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02-80 Development Regarding Treasury Information Requests Under Section 314 of the PATRIOT Act

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INFORMATIONAL

USA PATRIOT Act

SUGGESTED ROUTING

KEY TOPICS

Legal & Compliance
Operations
Senior Management

Money Laundering
Compliance Programs



Executive Summary

On November 19, 2002, the Department of the Treasury and its bureau the Financial Crimes Enforcement Network (FinCEN) advised associations representing major financial institutions of a brief moratorium on both new information requests and compliance with current information requests that have been recently issued under Section 314 of the USA PATRIOT Act of 2001. On November 26, 2002, the federal bank regulatory agencies issued a Joint Agency Notice (Notice) that addresses Section 314.1

Questions/Further Information

Questions regarding this Notice to Members may be directed to Emily Gordy, Department of Member Regulation, NASD Regulatory Policy and Oversight, at (202) 728-8070, or Nancy Libin, Office of General Counsel, NASD Regulatory Policy and Oversight, at (202) 728-8835.

Discussion

Background

The USA PATRIOT Act of 2001, which was signed into law on October 26, 2001, recognizes that law enforcement must be able to communicate quickly with financial institutions when requesting information regarding those suspected of engaging in money laundering or terrorist financing activities.

Section 314 of the PATRIOT Act authorizes law enforcement to establish a mechanism to communicate with financial institutions to request information about suspected money laundering and terrorist financing. Section 314 also allows financial institutions to share information among themselves regarding these activities. On September 26, 2002, the final rule implementing Section 314 became effective and is now part of the Treasury Department's Bank Secrecy Act regulations.2 Among other things, the final rule established a process through which law enforcement can communicate with financial institutions, including broker/dealers, in order to request information regarding those suspected of engaging in money laundering or terrorist activities so that any accounts and transactions involving these individuals or entities can be promptly located. On November 4, 2002, FinCEN began issuing information requests pursuant to this new authority.

Temporary Moratorium on Information Requests3

Since FinCEN began issuing these information requests (as described more fully in the bank regulators' Notice), some financial institutions have advised their regulators and FinCEN of a number of logistical issues and questions regarding compliance with the requests. In an effort to respond to and resolve these issues and concerns and to ensure that the most effective communication systems are in place between the government and the financial institutions, FinCEN has issued a brief moratorium on new information requests and on responding to prior requests. NASD understands that during the moratorium, FinCEN, in consultation with the federal financial regulators, will develop new guidance concerning future requests. Firms will be advised of both the lifting of the brief moratorium and the new guidance regarding the Section 314 information request process. Firms should monitor the Treasury and FinCEN Web Sites for this guidance.

FinCEN has advised the federal financial regulators that, in the event of a threat to national security or other emergency, it reserves the right to take necessary steps, including immediate reinstatement of the Section 314 information request process.

Anti-Money Laundering Compliance Officer Contact Information

Up-to-date contact information is important to ensure that the information requests made on behalf of law enforcement agencies by FinCEN reach relevant financial institutions.

In Notice to Members 02-78, NASD notified its members that, in order to facilitate Treasury's efforts to collect the anti-money laundering (AML) contact information that Section 314 requires, NASD had adopted an amendment to Rule 3011, requiring each member firm to provide to NASD contact information for the individual or individuals responsible for implementing the dayto- day operations and internal controls of the member's anti-money laundering program.4 The rule was effective immediately upon filing with the Securities and Exchange Commission on October 26, 2002, and will become operative on December 31, 2002. Accordingly, by December 31, 2002, firms are required to provide NASD with the following information: name, title, mailing address, e-mail address, telephone number, and facsimile number of the contact person.5 Members are also required to notify NASD promptly of any changes to the contact information.

It is important that members firms meet their obligations under Rule 3011, as amended, and provide accurate and complete contact information for their AML compliance officer. It is also important that when that information changes and becomes inaccurate or incomplete, the firm provides updated information to NASD. Compliance with Rule 3011, as amended, will ensure that FinCEN has accurate and complete contact information to effectively communicate with broker/dealers in the future.


1 Joint Agency Notice: Treasury Issues Moratorium on Section 314(a) Information Requests (November 26, 2002).

2 31 C.F.R. Part 103.

3 After the September 11, 2001 terrorist attacks, the Federal Bureau of Investigation (FBI) and other law enforcement agencies established a list of individuals and entities about whom information was sought from financial institutions regarding transactions or relationships with the named entities or individuals. The list was designated as the "Control List." SEC Release 2001-115. Information requests thus far have been disseminated to financial institutions that have been designated to receive the "Control List." FinCEN has also advised the federal financial regulators that the FBI will discontinue use of the "Control List" as a means of communicating information requests and will instead rely on the Section 314(a) process in the future.

4 Notice to Members 02-78 (November 2002).

5 While the AML compliance officer is not required to be a registered person as a result of serving that function, NASD anticipates that most AML compliance officers will be registered persons. Whether or not an AML compliance officer is registered with, or an employee of, the firm, an AML compliance officer is an associated person of the firm.


Attachment A — FinCEN Announcement of Joint Agency Notice

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Department of the Treasury Financial Crimes Enforcement Network
On November 26, 2002, a Joint Agency Notice was released by FinCEN and the primary federal regulators addressing two matters associated with section 314 of the USA PATRIOT Act as described below. Generally, section 314 authorizes law enforcement authorities to communicate with banking organizations and others about suspected money launderers and terrorists, and banking organizations to communicate amongst themselves about such matters.

Moratorium on Section 314(a) Information Requests

On September 18, 2002, the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) issued a Final Rule implementing section 314 of the USA PATRIOT Act. The Final Rule became effective on September 26, 2002 and is now part of Treasury's Bank Secrecy Act regulations, which are found at 31 CFR Part 103. The Final Rule, among other things, established a mechanism for law enforcement authorities to communicate names of suspected terrorists and money launderers to financial institutions in order to promptly locate accounts and transactions involving the suspects.
On November 4, 2002, FinCEN, based on the authority in section 314(a) and the Final Rule, sent its first request for information to financial institutions throughout the United States. FinCEN has since sent several other requests. Significant and useful information has been provided to law enforcement in response to its requests. This has included information about various types of transactions and accounts involving persons suspected of involvement in terrorist financing and money laundering, including those who used multiple institutions in several different geographic locations.
Financial institutions and their trade associations have notified the federal supervisory agencies and FinCEN about a number of logistical issues and questions with regard to the information request process instituted by FinCEN. In order to address these concerns and to ensure the most effective government-financial industry coordination possible, FinCEN, in coordination with relevant law enforcement agencies, has put into place a brief moratorium on new information requests and compliance with existing requests. During the moratorium, FinCEN, in consultation with the federal financial institution supervisory agencies, will develop additional guidance concerning section 314(a) information requests. You will be advised once this brief moratorium is lifted. At that time, you will also receive further guidance about the 314(a) information request process.
Notwithstanding the moratorium, FinCEN has advised the federal financial institutions supervisory agencies that it reserves the right to take such steps as are necessary, including the reinstatement of the section 314(a) information request process, in the event of an immediate threat to national security or other emergency.

The "Control List" and Section 314(a) Information Requests

FinCEN has advised the federal financial supervisory agencies that the FBI will discontinue the use of the "Control List" and instead will use the section 314(a) process to communicate with banking organizations and others about individuals and entities who are suspected of engaging in terrorist financing activities.
It is imperative that your bank, savings association or credit union be included in the contact list that FinCEN uses to communicate about suspected money launderers and terrorists. In developing its contact list, FinCEN decided to use the information that was provided in order to distribute the "Control List" and this information may have to be updated or enhanced. Accordingly, if your financial institution has not received any requests from FinCEN via e-mail or facsimile since November 4, 2002 (when FinCEN distributed its first section 314(a) information request), you should contact your primary federal supervisory agency to be added to FinCEN's contact list. The following information must be provided: financial institution name and charter number or other identifier; point of contact name and title, mailing (street number, P.O. box, city, state and zip code) and e-mail addresses; and telephone and facsimile numbers.
You may contact the following representatives from the federal financial institutions supervisory agencies and FinCEN to provide section 314(a) contact information or if you have any questions:

Board of Governors of the Federal Reserve System
Contact information:
e-mail: patriotact@frb.gov
fax: (202) 736-5641
Questions:
telephone: Laurie A. Bender, Senior Special Anti-Money Laundering Examiner at (202) 452-3794, or Pamela J. Johnson, Senior Anti-Money Laundering Coordinator at (202) 728-5829

Federal Deposit Insurance Corporation
Contact information:
e-mail: fdicadvisory@fdic.gov
fax: (202) 898-3627
Questions:
telephone: Special Activities Section at (202) 898-6750

Office of the Comptroller of the Currency
Contact information:
e-mail: nationalbankinfo@occ.treas.gov
fax: (202) 874-5301
Questions:
telephone: Brian C. McCormally, Director, or Robert S. Pasley, Assistant Director, Enforcement and Compliance Division at (202) 874-4800

Office of Thrift Supervision
Contact information:
e-mail: usap.contact@ots.treas.gov
fax: (202) 906-6326
Questions:
telephone: John J. Davidson, Senior Project Manager at (202) 906-6012

National Credit Union Administration
Contact information:
e-mail: www.ncua.gov/cuaddress
fax: (703) 518-6569
Questions:
telephone: John K. Ianno, Senior Trial Attorney at (703) 518-6540

Financial Crimes Enforcement Network (FinCEN)
Contact information:
e-mail: sys314a@FinCEN.treas.gov
fax: (703) 905-3660
Questions:
telephone: FinCEN Regulatory Helpline at 1-800-949-2732


Attachment B — Joint Agency Notice

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Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision
National Credit Union Administration

November 26, 2002

Joint Agency Notice

Treasury Issues Moratorium
on
Section 314(a) Information Requests


To All Banks, Savings Associations, and Credit Unions:

This Notice addresses two matters associated with section 314 of the USA PATRIOT Act as described below. Generally, section 314 authorizes law enforcement authorities to communicate with banking organizations and others about suspected money launderers and terrorists, and banking organizations to communicate amongst themselves about such matters.

Moratorium on Section 314(a) Information Requests

On September 18, 2002, the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) issued a Final Rule implementing section 314 of the USA PATRIOT Act. The Final Rule became effective on September 26, 2002 and is now part of Treasury's Bank Secrecy Act regulations, which are found at 31 CFR Part 103. The Final Rule, among other things, established a mechanism for law enforcement authorities to communicate names of suspected terrorists and money launderers to financial institutions in order to promptly locate accounts and transactions involving the suspects.
On November 4, 2002, FinCEN, based on the authority in section 314(a) and the Final Rule, sent its first request for information to financial institutions throughout the United States. FinCEN has since sent several other requests. Significant and useful information has been provided to law enforcement in response to its requests. This has included information about various types of transactions and accounts involving persons suspected of involvement in terrorist financing and money laundering, including those who used multiple institutions in several different geographic locations.
Financial institutions and their trade associations have notified the federal supervisory agencies and FinCEN about a number of logistical issues and questions with regard to the information request process instituted by FinCEN. In order to address these concerns and to ensure the most effective government-financial industry coordination possible, FinCEN, in coordination with relevant law enforcement agencies, has put into place a brief moratorium on new information requests and compliance with existing requests. During the moratorium, FinCEN, in consultation with the federal financial institution supervisory agencies, will develop additional guidance concerning section 314(a) information requests. You will be advised once this brief moratorium is lifted. At that time, you will also receive further guidance about the 314(a) information request process.
Notwithstanding the moratorium, FinCEN has advised the federal financial institutions supervisory agencies that it reserves the right to take such steps as are necessary, including the reinstatement of the section 314(a) information request process, in the event of an immediate threat to national security or other emergency.

The "Control List" and Section 314(a) Information Requests

FinCEN has advised the federal financial supervisory agencies that the FBI will discontinue the use of the "Control List" and instead will use the section 314(a) process to communicate with banking organizations and others about individuals and entities who are suspected of engaging in terrorist financing activities.
It is imperative that your bank, savings association or credit union be included in the contact list that FinCEN uses to communicate about suspected money launderers and terrorists. In developing its contact list, FinCEN decided to use the information that was provided in order to distribute the "Control List" and this information may have to be updated or enhanced. Accordingly, if your financial institution has not received any requests from FinCEN via e-mail or facsimile since November 4, 2002 (when FinCEN distributed its first section 314(a) information request), you should contact your primary federal supervisory agency to be added to FinCEN's contact list. The following information must be provided: financial institution name and charter number or other identifier; point of contact name and title, mailing (street number, P.O. box, city, state and zip code) and e-mail addresses; and telephone and facsimile numbers.
You may contact the following representatives from the federal financial institutions supervisory agencies and FinCEN to provide section 314(a) contact information or if you have any questions:

Board of Governors of the Federal Reserve System
Contact information:
e-mail: patriotact@frb.gov
fax: (202) 736-5641
Questions:
telephone: Laurie A. Bender, Senior Special Anti-Money Laundering Examiner at (202) 452-3794, or Pamela J. Johnson, Senior Anti-Money Laundering Coordinator at (202) 728-5829

Federal Deposit Insurance Corporation
Contact information:
e-mail: fdicadvisory@fdic.gov
fax: (202) 898-3627
Questions:
telephone: Special Activities Section at (202) 898-6750

Office of the Comptroller of the Currency
Contact information:
e-mail: nationalbankinfo@occ.treas.gov
fax: (202) 874-5301
Questions:
telephone: Brian C. McCormally, Director, or Robert S. Pasley, Assistant Director, Enforcement and Compliance Division at (202) 874-4800

Office of Thrift Supervision
Contact information:
e-mail: usap.contact@ots.treas.gov
fax: (202) 906-6326
Questions:
telephone: John J. Davidson, Senior Project Manager at (202) 906-6012

National Credit Union Administration
Contact information:
e-mail: www.ncua.gov/cuaddress
fax: (703) 518-6569
Questions:
telephone: John K. Ianno, Senior Trial Attorney at (703) 518-6540

Financial Crimes Enforcement Network (FinCEN)
Contact information:
e-mail: sys314a@FinCEN.treas.gov
fax: (703) 905-3660
Questions:
telephone: FinCEN Regulatory Helpline at 1-800-949-2732


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