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USA Patriot Act/Money Laundering

Treasury Issues Guidance on the USA PATRIOT Act, Pending Issuance of Final Rule

July 19, 2002

The Department of the Treasury and Treasury?s Financial Crimes Enforcement Network (FinCEN) today issued an interim rule advising financial institutions on how to comply with the statutory provisions of section 312 of the USA PATRIOT Act, pending issuance of the final rule that will be published by October 25, 2002.

Section 312, which takes effect on July 23, 2002, requires due diligence and enhanced due diligence for correspondent and private banking accounts maintained for non-U.S. persons. Under the interim rule, banks, savings associations, and credit unions must comply with the terms of section 312. Securities brokers and dealers, futures commission merchants, and introducing brokers will be required to comply with section 312 with regard to private banking accounts for non-U.S. persons. Finally, Treasury is deferring application of section 312 to all other financial institutions until the Department outlines the extent of their obligations in the final rule.

The interim rule contains guidance for banks, savings associations, credit unions, securities brokers and dealers, futures commission merchants, and introducing brokers that must comply with some or all provisions of section 312 prior to publication of a final rule. This interim guidance will remain in effect until Treasury issues a final rule. The interim guidance does not reflect the full range of due diligence procedures that will be required of financial institutions by the final rule.

Treasury previously issued a proposed rule on May 30, 2002, proposing to apply the broad statutory provisions contained in section 312 to a wide array of financial institutions. The proposed requirements under that rule are significant, and public comments have raised substantial and important concerns about the scope of the regulation, the types of financial institutions to which it applies, and the major definitions applicable to this section. For example, comments consistently noted that the definition of "correspondent account," which is central to section 312, is overly broad and difficult to implement. Moreover, Treasury is responsible for drafting definitions for key terms applicable to financial institutions other than banks. Additional time is necessary to give proper consideration to these definitions and the text of the proposed rule in light of the comments received.

Source: Department of the Treasury



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