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8000 - Miscellaneous Statutes and Regulations
Subpart I—Anti-Money Laundering Programs
§ 103.120 Anti-money laundering program requirements for
financial institutions regulated by a Federal functional regulator or a
self-regulatory organization, and casinos.
(a) Definitions. For purposes of this section:
(1) Financial institution means a financial
institution defined in 31 U.S.C.
5312(a)(2) or (c)(1) that is subject to regulation by a Federal
functional regulator or a self-regulatory organization.
(2) Federal functional regulator means:
(i) The Board of Governors of the Federal Reserve System;
(ii) The Office of the Comptroller of the Currency;
(iii) The Board of Directors of the Federal Deposit Insurance
Corporation;
(iv) The Office of Thrift Supervision;
(v) The National Credit Union Administration;
(vi) The Securities and Exchange Commission; or
(vii) The Commodity Futures Trading Commission.
(3) Self-regulatory organization:
(i) Shall have the same meaning as provided in section 3(a)(26)
of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(26)); and
(ii) Means a "registered entity" or a "registered
futures association" as provided in section 1a(29) or 17,
respectively, of the Commodity Exchange Act (7 U.S.C. 1a(29), 21).
(4) Casino has the same meaning as provided in
§ 103.11(n)(5).
(b) Requirements for financial institutions regulated only by
a Federal functional regulator, including banks, savings associations,
and credit unions. A financial institution regulated by a Federal
functional regulator that is not subject to the regulations of a self
regulatory organization shall be deemed to satisfy the requirements of
31 U.S.C. 5318(h)(1) if it
implements and maintains an anti-money laundering program that complies
with the requirements of §§ 103.176 and 103.178 and the regulation
of its Federal functional regulator governing such programs.
(c) Requirements for financial institutions regulated by a
self-regulatory organization, including registered securities
broker-dealers and futures commission merchants. A financial
institution regulated by a self-regulatory organization shall be deemed
to satisfy the requirements of 31 U.S.C. 5318(h)(1) if:
(1) The financial institution complies with the requirements of
§§ 103.176 and 103.178 and any applicable regulation of its Federal
functional regulator governing the establishment and implementation of
anti-money laundering programs; and
(2)(i) The financial institution implements and maintains an
anti-money laundering program that complies with the rules,
regulations, or requirements of its self-regulatory organization
governing such programs; and
(ii) The rules, regulations, or requirements of the
self-regulatory organization have been approved, if required, by the
appropriate Federal functional regulator.
{{2-28-06 p.8516.06-D}}
(d) Requirements for casinos. A casino shall be deemed
to satisfy the requirements of 31 U.S.C. 5318(h)(1) if it implements
and maintains a compliance program described in § 103.64.
[Codified to 31 C.F.R. § 103.120]
[Section 103.120 added at 67 Fed. Reg. 21113 April 29,
2002, effective April 24, 2002; amended at 71 Fed. Reg. 512, January 4,
2006, effective February 3, 2006]
§ 103.121 Customer Identification Programs for banks, savings
associations, credit unions, and certain non-Federally regulated banks.
(a) Definitions. For purposes of this section:
(1)(i) Account means a formal banking relationship
established to provide or engage in services, dealings, or other
financial transactions including a deposit account, a transaction or
asset account, a credit account, or other extension of credit.
Account also includes a relationship established to provide
a safety deposit box or other safekeeping services, or cash management,
custodian, and trust services.
(ii) Account does not include:
(A) A product or service where a formal banking relationship is
not established with a person, such as check-cashing, wire transfer, or
sale of a check or money order;
(B) An account that the bank acquires through an acquisition,
merger, purchase of assets, or assumption of liabilities; or
(C) An account opened for the purpose of participating in an
employee benefit plan established under the Employee Retirement Income
Security Act of 1974.
(2) Bank means:
(i) A bank, as that term is defined in § 103.11(c), that is
subject to regulation by a Federal functional regulator; and
(ii) A credit union, private bank, and trust company, as set
forth in § 103.11(c), that does not have a Federal functional
regulator.
(3)(i) Customer means:
(A) A person that opens a new account; and
(B) An individual who opens a new account for:
(1) An individual who lacks legal capacity, such as a
minor; or
(2) An entity that is not a legal person, such as a
civic club.
(ii) Customer does not include:
(A) A financial institution regulated by a Federal functional
regulator or a bank regulated by a state bank regulator;
(B) A person described in § 103.22(d)(2)(ii) through (iv); or
(C) A person that has an existing account with the bank, provided
that the bank has a reasonable belief that it knows the true identity
of the person.
(4) Federal functional regulator is defined at
§ 103.120(a)(2).
(5) Financial institution is defined at 31 U.S.C.
5312(a)(2) and (c)(1).
(6) Taxpayer identification number is defined by
section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109) and
the Internal Revenue Service regulations implementing that section
(e.g., social security number or employer identification
number).
(7) U.S. person means:
(i) A United States citizen; or
(ii) A person other than an individual (such as a corporation,
partnership, or trust), that is established or organized under the laws
of a State or the United States.
(8) Non-U.S. person means a person that is not a U.S.
person.
(b) Customer Identification Program: minimum requirements.
(1) In general. A bank must implement a written
Customer Identification Program (CIP) appropriate for its size and type
of business that, at a minimum, includes each of the requirements of
paragraphs (b)(1) through (5) of this section. If a bank is required to
have an anti-money laundering compliance program under the regulations
implementing 31 U.S.C. 5318(h), 12 U.S.C. 1818(s), or 12 U.S.C.
1786(q)(1), then the CIP must be a part of the anti-money laundering
compliance program. Until such time as credit unions, private banks,
and trust companies without a Federal functional regulator are subject
to such a program, their CIPs must be approved by their boards of
directors.
{{6-30-03 p.8516.07}}
(2) Identity verification procedures. The CIP must
include risk-based procedures for verifying the identity of each
customer to the extent reasonable and practicable. The procedures must
enable the bank to form a reasonable belief that it knows the true
identity of each customer. These procedures must be based on the
bank's assessment of the relevant risks, including those presented by
the various types of accounts maintained by the bank, the various
methods of opening accounts provided by the bank, the various types of
identifying information available, and the bank's size, location, and
customer base. At a minimum, these procedures must contain the elements
described in this paragraph (b)(2).
(i) Customer information required. (A) In
general. The CIP must contain procedures for opening an account
that specify the identifying information that will be obtained from
each customer. Except as permitted by paragraphs (b)(2)(i)(B) and (C)
of this section, the bank must obtain, at a minimum, the following
information from the customer prior to opening an account:
(1) Name;
(2) Date of birth, for an individual;
(3) Address, which shall be:
(i) For an individual, a residential or business
street address;
(ii) For an individual who does not have a residential
or business street address, an Army Post Office (APO) or Fleet Post
Office (FPO) box number, or the residential or business street address
of next of kin or of another contact individual; or
(iii) For a person other than an individual (such as a
corporation, partnership, or trust), a principal place of business,
local office, or other physical location; and
(4) Identification number, which shall be:
(i) For a U.S. person, a taxpayer identification
number; or
(ii) For a non-U.S. person, one or more of the
following: a taxpayer identification number; passport number and
country of issuance; alien identification card number; or number and
country of issuance of any other government-issued document evidencing
nationality or residence and bearing a photograph or similar safeguard.
Note to paragraph
(b)(2)(i)(A)(4)(ii): When opening an
account for a foreign business or enterprise that does not have an
identification number, the bank must request alternative
government-issued documentation certifying the existence of the
business or enterprise.
(B) Exception for persons applying for a taxpayer
identification number. Instead of obtaining a taxpayer
identification number from a customer prior to opening the account, the
CIP may include procedures for opening an account for a customer that
has applied for, but has not received, a taxpayer identification
number. In this case, the CIP must include procedures to confirm that
the application was filed before the customer opens the account and to
obtain the taxpayer identification number within a reasonable period of
time after the account is opened.
(C) Credit card accounts. In connection with a
customer who opens a credit card account, a bank may obtain the
identifying information about a customer required under paragraph
(b)(2)(i)(A) by acquiring it from a third-party source prior to
extending credit to the customer.
(ii) Customer verification. The CIP must contain
procedures for verifying the identity of the customer, using
information obtained in accordance with paragraph (b)(2)(i) of this
section, within a reasonable time after the account is opened. The
procedures must describe when the bank will use documents,
non-documentary methods, or a combination of both methods as described
in this paragraph (b)(2)(ii).
(A) Verification through documents. For a bank relying
on documents, the CIP must contain procedures that set forth the
documents that the bank will use. These documents may include:
(1) For an individual, unexpired government-issued
identification evidencing nationality or residence and bearing a
photograph or similar safeguard, such as a driver's license or
passport; and
(2) For a person other than an individual (such as a
corporation, partnership, or trust), documents showing the existence of
the entity, such as certified articles of incorporation, a
government-issued business license, a partnership agreement, or trust
instrument.
{{6-30-03 p.8516.08}}
(B) Verification through non-documentary methods. For
a bank relying on non-documentary methods, the CIP must contain
procedures that describe the non-documentary methods the bank will use.
(1) These methods may include contacting a customer;
independently verifying the customer's identity through the comparison
of information provided by the customer with information obtained from
a consumer reporting agency, public database, or other source; checking
references with other financial institutions; and obtaining a financial
statement.
(2) The bank's non-documentary procedures must
address situations where an individual is unable to present an
unexpired government-issued identification document that bears a
photograph or similar safeguard; the bank is not familiar with the
documents presented; the account is opened without obtaining documents;
the customer opens the account without appearing in person at the bank;
and where the bank is otherwise presented with circumstances that
increase the risk that the bank will be unable to verify the true
identity of a customer through documents.
(C) Additional verification for certain customers. The
CIP must address situations where, based on the bank's risk assessment
of a new account opened by a customer that is not an individual, the
bank will obtain information about individuals with authority or
control over such account, including signatories, in order to verify
the customer's identity. This verification method applies only when
the bank cannot verify the customer's true identity using the
verification methods described in paragraphs (b)(2)(ii)(A) and (B) of
this section.
(iii) Lack of verification. The CIP must include
procedures for responding to circumstances in which the bank cannot
form a reasonable belief that it knows the true identity of a customer.
These procedures should describe:
(A) When the bank should not open an account;
(B) The terms under which a customer may use an account while the
bank attempts to verify the customer's identity;
(C) When the bank should close an account, after attempts to
verify a customer's identity have failed; and
(D) When the bank should file a Suspicious Activity Report in
accordance with applicable law and regulation.
(3) Recordkeeping. The CIP must include procedures for
making and maintaining a record of all information obtained under the
procedures implementing paragraph (b) of this section.
(i) Required records. At a minimum, the record must
include:
(A) All identifying information about a customer obtained under
paragraph (b)(2)(i) of this section;
(B) A description of any document that was relied on under
paragraph (b)(2)(ii)(A) of this section noting the type of document,
any identification number contained in the document, the place of
issuance and, if any, the date of issuance and expiration date;
(C) A description of the methods and the results of any measures
undertaken to verify the identity of the customer under paragraph
(b)(2)(ii)(B) or (C) of this section; and
(D) A description of the resolution of any substantive
discrepancy discovered when verifying the identifying information
obtained.
(ii) Retention of records. The bank must retain the
information in paragraph (b)(3)(i)(A) of this section for five years
after the date the account is closed or, in the case of credit card
accounts, five years after the account is closed or becomes dormant.
The bank must retain the information in paragraphs (b)(3)(i)(B), (C),
and (D) of this section for five years after the record is made.
(4) Comparison with government lists. The CIP must
include procedures for determining whether the customer appears on any
list of known or suspected terrorists or terrorist organizations issued
by any Federal government agency and designated as such by Treasury in
consultation with the Federal functional regulators. The procedures
must require the bank to make such a determination within a reasonable
period of time after the account is opened, or earlier, if required by
another Federal law or regulation or Federal directive issued in
connection with the applicable list. The procedures must also require
the bank to follow all Federal directives issued in connection with
such lists.
{{12-31-07 p.8516.08-A}}
(5)(i) Customer notice. The CIP must include
procedures for providing bank customers with adequate notice that the
bank is requesting information to verify their identities.
(ii) Adequate notice. Notice is adequate if the bank
generally describes the identification requirements of this section and
provides the notice in a manner reasonably designed to ensure that a
customer is able to view the notice, or is otherwise given notice,
before opening an account. For example, depending upon the manner in
which the account is opened, a bank may post a notice in the lobby or
on its website, include the notice on its account applications, or use
any other form of written or oral notice.
(iii) Sample notice. If appropriate, a bank may use
the following sample language to provide notice to its customers:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW
ACCOUNT
To help the government fight the funding of terrorism and
money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies
each person who opens an account.
What this means for you: When you open an account, we will
ask for your name, address, date of birth, and other information that
will allow us to identify you. We may also ask to see your driver's
license or other identifying documents.
(6) Reliance on another financial institution. The CIP
may include procedures specifying when a bank will rely on the
performance by another financial institution (including an affiliate)
of any procedures of the bank's CIP, with respect to any customer of
the bank that is opening, or has opened, an account or has established
a similar formal banking or business relationship with the other
financial institution to provide or engage in services, dealings, or
other financial transactions, provided that:
(i) Such reliance is reasonable under the circumstances;
(ii) The other financial institution is subject to a rule
implementing 31 U.S.C. 5318(h) and is regulated by a Federal functional
regulator; and
(iii) The other financial institution enters into a contract
requiring it to certify annually to the bank that it has implemented
its anti-money laundering program, and that it will perform (or its
agent will perform) the specified requirements of the bank's CIP.
(c) Exemptions. The appropriate Federal functional
regulator, with the concurrence of the Secretary, may, by order or
regulation, exempt any bank or type of account from the requirements of
this section. The Federal functional regulator and the Secretary shall
consider whether the exemption is consistent with the purposes of the
Bank Secrecy Act and with safe and sound banking, and may consider
other appropriate factors. The Secretary will make these determinations
for any bank or type of account that is not subject to the authority of
a Federal functional regulator.
(d) Other requirements unaffected. Nothing in this
section relieves a bank of its obligation to comply with any other
provision in this part, including provisions concerning information
that must be obtained, verified, or maintained in connection with any
account or transaction.
[Codified to 31 C.F.R. § 103.121]
[Section 103.121 added at 68 Fed. Reg. 25109, May 9, 2003,
effective June 9, 2003, compliance date October 1,
2003]
§ 103.122 Customer identification programs for broker-dealers.
(a) Definitions. For the purposes of this section:
(1)(i) Account means a formal relationship with a
broker-dealer established to effect transactions in securities,
including, but not limited to, the purchase or sale of securities and
securities loaned and borrowed activity, and to hold securities or
other assets for safekeeping or as collateral.
(ii) Account does not include:
(A) An account that the broker-dealer acquires through any
acquisition, merger, purchase of assets, or assumption of liabilities;
or
(B) An account opened for the purpose of participating in an
employee benefit plan established under the Employee Retirement Income
Security Act of 1974.
(2) Broker-dealer means a person registered or
required to be registered as a broker or dealer with the Commission
under the Securities Exchange Act of 1934 (15 U.S.C. 77a
{{12-31-07 p.8516.08-B}}et
seq.), except persons who register pursuant to 15 U.S.C.
78o(b)(11).
(3) Commission means the United States Securities and
Exchange Commission.
(4)(i) Customer means: (A) A person that opens a new
account; and (B) an individual who opens a new account for:
(1) An individual who lacks legal capacity; or
(2) an entity that is not a legal person.
(ii) Customer does not include: (A) A financial
institution regulated by a Federal functional regulator or a bank
regulated by a state bank regulator; (B) a person described in
§ 103.22(d)(2)(ii) through (iv); or (C) a person that has an existing
account with the broker-dealer, provided the broker-dealer has a
reasonable belief that it knows the true identity of the person.
(5) Federal functional regulator is defined at
§ 103.120(a)(2).
(6) Financial institution is defined at 31 U.S.C.
5312(a)(2) and (c)(1).
(7) Taxpayer identification number is defined by
section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109) and
the Internal Revenue Service regulations implementing that section
(e.g., social security number or employer identification
number).
(8) U.S. person means: (i) A United States citizen; or
(ii) a person other than an individual (such as a corporation,
partnership or trust) that is established or organized under the laws
of a State or the United States.
(9) Non-U.S. person means a person that is not a
U.S. person.
(b) Customer identification program: minimum
requirements.
(1) In general. A broker-dealer must establish,
document, and maintain a written Customer Identification Program
("CIP") appropriate for its size and business that, at a minimum,
includes each of the requirements of paragraphs (b)(1) through (b)(5)
of this section. The CIP must be a part of the broker-dealer's
anti-money laundering compliance program required under 31 U.S.C.
5318(h).
(2) Identity verification procedures. The CIP must
include risk-based procedures for verifying the identity of each
customer to the extent reasonable and practicable. The procedures must
enable the broker-dealer to form a reasonable belief that it knows the
true identity of each customer. The procedures must be based on the
broker-dealer's assessment of the relevant risks including those
presented by the various types of accounts maintained by the
broker-dealer, the various methods of opening accounts provided by the
broker-dealer, the various types of identifying information available
and the broker-dealer's size, location and customer base. At a
minimum, these procedures must contain the elements described in this
paragraph (b)(2).
(i)(A) Customer information required. The CIP must
contain procedures for opening an account that specify identifying
information that will be obtained from each customer. Except as
permitted by paragraph (b)(2)(i)(B) of this section, the broker-dealer
must obtain, at a minimum, the following information prior to opening
an account:
(1) Name;
(2) Date of birth, for an individual;
(3) Address, which shall be: (i) For an
individual, a residential or business street address; (ii)
for an individual who does not have a residential or business street
address, an Army Post Office (APO) or Fleet Post Office (FPO) box
number, or the residential or business street address of a next of kin
or another contact individual; or (iii) for a person other
than an individual (such as a corporation, partnership or trust), a
principal place of business, local office or other physical location;
and
(4) Identification number, which shall be: (i) For a
U.S. person, a taxpayer identification number; or (ii) for a
non-U.S. person, one or more of the following: a taxpayer
identification number, a passport number and country of issuance, an
alien identification card number, or the number and country of issuance
of any other government-issued document evidencing nationality or
residence and bearing a photograph or similar safeguard.
Note to paragraph (b)(2)(i)(A)(4)(ii): When
opening an account for a foreign business or enterprise that does not
have an identification number, the broker-dealer must request
alternative government-issued documentation certifying the existence of
the business or enterprise.
(B) Exception for persons applying for a taxpayer
identification number. Instead of obtaining a taxpayer
identification number from a customer prior to opening an account, the
CIP may include procedures for opening an account for a customer that
has applied for,
{{6-30-03 p.8516.08-C}}but has not
received, a taxpayer identification number. In this case, the CIP must
include procedures to confirm that the application was filed before the
customer opens the account and to obtain the taxpayer identification
number within a reasonable period of time after the account is opened.
(ii) Customer verification. The CIP must contain
procedures for verifying the identity of each customer, using
information obtained in accordance with paragraph (b)(2)(i) of this
section, within a reasonable time before or after the customer's
account is opened. The procedures must describe when the broker-dealer
will use documents, non-documentary methods, or a combination of both
methods, as described in this paragraph (b)(2)(ii).
(A) Verification through documents. For a
broker-dealer relying on documents, the CIP must contain procedures
that set forth the documents the broker-dealer will use. These
documents may include:
(1) For an individual, an unexpired government-issued
identification evidencing nationality or residence and bearing a
photograph or similar safeguard, such as a driver's license or
passport; and
(2) For a person other than an individual (such as a
corporation, partnership or trust), documents showing the existence of
the entity, such as certified articles of incorporation, a
government-issued business license, a partnership agreement, or a trust
instrument.
(B) Verification through non-documentary methods. For
a broker-dealer relying on non-documentary methods, the CIP must
contain procedures that set forth the non-documentary methods the
broker-dealer will use.
(1) These methods may include contacting a customer;
independently verifying the customer's identity through the comparison
of information provided by the customer with information obtained from
a consumer reporting agency, public database, or other source; checking
references with other financial institutions; or obtaining a financial
statement.
(2) The broker-dealer's non-documentary procedures
must address situations where an individual is unable to present an
unexpired government-issued identification document that bears a
photograph or similar safeguard; the broker-dealer is not familiar with
the documents presented; the account is opened without obtaining
documents; the customer opens the account without appearing in person
at the broker-dealer; and where the broker-dealer is otherwise
presented with circumstances that increase the risk that the
broker-dealer will be unable to verify the true identity of the
customer through documents.
(C) Additional verification for certain customers. The
CIP must address situations where, based on the broker-dealer's risk
assessment of a new account opened by a customer that is not an
individual, the broker-dealer will obtain information about individuals
with authority or control over such account. This verification method
applies only when the broker-dealer cannot verify the customer's true
identity using the verification methods described in paragraphs
(b)(2)(ii)(A) and (B) of this section.
(iii) Lack of verification. The CIP must include
procedures for responding to circumstances in which the broker-dealer
cannot form a reasonable belief that it knows the true identity of a
customer. These procedures should describe:
(A) When the broker-dealer should not open an account;
(B) The terms under which a customer may conduct transactions
while the broker-dealer attempts to verify the customer's identity;
(C) When the broker-dealer should close an account after attempts
to verify a customer's identity fail; and
(D) When the broker-dealer should file a Suspicious Activity
Report in accordance with applicable law and regulation.
(3) Recordkeeping. The CIP must include procedures for
making and maintaining a record of all information obtained under
procedures implementing paragraph (b) of this section.
(i) Required records. At a minimum, the record must
include;
(A) All identifying information about a customer obtained under
paragraph (b)(2)(i) of this section,
(B) A description of any document that was relied on under
paragraph (b)(2)(ii)(A) of this section noting the type of document,
any identification number
{{6-30-03 p.8516.08-D}}contained in
the document, the place of issuance, and if any, the date of issuance
and expiration date;
(C) A description of the methods and the results of any measures
undertaken to verify the identity of a customer under paragraphs
(b)(2)(ii)(B) and (C) of this section; and
(D) A description of the resolution of each substantive
discrepancy discovered when verifying the identifying information
obtained.
(ii) Retention of records. The broker-dealer must
retain the records made under paragraph (b)(3)(i)(A) of this section
for five years after the account is closed and the records made under
paragraphs (b)(3)(i)(B), (C) and (D) of this section for five years
after the record is made. In all other respects, the records must be
maintained pursuant to the provisions of 17 CFR 240.17a--4.
(4) Comparison with government lists. The CIP must
include procedures for determining whether a customer appears on any
list of known or suspected terrorists or terrorist organizations issued
by an Federal government agency and designated as such by Treasury in
consultation with the Federal functional regulators. The procedures
must require the broker-dealer to make such a determination within a
reasonable period of time after the account is opened, or earlier if
required by another Federal law or regulation or Federal directive
issued in connection with the applicable list. The procedures also must
require the broker-dealer to follow all Federal directives issued in
connection with such lists.
(5)(i) Customer notice. The CIP must include
procedures for providing customers with adequate notice that the
broker-dealer is requesting information to verify their identities.
(ii) Adequate notice. Notice is adequate if the
broker-dealer generally describes the identification requirements of
this section and provides such notice in a manner reasonably designed
to ensure that a customer is able to view the notice, or is otherwise
given notice, before opening an account. For example, depending upon
the manner in which the account is opened, a broker-dealer may post a
notice in the lobby or on its Web site, include the notice on its
account applications or use any other form of oral or written notice.
(iii) Sample notice. If appropriate, a broker-dealer
may use the following sample language to provide notice to its
customers:
Important Information About Procedures for Opening a New Account
To help the government fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions
to obtain, verify, and record information that identifies each person
who opens an account.
What this means for you: When you open an account, we will ask for
your name, address, date of birth and other information that will allow
us to identify you. We may also ask to see your driver's license or
other identifying documents.
(6) Reliance on another financial institution. The CIP
may include procedures specifying when the broker-dealer will rely on
the performance by another financial institution (including an
affiliate) of any procedures of the broker-dealer's CIP, with respect
to any customer of the broker-dealer that is opening an account or has
established an account or similar business relationship with the other
financial institution to provide or engage in services, dealings, or
other financial transactions, provided that:
(i) Such reliance is reasonable under the circumstances;
(ii) The other financial institution is subject to a rule
implementing 31 U.S.C. 5318(h), and regulated by a Federal functional
regulator; and
(iii) The other financial institution enters into a contract
requiring it to certify annually to the broker-dealer that it has
implemented its anti-money laundering program, and that it will perform
(or its agent will perform) specified requirements of the
broker-dealer's CIP.
(c) Exemptions. The Commission, with the concurrence of
the Secretary, may by order or regulation exempt any broker-dealer that
registers with the Commission pursuant to 15 U.S.C. 78o or 15 U.S.C.
78o--4 or any type of account from the requirements of this section.
The Secretary, with the concurrence of the Commission, may exempt any
broker-dealer that registers with the Commission pursuant to 15 U.S.C.
78o--5. In issuing such exemptions, the Commission and the Secretary
shall consider whether the exemption is consistent with the purposes of
the Bank Secrecy Act, and in the public interest, and may consider
other necessary and appropriate factors.
{{12-31-07 p.8516.08-E}}
(d) Other requirements unaffected. Nothing in this
section relieves a broker-dealer of its obligation to comply with any
other provision of this part, including provisions concerning
information that must be obtained, verified, or maintained in
connection with any account or transaction.
[Codified to 31 C.F.R. § 103.122]
[Section 103.122 added at 68 Fed. Reg. 25129, May 9, 2003,
effective June 9, 2003, Brokers or Dealers subject to this final
regulation must comply by October 1, 2003]
§ 103.123 Customer identification programs for futures
commission merchants and introducing brokers.
(a) Definitions. For the purposes of this section:
(1)(i) Account means a formal relationship with a
futures commission merchant, including, but not limited to, those
established to effect transactions in contracts of sale of a commodity
for future delivery, options on any contract of sale of a commodity for
future delivery, or options on a commodity.
(ii) Account does not include:
(A) An account that the futures commission merchant acquires
through any acquisition, merger, purchase of assets, or assumption of
liabilities; or
(B) An account opened for the purpose of participating in an
employee benefit plan established under the Employee Retirement Income
Security Act of 1974.
(2) Commission means the United States Commodity
Futures Trading Commission.
(3) Commodity means any good, article, service, right,
or interest described in Section 1a(4) of the Commodity Exchange Act (7
U.S.C. 1a(4)).
(4) Contract of sale means any sale, agreement of sale
or agreement to sell as described in Section 1a(7) of the Commodity
Exchange Act (7 U.S.C. 1a(7)).
(5)(i) Customer means:
(A) A person that opens a new account with a futures commission
merchant; and
(B) An individual who opens a new account with a futures
commission merchant for:
(1) An individual who lacks legal capacity; or
(2) An entity that is not a legal person.
(ii) Customer does not include:
(A) A financial institution regulated by a Federal functional
regulator or a bank regulated by a state bank regulator;
(B) A person described in § 103.22(d)(2)(ii) through (iv); or
(C) A person that has an existing account, provided the futures
commission merchant or introducing broker has a reasonable belief that
it knows the true identity of the person.
(iii) When an account is introduced to a futures commission
merchant by an introducing broker, the person or individual opening the
account shall be deemed to be a customer of both the futures
commission merchant and the introducing broker for the purposes of this
section.
(6) Federal functional regulator is defined at
§ 103.120(a)(2).
(7) Financial institution is defined at 31 U.S.C.
5312(a)(2) and (c)(1).
(8) Futures commission merchant means any person
registered or required to be registered as a futures commission
merchant with the Commission under the Commodity Exchange Act (7 U.S.C.
1 et. seq.), except persons who register pursuant to Section
4f(a)(2) of the Commodity Exchange Act (7 U.S.C. 6f(a)(2)).
(9) Introducing broker means any person registered or
required to be registered as an introducing broker with the Commission
under the Commodity Exchange Act (7 U.S.C. 1 et seq.) except
persons who register pursuant to Section 4f(a)(2) of the Commodity
Exchange Act (7 U.S.C. 6f(a)(2)).
(10) Option means an agreement, contract or
transaction described in Section 1a(26) of the Commodity Exchange Act
(7 U.S.C. 1a(26)).
(11) Taxpayer identification number is defined by
section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109) and
the Internal Revenue Service regulations implementing that section
(e.g., social security number or employer identification
number).
(12) U.S. person means:
{{12-31-07 p.8516.08-F}}
(i) A United States citizen; or
(ii) A person other than an individual (such as a corporation,
partnership or trust) that is established or organized under the laws
of a State or the United States.
(13) Non-U.S. person means a person that is not a U.S.
person.
(b) Customer identification program: minimum
requirements--(1) In general. Each futures commission
merchant and introducing broker must implement a written Customer
Identification Program (CIP) appropriate for its size and business
that, at a minimum, includes each of the requirements of paragraphs
(b)(1) through (b)(5) of this section. The CIP must be a part of each
futures commission merchant's and introducing broker's anti-money
laundering compliance program required under 31 U.S.C. 5318(h).
(2) Identity verification procedures. The CIP must
include risk-based procedures for verifying the identity of each
customer to the extent reasonable and practicable. The procedures must
enable each futures commission merchant and introducing broker to form
a reasonable belief that it knows the true identity of each customer.
The procedures must be based on the futures commission merchant's or
introducing broker's assessment of the relevant risks, including those
presented by the various types of accounts maintained, the various
methods of opening accounts, the various types of identifying
information available, and the futures commission merchant's or
introducing broker's size, location and customer base. At a minimum,
these procedures must contain the elements described in paragraph
(b)(2) of this section.
(i)(A) Customer information required. The CIP must
include procedures for opening an account that specify identifying
information that will be obtained from each customer. Except as
permitted by paragraph (b)(2)(i)(B) of this section, each futures
commission merchant and introducing broker must obtain, at a minimum,
the following information prior to opening an account:
(1) Name;
(2) Date of birth, for an individual;
(3) Address, which shall be:
(i) For an individual, a residential or business
street address;
(ii) For an individual who does not have a residential
or business street address, an Army Post Office (APO) or Fleet Post
Office (FPO) box number, or the residential or business street address
of a next of kin or another contact individual; or
(iii) For a person other than an individual (such as a
corporation, partnership or trust), a principal place of business,
local office or other physical location; and
(4) Identification number, which shall be:
(i) For a U.S. person, a taxpayer identification
number; or
(ii) For a non-U.S. person, one or more of the
following: a taxpayer identification number, a passport number and
country of issuance, an alien identification card number, or the number
and country of issuance of any other government-issued document
evidencing nationality or residence and bearing a photograph or similar
safeguard.
Note to paragraph (b)(2)(i)(A)(4)(ii): When
opening an account for a foreign business or enterprise that does not
have an identification number, the futures commission merchant or
introducing broker must request alternative government-issued
documentation certifying the existence of the business or enterprise.
(B) Exception for persons applying for a taxpayer
identification number. Instead of obtaining a taxpayer
identification number from a customer prior to opening an account, the
CIP may include procedures for opening an account for a customer that
has applied for, but has not received, a taxpayer identification
number. In this case, the CIP must include procedures to confirm that
the application was filed before the customer opens the account and to
obtain the taxpayer identification number within a reasonable period of
time after the account is opened.
(ii) Customer verification. The CIP must obtain
procedures for verifying the identity of each customer, using
information obtained in accordance with paragraph (b)(2)(i) of this
section, within a reasonable time before or after the customer's
account is opened. The procedures must describe when the futures
commission merchant or introducing broker will use documents,
non-documentary methods, or a combination of both methods, as described
in this paragraph (b)(2)(ii).
(A) Verification through documents. For a futures
commission merchant or introducing broker relying on documents, the CIP
must contain procedures that set forth the
{{6-30-03 p.8516.08-G}}documents the futures
commission merchant or introducing broker will use. These documents may
include:
(1) For an individual, an unexpired government-issued
identification evidencing nationality or residence and bearing a
photograph or similar safeguard, such as a driver's license or
passport; and
(2) For a person other than an individual (such as a
corporation, partnership or trust), documents showing the existence of
the entity, such as certified articles of incorporation, a
government-issued business license, a partnership agreement, or a trust
instrument.
(B) Verification through non-documentary methods. For
a futures commission merchant or introducing broker relying on
non-documentary methods, the CIP must contain procedures that set forth
the non-documentary methods the futures commission merchant or
introducing broker will use.
(1) These methods may include contacting a customer;
independently verifying the customer's identity through the comparison
of information provided by the customer with information obtained from
a consumer reporting agency, public database, or other source; checking
references with other financial institutions; or obtaining a financial
statement.
(2) The futures commission merchant's or introducing broker's
non-documentary procedures must address situations where an individual
is unable to present an unexpired government-issued identification
document that bears a photograph or similar safeguard; the futures
commission merchant or introducing broker is not familiar with the
documents presented; the account is opened without obtaining documents;
the customer opens the account without appearing in person at the
futures commission merchant or introducing broker; and where the
futures commission merchant or introducing broker is otherwise
presented with circumstances that increase the risk that the futures
commission merchant or introducing broker will be unable to verify the
true identity of a customer through documents.
(C) Additional verification for certain customers. The
CIP must address situations where, based on the futures commission
merchant's or introducing broker's risk assessment of a new account
opened by a customer that is not an individual, the futures commission
merchant or introducing broker will obtain information about
individuals with authority or control over such account in order to
verify the customer's identity. This verification method applies only
when the futures commission merchant or introducing broker cannot
verify the customer's true identity after using the verification
methods described in paragraphs (b)(2)(ii)(A) and (B) of this section.
(iii) Lack of verification. The CIP must include
procedures for responding to circumstances in which the futures
commission merchant or introducing broker cannot form a reasonable
belief that it knows the true identity of a customer. These procedures
should describe:
(A) When an account should not be opened;
(B) The terms under which a customer may conduct transactions
while the futures commission merchant or introducing broker attempts to
verify the customer's identity;
(C) When an account should be closed after attempts to verify a
customer's identity have failed; and
(D) When the futures commission merchant or introducing broker
should file a Suspicious Activity Report in accordance with applicable
law and regulation.
(3) Recordkeeping. The CIP must include procedures for
making and maintaining a record of all information obtained under
procedures implementing paragraph (b) of this section.
(i) Required records. At a minimum, the record must
include:
(A) All identifying information about a customer obtained under
paragraph (b)(2)(i) of this section;
(B) A description of any document that was relied on under
paragraph (b)(2)(ii)(A) of this section noting the type of document,
any identification number contained in the document, the place of
issuance, and if any, the date of issuance and expiration
date;
{{6-30-03 p.8516.08-H}}
(C) A description of the methods and the results of any measures
undertaken to verify the identity of a customer under paragraphs
(b)(2)(ii)(B) and (C) of this section; and
(D) A description of the resolution of each substantive
discrepancy discovered when verifying the information obtained.
(ii) Retention of records. Each futures commission
merchant and introducing broker must retain the records made under
paragraph (b)(3)(i)(A) of this section for five years after the account
is closed and the records made under paragraphs (b)(3)(i)(B), (C), and
(D) of this section for five years after the record is made. In all
other respects, the records must be maintained pursuant to the
provisions of 17 CFR 1.31.
(4) Comparison with government lists. The CIP must
include procedures for determining whether a customer appears on any
list of known or suspected terrorists or terrorist organizations issued
by any Federal government agency and designated as such by Treasury in
consultation with the Federal functional regulators. The procedures
must require the futures commission merchant or introducing broker to
make such a determination within a reasonable period of time after the
account is opened, or earlier if required by another Federal law or
regulation or Federal directive issued in connection with the
applicable list. The procedures also must require the futures
commission merchant or introducing broker to follow all Federal
directives issued in connection with such lists.
(5)(i) Customer notice. The CIP must include
procedures for providing customers with adequate notice that the
futures commission merchant or introducing broker is requesting
information to verify their identities.
(ii) Adequate notice. Notice is adequate if the
futures commission merchant or introducing broker generally describes
the identification requirements of this section and provides such
notice in a manner reasonably designed to ensure that a customer is
able to view the notice, or is otherwise given notice, before opening
an account. For example, depending upon the manner in which the account
is opened, a futures commission merchant or introducing broker may post
a notice in the lobby or on its Web site, include the notice on its
account applications or use any other form of written or oral notice.
(iii) Sample notice. If appropriate, a futures
commission merchant or introducing broker may use the following sample
language to provide notice to its customers:
Important Information About Procedures For Opening a New
Account
To help the government fight the funding of terrorism and
money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies
each person who opens an account.
What this means for you: When you open an account, we will
ask for your name, address, date of birth and other information that
will allow us to identify you. We may also ask to see your driver's
license or other identifying documents.
(6) Reliance on another financial institution.
The CIP may include procedures specifying when the futures
commission merchant or introducing broker will rely on the performance
by another financial institution (including an affiliate) of any
procedures of its CIP, with respect to any customer of the futures
commission merchant or introducing broker that is opening an account,
or has established an account or similar business relationship with the
other financial institution to provide or engage in services, dealings,
or other financial transactions, provided that:
(i) Such reliance is reasonable under the circumstances;
(ii) The other financial institution is subject to a rule
implementing 31 U.S.C. 5318(h), and is regulated by a Federal
functional regulator; and
(iii) The other financial institution enters into a contract
requiring it to certify annually to the futures commission merchant or
introducing broker that it has implemented its antimoney laundering
program, and that it will perform (or its agent will perform) specified
requirements of the futures commission merchant's or introducing
broker's CIP.
(c) Exemptions. The Commission, with the concurrence of
the Secretary, may by order or regulation exempt any futures commission
merchant or introducing broker that registers with the Commission or
any type of account from the requirements of this section. In issuing
such exemptions, the Commission and the Secretary shall consider
whether the exemption is consistent with the purposes of the Bank
Secrecy Act, and in the public interest, and may consider other
necessary and appropriate factors.
{{6-30-06 p.8516.08-I}}
(d) Other requirements unaffected. Nothing in this
section relieves a futures commission merchant or introducing broker of
its obligation to comply with any other provision of this part,
including provisions concerning information that must be obtained,
verified, or maintained in connection with any account or transaction.
[Codified to 31 C.F.R. 103.123
[Section 103.123 added at 68 Fed. Reg. 12560, May 9, 2003,
effective June 9, 2003, futures commissions merchants and introducing
brokers subject to this final rule must comply by October 1,
2003]
§ 103.125 Anti-money laundering programs for money services
businesses.
(a) Each money services business, as defined by
§ 103.11(uu), shall
develop, implement, and maintain an effective anti-money laundering
program. An effective anti-money laundering program is one that is
reasonably designed to prevent the money services business from being
used to facilitate money laundering and the financing of terrorist
activities.
(b) The program shall be commensurate with the risks posed by the
location and size of, and the nature and volume of the financial
services provided by, the money services business.
(c) The program shall be in writing, and a money services business
shall make copies of the anti-money laundering program available for
inspection to the Department of the Treasury upon request.
(d) At a minimum, the program shall:
(1) Incorporate policies, procedures, and internal controls
reasonably designed to assure compliance with this part.
(i) Policies, procedures, and internal controls developed and
implemented under this section shall include provisions for complying
with the requirements of this part including, to the extent applicable
to the money services business, requirements for:
(A) Verifying customer identification;
(B) Filing reports;
(C) Creating and retaining records; and
(D) Responding to law enforcement requests.
(ii) Money services businesses that have automated data
processing systems should integrate their compliance procedures with
such systems.
(iii) A person that is a money services business solely because
it is an agent for another money services business as set forth in
§ 103.41(a)(2), and the
money services business for which it serves as agent, may by agreement
allocate between them responsibility for development of policies,
procedures, and internal controls required by this paragraph (d)(1).
Each money services business shall remain solely responsible for
implementation of the requirements set forth in this section, and
nothing in this paragraph (d)(1) relieves any money services business
from its obligation to establish and maintain an effective anti-money
laundering program.
(2) Designate a person to assure day to day compliance with the
program and this part. The responsibilities of such person shall
include assuring that:
(i) The money services business properly files reports, and
creates and retains records, in accordance with applicable requirements
of this part;
(ii) The compliance program is updated as necessary to reflect
current requirements of this part, and related guidance issued by the
Department of the Treasury; and
(iii) the money services business provides appropriate training
and education in accordance with paragraph (d)(3) of this section.
(3) Provide education and/or training of appropriate personnel
concerning their responsibilities under the program, including training
in the detection of suspicious transactions to the extent that the
money services business is required to report such transactions under
this part.
(4) Provide for independent review to monitor and maintain an
adequate program. The scope and frequency of the review shall be
commensurate with the risk of the financial services provided by the
money services business. Such review may be conducted by an officer or
employee of the money services business so long as the reviewer is not
the person designated in paragraph (d)(2) of this section.
{{6-30-06 p.8516.08-J}}
(e) Effective date. A money services business must
develop and implement an anti-money laundering program that complies
with the requirements of this section on or before the later of July
24, 2002, and the end of the 90-day period beginning on the day
following the date the business is established.
[Codified to 31 C.F.R. § 103.125]
[Section 103.125 added at 67 Fed. Reg. 21116, April 29, 2002,
effective April 24, 2002]
§ 103.130 Anti-money laundering programs for mutual funds.
(a) For purposes of this section, "mutual fund" means an
open-end company as defined in section 5(a)(1) of the Investment
Company act of 1940 (15 U.S.C.
80a--5(a)(1)).
(b) Effective July 24, 2002, each mutual fund shall develop and
implement a written anti-money laundering program reasonably designed
to prevent the mutual fund from being used for money laundering or the
financing of terrorist activities and to achieve and monitor compliance
with the applicable requirements of the Bank Secrecy Act
(31 U.S.C. 5311, et seq.),
and the implementing regulations promulgated thereunder by the
Department of the Treasury. Each mutual fund's anti-money laundering
program must be approved in writing by its board of directors or
trustees. A mutual fund shall make its anti-money laundering program
available for inspection by the Commission.
(c) The anti-money laundering program shall at a minimum:
(1) Establish and implement policies, procedures, and internal
controls reasonably designed to prevent the mutual fund from being used
for money laundering or the financing of terrorist activities and to
achieve compliance with the applicable provisions of the Bank Secrecy
Act and the implementing regulations thereunder;
(2) Provide for independent testing for compliance to be
conducted by the mutual fund's personnel or by a qualified outside
party;
(3) Designate a person or persons responsible for implementing
and monitoring the operations and internal controls of the program; and
(4) Provide ongoing training for appropriate persons.
[Codified to 31 C.F.R. § 103.130]
[Section 103.130 added at 67 Fed. Reg. 21121, April 29,
2002, effective April 24, 2002]
§ 103.131 Customer identification programs for mutual funds.
(a) Definitions. For purposes of this section:
(1)(i) Account means any contractual or other business
relationship between a person and a mutual fund established to effect
transactions in securities issued by the mutual fund, including the
purchase or sale of securities.
(ii) Account does not include:
(A) An account that a mutual fund acquires through any
acquisition, merger, purchase of assets, or assumption of liabilities;
or
(B) An account opened for the purpose of participating in an
employee benefit plan established under the Employee Retirement Income
Security Act of 1974.
(2)(i) Customer means:
(4) A person that opens a new account; and
(B) An individual who opens a new account for:
(1) An individual who lacks legal capacity, such as a
minor; or
(2) An entity that is not a legal person, such as a
civic club.
(ii) Customer does not include:
(A) A financial institution regulated by a federal functional
regulator or a bank regulated by a state bank regulator;
(B) A person described in § 103.22(d)(2)(ii) through (iv); or
(C) A person that has an existing account with the mutual fund,
provided that the mutual fund has a reasonable belief that it knows the
true identity of the person.
(3) Federal functional regulator is defined at
§ 103.120(a)(2).
(4) Financial institution is defined at 31 U.S.C.
5312(a)(2) and (c)(1).
(5) Mutual fund means an "investment company"
(as the term is defined in section 3 of the Investment Company Act (15
U.S.C. 80a--3)) that is an "open-end company" (as that term is
defined in section 5 of the Investment Company Act (15 U.S.C. 80a--5))
that is
{{6-30-03 p.8516.08-K}}registered or
is required to register with the Commission under section 8 of the
Investment Company Act (15 U.S.C. 80a--8).
(6) Non-U.S. person means a person that is not a
U.S. person.
(7) Taxpayer identification number is defined by
section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109) and
Internal Revenue Service regulations implementing that section (e.g.,
social security number or employer identification number).
(8) U.S. person means:
(i) A United States citizen; or
(ii) A person other than an individual (such as a corporation,
partnership or trust), that is established or organized under the laws
of a State or the United States.
(b) Customer identification program: minimum
requirements.
(1) In general. A mutual fund must implement a written
Customer Identification Program ("CIP") appropriate for its size
and type of business that, at a minimum, includes each of the
requirements of paragraphs (b)(1) through (5) of this section. The CIP
must be a part of the mutual fund's anti-money laundering program
required under the regulations implementing 31 U.S.C. 5318(h).
(2) Identity verification procedures. The CIP must
include risk-based procedures for verifying the identity of each
customer to the extent reasonable and practicable. The procedures must
enable the mutual fund to form a reasonable belief that it knows the
true identity of each customer. The procedures must be based on the
mutual fund's assessment of the relevant risks, including those
presented by the manner in which accounts are opened, fund shares are
distributed, and purchases, sales and exchanges are effected, the
various types of accounts maintained by the mutual fund, the various
types of identifying information available, and the mutual fund's
customer base. At a minimum, these procedures must contain the elements
described in this paragraph (b)(2).
(i) Customer information required. (A) In
general. The CIP must contain procedures for opening an account
that specify the identifying information that will be obtained with
respect to each customer. Except as permitted by paragraph (b)(2)(i)(B)
of this section, a mutual fund must obtain, at a minimum, the following
information prior to opening an account:
(1) Name;
(2) Date of birth, for an individual;
(3) Address, which shall be:
(i) For an individual, a residential or business
street address;
(ii) For an individual who does not have a residential
or business street address, an Army Post Office (APO) or Fleet Post
Office (FPO) box number, or the residential or business street address
of next of kin or of another contact individual; or
(iii) For a person other than an individual (such as a
corporation, partnership, or trust), a principal place of business,
local office or other physical location; and
(4) Identification number, which shall be:
(i) For a U.S. person, a taxpayer identification
number; or
(ii) For a non-U.S. person, one or more of the
following: a taxpayer identification number; passport number and
country of issuance; alien identification card number; or number and
country of issuance of any other government-issued document evidencing
nationality or residence and bearing a photograph or similar safeguard.
Note to paragraph
(b)(2)(i)(A)(4)(ii): When opening an
account for a foreign business or enterprise that does not have an
identification number, the mutual fund must request alternative
government-issued documentation certifying the existence of the
business or enterprise.
(B) Exception for persons applying for a taxpayer
identification number. Instead of obtaining a taxpayer
identification number from a customer prior to opening an account, the
CIP may include procedures for opening an account for a person that has
applied for, but has not received, a taxpayer identification number. In
this case, the CIP must include procedures to confirm that the
application was filed before the person opens the account and to obtain
the taxpayer identification number within a reasonable period of time
after the account is opened.
(ii) Customer verification. The CIP must contain
procedures for verifying the identity of the customer, using the
information obtained in accordance with paragraph (b)(2)(i) of this
section, within a reasonable time after the account is opened.
The
{{6-30-03 p.8516.08-L}}procedures must
describe when the mutual fund will use documents, non-documentary
methods, or a combination of both methods as described in this
paragraph (b)(2)(ii).
(A) Verification through documents. For a mutual fund
relying on documents, the CIP must contain procedures that set forth
the documents that the mutual fund will use. These documents may
include:
(1) For an individual, unexpired government-issued
identification evidencing nationality or residence and bearing a
photograph or similar safeguard, such as a driver's license or
passport; and
(2) For a person other than an individual (such as a
corporation, partnership, or trust), documents showing the existence of
the entity, such as certified articles of incorporation, a
government-issued business license, a partnership agreement, or trust
instrument.
(B) Verification through non-documentary methods. For
a mutual fund relying on non-documentary methods, the CIP must contain
procedures that describe the non-documentary methods the mutual fund
will use.
(1) These methods may include contacting a customer;
independently verifying the customer's identity through the comparison
of information provided by the customer with information obtained from
a consumer reporting agency, public database, or other source; checking
references with other financial institutions; and obtaining a financial
statement.
(2) The mutual fund's non-documentary procedures must
address situations where an individual is unable to present an
unexpired government-issued identification document that bears a
photograph or similar safeguard; the mutual fund is not familiar with
the documents presented; the account is opened without obtaining
documents; the customer opens the account without appearing in person;
and where the mutual fund is otherwise presented with circumstances
that increase the risk that the mutual fund will be unable to verify
the true identity of a customer through documents.
(C) Additional verification for certain customers. The
CIP must address situations where, based on the mutual fund's risk
assessment of a new account opened by a customer that is not an
individual, the mutual fund will obtain information about individuals
with authority of control over such account, including persons
authorized to effect transactions in the shareholder of record's
account, in order to verify the customer's identity. This verification
method applies only when the mutual fund cannot verify the customer's
true identity using the verification methods described in paragraphs
(b)(2)(ii)(A) and (B) of this section.
(iii) Lack of verification. The CIP must include
procedures for responding to circumstances in which the mutual fund
cannot form a reasonable belief that it knows the true identity of a
customer. These procedures should describe:
(A) When the mutual fund should not open an account;
(B) The terms under which a customer may use an account while the
mutual fund attempts to verify the customer's identity;
(C) When the mutual fund should file a Suspicious Activity Report
in accordance with applicable law and regulation; and
(D) When the mutual fund should close an account, after attempts
to verify a customer's identity have failed.
(3) Recordkeeping. The CIP must include procedures for
making and maintaining a record of all information obtained under
paragraph (b) of this section.
(i) Required records. At a minimum, the record must
include:
(A) All identifying information about a customer obtained under
paragraph (b)(2)(i) of this section;
(B) A description of any document that was relied on under
paragraph (b)(2)(ii)(A) of this section noting the type of document,
any identification number contained in the document, the place of
issuance, and if any, the date of issuance and expiration date;
(C) A description of the methods and the results of any measures
undertaken to verify the identity of the customer under paragraph
(b)(2)(ii)(B) or (C) of this section; and
(D) A description of the resolution of any substantive
discrepancy discovered when verifying the identifying information
obtained.
{{6-30-03 p.8516.08-M}}
(ii) Retention of records. The mutual fund must retain
the information in paragraph (b)(3)(i)(A) of this section for five
years after the date the account is closed. The mutual fund must retain
the information in paragraphs (b)(3)(i)(B), (C), and (D) of this
section for five years after the record is made.
(4) Comparison with government lists. The CIP must
include procedures for determining whether the customer appears on any
list of known or suspected terrorist or terrorist organizations issued
by any federal government agency and designated as such by the
Department of the Treasury in consultation with the federal functional
regulators. The procedures must require the mutual fund to make such a
determination within a reasonable period of time after the account is
open or earlier, if required by another federal law or regulation or
federal directive issued in connection with the applicable list. The
procedures must also require the mutual fund to follow all federal
directives issued in connection with such lists.
(5)(i) Customer notice. The CIP must include
procedures for providing mutual fund customers with adequate notice
that the mutual fund is requesting information to verify their
identities.
(ii) Adequate notice. Notice is adequate if the mutual
fund generally describes the identification requirements of this
section and provides the notice in a manner reasonably designed to
ensure that a customer is able to view the notice, or is otherwise
given notice, before opening an account. For example, depending on the
manner in which the account is opened, a mutual fund may post a notice
on its website, include the notice on its account applications, or use
any other form of written or oral notice.
(iii) Sample notice. If appropriate, a mutual fund may
use the following sample language to provide notice to its customers:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW
ACCOUNT
To help the government fight the funding of terrorism and
money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies
each person who opens an account.
What this means for you: When you open an account, we will
ask for your name, address, date of birth, and other information that
will allow us to identify you. We may also ask to see your driver's
license or other identifying documents.
(6) Reliance on other financial institutions.
The CIP may include procedures specifying when a mutual fund will
rely on the performance by another financial institution (including an
affiliate) of any procedures of the mutual fund's CIP, with respect to
any customer of the mutual fund that is opening, or has opened, an
account or has established a similar formal business relationship with
the other financial institution to provide or engage in services,
dealings, or other financial transactions, provided that:
(i) Such reliance is reasonable under the circumstances;
(ii) The other financial institution is subject to a rule
implementing 31 U.S.C. 5318(h) and is regulated by a federal functional
regulator; and
(iii) The other financial institution enters into a contract
requiring it to certify annually to the mutual fund that it has
implemented its anti-money laundering program, and that it (or its
agent) will perform the specific requirements of the mutual fund's
CIP.
(c) Exemptions. The Commission, with the concurrence of
the Secretary, may, by order or regulation, exempt any mutual fund or
type of account from the requirements of this section. The Commission
and the Secretary shall consider whether the exemption is consistent
with the purposes of the Bank Secrecy Act and is in the public
interest, and may consider other appropriate factors.
(d) Other requirements unaffected. Nothing in this
section relieves a mutual fund of its obligation to comply with any
other provision in this part, including provisions concerning
information that must be obtained, verified, or maintained in
connection with any account or transaction.
[Codified to 31 C.F.R. § 103.131]
[Section 103.131 added at 68 Fed. Reg. 25147, May 9, 2003,
effective June 9, 2003, each Mutual Fund must comply with this final
rule by October 1, 2003]
{{6-30-03 p.8516.08-N}}
§ 103.135 Anti-money laundering programs for operators of
credit card systems.
(a) Definitions. For purposes of this section:
(1) Operator of a credit card system means any person
doing business in the United States that operates a system for clearing
and settling transactions in which the operator's credit card, whether
acting as a credit or debit card, is used to purchase goods or services
or to obtain a cash advance. To fall within this definition, the
operator must also have authorized another person (whether located in
the United States or not) to be an issuing or acquiring institution for
the operator's credit card.
(2) Issuing institution means a person authorized by
the operator of a credit card system to issue the operator's credit
card.
(3) Acquiring institution means a person authorized by
the operator of a credit card system to contract, directly or
indirectly, with merchants or other persons to process transactions,
including cash advances, involving the operator's credit
card.
{{6-30-05 p.8516.09}}
(4) Operator's credit card means a credit card
capable of being used in the United States that:
(i) Has been issued by an issuing institution; and
(ii) Can be used in the operator's credit card system.
(5) Credit card has the same meaning as in
15 U.S.C. 1602(k). It includes
charge cards as defined in 12 CFR
226.2(15).
(6) Foreign bank means any organization that is
organized under the laws of a foreign country; engages in the business
of banking; is recognized as a bank by the bank supervisory or monetary
authority of the country of its organization or the country of its
principal banking operations; and receives deposits in the regular
course of its business. For purposes of this definition:
(i) The term foreign bank includes a branch of a foreign bank in
a territory of the United States, Puerto Rico, Guam, American Samoa, or
the U.S. Virgin Islands.
(ii) The term foreign bank does not include:
(A) A U.S. agency or branch of a foreign bank; and
(B) An insured bank organized under the laws of a territory of
the United States, Puerto Rico, Guam, American Samoa, or the U.S.
Virgin Islands.
(b) Anti-money laundering program
requirement. Effective July 24, 2002, each operator of a credit
card system shall develop and implement a written anti-money laundering
program reasonably designed to prevent the operator of a credit card
system from being used to facilitate money laundering and the financing
of terrorist activities. The program must be approved by senior
management. Operators of credit card systems must make their anti-money
laundering programs available to the Department of the Treasury or the
appropriate Federal regulator for review.
(c) Minimum requirements. At a minimum, the program
must:
(1) Incorporate policies, procedures, and internal controls
designed to ensure the following:
(i) That the operator does not authorize, or maintain
authorization for, any person to serve as an issuing or acquiring
institution without the operator taking appropriate steps, based upon
the operator's money laundering or terrorist financing risk
assessment, to guard against that person issuing the operator's credit
card or acquiring merchants who accept the operator's credit card in
circumstances that facilitate money laundering or the financing of
terrorist activities;
(ii) For purposes of making the risk assessment required by
paragraph (c)(1)(i) of this section, the following persons are presumed
to pose a heightened risk of money laundering or terrorist financing
when evaluating whether and under what circumstances to authorize, or
to maintain authorization for, any such person to serve as an issuing
or acquiring institution:
(A) A foreign shell bank that is not a regulated affiliate, as
those terms are defined in 31 CFR 104.10(e) and (j);
(B) A person appearing on the Specially Designated Nationals List
issued by Treasury's Office of Foreign Assets Control;
(C) A person located in, or operating under a license issued by,
a jurisdiction whose government has been identified by the Department
of State as a sponsor of international terrorism under 22 U.S.C. 2371;
(D) A foreign bank operating under an offshore banking license,
other than a branch of a foreign bank if such foreign bank has been
found by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act (12 U.S.C. 1841, et seq.) or the International
Banking Act (12 U.S.C. 3101, et seq.) to be subject to comprehensive
supervision or regulation on a consolidated basis by the relevant
supervisors in that jurisdiction;
(E) A person located in, or operating under a license issued by,
a jurisdiction that has been designated as noncooperative with
international anti-money laundering principles or procedures by an
intergovernmental group or organization of which the
United
{{6-30-05 p.8516.10}}States is a member, with
which designation the United States representative to the group or
organization concurs; and
(F) A person located in, or operating under a license issued by,
a jurisdiction that has been designated by the Secretary of the
Treasury pursuant to 31 U.S.C.
5318A as warranting special measures due to money laundering
concerns;
(iii) That the operator is in compliance with all applicable
provisions of subchapter II of chapter 53 of title 31, United States
Code and this part;
(2) Designate a compliance officer who will be responsible for
assuring that:
(i) The anti-money laundering program is implemented effectively;
(ii) The anti-money laundering program is updated as necessary to
reflect changes in risk factors or the risk assessment, current
requirements of part 103, and further guidance issued by the Department
of the Treasury; and
(iii) Appropriate personnel are trained in accordance with
paragraph (c)(3) of this section;
(3) Provide for education and training of appropriate personnel
concerning their responsibilities under the program; and
(4) Provide for an independent audit to monitor and maintain an
adequate program. The scope and frequency of the audit shall be
commensurate with the risks posed by the persons authorized to issue or
accept the operator's credit card. Such audit may be conducted by an
officer or employee of the operator, so long as the reviewer is not the
person designated in paragraph (c)(2) of this section or a person
involved in the operation of the program.
[Codified to 31 C.F.R. § 103.135]
[Section 103.135 added at 67 Fed. Reg. 21126, April 29,
2002, effective April 24, 2002]
§ 103.140 Anti-money laundering programs for dealers in
precious metals, precious stones, or jewels.
(a) Definitions. For purposes of this section:
(1) Covered goods means:
(i) Jewels (as defined in paragraph (a)(3) of this section);
(ii) Precious metals (as defined in paragraph (a)(4) of this
section);
(iii) Precious stones (as defined in paragraph (a)(5) of this
section); and
(iv) Finished goods (including, but not limited to, jewelry,
numismatic items, and antiques), that derive 50 percent or more of
their value from jewels, precious metals, or precious stones contained
in or attached to such finished goods;
(2) Dealer. (i) Except as provided in paragraphs
(a)(2)(ii) and (a)(2)(iii) of this section, the term "dealer"
means a person engaged within the United States as a business in the
purchase and sale of covered goods and who, during the prior calendar
or tax year:
(A) Purchased more than $50,000 in covered goods; and
(B) Received more than $50,000 in gross proceeds from the sale of
covered goods.
(ii) For purposes of this section, the term "dealer" does
not include:
(A) A retailer (as defined in paragraph (a)(7) of this section),
unless the retailer, during the prior calendar or tax year, purchased
more than $50,000 in covered goods from persons other than dealers or
other retailers (such as members of the general public or foreign
sources of supply); or
(B) A person licensed or authorized under laws of any State (or
political subdivision thereof) to conduct business as a pawnbroker, but
only to the extent such person is engaged in pawn transactions
(including the sale of pawn loan collateral).
(iii) For purposes of paragraph (a)(2) of this section, the terms
"purchase" and "sale" do not include a retail transaction
in which a retailer or a dealer accepts from a customer covered goods,
the value of which the retailer or dealer credits to the account of the
customer, and the retailer or dealer does not provide funds to the
customer in exchange for such covered goods.
(iv) For purposes of paragraphs (a)(2) and (b) of this section,
the terms "purchase" and "sale" do not include the purchase
of jewels, precious metals, or precious stones that are incorporated
into machinery or equipment to be used for industrial purposes, and the
purchase and sale of such machinery or equipment.
{{2-29-08 p.8516.10-A}}
(v) For purposes of applying the $50,000 thresholds in paragraphs
(a)(2)(i) and (a)(2)(ii)(A) of this section to finished goods defined
in paragraph (a)(1)(iv) of this section, only the value of jewels,
precious metals, or precious stones contained in, or attached to, such
goods shall be taken into account.
(3) Jewel means an organic substance with gem quality
market-recognized beauty, rarity, and value, and includes pearl, amber,
and coral.
(4) Precious metal means:
(i) Gold, iridium, osmium, palladium, platinum, rhodium,
ruthenium, or silver, having a level of purity of 500 or more parts per
thousand; and
(ii) An alloy containing 500 or more parts per thousand, in the
aggregate, of two or more of the metals listed in paragraph (a)(3)(i)
of this section.
(5) Precious stone means a substance with gem quality
market-recognized beauty, rarity, and value, and includes diamond,
corundum (including rubies and sapphires), beryl (including emeralds
and aquamarines), chrysoberyl, spinel, topaz, zircon, tourmaline,
garnet, crystalline and cryptocrystalline quartz, olivine peridot,
tanzanite, jadeite jade, nephrite jade, spodumene, feldspar, turquoise,
lapis lazuli, and opal.
(6) Person shall have the same meaning as provided in
§ 103.11(z).
(7) Retailer means a person engaged within the United
States in the business of sales primarily to the public of covered
goods.
(b) Anti-money laundering program requirement. (1) Each
dealer shall develop and implement a written anti-money laundering
program reasonably designed to prevent the dealer from being used to
facilitate money laundering and the financing of terrorist activities
through the purchase and sale of covered goods. The program must be
approved by senior management. A dealer shall make its anti-money
laundering program available to the Department of Treasury through
FinCEN or its designee upon request.
(2) To the extent that a retailer's purchases from persons other
than dealers and other retailers exceeds the $50,000 threshold
contained in paragraph (a)(2)(ii)(A), the anti-money laundering
compliance program required of the retailer under this paragraph need
only address such purchases.
(c) Minimum requirements. At a minimum, the anti-money
laundering program shall:
(1) Incorporate policies, procedures, and internal controls based
upon the dealer's assessment of the money laundering and terrorist
financing risks associated with its line(s) of business. Policies,
procedures, and internal controls developed and implemented by a dealer
under this section shall include provisions for complying with the
applicable requirements of the Bank Secrecy Act (31 U.S.C. 5311
et seq.), and this part.
(i) For purposes of making the risk assessment required by
paragraph (c)(1) of this section, a dealer shall take into account all
relevant factors including, but not limited to:
(A) The type(s) of products the dealer buys and sells, as well as
the nature of the dealer's customers, suppliers, distribution
channels, and geographic locations;
(B) The extent to which the dealer engages in transactions other
than with established customers or sources of supply, or other dealers
subject to this rule; and
(C) Whether the dealer engages in transactions for which payment
or account reconciliation is routed to or from accounts located in
jurisdictions that have been identified by the Department of State as a
sponsor of international terrorism under 22 U.S.C. 2371; designated as
non-cooperative with international anti-money laundering principles or
procedures by an intergovernmental group or organization of which the
United States is a member and with which designation the United States
representative or organization concurs; or designated by the Secretary
of the Treasury pursuant to 31 U.S.C. 5318A as warranting special
measures due to money laundering concerns.
(ii) A dealer's program shall incorporate policies, procedures,
and internal controls to assist the dealer in identifying transactions
that may involve use of the dealer to facilitate money laundering or
terrorist financing, including provisions for making reasonable
inquiries to determine whether a transaction involves money laundering
or terrorist financing, and for refusing to consummate, withdrawing
from, or terminating such transactions. Factors that may indicate a
transaction is designed to involve use of the dealer to facilitate
money laundering or terrorist financing include, but are not limited
to:
(A) Unusual payment methods, such as the use of large amounts of
cash, multiple or sequentially numbered money orders, traveler's
checks, or cashier's checks, or payment from third
parties;
{{2-29-08 p.8516.10-B}}
(B) Unwillingness by a customer or supplier to provide complete
or accurate contact information, financial references, or business
affiliations;
(C) Attempts by a customer or supplier to maintain an unusual
degree of secrecy with respect to the transaction, such as a request
that normal business records not be kept;
(D) Purchases or sales that are unusual for the particular
customer or supplier, or type of customer or supplier; and
(E) Purchases or sales that are not in conformity with standard
industry practice.
(2) Designate a compliance officer who will be responsible for
ensuring that:
(i) The anti-money laundering program is implemented effectively;
(ii) The anti-money laundering program is updated as necessary to
reflect changes in the risk assessment, requirements of this part, and
further guidance issued by the Department of the Treasury; and
(iii) Appropriate personnel are trained in accordance with
paragraph (c)(3) of this section.
(3) Provide for on-going education and training of appropriate
persons concerning their responsibilities under the program.
(4) Provide for independent testing to monitor and maintain an
adequate program. The scope and frequency of the testing shall be
commensurate with the risk assessment conducted by the dealer in
accordance with paragraph (c)(1) of this section. Such testing may be
conducted by an officer or employee of the dealer, so long as the
tester is not the person designated in paragraph (c)(2) of this section
or a person involved in the operation of the program.
(d) Effective date. A dealer must develop and implement
an anti-money laundering program that complies with the requirements of
this section on or before the later of January 1, 2006, or six months
after the date a dealer becomes subject to the requirements of this
section.
[Codified to 31 C.F.R. § 103.140]
[Section 103.140 added at 70 Fed. Reg. 33716, June 9, 2005,
effective July 11, 2005]
§ 103.170 Exempted anti-money laundering programs for certain
financial institutions.
(a) Exempt financial institutions. Subject to the
provisions of paragraph (c) and (d) of this section, the following
financial institutions (as defined in
31 U.S.C. 5312(a)(2) or
(c)(1)) are exempt from the requirement in
31 U.S.C. 5312(h)(1)
concerning the establishment of anti-money laundering programs:
(1) An agency of the United States Government, or of a State or
local government, carrying out a duty or power of a business described
in 31 U.S.C. 5312(a)(2); and
(2) [Reserved]
(b) Temporary exemption for certain financial institutions.
(1) Subject to the provisions of paragraphs (c) and (d) of this
section, the following financial institutions (as defined in 31 U.S.C.
5312(a)(2) or (c)(1)) are exempt from the requirement in 31 U.S.C.
5318(h)(1) concerning the establishment of anti-money laundering
programs:
(i) Pawnbroker;
(ii) Loan or finance company;
(iii) Travel agency;
(iv) Telegraph company;
(v) Seller of vehicles, including automobiles, airplanes, and
boats;
(vi) Person involved in real estate closings and settlements;
(vii) Private banker;
(viii) Commodity pool operator;
(ix) Commodity trading advisor; or
(x) Investment company.
(2) Subject to the provisions of paragraphs (c) and (d) of this
section, a bank (as defined in § 103.11(c)) that is not subject to
regulation by a Federal functional regulator (as defined in
§ 103.120(a)(2)) is exempt from the requirement in 31 U.S.C.
5318(h)(1) concerning the establishment of anti-money laundering
programs.
{{12-31-07 p.8516.10-C}}
(3) Subject to the provisions of paragraphs (c) and (d) of this
section, a person described in § 103.11(n)(7) is exempt from the
requirement in 31 U.S.C. 5318(h)(1) concerning the establishment of
anti-money laundering programs.
(c) Limitation on exemption. The exemptions described in
paragraphs (a)(2) and (b) of this section shall not apply to any
financial institution that is otherwise required to establish an
anti-money laundering program by this subpart I.
{{2-29-08 p.8516.11}}
(d) Compliance obligations of deferred financial
institutions. Nothing in this section shall be deemed to relieve
an exempt financial institution from its responsibility to comply with
any other applicable requirement of law or regulaiton, including title
31 of the U.S.C. and this part.
[Codified to 31 C.F.R. § 103.170]
[Section 103.170 added at 67 Fed. Reg. 21113, April 29, 2002,
effective April 24, 2002; 67 Fed. Reg. 68935, November 14, 2002;
amended at 73 Fed. Reg. 1976, January 11, 2008]
Special Due Diligence for Correspondent Accounts and Private
Banking Accounts
§ 103.175 Definitions.
Except as otherwise provided, the following definitions apply for
purposes of §§ 103.176 through 103.185;
(a) Attorney General means the Attorney General of the
United States.
(b) Beneficial owner of an account means an individual
who has a level of control over, or entitlement to, the funds or assets
in the account that, as a practical matter, enables the individual,
directly or indirectly, to control, manage or direct the account. The
ability to fund the account or the entitlement to the funds of the
account alone, however, without any corresponding authority to control,
manage or direct the account (such as in the case of a minor child
beneficiary), does not cause the individual to be a beneficial owner.
(c) Certification and recertification mean the
certification and recertification forms described in appendices A and
B, respectively, to this subpart.
(d) Correspondent account. (1) The term
correspondent account means:
(i) For purposes of § 103.176(a), (d) and (e), an account
established for a foreign financial institution to receive deposits
from, or to make payments or other disbursements on behalf of, the
foreign financial institution, or to handle other financial
transactions related to such foreign financial institution; and
(ii) For purposes of §§ 103.176(b) and (c), 103.177 and
103.185, an account established for a foreign bank to receive deposits
from, or to make payments or other disbursements on behalf of, the
foreign bank, or to handle other financial transactions related to such
foreign bank.
(2) For purposes of this definition, the term account:
(i) As applied to banks (as set forth in paragraphs (f)(1)(i)
through (vii) of this section);
(A) Means any formal banking or business relationship established
by a bank to provide regular services, dealings, and other financial
transactions; and
(B) Includes a demand deposit, savings deposit, or other
transaction or asset account and a credit account or other extension of
credit;
(ii) As applied to brokers or dealers in securities (as set forth
in paragraph (f)(1)(viii) of this section) means any formal
relationship established with a broker or dealer in securities to
provide regular services to effect transactions in securities,
including, but not limited to, the purchase or sale of sec
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