Joint final rule—amendment to customer identification programs for banks, savings associations, credit unions and certain non-federally regulated banks - Legal Developments

Federal Reserve Bulletin, July, 2003

The Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), together with the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (collectively, the Agencies), have jointly adopted a final rule to implement section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 (the Act). Section 326 requires the Secretary of the Treasury (Secretary) to jointly prescribe with each of the Agencies, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), a regulation that, at a minimum, requires financial institutions to implement reasonable procedures to verify the identity of any person seeking to open an account, to the extent reasonable and practicable; maintain records of the information used to verify the person's identity; and determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency. This final regulation applies to banks, savings associations, credit unions, private banks, and trust companies.

The text of the other Agencies' final rules can be found in 12 C.F.R. Parts 21, 326, 563, 748, and 31 C.F.R. Part 103, and was published in the Federal Register on May 9, 2003 (68 Federal Register 25089 (2003)). The Board adopted the amendment to Regulation H, Membership of State Banking Institutions in the Federal Reserve System, and Regulation K, International Banking Operations, 12 C.F.R. Parts 208 and 211, on April 21, 2003.

Effective June 9, 2003, 12 C.F.R. Parts 208 and 211 are amended as follows. Any transactions settled on or after October 1, 2003, are subject to this final rule.

Part 208--Membership of State Banking Institutions in the Federal Reserve System (Regulation H)

Subpart F--Miscellaneous Requirements

1. The authority citation for Part 208 continues to read as follows:

Authority: 12 U.S.C. 24, 24a, 36, 92a, 93a, 248(a), 248(c), 321-338a, 371d, 461, 481--486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 1828(o), 1831, 18310, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1843(l), 1882, 2901-2907, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 780-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

2. Revise section 208.63(b) to read as follows:

Section 208.63--Procedures for monitoring Bank Secrecy Act compliance.

(b) Establishment of BSA compliance program.

(1) Program requirement. Each bank shall develop and provide for the continued administration of a program reasonably designed to ensure and monitor compliance with the recordkeeping and reporting requirements set forth in subchapter II of chapter 53 of title 31, United States Code, the Bank Secrecy Act, and the implementing regulations promulgated thereunder by the Department of the Treasury at 31 C.F.R. Part 103. The compliance program shall be reduced to writing, approved by the board of directors, and noted in the minutes.

(2) Customer identification program. Each bank is subject to the requirements of 31 U.S.C. [section] 5318(l) and the implementing regulation jointly promulgated by the Board and the Department of the Treasury at 31 C.F.R. 103.121, which require a customer identification program to be implemented as part of the BSA compliance program required under this section.

Part 211--International Banking Operations (Regulation K)

1. The authority citation for Part 211 is revised to read as follows:

Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 3101 et seq., and 3901 et seq.; 15 U.S.C. 6801 and 6805; 31 U.S.C. 5318.

2. In section 211.5, add new paragraph (m) to read as follows:

Section 211.5--Edge and agreement corporations.

(m) Procedures for monitoring Bank Secrecy Act.

(1) [Reserved]

(2) Customer identification program. Each Edge or agreement corporation is subject to the requirements of 31 U.S.C. [section] 5318(l) and the implementing regulation jointly promulgated by the Board and the Department of the Treasury at 31 C.F.R. 103.121, which require a customer identification program.

3. In section 211.24, add new paragraph (j) to read as follows:

Section 211.24--Approval of offices of foreign banks; procedures for applications; standards for approval; representative office activities and standards for approval; preservation of existing authority.

(j) Procedures for monitoring Bank Secrecy Act compliance.

(1) [Reserved]

(2) Customer identification program. Except for a federal branch or a federal agency or a state branch that is insured by the FDIC, a branch, agency, or representative office of a foreign bank operating in the United States is subject to the requirements of 31 U.S.C. [section] 5318(l) and the implementing regulation jointly promulgated by the Board and the Department of the Treasury at 31 C.F.R. 103.121, which require a customer identification program.