Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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8/17/2007 Enhanced Due Diligence Rules on Correspondent Accounts for High-Risk Foreign Banks Finalized

Rules implementing enhanced due diligence requirements under section 312 of the USA PATRIOT Act for domestic institutions maintaining accounts for certain high risk foreign banks have been made final. The proposed rules were issued in January 2006 at the same time the general due diligence rules were issued in final form. The enhanced due diligence requirements apply to covered financial institutions that maintain correspondent accounts for foreign banks operating under (1) an offshore banking license, (2) a license issued by a foreign country designated as noncooperative (though no banks are currently on FATF’s NCCT list), or (3) a license issued by a foreign country designated by Treasury as warranting special measures due to money laundering concerns (e.g., Burma, Nauru). By October 5, 2008, some financial institutions previously exempted, such as securities broker-dealers registered with the SEC, futures commission merchants and introducing brokers registered with the Commodity Futures Trading Commission, and mutual funds, will have to have enhanced due diligence programs. The final rules will be incorporated into the bank and broker-dealer compliance checklists and will be discussed in the November issue of the USA PATRIOT Act Monitor.

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