Bank Secrecy Act Banco Delta Asia Sarl - Designation of Primary Money Laundering Concern

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

automatically take effect at the end of 45

days of continuous session of Congress

beginning on October 12, 2006. The 45-

day review period ended on February

16, 2007. This document confirms the

effective date as February 16, 2007.

DATES: Effective Date: The final rule

published on October 12, 2006 (71 FR

60055) took effect on February 16, 2007.

FOR FURTHER INFORMATION CONTACT:

Becky Shortland, Gray’s Reef National

Marine Sanctuary, 10 Ocean Science

Circle, Savannah, Georgia 31411; 912–

598–2381; Becky.Shortland@noaa.gov.

(Federal Domestic Assistance Catalog

Number 11.429 Marine Sanctuary Program)

Dated: March 13, 2007.

John H. Dunnigan,

Assistant Administrator for Ocean Services

and Coastal Zone Management.

[FR Doc. 07–1303 Filed 3–16–07; 8:45 am]

BILLING CODE 3510–08–M

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 416

Revised Medical Criteria for

Determination of Disability,

Musculoskeletal System and Related

Criteria

CFR Correction

In Title 20 of the Code of Federal

Regulations, Parts 400 to 499, revised as

of April 1, 2006, on page 948, § 416.933

is corrected by adding a sentence after

the second sentence to read as follows:

§ 416.933

How we make a finding of

presumptive disability or presumptive

blindness.

* * * For other impairments, a

finding of disability or blindness must

be based on medical evidence or other

information that, though not sufficient

for a formal determination of disability

or blindness, is sufficient for us to find

that there is a high degree of probability

that you are disabled or blind. * * *

[FR Doc. 07–55503 Filed 3–16–07; 8:45 am]

BILLING CODE 1505–01–D

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 341

[Docket No. 1976N–0052G] (formerly Docket

No

that, though not sufficient

for a formal determination of disability

or blindness, is sufficient for us to find

that there is a high degree of probability

that you are disabled or blind. * * *

[FR Doc. 07–55503 Filed 3–16–07; 8:45 am]

BILLING CODE 1505–01–D

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 341

[Docket No. 1976N–0052G] (formerly Docket

No. 76N–052G)

Cold, Cough, Allergy, Bronchodilator,

and Antiasthmatic Drug Products for

Over-the-Counter Human Use;

Technical Amendment

AGENCY: Food and Drug Administration,

HHS.

ACTION: Final rule; technical

amendment.

SUMMARY: The Food and Drug

Administration (FDA) is amending its

regulations to change the location of a

section in an over-the-counter (OTC)

drug monograph. This action is editorial

in nature and is intended to improve the

accuracy of the agency’s regulations.

DATES: This rule is effective March 19,

2007.

FOR FURTHER INFORMATION CONTACT:

Gerald M. Rachanow, Center for Drug

Evaluation and Research, Food and

Drug Administration, 10903 New

Hampshire Ave., Bldg. 22, rm. 5496,

Silver Spring, MD 20993, 301–796–

2090.

SUPPLEMENTARY INFORMATION: FDA

published the final monograph (FM) for

cold, cough, allergy, bronchodilator, and

antiasthmatic combination drug

products for OTC human use in the

Federal Register of December 23, 2002

(67 FR 78158). In that FM, FDA

inadvertently added § 341.40 (21 CFR

341.40) to subpart C of the monograph,

when that section should have been

added to subpart B of the monograph.

Accordingly, FDA is now moving

§ 341.40 from subpart C to subpart B of

the monograph.

Publication of this document

constitutes final action on this change

under the Administrative Procedure Act

(5 U.S.C. 553). Notice and public

procedures are unnecessary because

FDA is merely implementing a change

in the location of a section in an OTC

drug monograph. No other changes are

being made to that section of the

monograph

§ 341.40 from subpart C to subpart B of

the monograph.

Publication of this document

constitutes final action on this change

under the Administrative Procedure Act

(5 U.S.C. 553). Notice and public

procedures are unnecessary because

FDA is merely implementing a change

in the location of a section in an OTC

drug monograph. No other changes are

being made to that section of the

monograph.

List of Subjects in 21 CFR Part 341

Labeling, Over-the-counter drugs.

I Therefore, under the Federal Food,

Drug, and Cosmetic Act and under

authority delegated to the Commissioner

of Food and Drugs, 21 CFR part 341 is

amended as follows:

PART 341—COLD, COUGH, ALLERGY,

BRONCHODILATOR, AND

ANTIASTHMATIC DRUG PRODUCTS

FOR OVER-THE-COUNTER HUMAN

USE

I 1. The authority citation for 21 CFR

part 341 continues to read as follows:

Authority: 21 U.S.C. 321, 351, 352, 353,

355, 360, 371.

Subpart B—Active Ingredients

[Amended]

I 2. Remove § 341.40 Permitted

combinations of active ingredients from

subpart C and add it to subpart B of part

341.

Dated: March 12, 2007.

Jeffrey Shuren,

Assistant Commissioner for Policy.

[FR Doc. E7–4957 Filed 3–16–07; 8:45 am]

BILLING CODE 4160–01–S

DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506–AA83

Financial Crimes Enforcement

Network; Amendment to the Bank

Secrecy Act Regulations—Imposition

of Special Measure Against Banco

Delta Asia, Including Its Subsidiaries

Delta Asia Credit Limited and Delta

Asia Insurance Limited, as a Financial

Institution of Primary Money

Laundering Concern

AGENCY: Financial Crimes Enforcement

Network, Department of the Treasury.

ACTION: Final rule.

SUMMARY: The Financial Crimes

Enforcement Network (‘‘FinCEN’’) is

issuing a final rule imposing a special

measure against Banco Delta Asia SARL

(‘‘Banco Delta Asia’’ or ‘‘the bank’’) as

a financial institution of primary money

laundering concern, pursuant to the

authority contained in 31 U.S.C. 5318A

of the Bank Secrecy Act

cement

Network, Department of the Treasury.

ACTION: Final rule.

SUMMARY: The Financial Crimes

Enforcement Network (‘‘FinCEN’’) is

issuing a final rule imposing a special

measure against Banco Delta Asia SARL

(‘‘Banco Delta Asia’’ or ‘‘the bank’’) as

a financial institution of primary money

laundering concern, pursuant to the

authority contained in 31 U.S.C. 5318A

of the Bank Secrecy Act.

DATES: This final rule is effective on

April 18, 2007.

FOR FURTHER INFORMATION CONTACT:

Regulatory Policy and Programs

Division, Financial Crimes Enforcement

Network, (800) 949–2732.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Provisions

On October 26, 2001, the President

signed into law the Uniting and

Strengthening America by Providing

Appropriate Tools Required To

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

1 Therefore, references to the authority of the

Secretary of the Treasury under section 311 of the

USA PATRIOT Act apply equally to the Director of

the Financial Crimes Enforcement Network.

Accordingly, authorities granted to the Secretary are

attributed to the Director of FinCEN in this

rulemaking.

2 Language expanding the scope of the Bank

Secrecy Act to intelligence or counter-intelligence

activities to protect against international terrorism

was added by section 358 of the USA PATRIOT

Act.

3 Available special measures include requiring:

ncial Crimes Enforcement Network.

Accordingly, authorities granted to the Secretary are

attributed to the Director of FinCEN in this

rulemaking.

2 Language expanding the scope of the Bank

Secrecy Act to intelligence or counter-intelligence

activities to protect against international terrorism

was added by section 358 of the USA PATRIOT

Act.

3 Available special measures include requiring:

(1) Recordkeeping and reporting of certain financial

transactions; (2) collection of information relating to

beneficial ownership; (3) collection of information

relating to certain payable-through accounts; (4)

collection of information relating to certain

correspondent accounts; and (5) prohibition or

conditions on the opening or maintaining of

correspondent or payable-through accounts. 31

U.S.C. 5318A(b)(1)–(5). For a complete discussion

of the range of possible countermeasures, see 68 FR

18917 (April 17, 2003) (proposing to impose special

measures against Nauru).

4 Section 5318A(a)(4)(A) requires the Secretary to

consult with the Chairman of the Board of

Governors of the Federal Reserve System, any other

appropriate Federal banking agency, the Secretary

of State, the Securities and Exchange Commission,

the Commodity Futures Trading Commission, the

National Credit Union Administration, and, in our

sole discretion, ‘‘such other agencies and interested

parties as the Secretary may find to be appropriate.’’

The consultation process must also include the

Attorney General if the Secretary is considering

prohibiting or imposing conditions upon the

opening or maintaining of a correspondent account

by any domestic financial institution or domestic

financial agency for the foreign financial institution

of primary money laundering concern. 31 U.S.C.

5318(c)(1).

5 Classified information used in support of a

section 311 finding of primary money laundering

concern and imposition of special measure(s) may

be submitted by Treasury to a reviewing court ex

parte and in camera

pondent account

by any domestic financial institution or domestic

financial agency for the foreign financial institution

of primary money laundering concern. 31 U.S.C.

5318(c)(1).

5 Classified information used in support of a

section 311 finding of primary money laundering

concern and imposition of special measure(s) may

be submitted by Treasury to a reviewing court ex

parte and in camera. See section 376 of the

Intelligence Authorization Act for Fiscal Year 2004,

Pub. L. 108–177 (amending 31 U.S.C. 5318A by

adding new paragraph (f)).

Intercept and Obstruct Terrorism Act of

2001, Public Law 107–56 (‘‘USA

PATRIOT Act’’). Title III of the USA

PATRIOT Act amends the anti-money-

laundering provisions of the Bank

Secrecy Act, codified at 12 U.S.C.

1829b, 12 U.S.C. 1951–1959, and 31

U.S.C. 5311–5314 and 5316–5332, to

promote the prevention, detection, and

prosecution of money laundering and

the financing of terrorism. Regulations

implementing the Bank Secrecy Act

appear at 31 CFR part 103. The

authority of the Secretary of the

Treasury (‘‘the Secretary’’) to administer

the Bank Secrecy Act and its

implementing regulations has been

delegated to the Director of FinCEN

(‘‘the Director’’).1 The Bank Secrecy Act

authorizes the Director to issue

regulations to require all financial

institutions defined as such in the Act

to maintain or file certain reports or

records that have been determined to

have a high degree of usefulness in

criminal, tax, or regulatory

investigations or proceedings, or in the

conduct of intelligence or counter-

intelligence activities, including

analysis, to protect against international

terrorism, and to implement anti-money

laundering programs and compliance

procedures.2

Section 311 of the USA PATRIOT Act

added section 5318A to the Bank

Secrecy Act, granting the Director the

authority, after finding that reasonable

grounds exist for concluding that a

foreign jurisdiction, institution, class of

transactions, or type of account is of

‘‘primary money

gainst international

terrorism, and to implement anti-money

laundering programs and compliance

procedures.2

Section 311 of the USA PATRIOT Act

added section 5318A to the Bank

Secrecy Act, granting the Director the

authority, after finding that reasonable

grounds exist for concluding that a

foreign jurisdiction, institution, class of

transactions, or type of account is of

‘‘primary money laundering concern,’’

to require domestic financial

institutions and domestic financial

agencies to take certain ‘‘special

measures’’ against the primary money

laundering concern. Section 311

identifies factors for the Director to

consider and Federal agencies to consult

before we may find that reasonable

grounds exist for concluding that a

jurisdiction, institution, class of

transactions, or type of account is of

primary money laundering concern. The

statute also provides similar procedures,

including factors and consultation

requirements, for selecting the specific

special measures to be imposed against

the primary money laundering concern.

Taken as a whole, section 311

provides the Director with a range of

options that can be adapted to target

specific money laundering and terrorist

financing concerns most effectively.

These options provide the authority to

bring additional and useful pressure on

those jurisdictions and institutions that

pose money laundering threats and the

ability to take steps to protect the U.S.

financial system. Through the

imposition of various special measures,

we can gain more information about the

concerned jurisdictions, institutions,

transactions, and accounts; monitor

more effectively the respective

jurisdictions, institutions, transactions,

and accounts; and ultimately protect

U.S. financial institutions from

involvement with jurisdictions,

institutions, transactions, or accounts

that pose a money laundering concern

ious special measures,

we can gain more information about the

concerned jurisdictions, institutions,

transactions, and accounts; monitor

more effectively the respective

jurisdictions, institutions, transactions,

and accounts; and ultimately protect

U.S. financial institutions from

involvement with jurisdictions,

institutions, transactions, or accounts

that pose a money laundering concern.

Before making a finding that

reasonable grounds exist for concluding

that a foreign financial institution is of

primary money laundering concern, the

Director is required by the Bank Secrecy

Act to consult with both the Secretary

of State and the Attorney General.

In addition to these consultations,

when finding that a foreign financial

institution is of primary money

laundering concern, the Director is

required by section 311 to consider

‘‘such information as [we] determine[

]

to be relevant, including the following

potentially relevant factors:’’

• The extent to which such financial

institution is used to facilitate or

promote money laundering in or

through the jurisdiction;

• The extent to which such financial

institution is used for legitimate

business purposes in the jurisdiction;

and

• The extent to which such action is

sufficient to ensure, with respect to

transactions involving the institution

operating in the jurisdiction, that the

purposes of the Bank Secrecy Act

continue to be fulfilled, and to guard

against international money laundering

and other financial crimes.

If we determine that reasonable

grounds exist for concluding that a

foreign financial institution is of

primary money laundering concern, we

must determine the appropriate special

measure(s) to address the specific

money laundering risks

on, that the

purposes of the Bank Secrecy Act

continue to be fulfilled, and to guard

against international money laundering

and other financial crimes.

If we determine that reasonable

grounds exist for concluding that a

foreign financial institution is of

primary money laundering concern, we

must determine the appropriate special

measure(s) to address the specific

money laundering risks. Section 311

provides a range of special measures

that can be imposed, individually or

jointly, in any combination, and in any

sequence.3 In the imposition of special

measures, we follow procedures similar

to those for finding a foreign financial

institution to be of primary money

laundering concern, but we also engage

in additional consultations and consider

additional factors. Section 311 requires

us to consult with other appropriate

Federal agencies and parties 4 and to

consider the following specific factors:

• Whether similar action has been or

is being taken by other nations or

multilateral groups;

• Whether the imposition of any

particular special measure would create

a significant competitive disadvantage,

including any undue cost or burden

associated with compliance, for

financial institutions organized or

licensed in the United States;

• The extent to which the action or

the timing of the action would have a

significant adverse systemic impact on

the international payment, clearance,

and settlement system, or on legitimate

business activities involving the

particular institution; and

• The effect of the action on U.S.

national security and foreign policy.5

In this final rule, we are imposing the

fifth special measure (31 U.S.C.

5318A(b)(5)) against Banco Delta Asia, a

commercial bank in Macau, Special

Administrative Region, China

(‘‘Macau’’)

onal payment, clearance,

and settlement system, or on legitimate

business activities involving the

particular institution; and

• The effect of the action on U.S.

national security and foreign policy.5

In this final rule, we are imposing the

fifth special measure (31 U.S.C.

5318A(b)(5)) against Banco Delta Asia, a

commercial bank in Macau, Special

Administrative Region, China

(‘‘Macau’’). The fifth special measure

allows for the imposition of conditions

upon, or the prohibition of, the opening

or maintaining of correspondent or

payable-through accounts in the United

States for or on behalf of a foreign

financial institution of primary money

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

6 The Bankers’ Almanac (2006). For purposes of

this rulemaking, our finding of primary money

laundering concern and imposition of special

measures shall apply exclusively to Banco Delta

Asia and its branches, offices, and subsidiaries, and

not to Delta Asia Group (Holdings) Ltd., or any of

its other subsidiaries.

7 Banco Delta Asia’s historical name, Banco Hang

Sang, is not to be confused with Hang Seng Bank,

a Hong Kong bank, nor the Hang Seng Index, an

index of certain shares traded on the Hong Kong

Stock Exchange.

8 As of November 2006, Bankers’ Almanac

indicated that the bank maintained one U.S.

correspondent relationship, although it is possible

that the self-reported data had not been updated.

9 The Bankers’ Almanac (2006).

10 See 70 FR 55214 (Finding) (Sept. 20, 2005); 70

FR 55217 (Notice of Proposed Rulemaking) (Sept.

20, 2005).

11 Id

of certain shares traded on the Hong Kong

Stock Exchange.

8 As of November 2006, Bankers’ Almanac

indicated that the bank maintained one U.S.

correspondent relationship, although it is possible

that the self-reported data had not been updated.

9 The Bankers’ Almanac (2006).

10 See 70 FR 55214 (Finding) (Sept. 20, 2005); 70

FR 55217 (Notice of Proposed Rulemaking) (Sept.

20, 2005).

11 Id.

12 See, e.g.: http://www.fas.org/irp/threat/

pub45270index.html (International Crime Threat

Assessment, 2000) http://archives.cnn.com/1999/

ASIANOW/east/macau/stories/macau.north.korea/

index.html (1999); http://www.asiapacificms.com/

articles/north_korea_banking/ (2003); http://

www.gluckman.com/MacauHo.html (1997); http://

www.asiaweek.com/asiaweek/98/1030/nat7.html

(1999); http://archives.cnn.com/1999/ASIANOW/

east/macau/profiles/edmond.ho/ (1999); http://

www.asianpacificpost.com/portal2/

pageView.html?id

=402881910674ebab010674f4ca74141f; etc.

13 Macao, China, Jurisdiction Report (to Asia

Pacific Group Annual Meeting), 2006. PROGRESS

REPORT ON THE IMPLEMENTATION OF THE

RECOMMENDATIONS OF THE APG

EVALUATION REPORT, 2006.

14 ‘‘Serious crimes’’ are defined as crimes carrying

a punishment of two to eight years imprisonment.

laundering concern. Unlike the other

special measures, this special measure

may be imposed only through the

issuance of a regulation.

B. Banco Delta Asia

Banco Delta Asia, located and

licensed in Macau, is the commercial

banking arm of its parent company,

Delta Asia Group (Holdings) Ltd. (‘‘Delta

Asia Group’’).6 In addition to

commercial banking, Delta Asia Group

engages in investment banking and

insurance activities. Banco Delta Asia

was originally established in 1935 as

Banco Hang Sang,7 and its name

changed to Banco Delta Asia in

December 1993. According to Banco

Delta Asia’s representations to us, the

bank had roughly $205 million (U.S.

dollars) in assets as of July 2006

lta

Asia Group’’).6 In addition to

commercial banking, Delta Asia Group

engages in investment banking and

insurance activities. Banco Delta Asia

was originally established in 1935 as

Banco Hang Sang,7 and its name

changed to Banco Delta Asia in

December 1993. According to Banco

Delta Asia’s representations to us, the

bank had roughly $205 million (U.S.

dollars) in assets as of July 2006. Banco

Delta Asia operates eight branches in

Macau (including a branch at a casino)

and is served by a representative office

in Japan. According to statements made

by Banco Delta Asia, many of its foreign

correspondent relationships in North

America, Europe, and Asia were

terminated after the publication of our

finding of primary money laundering

concern, and the bank no longer

maintains a foreign correspondent

account in the United States.8 Banco

Delta Asia may still have indirect access

to the U.S. financial system, however,

via nested correspondent accounts at

other foreign financial institutions that

have correspondent accounts at covered

financial institutions. Banco Delta Asia

has two wholly owned subsidiaries:

Delta Asia Credit Limited and Delta

Asia Insurance Limited.9

II. The 2005 Finding and Subsequent

Developments

A. The 2005 Finding

Based upon review and analysis of

pertinent information, consultations

with relevant Federal agencies and

parties, and consideration of the factors

enumerated in section 311, in

September 2005 the Director found that

reasonable grounds existed for

concluding that Banco Delta Asia was a

financial institution of primary money

laundering concern. This finding was

published in conjunction with a Notice

of Proposed Rulemaking,10 which

proposed prohibiting covered financial

institutions from, directly or indirectly,

opening or maintaining correspondent

accounts in the United States for Banco

Delta Asia or any of its branches, offices,

or subsidiaries, pursuant to the

authority under 31 U.S.C. 5318A

primary money

laundering concern. This finding was

published in conjunction with a Notice

of Proposed Rulemaking,10 which

proposed prohibiting covered financial

institutions from, directly or indirectly,

opening or maintaining correspondent

accounts in the United States for Banco

Delta Asia or any of its branches, offices,

or subsidiaries, pursuant to the

authority under 31 U.S.C. 5318A.

The Notice of Proposed Rulemaking

outlined the various factors supporting

the finding and proposed prohibition.11

Specifically, we stated that Banco Delta

Asia had provided financial services for

more than 20 years to multiple North

Korean-related individuals and entities

that were engaged in illicit activities.

Sources showed that certain of such

entities had paid a fee to Banco Delta

Asia for financial access to the banking

system with little oversight or control,

and that the bank helped conduct

surreptitious, multi-million dollar cash

deposits and withdrawals on their

behalf. In fact, the bank facilitated

several multi-million dollar wire

transfers connected to alleged criminal

activity on behalf of one such company.

Banco Delta Asia maintained an

uninterrupted banking relationship with

one North Korean front company

despite the fact that the head of the

company was charged with attempting

to deposit large sums of counterfeit

currency into Banco Delta Asia, for

which he was expelled from Macau.

Banco Delta Asia also serviced the

account of a known international drug

trafficker. Treasury’s September 2005

Notice also noted that any legitimate

business use of Banco Delta Asia

appeared to be significantly outweighed

by its use to promote or facilitate money

laundering and other financial crimes

ums of counterfeit

currency into Banco Delta Asia, for

which he was expelled from Macau.

Banco Delta Asia also serviced the

account of a known international drug

trafficker. Treasury’s September 2005

Notice also noted that any legitimate

business use of Banco Delta Asia

appeared to be significantly outweighed

by its use to promote or facilitate money

laundering and other financial crimes.

Treasury determined that a finding

that Banco Delta Asia was of primary

money laundering concern and

prohibiting covered financial

institutions from opening or

maintaining correspondent accounts for

that institution would prevent suspect

accountholders at Banco Delta Asia

from accessing the U.S. financial system

to facilitate money laundering. It would

also bring criminal conduct occurring at

or through Banco Delta Asia to the

attention of the international financial

community and thus serve the purposes

of the Bank Secrecy Act as well as guard

against international money laundering

and other financial crime.

B. Jurisdictional Developments

As Special Administrative Region to

the People’s Republic of China, Macau

retains substantial autonomy in all areas

related to the regulation and oversight of

its financial services sector and

domestic economic affairs. Macau’s

financial system, including its robust

casino and gaming sector, has

historically been known to be

vulnerable to financial crime,12 due in

large part to an under-developed anti-

money laundering regime. As discussed

below, however, Macau has begun to

take important steps to address those

systemic concerns

oversight of

its financial services sector and

domestic economic affairs. Macau’s

financial system, including its robust

casino and gaming sector, has

historically been known to be

vulnerable to financial crime,12 due in

large part to an under-developed anti-

money laundering regime. As discussed

below, however, Macau has begun to

take important steps to address those

systemic concerns.

While Macau has worked to develop

its anti-money laundering and counter-

terrorist financing framework since the

1990s, and has joined regional groups

such as the Asia Pacific Group on

Money Laundering (APG) to aid these

efforts, Macanese authorities have taken

a number of additional important steps

since the September 2005 Notice of

Proposed Rulemaking on Banco Delta

Asia to address the reported money

laundering risks and systemic

vulnerabilities.13 In April 2006, Macau

enacted Law no. 2/2006 on Prevention

and Repression of the Crime of Money

Laundering and Law no. 3/2006 on

Prevention and Repression of the Crime

of Terrorism. The new law on money

laundering replaces and supersedes

existing money laundering legislation,

Decree-Law 24/98/M, and the

provisions on money laundering in Law

6/97/M against organized crime, and

makes comprehensive and stand-alone

the crime of money laundering. Further,

it broadens the scope of predicate

offences to all serious crimes,14

including terrorism, and is extended to

conduct occurring outside of Macau.

Violations of the anti-money laundering

law are punishable with a penalty of

imprisonment of not less than three

years, ‘‘as well as [forfeiture of] any

assets obtained therefrom.’’

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m, and is extended to

conduct occurring outside of Macau.

Violations of the anti-money laundering

law are punishable with a penalty of

imprisonment of not less than three

years, ‘‘as well as [forfeiture of] any

assets obtained therefrom.’’

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

15 The domestic currency of Macau. As of

February 2007, the exchange rate for patacas to U.S.

dollars was approximately 8:1.

16 The Macanese government recognizes both

‘‘Macau’’ and ‘‘Macao’’ as the correct spelling of the

jurisdiction. Certain government agencies and

publications use the more traditional Portuguese

spelling, Macao.

17 The administrative committee consists of the

Chief Executive Officer of a note-issuing bank in

Macau, the Deputy Director of the Macau Monetary

Authority Internal Audit Department, and an

attorney from a prominent Macanese law firm. No

employees or former employees of the bank were

appointed to the administrative committee. The

present term is scheduled to continue through

March 2007.

18 Even to the extent that the bank’s former

management is permanently replaced, we note that

the former chief executive officer and chairman of

the board is also the controlling owner of the bank

and would still possess significant influence over

the operations of the bank.

19 The bank met with representatives from the

U.S. Government in November 2005, and February

and July 2006. The bank also provided information

in writing through the comment process described

in the Notice of Proposed Rulemaking.

20 According to the bank’s representations to us,

one firm was retained by the Macau Monetary

Authority and one was retained by the bank under

the oversight of the administrative committee.

21 We have recently been informed that Banco

Delta Asia has hired a compliance officer

nk also provided information

in writing through the comment process described

in the Notice of Proposed Rulemaking.

20 According to the bank’s representations to us,

one firm was retained by the Macau Monetary

Authority and one was retained by the bank under

the oversight of the administrative committee.

21 We have recently been informed that Banco

Delta Asia has hired a compliance officer.

22 These conclusions were derived in part from

classified sources, but primarily from an

independent review by a large international

accounting firm of Banco Delta Asia’s activity with

North Korean-related clients and a separate U.S.

Government review of Banco Delta Asia

documentation, including that used to conduct the

independent review.

In addition, in May 2006, Macau

enacted Administrative Regulation no.

7/2006—Preventive Measures Against

Money Laundering and Financing

Terrorism—a set of implementing

measures related to the new laws which

statutorily went into full legal effect on

November 12, 2006. The regulation

broadens and clarifies the obligations of

covered institutions regarding

identification of customers and contract

parties as well as the nature, purpose,

and source of funds and transactions

performed; requires recordkeeping and

reporting of suspicious and large cash

transactions; and obligates institutions

to refuse transactions absent adequate

information. Further, the regulation

provides for fines (between 10,000 and

500,000 patacas 15 for a natural person

and between 100,000 and 5,000,000

patacas for a legal person) against those

found to be in violation of the anti-

money laundering laws

s recordkeeping and

reporting of suspicious and large cash

transactions; and obligates institutions

to refuse transactions absent adequate

information. Further, the regulation

provides for fines (between 10,000 and

500,000 patacas 15 for a natural person

and between 100,000 and 5,000,000

patacas for a legal person) against those

found to be in violation of the anti-

money laundering laws. The regulation,

applicable to multiple sectors (financial

and designated non-financial businesses

and professions) now covered under the

new provisions, is aimed at combating

the financing of terrorism and money

laundering and stipulates that the duties

established under the new provisions

will be applied by the following

supervisory and regulatory agencies in

relation to the entities subject to their

respective supervision: Macao 16

Monetary Authority, Gaming Inspection

and Coordination Bureau, Macao Trade

and Investment Bureau, Finance

Department, Macao Lawyers

Association, Independent Commission

for the Exercise of the Disciplinary

Power over Solicitors, Legal Affairs

Bureau, and Macau Economic

Department. The new regulation has

also specified penalties for non-

compliance by covered institutions.

The Office of Financial Intelligence

(‘‘GIF’’) was established by Order of the

Chief Executive no. 227/2006 in August

2006 and began operations on

November 12, 2006. As provided in the

order, this office will function as

Macau’s financial intelligence unit

(‘‘FIU’’), collecting, analyzing and

disseminating information on

suspicious and large cash transactions

and cooperating as necessary with

international FIUs. GIF also has the

responsibility for reporting suspected

money laundering activities to the

Public Prosecutions Office and, to the

extent capable and necessary, for

providing technical assistance to

covered institutions and all regulatory

bodies subject to the new legislation

nating information on

suspicious and large cash transactions

and cooperating as necessary with

international FIUs. GIF also has the

responsibility for reporting suspected

money laundering activities to the

Public Prosecutions Office and, to the

extent capable and necessary, for

providing technical assistance to

covered institutions and all regulatory

bodies subject to the new legislation.

Macanese authorities have created a

Money Laundering Related Crime

Division (a special investigative agency

dedicated to financial crimes) within

the Judiciary Police. A separate law

governing international mutual legal

assistance in criminal matters, Law no.

6/2006 on Judicial Cooperation in

Criminal Matters, was approved by the

Legislative Assembly (‘‘LA’’) in July

2006 and became effective November 1,

2006.

Finally, while Customs authorities in

Macau require declaration of cross-

border trade movements in goods and

valuables, there are currently no

provisions to monitor or declare cross-

border currency movements in and out

of Macau. Macanese authorities have

stated they are undertaking a study on

this issue that will help inform

authorities on the development of a

potential strategy to effectively address

cross-border currency movements.

However, no specific strategy has been

formulated to date.

While these efforts are important and

welcome signs of Macau’s overall

progress in strengthening its anti-money

laundering and combating the financing

of terrorism regime, full and

comprehensive implementation of these

measures in all the covered sectors will

need to follow.

C

ffectively address

cross-border currency movements.

However, no specific strategy has been

formulated to date.

While these efforts are important and

welcome signs of Macau’s overall

progress in strengthening its anti-money

laundering and combating the financing

of terrorism regime, full and

comprehensive implementation of these

measures in all the covered sectors will

need to follow.

C. Banco Delta Asia’s Subsequent

Developments

Shortly after the issuance of our

finding and Notice of Proposed

Rulemaking, the Macau Monetary

Authority appointed a three person

‘‘administrative committee’’ that

temporarily replaced the senior

management of the bank to oversee the

daily operations of the bank and address

the concerns we raised.17 Although the

executive order appointing the

committee and establishing their six-

month term has twice been extended, no

plan has been proffered to change

permanently the management or

ownership structure of the bank,

notwithstanding the egregious historical

practices detailed below.18 Given the

possibility that the bank will be

returned to the control of its former

management and primary shareholder

in the future, our ongoing concerns

about their historical practices and their

potential for recidivism detailed below

remain a reasonable basis both for our

conclusion that Banco Delta Asia is of

primary money laundering concern and

for our imposition of a special measure

to safeguard the U.S. financial system

l be

returned to the control of its former

management and primary shareholder

in the future, our ongoing concerns

about their historical practices and their

potential for recidivism detailed below

remain a reasonable basis both for our

conclusion that Banco Delta Asia is of

primary money laundering concern and

for our imposition of a special measure

to safeguard the U.S. financial system.

Representatives of the bank informed

us that the government-appointed

administrative committee has taken

steps to address many of the money

laundering concerns that we previously

identified.19 For example, two

independent accounting firms were

retained 20 to investigate the allegations

in the Notice of Proposed Rulemaking,

to assess the weaknesses in the bank’s

internal anti-money laundering

procedures, and to assist in the

development of a revised anti-money

laundering program (a process that

reportedly is still ongoing more than a

year later). These representatives also

reported that the administrative

committee has begun to recruit a

permanent compliance officer 21 and

that all North Korean-related accounts

previously maintained by the bank have

been closed.

Despite these representations, we

continue to have serious concerns

regarding the bank’s potential to be

used, wittingly or unwittingly, for illicit

purposes. In fact, questions regarding

the completeness and accuracy of the

information and records provided by the

bank to the accounting firm retained to

help address the bank’s weaknesses

resulted in the firm’s disclaimer that its

reported findings did not constitute a

reliable audit. Our investigation has

corroborated these concerns.22 For

example, we are aware of multiple

North Korean-related accounts that the

bank did not identify to the accounting

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aimer that its

reported findings did not constitute a

reliable audit. Our investigation has

corroborated these concerns.22 For

example, we are aware of multiple

North Korean-related accounts that the

bank did not identify to the accounting

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

23 See supra footnote 22.

24 See supra footnote 22.

25 Inasmuch as Banco Delta Asia was the sole

institution involved in the processing of these

transactions, and considering our concerns

regarding the bank’s potential complicity involving

illicit activity, the commingling of funds and the

rapid movement of large round-figure amounts via

such intra-bank transfers is particularly suspicious

as a means of obscuring the true nature and source

of the funds involved.

26 See supra footnote 22.

27 This level of activity is significant considering

the bank reported the equivalent of only $390

million in total customer deposits immediately

prior to our Notice of Proposed Rulemaking.

28 See supra footnote 22.

firm and, hence, the accounting firm did

not review.

In a review of recently obtained data

pertaining to Banco Delta Asia, we

verified the bank had grossly inadequate

controls in place to deter or detect

money laundering or other illicit

activity.23 Prior to the government’s

appointment of the administrative

committee, there was a systemic lack of

due diligence, including:

• Failure to take reasonable measures

to identify suspicious activity,

suspicious entities, and bulk cash

activity inconsistent with the stated

business of the bank’s clients;

• Failure to obtain or maintain

sufficient information regarding identity

verification and the nature of business

activities in customer files;

• Failure to adequately control and

retain documents relating to the bank’s

largest wholesale bulk cash custom

identify suspicious activity,

suspicious entities, and bulk cash

activity inconsistent with the stated

business of the bank’s clients;

• Failure to obtain or maintain

sufficient information regarding identity

verification and the nature of business

activities in customer files;

• Failure to adequately control and

retain documents relating to the bank’s

largest wholesale bulk cash customers;

• Failure to consistently follow its

own policies and procedures with

respect to multiple business offerings,

including screening for counterfeit

currency;

• Failure to effectively rate the risk of

its customer base; to monitor, on an

ongoing basis, accounts that should

have been designated as high risk; to

take corrective action against entities in

which illicit activity was detected;

• Failure to update or use sufficient

information technology systems when

manual systems proved inadequate;

• Failure to regularly update its anti-

money laundering policies with new

information or best practices; and

• Failure to internally audit the

adequacy of the compliance department

at the bank.

In a review of this same data,24 we

have also verified that the bank’s grossly

inadequate due diligence facilitated

unusual or deceptive financial practices

by North Korean-related clients. These

practices have included:

• Suppressing the identity and

location of originators of transactions

and arranging for funds transfers via

third parties.

• Repeated bank transfers of large,

round-figure sums both to and from

accounts held at other banks that appear

to have no licit purpose and may be

indicative of layering activity.

• The routine use of cash couriers to

move large amounts of currency, usually

U.S. dollars, in the absence of any

credible explanation of the origin or

purpose for the cash transactions. For

example, records from 2002 show that

one North Korean-linked entity

deposited the equivalent of over U.S

t other banks that appear

to have no licit purpose and may be

indicative of layering activity.

• The routine use of cash couriers to

move large amounts of currency, usually

U.S. dollars, in the absence of any

credible explanation of the origin or

purpose for the cash transactions. For

example, records from 2002 show that

one North Korean-linked entity

deposited the equivalent of over U.S.

$50 million, accounting for more than

half of Banco Delta Asia’s bulk cash

deposits that year.

• Internal book transfers involving

the movement of funds among accounts

and accountholders via intra-bank

transfers occurring repeatedly and in

large, round-figure sums. This

sometimes involved shifting currencies

and significant round-figure transfers

between business and personal

accounts.25

Moreover, in our review of this same

data, we became aware that the extent

to which the bank was historically used

for illicit activity exceeds our original

findings and reveals a deliberate effort

to attract and maintain high-risk

accounts regardless of their nexus to

illicit activities. A review of recently

obtained data pertaining to Banco Delta

Asia’s historical activity has established

the following: 26

• Many North Korean-related

individuals and companies banking at

Banco Delta Asia had connections to

entities involved in trade in counterfeit

U.S. currency, counterfeit cigarettes,

and narcotics, including several front

companies suspected of laundering

hundreds of millions of dollars in cash

through Banco Delta Asia.27 The bank

did not conduct due diligence to

attempt to verify the source of the

unusually large currency deposits made

involving these clients

lta Asia had connections to

entities involved in trade in counterfeit

U.S. currency, counterfeit cigarettes,

and narcotics, including several front

companies suspected of laundering

hundreds of millions of dollars in cash

through Banco Delta Asia.27 The bank

did not conduct due diligence to

attempt to verify the source of the

unusually large currency deposits made

involving these clients.

• Despite widely reported currency

counterfeiting concerns, the bank

provided a discount as an incentive to

a high-risk North Korean-related bulk

currency depositor to encourage its

continued use of the bank, and

continued to accept deposits from that

customer even after it had knowledge

that another institution had rejected

those transactions.

These activities, in aggregate, should

have raised significant concerns at the

bank. Internal bank documents reveal

that in the few cases where bank

employees documented their concerns

over the potential for money laundering

activity by entities making

commercially unjustifiable large cash

deposits or engaged in other suspicious

behavior, senior management of the

bank consistently failed to take any

action when appropriate explanations

for the activity were not provided. In

fact, senior management in certain cases

would verbally vouch for the customers

in question without any documentary

evidence and indicate that the

transactions should continue to be

processed.28

Banco Delta Asia provided North

Korean-related entities with tailored

services that allowed those entities to

engage in extraordinarily deceptive

financial activity. For example, two

related business accountholders, which

accounted for more than 30 percent of

the bank’s bulk cash turnover over a

multiple year period, provided

intermediary financial services on

behalf of North Korean banks at least in

part to disguise the origins of the

transactions

ilored

services that allowed those entities to

engage in extraordinarily deceptive

financial activity. For example, two

related business accountholders, which

accounted for more than 30 percent of

the bank’s bulk cash turnover over a

multiple year period, provided

intermediary financial services on

behalf of North Korean banks at least in

part to disguise the origins of the

transactions. Bank documents reveal

that Banco Delta Asia had knowledge of

the relationships between the banks and

these entities, willingly obscured the

identity of the transacting institutions,

and agreed to continue treating the

accounts as business accounts, not

banking accounts, despite activity

consistent with banking.

Even after our finding of primary

money laundering concern, the bank’s

management dismissed concerns

presented by independent reviewers of

the bank’s shortcomings involving

customer identification and ongoing due

diligence obligations. For example, bank

managers asserted that Banco Delta

Asia’s North Korean client banks were

low-risk based on the effective

supervision by the Central Bank of

North Korea and the unlikelihood that

North Korean government-owned

entities would be used for illicit

purposes. As publicly available

information clearly contradicted these

assumptions, the bank management’s

claims seem overly permissive and fail

to meet even the most basic due

diligence standards. In fact, the Macau

Monetary Authority informed the bank

in 2004 in writing that North Korea

lacked transparency in supervisory

standards. It recommended that the

bank either strengthen its due diligence

procedures and establish a detailed

procedure manual for dealing with

North Korean banks, or scale down or

terminate this type of risky business.

Nevertheless, the management of the

bank continued to provide

uninterrupted financial services to such

customers with minimal or no due

diligence. In fact, in the face of concerns

expressed by the Macau Monetary

Authority and the U.S

diligence

procedures and establish a detailed

procedure manual for dealing with

North Korean banks, or scale down or

terminate this type of risky business.

Nevertheless, the management of the

bank continued to provide

uninterrupted financial services to such

customers with minimal or no due

diligence. In fact, in the face of concerns

expressed by the Macau Monetary

Authority and the U.S. Department of

the Treasury, a senior bank official

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12735

Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

29 See http://www.forbes.com/finance/feeds/afx/

2005/09/18/afx2230247.html ‘‘Macau Banco Delta

Asia halts NKorea business, denies money

laundering-report.’’ (19 September 2005)

30 The bank has indicated that it has not yet fully

implemented new policies, procedures, and

controls for money laundering prevention.

31 Additional comments submitted on behalf of

the bank are discussed in Section IV of this Final

Rule.

32 See supra footnote 3.

33 For purposes of the rule, a correspondent

account is defined as an account established to

receive deposits from, or make payments or other

disbursements on behalf of, a foreign bank, or

handle other financial transactions related to the

foreign bank (see 31 U.S.C. 5318A(e)(1)(B), as

implemented in 31 CFR 103.175(d)(1)(ii))

ssed in Section IV of this Final

Rule.

32 See supra footnote 3.

33 For purposes of the rule, a correspondent

account is defined as an account established to

receive deposits from, or make payments or other

disbursements on behalf of, a foreign bank, or

handle other financial transactions related to the

foreign bank (see 31 U.S.C. 5318A(e)(1)(B), as

implemented in 31 CFR 103.175(d)(1)(ii)).

assured the public that Banco Delta

Asia’s cessation of business with North

Korean accountholders was only a

temporary measure to resolve the bank’s

dispute with FinCEN.29

Representatives of the bank maintain

that the administrative committee has

taken or is in the process of taking some

measures to address the concerns raised

in our finding and Notice of Proposed

Rulemaking, including terminating all

North Korean-related accounts,

conducting a risk assessment of all

accountholders, drafting a revised anti-

money laundering program, and

upgrading its information technology

systems.30 In one of its comments

submitted in response to the Notice of

Proposed Rulemaking, the bank stated

that these remedial measures and

Macau’s new regulatory controls would

prevent the bank from returning to its

former business practices.31 However,

the totality of the information presented

above casts significant doubt upon the

commitment of the bank, apart from the

administrative committee, to resolve

effectively the ongoing money

laundering vulnerabilities at the bank.

The administrative committee’s

termination of North Korean-related

customer relationships does not address

effectively the bank’s historical

proclivity to seek out such customers or

the potential of the bank to return to

such practices. In fact, historical

attempts by bank employees to follow

the limited procedures or best practices

that were in place at that time were

quashed at the highest levels of the

bank

ttee’s

termination of North Korean-related

customer relationships does not address

effectively the bank’s historical

proclivity to seek out such customers or

the potential of the bank to return to

such practices. In fact, historical

attempts by bank employees to follow

the limited procedures or best practices

that were in place at that time were

quashed at the highest levels of the

bank.

Despite any remedial measures and

regulatory changes, this historical

pattern of disregard by the bank’s

management and primary shareholder

regarding both the systemic due

diligence failures at the bank and the

potential use of the bank for illicit

purposes, and the resultant likelihood of

recidivism upon the dissolution of the

administrative committee, leave us

concerned about the potential for the

bank to continue to be used for money

laundering and other illicit purposes.

Accordingly, we find that Banco Delta

Asia continues to be a financial

institution of primary money laundering

concern.

III. Imposition of the Fifth Special

Measure

Consistent with the finding that

Banco Delta Asia is a financial

institution of primary money laundering

concern, and based upon additional

consultations with required Federal

agencies and parties, as well as

consideration of additional relevant

factors, including the comments

received on the proposed rule, we are

imposing the fifth special measure

authorized by 31 U.S.C. 5318A(b)(5)

with regard to Banco Delta Asia.32 That

special measure authorizes the

prohibition of, or the imposition of

conditions upon, the opening or

maintaining of correspondent or

payable-through accounts 33 by any

domestic financial institution or

domestic financial agency for, or on

behalf of, a foreign financial institution

found to be of primary money

laundering concern. A discussion of the

additional section 311 factors relevant

to the imposition of this particular

special measure follows.

A

of

conditions upon, the opening or

maintaining of correspondent or

payable-through accounts 33 by any

domestic financial institution or

domestic financial agency for, or on

behalf of, a foreign financial institution

found to be of primary money

laundering concern. A discussion of the

additional section 311 factors relevant

to the imposition of this particular

special measure follows.

A. Similar Actions Have Not Been or

May Not Be Taken by Other Nations or

Multilateral Groups Against Banco Delta

Asia

At this time, other countries and

multilateral groups have not taken any

action against Banco Delta Asia similar

to the imposition of the fifth special

measure pursuant to section 311, which

prohibits U.S. financial institutions and

financial agencies from opening or

maintaining a correspondent account in

the United States for or on behalf of

Banco Delta Asia and requires those

institutions and agencies to guard

against indirect use by Banco Delta Asia

of the foreign correspondent accounts

they maintain. After the issuance of the

Notice of Proposed Rulemaking,

however, the government of Macau did

indicate its concern with illicit money

flows into Banco Delta Asia by freezing

accounts believed to be associated with

illicit North Korean-related activity.

B. The Imposition of the Fifth Special

Measure Would Not Create a Significant

Competitive Disadvantage, Including

Any Undue Cost or Burden Associated

With Compliance for Financial

Institutions Organized or Licensed in

the United States

The fifth special measure imposed by

this rule prohibits covered financial

institutions from opening or

maintaining correspondent accounts in

the United States for, or on behalf of,

Banco Delta Asia. As a corollary to this

measure, covered financial institutions

also are required to take reasonable

steps to apply due diligence to all of

their correspondent accounts to ensure

that no such account is being used

indirectly to provide services to Banco

Delta Asia

institutions from opening or

maintaining correspondent accounts in

the United States for, or on behalf of,

Banco Delta Asia. As a corollary to this

measure, covered financial institutions

also are required to take reasonable

steps to apply due diligence to all of

their correspondent accounts to ensure

that no such account is being used

indirectly to provide services to Banco

Delta Asia. The burden associated with

these requirements is not expected to be

significant, given that we are not aware

of any covered financial institution that

maintains a correspondent account

directly for Banco Delta Asia. Moreover,

there is a minimal burden involved in

transmitting a one-time notice to all

correspondent accountholders

concerning the prohibition on indirectly

providing services to Banco Delta Asia.

In addition, covered financial

institutions generally apply some degree

of due diligence in screening their

transactions and accounts, often through

the use of commercially available

software, such as that used for

compliance with the economic

sanctions programs administered by the

Department of the Treasury’s Office of

Foreign Assets Control. As explained in

more detail in the section-by-section

analysis below, financial institutions

should be able to adapt their existing

screening procedures to comply with

this special measure. Thus, the due

diligence that is required by this rule is

not expected to impose a significant

additional burden upon covered

financial institutions.

C. The Action or Timing of the Action

Will Not Have a Significant Adverse

Systemic Impact on the International

Payment, Clearance, and Settlement

System, or on Legitimate Business

Activities Involving Banco Delta Asia

Banco Delta Asia is not a major

participant in the international payment

system and is not relied upon by the

international banking community for

clearance or settlement services

Action or Timing of the Action

Will Not Have a Significant Adverse

Systemic Impact on the International

Payment, Clearance, and Settlement

System, or on Legitimate Business

Activities Involving Banco Delta Asia

Banco Delta Asia is not a major

participant in the international payment

system and is not relied upon by the

international banking community for

clearance or settlement services. Thus,

the imposition of the fifth special

measure against Banco Delta Asia will

not have a significant adverse systemic

impact on the international payment,

clearance, and settlement system. In

addition, as the bank historically sought

out high-risk customers that represented

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

34 As previously mentioned, although Macau’s

legislative and regulatory developments regarding

its overall anti-money laundering and counter-

financing of terrorism regime are encouraging,

Macau will need to more fully demonstrate

implementation to continue improving its

weaknesses.

35 Comments were to be submitted by October 20,

2005. See 70 FR 55217 (September 20, 2005).

36 See 70 FR 55214 (September 20, 2005) at

55215.

37 See 70 FR 55218, FN 5.

entire business lines and a material

amount of its overall business, we

believe that any legitimate use of Banco

Delta Asia is significantly outweighed

by its potential and reported use to

promote or facilitate money laundering.

Moreover, in light of the existence of

multiple alternative banks in Macau, we

believe that imposition of the fifth

special measure against Banco Delta

Asia will not impose an undue burden

on legitimate business activities in

Macau.

D. The Action Enhances U.S. National

Security and Complements U.S. Foreign

Policy

The exclusion from the U.S

use to

promote or facilitate money laundering.

Moreover, in light of the existence of

multiple alternative banks in Macau, we

believe that imposition of the fifth

special measure against Banco Delta

Asia will not impose an undue burden

on legitimate business activities in

Macau.

D. The Action Enhances U.S. National

Security and Complements U.S. Foreign

Policy

The exclusion from the U.S. financial

system of banks such as Banco Delta

Asia that serve as conduits for

significant money laundering activity

and that participate in other financial

crime enhances U.S. national security

by making it more difficult for criminals

to access the substantial resources and

services of the U.S. financial system. In

addition, the imposition of the fifth

special measure against Banco Delta

Asia complements the U.S.

government’s overall foreign policy

strategy of making entry into the U.S.

financial system more difficult for high-

risk financial institutions located in

jurisdictions with weak or poorly

implemented and enforced anti-money

laundering controls.34

IV. Notice of Proposed Rulemaking and

Comments

We received two comment letters on

the Notice of Proposed Rulemaking

within the timeframe established in the

Notice.35 Additional comments were

submitted on behalf of Banco Delta Asia

subsequent to that timeframe but were

considered at the bank’s request for

purposes of this rulemaking.

Additionally, we met with

representatives of Banco Delta Asia on

three separate occasions after the close

of the comment period. We did not

receive any comments addressing our

description in the Notice of Proposed

Rulemaking of the illicit activities of

North Korea.36

One comment letter was from an

individual at a U.S. university. This

comment suggested that the potential

for indirect access by an entity of

primary money laundering concern was

not adequately addressed by the

notification provision and requirement

to monitor for indirect access

addressing our

description in the Notice of Proposed

Rulemaking of the illicit activities of

North Korea.36

One comment letter was from an

individual at a U.S. university. This

comment suggested that the potential

for indirect access by an entity of

primary money laundering concern was

not adequately addressed by the

notification provision and requirement

to monitor for indirect access. The

commenter did not suggest a viable

alternative, and we believe that the

combination of notification and

screening provides the appropriate

balance between effectiveness and

burden in preventing Banco Delta Asia

from accessing correspondent accounts

at covered financial institutions. This

commenter also expressed concern over

the potential difficulty for detecting

indirect access by Banco Delta Asia,

considering its multiple branches and

subsidiaries and its relationship to its

parent company and its other

subsidiaries. The commenter provided a

description of what she considered best

practices for institutions to identify

indirect access in light of this perceived

difficulty. As we indicated in the Notice

of Proposed Rulemaking, the scope of

the finding of primary money

laundering concern, and therefore the

target of the imposition of special

measure, is limited only to Banco Delta

Asia and its subsidiaries, not to its

parent company or any of the parent

company’s other subsidiaries.37

Additionally, although this final rule

requires covered financial institutions to

take certain minimum due diligence

measures, the methodology or best

practices for implementing those

requirements falls outside the scope of

this rulemaking.

All of the remaining comments, both

within and outside of the timeframe

designated in the Notice of Proposed

Rulemaking, were submitted on behalf

of Banco Delta Asia

hough this final rule

requires covered financial institutions to

take certain minimum due diligence

measures, the methodology or best

practices for implementing those

requirements falls outside the scope of

this rulemaking.

All of the remaining comments, both

within and outside of the timeframe

designated in the Notice of Proposed

Rulemaking, were submitted on behalf

of Banco Delta Asia. The bank requested

that FinCEN revoke the finding of

primary money laundering concern and

the Notice of Proposed Rulemaking in

light of remedial steps the bank claims

that it, and the government of Macau,

had taken or are in the process of taking

to address the concerns we raised. As

indicated above, however, our primary

concern regards a pattern of activity by

the former and presumed future senior

management and owners of the bank to

ignore, facilitate, or even encourage

illicit activity. Consequently, despite

any preliminary steps taken under the

oversight of the administrative

committee, we remain concerned about

the extent to which the bank still could

be used for illicit purposes.

In its comments, the bank also

addressed the statutory criteria we are

required to consider when imposing the

special measure to prohibit covered

financial institutions from opening or

maintaining correspondent accounts for

Banco Delta Asia. The bank cited the

fact, and we acknowledged in the

proposed rule, that no other countries or

jurisdictions had taken similar action to

the one we were proposing. However,

after the issuance of the Notice of

Proposed Rulemaking asserting illicit

flows of money into Banco Delta Asia

involving North Korean-related entities,

the Government of Macau was

concerned enough to freeze some of the

funds in those accounts

and we acknowledged in the

proposed rule, that no other countries or

jurisdictions had taken similar action to

the one we were proposing. However,

after the issuance of the Notice of

Proposed Rulemaking asserting illicit

flows of money into Banco Delta Asia

involving North Korean-related entities,

the Government of Macau was

concerned enough to freeze some of the

funds in those accounts. The bank

further indicated that the jurisdiction of

Macau, immediately following the

issuance of the Notice of Proposed

Rulemaking, had assumed operational

control of the bank and provided

liquidity after roughly one-third of the

bank’s total deposits were withdrawn by

the bank’s depositors. The bank cited

these measures as indicia of Macau’s

faith in the bank and suggested that any

concerns we may have had about the

bank should be satisfied in light of

Macau’s oversight of and investment in

the future of the bank. Despite our

comments about the jurisdictional

developments in section II.B., above,

Macau’s imposed oversight of the bank

not only does not negate our original

findings but, to the extent such action

indicates a lack of faith in the bank’s

ability to autonomously address its

significant money laundering

vulnerabilities, may be viewed as

supporting our finding of primary

money laundering concern.

The bank also cited the lack of

confidence in the bank by the bank’s

depositors as evidence of a ‘‘significant

adverse impact * * * on legitimate

business activities involving [the

bank],’’ another statutory criteria we

must consider. Although we recognize

that certain customers of Banco Delta

Asia will be affected by this rulemaking,

the availability of alternative banking

services in Macau will alleviate the

burden on legitimate business activities

within that jurisdiction

ce of a ‘‘significant

adverse impact * * * on legitimate

business activities involving [the

bank],’’ another statutory criteria we

must consider. Although we recognize

that certain customers of Banco Delta

Asia will be affected by this rulemaking,

the availability of alternative banking

services in Macau will alleviate the

burden on legitimate business activities

within that jurisdiction. Moreover, to

the extent that the bank has not

sufficiently implemented remedial

measures that address the deficiencies

outlined above, we continue to believe

that the impact of the rule upon any

legitimate activities of the bank is

significantly outweighed by the

potential for the bank to be used for

money laundering or other illicit

financial activity.

Finally, the bank suggested in its

comments that imposing the fifth

special measure would be inconsistent

with U.S. foreign policy considerations.

We disagree.

Accordingly, the statutory criteria for

finding Banco Delta Asia to be a

financial institution of primary money

laundering concern and for imposing

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

38 See 31 CFR 103.175(d)(2)(ii)-(iv).

39 Again, for purposes of the final rule, a

correspondent account is defined as an account

Continued

the fifth special measure have been fully

addressed.

V. Section-by-Section Analysis

The final rule prohibits covered

financial institutions from opening or

maintaining any correspondent account

for, or on behalf of, Banco Delta Asia.

Covered financial institutions are

required to apply due diligence to their

correspondent accounts to guard against

their indirect use by Banco Delta Asia.

At a minimum, that due diligence must

include two elements

ction-by-Section Analysis

The final rule prohibits covered

financial institutions from opening or

maintaining any correspondent account

for, or on behalf of, Banco Delta Asia.

Covered financial institutions are

required to apply due diligence to their

correspondent accounts to guard against

their indirect use by Banco Delta Asia.

At a minimum, that due diligence must

include two elements. First, a covered

financial institution must notify its

correspondent accountholders that the

account may not be used to provide

Banco Delta Asia with access to the

covered financial institution. Second, a

covered financial institution must take

reasonable steps to identify any indirect

use of its correspondent accounts by

Banco Delta Asia, to the extent that such

indirect use can be determined from

transactional records maintained by the

covered financial institution in the

normal course of business. A covered

financial institution must take a risk-

based approach when deciding what, if

any, additional due diligence measures

it should adopt to guard against the

indirect use of correspondent accounts

by Banco Delta Asia, based on risk

factors such as the type of services

offered by, and geographic locations of,

its correspondents.

A. 103.193(a)—Definitions

1. Banco Delta Asia

Section 103.193(a)(1) of this rule

defines Banco Delta Asia to include all

branches, offices, and subsidiaries of

Banco Delta Asia operating in Macau or

in any jurisdiction. These branches and

offices include, but are not necessarily

limited to, the Amaral, Antonio, Barca,

Campo, Ioa Hon, Lisboa, Outubro, and

Tap Sac branches in Macau, the Airport

Service Centre, Financial Services

Centre, Macao Administrative Centre,

The Bank Centre, and the Tokyo

Representative Office. Banco Delta

Asia’s subsidiaries include, but are not

necessarily limited to, Delta Asia Credit

Ltd. and Delta Asia Insurance Limited

not necessarily

limited to, the Amaral, Antonio, Barca,

Campo, Ioa Hon, Lisboa, Outubro, and

Tap Sac branches in Macau, the Airport

Service Centre, Financial Services

Centre, Macao Administrative Centre,

The Bank Centre, and the Tokyo

Representative Office. Banco Delta

Asia’s subsidiaries include, but are not

necessarily limited to, Delta Asia Credit

Ltd. and Delta Asia Insurance Limited.

FinCEN will provide updated

information, as it is available; however,

covered financial institutions should

take commercially reasonable measures

to determine whether a customer is a

branch, office, or subsidiary of Banco

Delta Asia.

2. Correspondent Account

Section 103.193(a)(2) defines the term

‘‘correspondent account’’ by reference to

the definition contained in 31 CFR

103.175(d)(1)(ii). Section

103.175(d)(1)(ii) defines a

correspondent account to mean an

account established for a foreign bank to

receive deposits from, or make

payments or other disbursements on

behalf of the foreign bank, or to handle

other financial transactions related to

the foreign bank.

In the case of a depository institution

in the United States, this broad

definition of account includes most

types of banking relationships between

the depository institution and a foreign

bank that are established to provide

regular services, dealings, and other

financial transactions including a

demand deposit, savings deposit, or

other transaction or asset account, and

a credit account or other extension of

credit.

In the case of securities broker-

dealers, futures commission merchants,

introducing brokers in commodities,

and investment companies that are

open-end companies (‘‘mutual funds’’),

we are using the same definition of

‘‘account’’ for purposes of this rule that

was established in the final rule

implementing section 312 of the USA

PATRIOT Act.38

3

it account or other extension of

credit.

In the case of securities broker-

dealers, futures commission merchants,

introducing brokers in commodities,

and investment companies that are

open-end companies (‘‘mutual funds’’),

we are using the same definition of

‘‘account’’ for purposes of this rule that

was established in the final rule

implementing section 312 of the USA

PATRIOT Act.38

3. Covered Financial Institution

Section 103.193(a)(3) of the rule

defines covered financial institution to

include the following:

• An insured bank (as defined in

section 3(h) of the Federal Deposit

Insurance Act (12 U.S.C. 1813(h));

• A commercial bank;

• An agency or branch of a foreign

bank in the United States;

• A federally insured credit union;

• A savings association;

• A corporation acting under section

25A of the Federal Reserve Act (12

U.S.C. 611 et seq.);

• A trust bank or trust company that

is federally regulated and is subject to

an anti-money laundering program

requirement;

• A broker or dealer in securities

registered, or required to be registered,

with the U.S. Securities and Exchange

Commission under the Securities

Exchange Act of 1934 (15 U.S.C. 78a et

seq.), except persons who register

pursuant to section 15(b)(11) of the

Securities Exchange Act of 1934;

• A futures commission merchant or

an introducing broker registered, or

required to be registered, with the

Commodity Futures Trading

Commission under the Commodity

Exchange Act (7 U.S.C. 1 et seq.), except

persons who register pursuant to section

4(f)(a)(2) of the Commodity Exchange

Act; and

• A mutual fund, which means an

investment company (as defined in

section 3(a)(1) of the Investment

Company Act of 1940 (‘‘Investment

Company Act’’) (15 U.S.C. 80a-3(a)(1)))

that is an open-end company (as defined

in section 5(a)(1) of the Investment

Company Act (15 U.S.C. 80a-5(a)(1)))

and that is registered, or is required to

register, with the U.S

) of the Commodity Exchange

Act; and

• A mutual fund, which means an

investment company (as defined in

section 3(a)(1) of the Investment

Company Act of 1940 (‘‘Investment

Company Act’’) (15 U.S.C. 80a-3(a)(1)))

that is an open-end company (as defined

in section 5(a)(1) of the Investment

Company Act (15 U.S.C. 80a-5(a)(1)))

and that is registered, or is required to

register, with the U.S. Securities and

Exchange Commission pursuant to the

Investment Company Act.

In the Notice of Proposed Rulemaking,

we defined ‘‘covered financial

institution’’ by reference to 31 CFR

103.175(f)(2), the operative definition of

that term for purposes of the rules

implementing sections 313 and 319 of

the USA PATRIOT Act, and we also

included in the definition futures

commission merchants, introducing

brokers, and mutual funds. The

definition of ‘‘covered financial

institution’’ we are adopting for

purposes of this final rule is

substantially the same as originally

proposed.

B. 103.193(b)—Requirements for

Covered Financial Institutions

For purposes of complying with the

final rule’s prohibition on the opening

or maintaining in the United States of

correspondent accounts for, or on behalf

of, Banco Delta Asia, we expect a

covered financial institution to take

such steps that a reasonable and

prudent financial institution would take

to protect itself from loan or other fraud

or loss based on misidentification of a

person’s status.

1. Prohibition of Direct Use of

Correspondent Accounts

Section 103.193(b)(1) of the rule

prohibits all covered financial

institutions from opening or

maintaining a correspondent account in

the United States for, or on behalf of,

Banco Delta Asia. The prohibition

requires all covered financial

institutions to review their account

records to ensure that they maintain no

accounts directly for, or on behalf of,

Banco Delta Asia.

2

ent Accounts

Section 103.193(b)(1) of the rule

prohibits all covered financial

institutions from opening or

maintaining a correspondent account in

the United States for, or on behalf of,

Banco Delta Asia. The prohibition

requires all covered financial

institutions to review their account

records to ensure that they maintain no

accounts directly for, or on behalf of,

Banco Delta Asia.

2. Due Diligence Upon Correspondent

Accounts To Prohibit Indirect Use

As a corollary to the prohibition on

the opening or maintaining of

correspondent accounts directly for

Banco Delta Asia, section 103.193(b)(2)

requires a covered financial institution

to apply due diligence to its

correspondent accounts 39 that is

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

established by a covered financial institution for a

foreign bank to receive deposits from, or to make

payments or other disbursements on behalf of, a

foreign bank, or to handle other financial

transactions related to the foreign bank. For

purposes of this definition, the term account means

any formal banking or business relationship

established to provide regular services, dealings,

and other financial transactions. See 31 CFR

103.175(d)(2).

40 Despite Banco Delta Asia’s representation that

the majority of its correspondent accounts at foreign

financial institutions were terminated after our

finding of primary money laundering concern, the

self-reported list of the bank’s correspondent

accounts in the Banker’s Almanac was identical

before and after our finding, making it difficult to

know with certainty what institutions actually

maintain correspondent accounts with the bank.

reasonably designed to guard against

their indirect use by Banco Delta Asia

were terminated after our

finding of primary money laundering concern, the

self-reported list of the bank’s correspondent

accounts in the Banker’s Almanac was identical

before and after our finding, making it difficult to

know with certainty what institutions actually

maintain correspondent accounts with the bank.

reasonably designed to guard against

their indirect use by Banco Delta Asia.

At a minimum, that due diligence must

include notifying correspondent

accountholders that correspondent

accounts may not be used to provide

Banco Delta Asia with access to the

covered financial institution. For

example, a covered financial institution

may satisfy this requirement by

transmitting the following notice to all

of its correspondent accountholders:

Notice: Pursuant to U.S. regulations issued

under section 311 of the USA PATRIOT Act,

31 CFR 103.193, we are prohibited from

establishing, maintaining, administering or

managing a correspondent account for, or on

behalf of, Banco Delta Asia or any of its

subsidiaries (including, but not limited to,

Delta Asia Credit Limited, and Delta Asia

Insurance Limited). The regulations also

require us to notify you that you may not

provide Banco Delta Asia or any of its

subsidiaries with access to the correspondent

account you hold at our financial institution.

If we become aware that Banco Delta Asia or

any of its subsidiaries is indirectly using the

correspondent account you hold at our

financial institution, we will be required to

take appropriate steps to prevent such access,

including, where necessary, terminating your

account.

The purpose of the notice requirement

is to help ensure that Banco Delta Asia

is denied access to the U.S. financial

system, as well as to increase awareness

within the international financial

community of the risks and deficiencies

of Banco Delta Asia

institution, we will be required to

take appropriate steps to prevent such access,

including, where necessary, terminating your

account.

The purpose of the notice requirement

is to help ensure that Banco Delta Asia

is denied access to the U.S. financial

system, as well as to increase awareness

within the international financial

community of the risks and deficiencies

of Banco Delta Asia. However, we do

not require or expect a covered financial

institution to obtain a certification from

its correspondent accountholders that

indirect access will not be provided in

order to comply with this notice

requirement. Instead, methods of

compliance with the notice requirement

could include, for example, transmitting

a one-time notice by mail, fax, or e-mail

to a covered financial institution’s

correspondent accountholders,

informing those accountholders that

their correspondent accounts may not

be used to provide Banco Delta Asia

with indirect access to the covered

financial institution, or including such

information in the next regularly

occurring transmittal from the covered

financial institution to its correspondent

accountholders.

This final rule also requires a covered

financial institution to take reasonable

steps to identify any indirect use of its

correspondent accounts by Banco Delta

Asia, to the extent that such indirect use

can be determined from transactional

records maintained by the covered

financial institution in the normal

course of business. For example, a

covered financial institution is expected

to apply an appropriate screening

mechanism to be able to identify a funds

transfer order that, on its face, lists

Banco Delta Asia as the originator’s or

beneficiary’s financial institution, or

otherwise references Banco Delta Asia

in a manner detectable under the

financial institution’s normal business

screening procedures

iness. For example, a

covered financial institution is expected

to apply an appropriate screening

mechanism to be able to identify a funds

transfer order that, on its face, lists

Banco Delta Asia as the originator’s or

beneficiary’s financial institution, or

otherwise references Banco Delta Asia

in a manner detectable under the

financial institution’s normal business

screening procedures. We acknowledge

that not all institutions are capable of

screening every field in a funds transfer

message and that the risk-based controls

of some institutions may not necessitate

such comprehensive screening.

Alternatively, other institutions may

perform more thorough screening as

part of their risk-based determination to

perform ‘‘additional due diligence,’’ as

described below. An appropriate

screening mechanism could be the

mechanism currently used by a covered

financial institution to comply with

various legal requirements, such as the

commercially available software used to

comply with the sanctions programs

administered by the Office of Foreign

Assets Control.

Notifying correspondent

accountholders and taking reasonable

steps to identify any indirect use of

correspondent accounts by Banco Delta

Asia in the manner discussed above are

the minimum due diligence

requirements under this final rule.

Beyond these minimum steps, a covered

financial institution should adopt a risk-

based approach for determining what, if

any, additional due diligence measures

it should implement to guard against the

indirect use of its correspondent

accounts by Banco Delta Asia, based on

risk factors such as the type of services

it offers and the geographic locations of

its correspondent accountholders.

A covered financial institution that

obtains knowledge that a correspondent

account is being used by a foreign bank

to provide indirect access to Banco

Delta Asia must take all appropriate

steps to prevent such indirect access,

including, when necessary, terminating

the correspondent account

the type of services

it offers and the geographic locations of

its correspondent accountholders.

A covered financial institution that

obtains knowledge that a correspondent

account is being used by a foreign bank

to provide indirect access to Banco

Delta Asia must take all appropriate

steps to prevent such indirect access,

including, when necessary, terminating

the correspondent account. A covered

financial institution may afford such

foreign bank a reasonable opportunity to

take corrective action prior to

terminating the correspondent account.

We have added language in the final

rule clarifying that, should the foreign

bank refuse to comply, or if the covered

financial institution cannot obtain

adequate assurances that the account

will not be available to Banco Delta

Asia, the covered financial institution

must terminate the account within a

commercially reasonable time. This

means that the covered financial

institution should not permit the foreign

bank to establish any new positions or

execute any transactions through the

account, other than those necessary to

close the account. A covered financial

institution may reestablish an account

closed under this rule if it determines

that the account will not be used to

provide banking services indirectly to

Banco Delta Asia.

3. Reporting Not Required

Section 103.193(b)(3) of the rule

clarifies that the rule does not impose

any reporting requirement upon any

covered financial institution that is not

otherwise required by applicable law or

regulation. However, a covered financial

institution must document its

compliance with the requirement that it

notify its correspondent accountholders

that the accounts may not be used to

provide Banco Delta Asia with access to

the covered financial institution.

VI. Regulatory Flexibility Act

It is hereby certified that this rule will

not have a significant economic impact

on a substantial number of small

entities

ed financial

institution must document its

compliance with the requirement that it

notify its correspondent accountholders

that the accounts may not be used to

provide Banco Delta Asia with access to

the covered financial institution.

VI. Regulatory Flexibility Act

It is hereby certified that this rule will

not have a significant economic impact

on a substantial number of small

entities. The correspondent accounts

that the bank previously held in the

United States were closed, and we have

no knowledge of any small covered

financial institutions maintaining

correspondent accounts for other foreign

banks that presently maintain a

correspondent relationship with Banco

Delta Asia.40 It therefore appears that

Banco Delta Asia no longer holds

correspondent accounts in the United

States and that most if not all of the

nested correspondent accounts to which

Banco Delta Asia has indirect access

would be with large covered financial

institutions. Thus, the prohibition on

establishing or maintaining such

correspondent accounts will not have a

significant impact on a substantial

number of small entities. In addition, all

covered financial institutions currently

must exercise some degree of due

diligence in order to comply with

various legal requirements. The tools

used for such purposes, including

commercially available software used to

comply with the economic sanctions

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al institutions currently

must exercise some degree of due

diligence in order to comply with

various legal requirements. The tools

used for such purposes, including

commercially available software used to

comply with the economic sanctions

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

programs administered by the Office of

Foreign Assets Control, can be modified

to monitor for the use of correspondent

accounts by Banco Delta Asia. Thus, the

due diligence that is required by this

rule—i.e., the one-time transmittal of

notice to correspondent accountholders

and screening of transactions to identify

any indirect use of a correspondent

account—is not expected to impose a

significant additional economic burden

on small covered financial institutions.

VII. Paperwork Reduction Act of 1995

The collection of information

contained in the final rule has been

approved by the Office of Management

and Budget (OMB) in accordance with

the Paperwork Reduction Act of 1995

(44 U.S.C. 3507(d)), and has been

assigned OMB Control Number 1506–

0045. An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless it displays a valid control

number assigned by OMB.

The only requirements in the final

rule that are subject to the Paperwork

Reduction Act are the requirements that

a covered financial institution notify its

correspondent accountholders that the

correspondent accounts maintained on

their behalf may not be used to provide

Banco Delta Asia with access to the

covered financial institution and the

requirement that a covered financial

institution document its compliance

with this obligation to notify its

correspondents

ction Act are the requirements that

a covered financial institution notify its

correspondent accountholders that the

correspondent accounts maintained on

their behalf may not be used to provide

Banco Delta Asia with access to the

covered financial institution and the

requirement that a covered financial

institution document its compliance

with this obligation to notify its

correspondents. The estimated annual

average burden associated with this

collection of information is one hour per

affected financial institution. We

received no comments on this

information collection burden estimate.

Comments concerning the accuracy of

this information collection estimate and

suggestions for reducing this burden

should be sent (preferably by fax (202–

395–6974)) to the Desk Officer for the

Department of the Treasury, Office of

Information and Regulatory Affairs,

Office of Management and Budget,

Washington, DC 20503 (or by the

Internet to

Alexander_T._Hunt@omb.eop.gov), with

a copy to FinCEN by paper mail to

FinCEN, P.O. Box 39, Vienna, VA

22183, ‘‘Attn: Section 311—Imposition

of Special Measure Against Banco Delta

Asia’’ or by electronic mail to

regcomments@fincen.treas.gov with the

caption ‘‘Attn: Section 311—Imposition

of Special Measure Against Banco Delta

Asia’’ in the body of the text.

VIII. Executive Order 12866

This rule is not a significant

regulatory action for purposes of

Executive Order 12866, ‘‘Regulatory

Planning and Review.’’

List of Subjects in 31 CFR Part 103

Administrative practice and

procedure, Banks and banking, Brokers,

Counter-money laundering, Counter-

terrorism, and Foreign banking.

Authority and Issuance

I For the reasons set forth in the

preamble, Part 103 of title 31 of the

Code of Federal Regulations is amended

as follows:

PART 103—FINANCIAL

RECORDKEEPING AND REPORTING

OF CURRENCY AND FINANCIAL

TRANSACTIONS

I 1. The authority citation for part 103

continues to read as follows:

Authority: 12 U.S.C. 1829b and 1951–1959;

31 U.S.C

terrorism, and Foreign banking.

Authority and Issuance

I For the reasons set forth in the

preamble, Part 103 of title 31 of the

Code of Federal Regulations is amended

as follows:

PART 103—FINANCIAL

RECORDKEEPING AND REPORTING

OF CURRENCY AND FINANCIAL

TRANSACTIONS

I 1. The authority citation for part 103

continues to read as follows:

Authority: 12 U.S.C. 1829b and 1951–1959;

31 U.S.C. 5311–5314 and 5316–5332; title III,

sec. 314 Pub. L. 107–56, 115 Stat. 307.

I 2. Subpart I of Part 103 is amended by

adding new § 103.193 as follows:

§ 103.193

Special measures against Banco

Delta Asia.

(a) Definitions. For purposes of this

section:

(1) Banco Delta Asia means all

branches, offices, and subsidiaries of

Banco Delta Asia operating in any

jurisdiction, including its subsidiaries

Delta Asia Credit Limited and Delta

Asia Insurance Limited.

(2) Correspondent account has the

same meaning as provided in

§ 103.175(d)(1)(ii).

(3) Covered financial institution

includes:

(i) An insured bank (as defined in

section 3(h) of the Federal Deposit

Insurance Act (12 U.S.C. 1813(h)));

(ii) A commercial bank;

(iii) An agency or branch of a foreign

bank in the United States;

(iv) A federally insured credit union;

(v) A savings association;

(vi) A corporation acting under

section 25A of the Federal Reserve Act

(12 U.S.C. 611 et seq.);

(vii) A trust bank or trust company

that is federally regulated and is subject

to an anti-money laundering program

requirement;

(viii) A broker or dealer in securities

registered, or required to be registered,

with the U.S. Securities and Exchange

Commission under the Securities

Exchange Act of 1934 (15 U.S.C. 78a et

seq.), except persons who register

pursuant to section 15(b)(11) of the

Securities Exchange Act of 1934;

that is federally regulated and is subject

to an anti-money laundering program

requirement;

(viii) A broker or dealer in securities

registered, or required to be registered,

with the U.S. Securities and Exchange

Commission under the Securities

Exchange Act of 1934 (15 U.S.C. 78a et

seq.), except persons who register

pursuant to section 15(b)(11) of the

Securities Exchange Act of 1934;

(ix) A futures commission merchant

or an introducing broker registered, or

required to register, with the

Commodity Futures Trading

Commission under the Commodity

Exchange Act (7 U.S.C. 1 et seq.), except

persons who register pursuant to section

4(f)(a)(2) of the Commodity Exchange

Act; and

(x) A mutual fund, which means an

investment company (as defined in

section 3(a)(1) of the Investment

Company Act of 1940 (‘‘Investment

Company Act’’) (15 U.S.C. 80a-3(a)(1)))

that is an open-end company (as defined

in section 5(a)(1) of the Investment

Company Act (15 U.S.C. 80a–5(a)(1)))

and that is registered, or is required to

register, with the U.S. Securities and

Exchange Commission pursuant to the

Investment Company Act.

(4) Subsidiary means a company of

which more than 50 percent of the

voting stock or analogous equity interest

is owned by another company.

(b) Requirements for covered financial

institutions—(1) Prohibition on direct

use of correspondent accounts. A

covered financial institution shall

terminate any correspondent account

that is established, maintained,

administered, or managed in the United

States for, or on behalf of, Banco Delta

Asia.

(2) Due diligence of correspondent

accounts to prohibit indirect use.

another company.

(b) Requirements for covered financial

institutions—(1) Prohibition on direct

use of correspondent accounts. A

covered financial institution shall

terminate any correspondent account

that is established, maintained,

administered, or managed in the United

States for, or on behalf of, Banco Delta

Asia.

(2) Due diligence of correspondent

accounts to prohibit indirect use.

(i) A covered financial institution

shall apply due diligence to its

correspondent accounts that is

reasonably designed to guard against

their indirect use by Banco Delta Asia.

At a minimum, that due diligence must

include:

(A) Notifying correspondent

accountholders the correspondent

account may not be used to provide

Banco Delta Asia with access to the

covered financial institution; and

(B) Taking reasonable steps to identify

any indirect use of its correspondent

accounts by Banco Delta Asia, to the

extent that such indirect use can be

determined from transactional records

maintained in the covered financial

institution’s normal course of business.

(ii) A covered financial institution

shall take a risk-based approach when

deciding what, if any, additional due

diligence measures it should adopt to

guard against the indirect use of its

correspondent accounts by Banco Delta

Asia.

(iii) A covered financial institution

that obtains knowledge that a

correspondent account is being used by

the foreign bank to provide indirect

access to Banco Delta Asia shall take all

appropriate steps to prevent such

indirect access, including, where

necessary, terminating the

correspondent account.

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

anco Delta Asia shall take all

appropriate steps to prevent such

indirect access, including, where

necessary, terminating the

correspondent account.

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Federal Register / Vol. 72, No. 52 / Monday, March 19, 2007 / Rules and Regulations

(iv) A covered financial institution

required to terminate a correspondent

account pursuant to paragraph (b)(2)(iii)

of this section:

(A) Should do so within a

commercially reasonable time, and

should not permit the foreign bank to

establish any new positions or execute

any transaction through such

correspondent account, other than those

necessary to close the correspondent

account; and

(B) May reestablish a correspondent

account closed pursuant to this

paragraph if it determines that the

correspondent account will not be used

to provide banking services indirectly to

Banco Delta Asia.

(3) Recordkeeping and reporting. (i) A

covered financial institution is required

to document its compliance with the

notice requirement set forth in

paragraph (b)(2)(i)(A) of this section.

(ii) Nothing in this section shall

require a covered financial institution to

report any information not otherwise

required to be reported by law or

regulation.

Dated: March 14, 2007.

William F. Baity,

Acting Director, Financial Crimes

Enforcement Network.

[FR Doc. 07–1313 Filed 3–14–07; 11:41 am]

BILLING CODE 4810–02–P

DEPARTMENT OF HOMELAND

SECURITY

Coast Guard

33 CFR Part 100

[CGD05–07–001]

RIN 1625–AA08

Special Local Regulations for Marine

Events; Severn River, College Creek,

Weems Creek and Carr Creek,

Annapolis, MD

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

SUMMARY: The Coast Guard is amending

the special local regulations at 33 CFR

100.518. This rulemaking is intended to

accommodate changes in event dates for

recurring marine events specified in this

regulation

1]

RIN 1625–AA08

Special Local Regulations for Marine

Events; Severn River, College Creek,

Weems Creek and Carr Creek,

Annapolis, MD

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

SUMMARY: The Coast Guard is amending

the special local regulations at 33 CFR

100.518. This rulemaking is intended to

accommodate changes in event dates for

recurring marine events specified in this

regulation. The marine events included

in this special local regulation include

the Safety at Sea Seminar, U.S. Naval

Academy Crew Races and the Blue

Angels Air Show. This rule is intended

to restrict vessel traffic in portions of the

Severn River during the period of these

marine events and is necessary to

provide for the safety of life on

navigable waters during the event.

DATES: This rule is effective March 24,

2007.

ADDRESSES: Documents indicated in this

preamble as being available in the

docket, are part of docket (CGD05–07–

001) and are available for inspection or

copying at Commander (dpi), Fifth

Coast Guard District, 431 Crawford

Street, Portsmouth, Virginia 23704–

5004, between 9 a.m. and 2 p.m.,

Monday through Friday, except Federal

holidays.

FOR FURTHER INFORMATION CONTACT:

Dennis M. Sens, Project Manager,

Inspections and Compliance Branch, at

(757) 398–6204.

SUPPLEMENTARY INFORMATION:

Regulatory Information

On February 1, 2007, we published a

Notice of proposed rulemaking (NPRM)

entitled Special Local Regulations for

Marine Events; College Creek, Weems

Creek and Carr Creek, Annapolis, MD in

the Federal Register (72 FR 4669). We

received no letters commenting on the

proposed rule. No public meeting was

requested, and none was held.

Under 5 U.S.C. 553(d)(3), the Coast

Guard finds that good cause exists for

making this rule effective less than 30

days after publication in the Federal

Register

tions for

Marine Events; College Creek, Weems

Creek and Carr Creek, Annapolis, MD in

the Federal Register (72 FR 4669). We

received no letters commenting on the

proposed rule. No public meeting was

requested, and none was held.

Under 5 U.S.C. 553(d)(3), the Coast

Guard finds that good cause exists for

making this rule effective less than 30

days after publication in the Federal

Register. Delaying the effective date

would be contrary to the public interest,

since immediate action is needed to

ensure the safety of the event

participants, support craft and other

vessels transiting the event area.

However, advance notifications will be

made to affected waterway users via

marine information broadcasts, area

newspapers and local radio stations.

Background and Purpose

We are amending 33 CFR 100.518 to

accommodate changes to the

enforcement period for U.S. Naval

Academy sponsored marine events.

Each year the U.S. Naval Academy hosts

various marine events on the Severn

River adjacent to the academy.

Organized collegiate crew races are

typically held annually during

weekends in March, April and May. The

Blue Angels air show is normally

scheduled during graduation week at

the U.S. Naval Academy. Maritime

traffic is prohibited from using the

regulated area of the Severn River

during air show performances in

accordance with Federal Aviation

Administration requirements. The dates

for marine events for 2007 will be;

Safety at Sea Seminar on March 24,

2007; U.S. Naval Academy crew races

on May 6 and May 27, 2007; and the

Blue Angels air show on May 23 and

May 24, 2007. The special regulation

will be enforced from 5 a.m. to 6 p.m.

on those days and if the event’s daily

activities should conclude prior to 6

p.m., enforcement of this regulation may

be terminated for that day at the

discretion of the Patrol Commander.

The U.S. Naval Academy is the sponsor

for all of these events and intends to

hold them annually on the dates

provided in 33 CFR 100.518

007. The special regulation

will be enforced from 5 a.m. to 6 p.m.

on those days and if the event’s daily

activities should conclude prior to 6

p.m., enforcement of this regulation may

be terminated for that day at the

discretion of the Patrol Commander.

The U.S. Naval Academy is the sponsor

for all of these events and intends to

hold them annually on the dates

provided in 33 CFR 100.518.

Discussion of Comments and Changes

The Coast Guard did not receive

comments in response to the Notice of

proposed rulemaking (NPRM) published

in the Federal Register. Accordingly,

the Coast Guard is establishing

temporary special local regulations on

specified waters of the Severn River,

College Creek, Weems Creek and Carr

Creek, Annapolis, Maryland.

Regulatory Evaluation

This rule is not a ‘‘significant

regulatory action’’ under section 3(f) of

Executive Order 12866, Regulatory

Planning and Review, and does not

require an assessment of potential costs

and benefits under section 6(a)(3) of that

Order. The Office of Management and

Budget has not reviewed it under that

Order. It is not ‘‘significant’’ under the

regulatory policies and procedures of

the Department of Homeland Security

(DHS).

We expect the economic impact of

this rule to be so minimal that a full

Regulatory Evaluation under the

regulatory policies and procedures of

DHS is unnecessary. The effect of this

action merely establishes the dates on

which the existing regulations would be

enforced. It would not impose any

additional restrictions on vessel traffic.

Small Entities

Under the Regulatory Flexibility Act

(5 U.S.C. 601–612), we have considered

whether this rule would have a

significant economic impact on a

substantial number of small entities.

The term ‘‘small entities’’ comprises

small businesses, not-for-profit

organizations that are independently

owned and operated and are not

dominant in their fields, and

governmental jurisdictions with

populations of less than 50,000

Flexibility Act

(5 U.S.C. 601–612), we have considered

whether this rule would have a

significant economic impact on a

substantial number of small entities.

The term ‘‘small entities’’ comprises

small businesses, not-for-profit

organizations that are independently

owned and operated and are not

dominant in their fields, and

governmental jurisdictions with

populations of less than 50,000.

The Coast Guard certifies under 5

U.S.C. 605(b) that this rule would not

have a significant economic impact on

a substantial number of small entities.

This rule would affect the following

entities, some of which might be small

entities: the owners or operators of

vessels intending to transit or anchor in

a portion of the Severn River during the

event.

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