar amount of $800
billion and a peak aggregate daily dollar
amount of over $1 trillion.
Money laundering is a vital
component of drug trafficking and other
criminal activity throughout the world,
and Federal law enforcement agencies
believe that a significant amount of the
money laundered involves wire
transfers. Proceeds from illegal activities
may be processed through money
laundering schemes involving domestic
and/or international payments by wire
transfers. Such activity has been
documented in several recent
investigations conducted by Treasury
and other Federal law enforcement
agencies. The Board and the Treasury
believe that the records to be retained
under this proposed rulemaking will be
useful in tracing the proceeds of illegal
activities and will assist in the
identification and prosecution of
individuals involved in such illegal
activities. Accordingly, Treasury and
the Board believe that maintenance of
these records will have a high degree of
usefulness in criminal, tax, or regulatory
investigations of money laundering
operations. Further, the Treasury and
the Board believe that these
recordkeeping requirements will not
have a significant adverse impact on the
cost or the efficiency of the payments
system.
Codification of the Proposed Rule
To minimize potential confusion by
affected entities regarding the scope of
this proposed joint rule and its
interaction with other anti-money
laundering regulations, the substantive
requirements of the proposed rule will
be codified with other Bank Secrecy Act
regulations, as part of Treasury’s
regulations in 31 CFR part 103. Because
the Board is required to prescribe these
regulations jointly with Treasury, the
Board is proposing to add a new subpart
B to 12 CFR part 219, which will crossreference the jointly prescribed
requirements in 31 CFR part 103. The
current text of 12 CFR part 219,
concerning reimbursement to financial
institutions for assembling and
providing financial records pursuant to
the Right to Financial Privacy Act, will
46026
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
Initial Regulatory Flexibility Analysis
As required by 5 U.S.C. 603(b), a
“description of the reasons why action
by the agency is being considered” and
a “succinct statement of the objectives
Summary Description of the Revised
of, and legal basis for, the proposed
Proposed Rule
rule” are found elsewhere in this
The joint notice, published elsewhere preamble.
in today’s Federal Register provides an
The Board and the Treasury propose
extensive description of the substantive that the requirements in this rule be
requirements of the proposed rule.
applicable to all financial institutions
While the Board is authorized to
subject to the Bank Secrecy Act, as
promulgate jointly proposed
implemented, regardless of their size.
recordkeeping and reporting
An exemption for small entities would
requirements with regard to domestic
not be appropriate because it would
wire transfers by insured depository
permit money laundering operations to
institutions, the Board is specifically
evade the recordkeeping process by
required to promulgate jointly with
using small financial institutions. This
Treasury recordkeeping and reporting
would significantly diminish the
requirements for international wire
usefulness of these records for criminal,
transfers by both insured depository
tax or regulatory investigations.
institutions and nonbank financial
The small entities that will be affected
institutions. The Board is not authorized by this proposed rule include small
to promulgate recordkeeping and
banks and many check cashing and
reporting requirements for domestic
money transmitting businesses. In order
wire transfers by nonbank financial
to minimize the economic impact on
institutions. (Treasury has this authority small entities, the proposed rule would
under other statutory provisions.) This
allow financial institutions that send or
limitation is reflected in the Board’s
receive transmittal orders for account
proposed subpart B of 12 CFR part 219.
holders to use existing records to satisfy
The recordkeeping and reporting
some of the recordkeeping
requirements proposed by the Board for requirements. The Board and the
international wire transfers by nonbank Treasury do not believe that the
financial institutions, however, are
proposed rule would impose reporting
identical to those proposed by Treasury or recordkeeping burdens on small
for domestic (and international) wire
entities that require specialized
transfers by nonbank financial
professional skills not available to them.
institutions. Therefore, compliance by
List of Subjects in 12 CFR Part 219
nonbank financial institutions with the
Banks, banking, Currency, Reporting
proposed requirements will not be
affected by this limitation in the Board’s and recordkeeping requirements,
regulatory authority.
Foreign banking.
For the reasons set out in the
Submission o f Comments
preamble, 12 CFR part 219 is proposed
to be amended as set forth below.
Comments on all aspects of the
proposed regulation are welcome. The
PART 219—REIMBURSEMENT FOR
Treasury and the Board specifically
PROVIDING FINANCIAL RECORDS;
request comment on the usefulness of
RECORDKEEPING REQUIREMENTS
the records covered by the proposed
FOR CERTAIN FINANCIAL RECORDS
rule for law enforcement purposes and
the effects that the proposed rule might
1. The title of part 219 is revised to
have on the cost and efficiency of the
read as set forth above.
payment system. All comments received
before the closing date will be carefully
Subpart A—Reimbursement to
considered. Oral comments must be
Financial Institutions for Providing
reduced to writing and submitted to the Financial Records
Board and/or Treasury to receive
consideration. Comments received after §§ 219.1 through 219.7 [D esignated a s
S u bpart A]
the closing date and too late for
2. Sections 219.1 through 219.7 are
consideration will be treated as possible
designated as subpart A, and a new
suggestions for future action. Neither
the Board nor Treasury will recognize as subpart A heading is added to read as
confidential any materials or comments, set forth above.
3. The authority citation for part 219
including the name of any person
submitting comments. Any material not is designated as the authority for
subpart A and continues to read as
intended to be disclosed to the public
follows:
should not be included in the
comments.
A uthority; 12 U.S.C. 3415.
become subpart A of 12 CFR part 219.
(The Board expects to revise and update
this newly designated subpart A in the
near future.)
4. Subpart A is amended by revising
§ 219.1 to read as follows:
§ 219.1
Authority, p u rp o se a n d sco p e.
This subpart of Regulation S (12 CFR
part 219) is issued by the Board of
Governors of the Federal Reserve
System (the Board) under section 1115
of the Right to Financial Privacy Act
(the Act) (12 U.S.C. 3415). It establishes
the rates and conditions for
reimbursement of reasonably necessary
costs directly incurred by financial
institutions in assembling or providing
customer financial records to a
government authority pursuant to the
Act.
5. Section 219.2 is amended by
revising the introductory text to read as
follows:
§219.2
Definitions.
For the purposes of this subpart, the
following definitions shall apply:
* * * * *
6. Subpart B is added to part 219 to
read as follows:
Subpart B—Recordkeeping and
Reporting Requirements for Funds
Transfers and Transmittals of Funds
Sec.
219.21 Authority, purpose and scope.
219.22 Definitions.
219.23 Recordkeeping and reporting
requirements.
219.24. Retention period.
Subpart B—Recordkeeping and
Reporting Requirements for Funds
Transfers and Transmittals of Funds
A uthority: 12 U.S.C. 1829b (2) and (3).
§ 219.21
Authority, p u rp o se and sco p e.
This subpart of Regulation S (12 CFR
part 219) is issued by the Board under
the authority of section 21(b) of the
Federal Deposit Insurance Act (12
U.S.C. 1829b), as amended by the
Annunzio-Wylie Anti-Money
Laundering Act of 1992 (Pub.L. 102550, title XV; 106 Stat. 3672, 4044),
which authorizes the Board and the
Secretary of the Treasury jointly to
prescribe recordkeeping and reporting
requirements for domestic wire transfers
by insured depository institutions; and
which also requires the Board and
Treasury jointly to prescribe
recordkeeping and reporting
requirements for international wire
transfers by insured depository
institutions and by nonbank financial
institutions. The definitions and
recordkeeping and reporting
requirements referenced in this subpart
are jointly promulgated and
administered by the Board and the
Treasury and are codified in 31 CFR
Federal Register / Vol. 58, No. 167 / Tuesday, August 31, 1993 / Proposed Rules
103.11 and 103.33 (e), and (g). Such
recordkeeping and reporting
requirements will assist in die
prosecution of money laundering
activities and are determined to have a
high degree of usefulness in criminal,
tax or regulatory investigations or
proceedings.
9219.22
D efinitions.
The following terms are defined in 31
CFR 103.11 under the joint authority of
the Board and the Treasury:
Accept.
Beneficiary.
Beneficiary’s bank.
Execution date.
Funds transfer.
Intermediary bank.
Intermediary financial institution.
Originator.
Originator’ bank.
s
Payment date.
Payment order.
Receiving bank.
Receiving financial institution.
Recipient.
Recipient’ financial institution.
s
Sender.
Transmittal offunds.
Transmittal order.
Transmittor.
Transmittor's financial institution.
S 219.23 R ecordkeeping a n d reporting
requirem ents.
(a) Domestic and international funds
transfers by insured depository
institutions. The Board and the Treasury
are jointly authorized to promulgate
recordkeeping and reporting
requirements for domestic and
international funds transfers by insured
depository institutions whenever the
agencies determine that the
maintenance of such records has a high
degree of usefulness in criminal, tax, or
regulatory investigations or proceedings.
These regulations are codified at 31 CFR
103.33(e). For the purposes of this
subpart, the provisions of 31 CFR
103.33(e) apply only to funds transfers
by insured depository institutions.
(b) International transmittals o f funds
by financial institutions other than
insured depository institutions. The
Board and the Treasury are jointly
required to promulgate reporting and
recordkeeping requirements for
international transmittals of funds by
financial institutions, including brokers
and dealers in securities, and businesses
that issue or redeem money orders,
travelers’ checks or other similar
instruments. In prescribing these
requirements, the Board and the
Treasury take into account the
46027
usefulness of these records in criminal,
tax, or regulatory investigations or
proceedings and the effect the
recordkeeping will have on the cost and
efficiency of the payment system. These
regulations are codified at 31 CFR
103.33 (f) and (g). For the purposesof
this subpart, the provisions of 31 CFR
103.33 (f) and (g) apply only to
international transmittals of funds by
financial institutions other than insured
depository institutions.
$ 219.24
R etention period.
All records that are required to be
retained by this subpart shall be
retained for a period of five years. All
these records shall be filed or stored in
such a way as to be accessible within a
reasonable period of time, taking into
consideration the nature of the record,
and the amount of time that has expired
since the record was made. Any records
required to be retained by this part shall
be made available to the Board upon
request.
By order of the Board of Governors of the
Federal Reserve System, August 19,1993.
William W. Wiles,
Secretary of the Board.
(FR Doc. 93-20841 Filed 8-30-93; 8:45 am)
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