Today, the FDIC solemnly recognizes the one-year anniversary of the
Attack on America and remembers those who lost their lives on that
This issue of FYI summarizes the progress that has been made
over the past 12 months in the financial war on terrorism. The FDIC is
proud to work closely with the Office of Homeland Security (OHS), the
Department of the Treasury, and our fellow state and federal financial
regulators to stem the flow of terrorist funds, provide technical
assistance to foreign governments, and safeguard the nation's critical
banking and finance infrastructure.
Stemming the Flow of Terrorist Funds
The FDIC is participating on several Treasury
Department working groups to implement provisions of Title III of the USA
PATRIOT Act signed into law by
President Bush on October 26, 2001. The Act expands the U.S. anti-money
laundering umbrella to industries not previously subject to this type of
regulation. It also marks the first time the United States has taken its
money laundering regulations offshore – applying recordkeeping and
monitoring requirements to the foreign branches of U.S. banks and foreign
institutions operating in the U.S.
The Act calls for enhanced due-diligence procedures in U.S. banks for
private banking accounts opened for foreign individuals and correspondent
accounts opened for foreign banks. The rule specifically requires that
these procedures be designed to detect and report money laundering and
other illegal activities.
A number of important provisions of the Act
that involve the FDIC are currently being implemented, as detailed below
in Appendix 1.
addition, the FDIC began working with the other federal financial
institution regulators and the Federal Bureau of Investigation in
October 2001 to establish a system to facilitate cooperation with law
enforcement authorities in their ongoing investigation of terrorist
activities. The Financial
Crimes Enforcement Network (FinCEN) is
working to consolidate, streamline and secure communications between
FDIC-insured institutions and government regulatory and law enforcement
bodies. FinCEN is mandated to establish these systems by the USA PATRIOT
Act, and is working with the FDIC and the other regulators to complete the
Providing Technical Assistance to Foreign Governments
The FDIC has long provided foreign technical assistance to help
developing countries construct and maintain sound banking systems. Strong
governance in foreign banks contributes to the stability of foreign
economies which enhances trade opportunities for United States companies;
limits the risks of contagion to this country from the failure of foreign
banks; and reduces opportunities for money laundering supporting
corruption, criminal activities and terrorism.
The FDIC is actively participating in working groups and technical
assistance missions sponsored by the State and Treasury Departments to
assess vulnerabilities to terrorist financing activity worldwide, and to
develop and implement plans to assist foreign governments in their efforts
in this regard. Last year the FDIC participated in 10 technical missions
to countries in Asia, Eastern Europe and Latin America.
The FDIC has also participated in a number of
meetings with the Financial
Action Task Force (FATF), including a
special FATF Money Laundering plenary held in Washington, D.C. in October
2001. This plenary developed a set of anti-terrorist funding
recommendations that would be used as standards by the international
community when assessing a country’s vulnerabilities to terrorist
funding and the adequacy of the measures it has in place to curtail such
In addition, through participation on the Basel
Committee the FDIC has been involved
in the decision-making process that led to the approval and issuance of a
number of international guidelines on money laundering and terrorism.
Safeguarding the Nation’s Critical Banking and Finance
The FDIC works with the OHS and the
Office of Cyberspace Security through the
and Banking Information Infrastructure Committee (FBIIC)
on efforts to improve the reliability and security of the financial
The Treasury Department has been named as the primary coordinating body
for critical infrastructure initiatives of the financial services industry
and, as such, chairs the FBIIC.
The FBIIC is undertaking several initiatives aimed at protecting the
critical infrastructure of the banking and finance sectors, all of which
have FDIC participation. See
In addition, the FDIC participates on the Emergency Supervision
Communications Group of the Federal Financial Institutions Examination
Council (FFIEC). This interagency group is a subcommittee of the FFIEC’s
Supervision Task Force that is charged with developing FFIEC Supervisory
Emergency Communication Protocols that focus on maintaining our
supervisory responsibilities in times of emergency.
In a September 9, 2002 speech at the Institute of International Bankers’
annual membership luncheon in New York, NY, FDIC Chairman Don Powell
discussed how the terrorist attacks of September 11, 2001 have affected
the banking industry in the last year. The text of Chairman Powell’s
remarks is available at
Send feedback and technical questions about the FYI series to: firstname.lastname@example.org
Appendix 1 - Implementation of Banking-Related
Provisions of the USA PATRIOT Act of 2001
312 — Enhanced Due Diligence. A
proposal was published in the Federal
Register on May 30, 2002, calling
for banks to conduct enhanced due diligence procedures for any private
banking accounts opened for foreign individuals, and correspondent
accounts opened for foreign banks. The procedures are designed to
detect money laundering or other illegal activity.
313 — Prohibition on Correspondent Accounts with Foreign Shell Banks.
This interim final rule that became effective on December 5, 2001,
amends 31 USC 5318(j) by prohibiting financial institutions from
providing correspondent accounts to foreign "shell banks"
(banks that do not have a physical presence in any country). Foreign
banks with accounts in the U.S. were asked to sign a certification
that they are not shell banks and have a physical presence in some
location, or are affiliates of a bank with a physical presence. The
FDIC issued a financial institution letter (FIL-110-2001)
to notify banks of the rule change.
314 – Cooperative Efforts to Deter Money Laundering.
An interim final rule and a proposed rule were published in the Federal
Register on March 4, 2002. The
interim rule requires banks to complete an annual certification to the
Treasury Department that allows them to discuss with other
institutions any matters involving terrorist financing or money
laundering that may arise during the upcoming year. Comments on this
rule have been reviewed. The Treasury Department has begun a pilot
program to test secure communications links between government
agencies and financial institutions that can be used to file
suspicious activities reports and issue alerts.
326 – Minimum Standards for Customer Identification.
A proposed rule was published in the Federal
Register on July 23, 2002 that
would specify minimum types of information a bank will be required to
gather about new account holders and allows each institution to
determine the most appropriate types of identification it will accept.
A final rule is due by October 26, 2002.
327 – Consideration of Anti-Money Laundering Record.
As directed by the Act, the FDIC has issued internal directives and a
financial institution letter (FIL-82-2002)
to make a bank’s effectiveness in combating money laundering
activities a factor in considering merger applications. The provision
applies to Bank Merger Act applications submitted after December 31,
Appendix 2 - Current Initiatives of the
Finance and Banking Information Infrastructure Committee (FBIIC)
Current FBIIC initiatives include:
Financial Industry Infrastructure Assessment. This initiative,
undertaken at the request of the Critical
Infrastructure Protection (CIP) Board,
identifies critical infrastructure assets, their locations, potential
vulnerabilities, and prioritizes their importance to the financial
Public/Private Partnership. The FBIIC named a private sector
coordinator for a partnership between the government and the financial
services industry to strengthen critical infrastructure protection
Industry Communication. The FDIC is assisting the OHS and the
CIP Board in establishing secure communications with insured
institutions for the purpose of communicating during an emergency.
Sponsorship of Private Sector Institutions in Programs of the National
Communications System (NCS). The
FBIIC is developing policies on the sponsorship of NCS Priority
Telecommunications Access services for private sector institutions.
The committee's interim policy on the Government Emergency
Telecommunications Service (GETS) Card Program was issued in late
July. The FDIC issued a financial institution letter (FIL
84-2002) that describes the GETS
Card Program, sets out the criteria to be used by FBIIC agencies to
determine whether a private sector entity qualifies for federal
sponsorship, and explains how FDIC-supervised financial institutions
can obtain federal sponsorship for the issuance of GETS cards to key
Roundtable on Continuity of Operations Planning. This initiative
focuses on the continuity of operations of FBIIC agencies. Recently, the
FDIC presented a briefing to attendees at a roundtable meeting on the
development of our business continuity and emergency response plans and
lessons learned during the creation of those plans.
Members of FBIIC include the federal financial regulatory agencies, the National Association of Insurance Commissioners, and representatives from OHS, OCS, and other national defense organizations. The federal financial regulatory agencies are the Commodity Futures Trading Commission (CFTC), Federal Reserve, FDIC, National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), the Securities and Exchange Commission (SEC), and the Treasury Department.