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Bank Secrecy Act and Anti-Money Laundering

Minimum Due Diligence Requirements

The requirements of 31 U.S.C. 5318(i), effective July 23, 2002, that applies to a financial institution are:

i)  Due Diligence for United States Private Banking and Correspondent Bank Accounts Involving Foreign Persons.--
    (1)  IN GENERAL.--Each financial institution that establishes, maintains, administers, or manages a private banking account or a correspondent account in the United States for a non-United States person, including a foreign individual visiting the United States, or a representative of a non-United States person shall establish appropriate, specific, and, where necessary, enhanced, due diligence policies, procedures, and controls that are reasonably designed to detect and report instances of money laundering through those accounts.
    (2)  Additional Standards for Certain Correspondent Accounts.--
      (A)  In General.--Subparagraph (B) shall apply if a correspondent account is requested or maintained by, or on behalf of, a foreign bank operating--
        (i)  under an offshore banking license; or
        (ii)  under a banking license issued by a foreign country that has been designated--
          (I)  as noncooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member, with which designation the United States representative to the group or organization concurs; or
          (II)  by the Secretary of the Treasury as warranting special measures due to money laundering concerns.
      (B)  POLICIES, PROCEDURES, AND CONTROLS.--The enhanced due diligence policies, procedures, an controls required under paragraph (1) shall, at a minimum, ensure that the financial institution in the United States takes reasonable steps--
        (i)  to ascertain for any such foreign bank, the shares of which are not publicly traded, the identity of each of the owners of the foreign bank, and the nature and extent of the ownership interest of each such owner;
        (ii)  to conduct enhanced scrutiny of such account to guard against money laundering and report any suspicious transactions under subsection (g); and
        (iii)  to ascertain whether such foreign bank provides correspondent accounts to other foreign banks and, if so, the identity of those foreign banks and related due diligence information, as appropriate under paragraph (1).
    (3)  MINIMUM STANDARDS FOR PRIVATE BANKING ACCOUNTS.--If a private banking account is requested or maintained by, or on behalf of, a non-United States person, then the due diligence policies, procedures, and controls required under paragraph (1) shall, at a minimum, ensure that the financial institution takes reasonable steps--
      (A)  to ascertain the identity of the nominal and beneficial owners of, and the source of funds deposited into, such account as needed to guard against money laundering and report any suspicious transactions under subsection (g); and
      (B)  to conduct enhanced scrutiny of any such account that is requested or maintained by, or on behalf of, a senior foreign political figure, or any immediate family member or close associate of a senior foreign political figure that is reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption.
    (4)  DEFINITION.--For purposes of this subsection, the following definitions shall apply:
      (A)  OFFSHORE BANKING LICENSE.--The term "offshore banking license" means a license to conduct banking activities which, as a condition of the license, prohibits the licensed entity from conducting banking activities with the citizens of, or with the local currency of, the country which issued the license.
      (B)  PRIVATE BANKING ACCOUNT.--The term "private banking account" means an account (or any combination of accounts) that--
        (i)  requires a minimum aggregate deposits of funds or other assets of not less than $1,000,000;
        (ii)  is established on behalf of 1 or more individuals who have a direct or beneficial ownership interest in the account; and
{{12-31-01 p.8392}}(iii)  is assigned to, or is administered or managed by, in whole or in part, an officer, employee, or agent of a financial institution acting as a liaison between the financial institution and the direct or beneficial owner of the account.
  (j)  Prohibition on United States Correspondent Accounts With Foreign Shell Banks.--
    (1)  IN GENERAL.--A financial institution described in subparagraphs (A) through (G) of section 5312(a)(2) (in this subsection referred to as a "covered financial institution") shall not establish, maintain, administer, or manage a correspondent account in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country.
    (2)  Prevention of Indirect Service to Foreign Shell Banks.--A covered financial institution shall take reasonable steps to ensure that any correspondent account established, maintained, administered, or managed by that covered financial institution in the United States for a foreign bank is not being used by that foreign bank to indirectly provide banking services to another foreign bank that does not have a physical presence in any country. The Secretary of the Treasury shall, by regulation, delineate the reasonable steps necessary to comply with this paragraph.
    (3)  EXCEPTION.--Paragraphs (1) and (2) do not prohibit a covered financial institution from providing a correspondent account to a foreign bank, if the foreign bank--
      (A)  is an affiliate of a depository institution, credit union, or foreign bank that maintains a physical presence in the United States or a foreign country, as applicable; and
      (B)  is subject to supervision by a banking authority in the country regulating the affiliated depository institution, credit union, or foreign bank described in subparagraph (A), as applicable.
    (4)  DEFINITIONS.--For purposes of this subsection--
      (A)  the term "affiliate" means a foreign bank that is controlled by or is under common control with a depository institution, credit union, or foreign bank; and
      (B)  the term "physical presence" means a place of business that--
        (i)  is maintained by a foreign bank;
        (ii)  is located at a fixed address (other than solely an electronic address) in a country in which the foreign bank is authorized to conduct banking activities, as which location the foreign bank--
          (I)  employs 1 or more individuals on a full-time basis; and
          (II)  maintains operating records related to its banking activities; and
        (iii)  is subject to inspection by the banking authority which licensed the foreign bank to conduct banking activities.




Last Updated 07/08/2004 Supervision@fdic.gov