Notice2025-09162
Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and Agents for Service of Legal Process
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 22, 2025
Issuing agencies
Treasury DepartmentFinancial Crimes Enforcement Network
Abstract
As part of its continuing effort to reduce paperwork and respondent burden, FinCEN invites comments on the proposed renewal, without change, of certain existing information collection requirements found in Bank Secrecy Act (BSA) regulations applicable to certain covered financial institutions. Under these regulations, among other requirements, a covered financial institution is prohibited from establishing, maintaining, administering, or managing correspondent accounts in the United States for or on behalf of a foreign shell bank. The regulations require that a covered financial institution take reasonable steps to ensure that any correspondent account that it establishes, maintains, administers, or manages in the United States for a foreign bank is not used by the foreign bank to indirectly provide banking services to a foreign shell bank. The regulations also mandate that a covered financial institution that maintains a correspondent account in the United States for a foreign bank retain records in the United States identifying the owners of each such foreign bank whose shares are not publicly traded, unless the foreign bank files a Form FR-Y with the Federal Reserve Board identifying the current owners of the foreign bank, and the name and street address of a person who resides in the United States and is authorized, and has agreed to be an agent to accept service of legal process for records regarding each such correspondent account. This request for comments is made pursuant to the Paperwork Reduction Act of 1995.
Full Text
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<title>Federal Register, Volume 90 Issue 98 (Thursday, May 22, 2025)</title>
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[Federal Register Volume 90, Number 98 (Thursday, May 22, 2025)]
[Notices]
[Pages 21987-21996]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-09162]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
Agency Information Collection Activities; Proposed Renewal;
Comment Request; Renewal Without Change of Prohibition on Correspondent
Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign
Banks and Agents for Service of Legal Process
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice and request for comments.
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SUMMARY: As part of its continuing effort to reduce paperwork and
respondent burden, FinCEN invites comments on the proposed renewal,
without change, of certain existing information collection requirements
found in Bank Secrecy Act (BSA) regulations applicable to certain
covered financial institutions. Under these regulations, among other
requirements, a covered financial institution is prohibited from
establishing, maintaining, administering, or managing correspondent
accounts in the United States for or on behalf of a foreign shell bank.
The regulations require that a covered financial institution take
reasonable steps to ensure that any correspondent account that it
establishes, maintains, administers, or manages in the United States
for a foreign bank is not used by the foreign bank to indirectly
provide banking services to a foreign shell bank. The regulations also
mandate that a covered financial institution that maintains a
correspondent account in the United States for a foreign bank retain
records in the United States identifying the owners of each such
foreign bank whose shares are not publicly traded, unless the foreign
bank files a Form FR-Y with the Federal Reserve Board identifying the
current owners of the foreign bank, and the name and street address of
a person who resides in the United States and is authorized, and has
agreed to be an agent to accept service of legal process for records
regarding each such correspondent account. This request for comments is
made pursuant to the Paperwork Reduction Act of 1995.
DATES: Written comments are welcome and must be received on or before
July 21, 2025.
ADDRESSES: Comments may be submitted by any of the following methods:
<bullet> Federal E-rulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the instructions for submitting comments. Refer to Docket Number
FINCEN-2025-0005 and the Office of Management and Budget (OMB) control
number 1506-0043.
<bullet> Mail: Policy Division, Financial Crimes Enforcement
Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-
2025-0005 and OMB control number 1506-0043.
Please submit comments by one method only. Comments will be
reviewed consistent with the Paperwork Reduction Act of 1995 and
applicable OMB regulations and guidance. All comments submitted in
response to this notice will become a matter of public record.
Therefore, you should submit only information that you wish to make
publicly available.
FOR FURTHER INFORMATION CONTACT: FinCEN's Regulatory Support Section by
submitting an inquiry at <a href="http://www.fincen.gov/contact">www.fincen.gov/contact</a>.
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Provisions
The legislative framework generally referred to as the BSA consists
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended by the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (USA PATRIOT Act),\1\ and other legislation, including the Anti-
Money Laundering Act of 2020 (AML Act).\2\ The BSA is codified at 12
U.S.C. 1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, including
notes thereto, with implementing regulations at 31 CFR chapter X.
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\1\ Public Law 107-56, 115 Stat. 272 (Oct. 26, 2001).
\2\ The AML Act was enacted as Division F, sections 6001-6511,
of the William M. (Mac) Thornberry National Defense Authorization
Act for Fiscal Year 2021, Public Law 116-283, 134 Stat. 3388 (Jan.
1, 2021).
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The BSA authorizes the Secretary of the Treasury (Secretary) to,
inter alia, require financial institutions to keep records and file
reports that are determined to have a high degree of usefulness in
criminal, tax, or regulatory matters, risk assessments or proceedings,
or in intelligence or counter-intelligence activities, including
analysis, to protect against terrorism, and to implement anti-money
laundering/countering the financing of terrorism (AML/CFT) programs and
compliance procedures.\3\ The Secretary has delegated to the Director
of FinCEN (Director) the authority to administer the BSA.\4\
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\3\ See 31 U.S.C. 5311(1)-(2).
\4\ Treasury Order 180-01 (Reaffirmed Jan. 14, 2020); see also
31 U.S.C. 310(b)(2)(I) (providing that the Director of FinCEN shall
``[a]dminister the requirements of subchapter II of chapter 53 of
this title, chapter 2 of title I of Public Law 91-508, and section
21 of the Federal Deposit Insurance Act, to the extent delegated
such authority by the Secretary.'').
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31 U.S.C. 5318(j) prohibits a covered financial institution \5\
from maintaining correspondent accounts in the United States for, or on
behalf of, foreign banks that do not have a physical presence in any
country. In addition, under 31 U.S.C. 5318(k), a covered financial
institution maintaining a correspondent account in the United States
for a foreign bank, must retain records identifying: (i) the owners of
record and the beneficial owners of the foreign bank, and (ii) the name
and address of a person residing in the United States who is authorized
to accept service of legal process for the foreign bank.\6\ The
regulations implementing 31 U.S.C. 5318(j) and 31 U.S.C. 5318(k) appear
at 31 CFR 1010.630.
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\5\ A covered financial institution is any financial institution
described in subparagraphs (A) through (G) of 31 U.S.C. 5312(a)(2),
including an insured bank, as defined in section 3(h) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(h)); a commercial bank or
trust company; a private banker; an agency or branch of a foreign
bank in the United States; any credit union; a thrift institution;
and a broker or dealer registered with the Securities and Exchange
Commission (SEC) under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.). 31 U.S.C. 5318(j)(1).
\6\ 31 U.S.C. 5318(k)(3)(A) and (B). The AML Act amended the
provision by including a reference to ``record and beneficial''
ownership and by indicating, with respect to agents for service of
process, that requests could involve records related to the
correspondent account or accounts held at the foreign bank.
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31 CFR 1010.630(a)(1) prohibits a covered financial institution \7\
from establishing, maintaining, administering, or managing
[[Page 21988]]
correspondent accounts \8\ in the United States for, or on behalf of,
foreign shell banks.\9\ A covered financial institution must take
reasonable steps to ensure that any correspondent account established,
maintained, administered, or managed by that covered financial
institution in the United States for a foreign bank is not being used
by that foreign bank \10\ to indirectly provide banking services to a
foreign shell bank.\11\
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\7\ A covered financial institution for purposes of 31 CFR
1010.630 is: (i) an insured bank (as defined in section 3(h) of the
Federal Deposit Insurance Act (12 U.S.C. 1813(h))); (ii) a
commercial bank or trust company; (iii) a private banker; (iv) an
agency or branch of a foreign bank in the United States; (v) a
credit union; (vi) a savings association; (vii) a corporation acting
under section 25A of the Federal Reserve Act (12 U.S.C. 611 et
seq.); and (viii) a broker or dealer in securities registered, or
required to be registered, with the SEC under the Securities
Exchange Act of 1934 (15 U.S.C. 78a, et seq.), except persons who
register pursuant to section 15(b)(11) of the Securities Exchange
Act of 1934. 31 CFR 1010.605(e)(2).
\8\ For purposes of 31 CFR 1010.630, a correspondent account is
defined as 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. 31 CFR 1010.605(c)(1)(ii).
\9\ Foreign shell bank means a foreign bank without a physical
presence in any country. 31 CFR 1010.605(g).
\10\ A foreign bank is defined as a bank organized under foreign
law, or an agency, branch or office located outside the United
States of a bank. The term does not include an agent, agency, branch
or office within the United States of a bank organized under foreign
law. 31 CFR 1010.100(u).
\11\ Covered financial institutions are not prohibited from
providing correspondent accounts or banking services to foreign
shell banks that qualify as ``regulated affiliates.'' 31 CFR
1010.630(a)(1)(iii).
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31 CFR 1010.630(a)(2) requires a covered financial institution that
maintains a correspondent account in the United States for a foreign
bank to retain records in the United States identifying: (i) the owners
\12\ of each such foreign bank whose shares are not publicly
traded,\13\ unless the foreign bank is required to file with the
Federal Reserve Board a Form FR Y-7 that identifies the current owners
of the foreign bank; \14\ and (ii) the name and street address of a
person who resides in the United States and is authorized, and has
agreed to be an agent to accept service of legal process for records
regarding each such account.
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\12\ ``Owner'' is defined at 31 CFR 1010.605(j) as any person
who, directly or indirectly, owns, controls, or has the power to
vote 25 percent or more of any class of voting securities or other
voting interests of a foreign bank, or controls in any manner the
election of a majority of the directors (or individuals exercising
similar functions) of a foreign bank.
\13\ The phrase ``publicly traded'' refers to shares that are
traded on an exchange or on an organized over-the-counter market
that is regulated by a ``foreign securities authority'' as defined
in section 3(a)(50) of the Securities Exchange Act of 1934 (15
U.S.C. 78C(a)(50)). 31 CFR 1010.630(a)(2)(iii).
\14\ 31 CFR 1010.630(a)(2)(ii).
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31 CFR 1010.630(b) states that a covered financial institution will
be deemed to be in compliance with the requirements of 31 CFR
1010.630(a) with respect to a foreign bank if the covered financial
institution obtains, at least once every three years, a certification
or recertification from the foreign bank. FinCEN has developed an
optional form \15\ that a covered financial institution may use in
obtaining the certification or recertification.
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\15\ See ``Certification Regarding Correspondent Accounts for
Foreign Banks,'' OMB Control Number 1506-0043, available at <a href="https://www.fincen.gov/sites/default/files/shared/Certification%20Regarding%20Correspondent%20Accounts%20for%20Foreign%20Banks.pdf">https://www.fincen.gov/sites/default/files/shared/Certification%20Regarding%20Correspondent%20Accounts%20for%20Foreign%20Banks.pdf</a>.
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31 CFR 1010.630(c) requires a covered financial institution to
request that a foreign bank verify or correct the information provided
in such foreign bank's certification or recertification, if the covered
financial institution knows, suspects, or has reason to suspect that
such information is incorrect or no longer accurate. Additionally, the
covered financial institution may take other appropriate measures to
ascertain the accuracy of the information or to obtain the correct
information.
If a covered financial institution has not obtained a certification
or recertification, or otherwise obtained documentation of information
needed for a certification or recertification, within 30 calendar days
after the date the account is established, and at least once every
three years thereafter, the covered financial institution must close
all such foreign bank's correspondent accounts within a commercially
reasonable time, and must restrict the foreign bank's ability to
establish any new position or execute any new transactions through any
such account other than those transactions necessary to close the
account.\16\ If a covered financial institution conducting an interim
verification pursuant to 31 CFR 1010.630(c) has not obtained
verification of the information or corrected information within 90
calendar days after the date of undertaking the interim verification,
the covered financial institution must follow the same account closure
procedures set out above.\17\
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\16\ 31 CFR 1010.630(d)(2).
\17\ 31 CFR 1010.630(d)(3).
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31 CFR 1010.630(d)(4) prohibits covered financial institutions
from: (i) re-establishing any account closed pursuant to 31 CFR
1010.630(d); and (ii) establishing any other correspondent account with
the foreign bank whose account was closed, unless the foreign bank
provides the appropriate certification or recertification.
31 CFR 1010.630(d)(5) states that a covered financial institution
will not be held liable to any person in any court or arbitration
proceeding for terminating a correspondent account in accordance with
31 CFR 1010.630(d).
31 CFR 1010.630(e) requires covered financial institutions to
retain any original document provided by a foreign bank, and the
original or a copy of any document otherwise relied upon by the covered
financial institution for purposes of complying with 31 CFR 1010.630,
for at least five years after the date that a covered financial
institution no longer maintains any correspondent account for such
foreign bank, or longer if directed by the Secretary.
II. Paperwork Reduction Act of 1995 (PRA) <SUP>18</SUP>
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\18\ Public Law 104-13, 109 Stat. 163 (May 22, 1995), codified
at 44 U.S.C. 3506(c)(2)(A)).
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Title: Prohibition on correspondent accounts for foreign shell
banks; records concerning owners of foreign banks and agents for
service of legal process (31 CFR 1010.630).
OMB Control Number: 1506-0043.
Form Number: Optional form--certification regarding correspondent
accounts for foreign banks.\19\
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\19\ See supra note 13.
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Abstract: FinCEN is issuing this notice to renew the OMB control
number for regulations prohibiting a covered financial institution from
maintaining correspondent accounts for foreign shell banks and
requiring a covered financial institution to maintain records
identifying the owners of certain foreign banks and agents residing in
the United States who have agreed to accept service of legal process
for records regarding correspondent accounts.
Affected Public: Businesses or other for-profit institutions, and
non-profit institutions.
Type of Review: Renewal without change of a currently approved
information collection.
Frequency: As required.
Estimated Number of Potential Respondents: 12,637 covered financial
institutions.\20\
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\20\ Table 1 presents the distribution of financial
institutions, by type, covered by this notice.
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A ``covered financial institution,'' as defined for purposes of 31
CFR 1010.630,\21\ is comprised of entities subject to the Anti-money
laundering (AML) program requirements for banks at 31 CFR 1020.210 plus
the entities subject to the Anti-money laundering program requirements
for brokers or dealers in securities at 31 CFR 1023.210.\22\
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\21\ See supra notes 5 and 6.
\22\ See 31 CFR 1010.100(d). A wide variety of terms have been
used at different times to describe various, sometimes overlapping
categories of legal entities chartered by federal, state, or
territorial authorities to take deposits and/or provide trust
company services and comparable foreign entities licensed to engage
in such business within the United States. This variety of terms and
lack of sharp distinctions is a consequence of the complex legal
history of banking in the United States, in which new regulatory
schemes have often been added to existing legal frameworks, while
acts of simplification and rationalization have been far less
common. The BSA's original language on this subject reflected this
complexity. See Section 203(e)(1)-(6) of the Currency and Foreign
Transactions Reporting Act, Public Law 91-508 (Oct. 26, 1970), 84
Stat. 1119. The initial implementing regulations for the BSA
rationalized this subject by referring to all of these legal
entities by the single label ``bank,'' defined in a comparatively
straightforward and comprehensive fashion. See Treasury Department,
Final Rule, Part 103--Financial Recordkeeping and Reporting of
Currency and Foreign Transactions, 37 FR 6912 (April 5, 1972).
Neither statutory nor regulatory language on this subject has
changed significantly in the ensuing five decades. This has had the
practical advantage that the regulatory footprint of FinCEN's bank-
related regulations has been quite congruent from one regulation to
another. FinCEN acknowledges, however, that the occasional
reiteration of old terminology has obscured this practical
advantage. FinCEN is taking the opportunity of the current notice to
affirm that all FinCEN regulations that implement statutory
obligations imposed on financial institutions described in 31 U.S.C.
5312(a)(2)(A)-(F) can count covered entities for purposes of burden
calculation the way that FinCEN has developed to count the defined
category ``banks.'' This is true even when regulations applicable to
financial institutions described in 31 U.S.C. 5312(a)(2)(A)-(F) use
a term other than ``bank'' such as ``covered financial
institution.'' This congruence across regulations allows FinCEN to
be able to explain more clearly how it counts regulated entities and
calculates burden on a notice-by-notice basis, and to provide
greater transparency about its methods more consistently across
notices.
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[[Page 21989]]
The AML program requirements for banks (31 CFR 1020.210) separate
the category of ``banks'' in two broad categories: banks regulated by a
Federal functional regulator \23\ and banks lacking a Federal
functional regulator.\24\ FinCEN's estimates of the potential
respondents covered by this notice rely on a methodology that
identifies banks by these groupings.
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\23\ 31 CFR 1020.210(a).
\24\ 31 CFR 1020.210(b).
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The distribution of financial institutions, by type, covered by
this notice is reflected in table 1 below:
Table 1--Distribution of Financial Institutions Covered by This Notice
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Type of institution Count
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Banks with a Federal functional regulator (FFR)......... 8,922 \a\
Banks lacking an FFR.................................... 399 \b\
Brokers or dealers in securities (broker-dealers)....... 3,316 \c\
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Total............................................... 12,637
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\a\ This includes 4,467 Federal Deposit Insurance Corporation (FDIC)-
insured depository institutions (including national banks, state banks
that are members of the Federal Reserve System, state-chartered non-
member banks, and insured U.S. branches of foreign banks, i.e., all
federally regulated banks) according to the FDIC's quarterly data
summary for Q1 2025, and 4,455 National Credit Union Administration
(NCUA)-insured credit unions (including federal credit unions and
state-chartered credit unions with NCUA insurance, i.e., all federally
regulated credit unions) according to NCUA's quarterly credit union
data summary for Q1 2025.
\b\ The Board of Governors of the Federal Reserve System Master Account
and Services Database contains data on financial institutions that
utilize Reserve Bank financial services, including those with no
federal regulator. FinCEN used this data to identify 399 banks and
credit unions utilizing Reserve Bank financial services with no
federal regulator.
\c\ The SEC data on active broker-dealers (Company Information About
Active Broker-Dealers) contains 3,316 active broker-dealers who are
registered with the SEC.
Estimated Number of Expected Respondents: 104 covered financial
institutions that maintain correspondent accounts with foreign
banks.\25\
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\25\ Table 2 provides FinCEN's estimate of the number of banks
and broker-dealers that maintain correspondent accounts for foreign
banks.
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While the regulations apply to banks and broker-dealers, in
practice the recordkeeping costs would only accrue to the banks and
broker-dealers that maintain correspondent accounts for foreign banks.
Table 2 presents an estimate of this subpopulation of banks and broker-
dealers based on public data from the most recent available calendar
year end. The methodology used to estimate the population in table 2,
as a proper subset of the total potentially affected population, is
consistent with the approach FinCEN utilized in its recent renewal of
OMB control number 1506-0066 (CISADA) \26\ and its recent proposal to
impose 311 special measures with respect to Huione Group,\27\ but has
been updated to incorporate newly available data on affected entities.
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\26\ See FinCEN, Agency Information Collection Activities;
Proposed Renewal; Comment Request; Renewal Without Change of
Reporting Obligations on Foreign Bank Relationships With Iranian-
Linked Financial Institutions Designated Under IEEPA and IRGC-Linked
Persons Designated Under IEEPA, 90 FR 14183 (Mar. 28, 2025).
\27\ See, FinCEN, Proposal of Special Measure regarding Huione
Group, as a Foreign Financial Institution of Primary Money
Laundering Concern, 90 FR 18934 (May 5, 2025).
Table 2--Distribution of Financial Institutions, by Type, Estimated To
Maintain Correspondent Accounts for Foreign Banks
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Number of
Type of financial institution financial
institutions
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Banks with an FFR....................................... 61 \a\
Banks lacking an FFR.................................... 17 \b\
Broker-dealers.......................................... 26 \c\
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Total............................................... 104
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\a\ Data are from the Federal Financial Institution Examination Council
Central Data Repository for Reports of Condition and Income (Call
Reports) and Uniform Bank Performance Reports (UBPRs), available for
most FDIC-insured institutions. Using this source of data, FinCEN
determines that as of Q4 2024, approximately 61 banking organizations
(national and state banks, trusts, thrifts and savings and loans,
branches and agencies of foreign banking organizations, representative
offices, Edge Act corporations, and agreement corporations) will be
affected by this rule on any given year. Specifically, we determine
that there are approximately 61 entities (U.S. banks; national and
state-chartered banks, trusts, savings and loans, thrifts; branches
and agencies of foreign banks; Edge Act corporations; and agreement
corporations) that report values for deposit liabilities of banks in
foreign countries. Non-zero deposit liabilities in a foreign country
are treated as indicia that a bank maintains a correspondent account
for at least one foreign financial institution. Credit unions, due to
chartering restrictions, do not typically maintain foreign
correspondent accounts.
\b\ The Board of Governors of the Federal Reserve System Master Account
and Services Database contains data on financial institutions that
utilize Reserve Bank financial services, including those with no
federal regulator. FinCEN used this data to identify an additional 17
international banking entities with no federal regulator and who do
not file Call Reports, but who are also likely to maintain
correspondent accounts with a foreign financial institution.
\c\ Broker-dealers, unless they are publicly traded, are not required to
make reports indicating whether they have foreign correspondent
accounts or hold foreign deposits. FinCEN reviewed 10-Q (SEC quarterly
filing for US publicly traded firms) and 6-K (SEC filing for foreign
private issuers of securities) and identified nine publicly-traded
broker-dealers with U.S. operations that reported foreign deposits.
However, because many broker-dealers are not publicly traded, FinCEN
conservatively estimates that the proportion of broker-dealers with
foreign correspondent accounts will be similar to the proportion for
banks (approximately 0.8%). 0.8% of 3,316 active broker-dealers is
approximately 26 broker-dealers assumed to have foreign correspondent
accounts.
Estimated Recordkeeping Burden: <SUP>28</SUP>
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\28\ In addition to requirements in 31 CFR 1010.630, a covered
financial institution is subject to, among other requirements, AML/
CFT program and due diligence requirements in 31 CFR 1010.610. The
burden for a covered financial institution to comply with 31 CFR
1010.610 is included in OMB control number 1506-0046. OMB control
number 1506-0046 was renewed in 2024, following a notice and request
for comment published in the Federal Register. See FinCEN, Agency
Information Collection Activities; Proposed Renewal; Comment
Request; Renewal Without Change of Due Diligence Programs for
Correspondent Accounts for Foreign Financial Institutions and for
Private Banking Accounts, 89 FR 49273 (June 11, 2024). In the
notice, FinCEN assigned an expected average recordkeeping burden of
two hours per covered financial institution per year associated with
the requirements in 31 CFR 1010.610. The burden estimates covered in
this notice are meant to complement that burden estimate and should
be considered an incremental assessment of the additional time and
other costs related to recordkeeping as required by 31 CFR 1010.630
that are not otherwise accounted for under other OMB control numbers
pertaining to the same (or similar) activities, including OMB
control number 1506-0046.
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FinCEN is implementing methodological changes in its approach
[[Page 21990]]
to recordkeeping burden estimates in this renewal as part of certain,
broader programmatic efforts to better align and harmonize PRA burden
estimates across the OMB control numbers that pertain to a covered
financial institution's BSA-related activities and AML/CFT program
obligations. These changes are being undertaken with a view to both
improving the accuracy and precision of the estimates in each
individual renewal and enhancing the tractability of each component
analysis within the context of FinCEN's full portfolio of active OMB
control numbers.
In recent related renewals,\29\ including the most recent prior
renewal of 1506-0043,\30\ FinCEN has noted certain practical challenges
to determining the total number of covered financial institutions that
maintain correspondent accounts for foreign banks, as well as
challenges to estimating the total number of correspondent accounts for
foreign banks that each of those covered financial institutions
maintains. In the 2022 renewal notice related to these regulations,
FinCEN previewed its intention to consider further harmonization and
potential integration of PRA burden estimates across regulatory
sections pertaining to due diligence requirements unique to the
maintenance of foreign correspondent accounts.\31\ In addition, FinCEN
has noted a paucity of publicly available data from which to derive
estimates of the number of covered financial institutions that have an
obligation under the regulation to obtain certification or
recertification forms from foreign banks in any given year, how many of
each type of certification is required in any given year, how often
covered financial institutions need to conduct interim verifications
for foreign banks for which they suspect the current information is no
longer correct, and how frequently covered financial institutions need
to determine if correspondent account closure is necessary.
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\29\ See FinCEN, Agency Information Collection Activities;
Proposed Renewal: Comment Request; Renewal Without Change of Due
Diligence Programs for Correspondent Accounts for Foreign Financial
Institutions and for Private Banking Accounts, 89 FR 49273 (June 11,
2024) for the most recent renewal of OMB control number 1506-0046.
See FinCEN, Agency Information Collection Activities; Proposed
Renewal; Comment Request; Renewal Without Change of Recordkeeping
and Termination of Correspondent Accounts for Foreign Banks, 83 FR
42555 (Aug. 22, 2018) (the 2018 Shell Bank PRA Renewal) and FinCEN,
Agency Information Collection Activities; Proposed Renewal; Comment
Request; Renewal Without Change of Prohibition on Correspondent
Accounts for Foreign Shell Banks; Records Concerning Owners of
Foreign Banks and Agents for Service of Legal Process, 87 FR 7919
(Feb. 10, 2022) (the 2022 Shell Bank PRA Renewal) for the last two
renewals of OMB control number 1506-0043.
\30\ See supra note 27. 2022 Shell Bank PRA Renewal.
\31\ ``FinCEN assesses that the provisions of 31 CFR 1010.630
are in large part conducted in connection with the due diligence and
enhanced due diligence covered financial institutions conduct on
foreign correspondent accounts as required by 31 CFR 1010.610. In
future supplemental annual PRA burden estimates for 31 CFR 1010.610
and 31 CFR 1010.630, FinCEN will consider whether the burden
estimates for these two regulatory requirements should be linked and
estimated together.'' Id. at Section II.2.
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To minimize these practical challenges, FinCEN has applied a
different approach in one of its recent renewal notices.\32\ While
increasing its estimates of the number of expected respondents, FinCEN
concurrently has reduced its estimates of: (1) the implied number of
foreign banks with correspondent accounts; and (2) the time burden of
compliance with 31 CFR 1010.630 per foreign correspondent account.\33\
Noting ``that some covered financial institutions may only maintain a
few correspondent accounts for foreign banks, while other covered
financial institutions may maintain multiple correspondent accounts for
foreign banks,'' \34\ FinCEN has projected that each covered financial
institution would conduct one initial certification and one
recertification each year and assigned a corresponding total average
annual burden of 30 hours per covered financial institution.\35\ For
each activity, respectively, the estimated (re)certification burden is
intended to include time spent to obtain or update assurances from the
foreign bank that it does not provide banking services, directly or
indirectly, to a foreign shell bank; ownership information from the
foreign bank, if necessary; and the name and address of an agent for
service of legal process for the foreign bank residing in the United
States. FinCEN also includes the time to review all documentation
submitted by the foreign bank, and the time to maintain records of all
documentation associated with the (re)certification process for the
foreign bank. FinCEN's estimates have contemplated a covered financial
institution obtaining the requisite (re)certification information via
the provision of FinCEN's optional certification form to the foreign
bank for which it maintained a correspondent account, which the foreign
bank would then complete and return to the covered financial
institution.
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\32\ Id.; see supra note 27.
\33\ When FinCEN renewed OMB control number 1506-0043 in 2022,
it estimated that there were 8,696 covered financial institutions
with one or more correspondent accounts for foreign banks. See the
2022 Shell Bank PRA Renewal. In the preceding renewal, it estimated
that there were 2,000 coved financial institutions with
correspondent accounts for 9,000 foreign banks. See the 2018 Shell
Bank PRA Renewal. In 2018, the PRA total burden estimate included an
annual estimate of the following three items per covered financial
institution: (i) 20 hours to complete a certification for a foreign
bank; (ii) five hours to complete a recertification for a foreign
bank; and (iii) nine hours to maintain records on the foreign bank's
certification/recertification.
\34\ Id.
\35\ See supra note 27. In the 2022 renewal of OMB control
number 1506-0043, FinCEN revised its estimate to incorporate the
recordkeeping component of the burden estimate within the
certification and recertification process. FinCEN also revised its
assessment of the time necessary to conduct a recertification, as
the process is identical to a certification. For those reasons,
FinCEN estimated the burden for a certification and corresponding
recordkeeping was 15 hours; and the burden for a recertification and
corresponding recordkeeping was also 15 hours.
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FinCEN now estimates the PRA burden of 31 CFR 1010.630 would
comprise the following: 20 hours to complete a certification for a
foreign bank, five hours to complete a recertification for a foreign
bank, and nine hours to maintain records on the foreign bank's
(re)certification. At the time of the original estimates, the initial
20 hours for a new certification was intended to include ``the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.'' \36\ Because FinCEN maintains more than
one active OMB control number that would potentially cover these
activities (reviewing instructions, searching, gathering, and
maintaining requisite data, and reviewing relevant information) it is
possible that prior burden assignments have overestimated the
incremental PRA costs of the regulatory requirements.
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\36\ See supra note 13.
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In this notice, FinCEN is attempting to harmonize the burden hours
implied by the aggregate estimates contained in the
[[Page 21991]]
2024 renewal of OMB control number 1506-0046, which did not make a
distinction between entities that are potentially affected and those
that are expected to incur costs, with the burden estimates here that
do.\37\ Accounting for these differences and retroactively applying
certain simplifying assumptions,\38\ the covered financial entities
subject to, and expected to be affected by, 31 CFR 1010.630 would
already be estimated to incur a burden of approximately 150 hours per
year, on average,\39\ in connection with due diligence activities over
foreign correspondent accounts under 31 CFR 1010.610 as accounted for
in the 2024 renewal of 1506-0046.
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\37\ FinCEN intends to employ this methodological refinement
across all relevant OMB control numbers going forward.
\38\ For purposes of tractability in comparison to OMB control
number 1506-0046, FinCEN assigns a 15-minute (0.25 hour)
recordkeeping burden to entities that maintain neither foreign
correspondent accounts nor private banking accounts. FinCEN then
imposes a simplifying assumption that the residual recordkeeping
burden to affected entities is twice as high for entities that
maintain both foreign correspondent accounts and private banking
accounts than entities that provide only one service or the other.
The population of entities that offer private banking accounts is
estimated using a size threshold of $10 billion in total
consolidated assets.
\39\ Based on estimates derived from available bank data for
calendar years 2023 and 2024 that averaged across and between
cohorts that were expected to maintain both foreign correspondent
and private banking accounts and those expected to maintain foreign
correspondent accounts only.
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In the itemization below, FinCEN reviews the primary
characteristics of the regulatory requirements and explains its
intended revised assignment of annual PRA burden hours to those
requirements.
(a) 31 CFR 1010.630 (a):
31 CFR 1010.630(a) sets forth certain requirements for covered
financial institutions with respect to correspondent accounts
maintained for foreign banks. FinCEN's estimate of incremental burden
per element of 31 CFR 1010.630(a) is discussed below.
(a)(1): While 31 CFR 1010.630(a)(1) does not prohibit a covered
financial institution from providing a correspondent account or other
banking services to a regulated affiliate,\40\ it does prohibit a
covered financial institution from establishing, maintaining,
administering, or managing an account in the United States for, or on
behalf of, a foreign shell bank.\41\ It also requires a covered
financial institution to take reasonable steps to ensure that the
accounts they establish, maintain, administer or manage for a foreign
bank are not used to provide services to foreign shell banks
indirectly.\42\ FinCEN is reducing the time burden of the recordkeeping
requirements of (a)(1) to one hour per foreign correspondent account
per year in the estimates in this renewal.
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\40\ 31 CFR 1010.630(a)(1)(iii).
\41\ 31 CFR 1010.630(a)(1)(i).
\42\ 31 CFR 1010.630(a)(1)(ii).
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FinCEN has two reasons for this reduction. First, the absence of an
activity (in this case, not establishing, maintaining, administering,
or managing an account for a foreign shell bank), and obtaining
evidence or assurances of that absence, is unlikely to generate
significant or lengthy documentation.\43\ Separately, while a covered
financial institution is likely to document the reasonable steps it
undertook to ensure that the foreign banks it serves are not shell
banks themselves, and are not in turn providing services to foreign
shell banks, these steps and their related recordkeeping burden would
already be accounted for under either the recordkeeping burden of OMB
control number 1506-0046 (which covers 31 CFR 1010.610) or the
activities undertaken in connection with other components of 31 CFR
1010.630, particularly 1010.630(c), (d), and (e), since obtaining and
verifying information,\44\ retaining records of that information,\45\
and closing accounts when the requisite information cannot be obtained
or verified \46\ are all reasonable steps to take to ensure that
foreign shell banks are not obtaining services indirectly. This
assignment is generally consistent with the allocation of burden in the
most recent prior renewal notice.\47\
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\43\ For example, in Section C, if using the optional
certification form provided by FinCEN (see supra note 13), a foreign
bank may either self-identify as a shell bank by selecting a box or,
by selecting one of two other boxes and completing three information
fields, certify that is not a shell bank. Similarly, Section D of
the optional certification form allows the foreign bank to certify
that it does not indirectly provide services to any foreign shell
bank by checking a box.
\44\ 31 CFR 1010.630(c).
\45\ 31 CFR 1010.630(e).
\46\ 31 CFR 1010.630(d).
\47\ ``FinCEN believes that the due diligence being conducted to
comply with 31 CFR 1010.610(a) would be coordinated with the
identification of foreign banks that have not provided the required
certification, recertification, or interim verification within the
required timeframes, resulting in the closure of correspondent
accounts with such foreign banks consistent with 31 CFR
1010.610(d).'' 87 FR 7294 (Feb. 10, 2022).
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(a)(2)(i): 31 CFR 1010.630(a)(2)(i) requires a covered financial
institution to maintain, in the United States, for each foreign bank
for which the covered financial institution maintains a correspondent
account: (1) records that identify the owners of the foreign bank \48\
and (2) the name and address of an authorized agent who agrees to
accept service of legal process for records and who resides in the
United States. (There is a partial exception to the requirement to
maintain ownership records: a covered financial institution does not
have to maintain such records on foreign banks that have filed Form FR
Y-7 with the Federal Reserve or that are publicly traded as defined in
31 CFR 1010.630(a)(2)(iii).) FinCEN is assigning zero hours of
incremental burden to the requirements of this subsection because
maintaining records of ownership and agent for service of legal process
information are a proper subset of the recordkeeping activities
required by 31 CFR 1010.630(e) and would otherwise be doubly counted if
assigned recordkeeping burden hours as part of 31 CFR 1010.630(a) as
well.
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\48\ As defined in 31 CFR 1010.605(j).
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(a)(2)(ii) and (iii): FinCEN is also assigning zero burden hours to
the remaining subsections of 31 CFR 1010.630(a)(2), as both 31 CFR
1010.630(a)(2)(ii) and (iii) define subpopulations of foreign banks for
which a covered financial institution is not required to maintain
ownership records. Exempting foreign banks that have a form FR Y-7 on
file with the Federal Reserve Board (in 31 CFR 1010.630(a)(2)(ii)) and
defining the scope of exempted banks whose shares are publicly traded
to cover all foreign banks with shares traded on a market regulated by
a foreign securities authority \49\ (in 31 CFR 1010.630(a)(2)(iii)) are
both expected to reduce paperwork and respondent burden. In part, the
exemptions reduce burden by minimizing the duplication of effort in
collecting information that is already reported to another authority or
agency (and would thereby be available for investigative and
enforcement purposes, as needed). Additionally, the exemptions remove
what would otherwise be a redundant recordkeeping burden on covered
financial institutions with respect to records that a regulatory agency
or authority already maintains.
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\49\ 15 U.S.C. 78c(a)(50).
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(b) 31 CFR 1010.630 (b):
31 CFR 1010.630(b) establishes a safe harbor such that, provided a
covered financial institution continues to meet its concurrent
obligations under 31 CFR 1010.630(c) and (d), the financial institution
need not obtain (re)certification of the foreign banks for whom it
maintains correspondent accounts more than once per three years to
satisfy its obligations under 31 CFR 1010.630(a). FinCEN notes that, to
the extent that more frequent
[[Page 21992]]
(re)certification is not otherwise required for business or other
compliance purposes, the safe harbor is expected to reduce paperwork
and respondent burden. Additionally, the records or documentation
necessary to establish that the conditions of the safe harbor have been
met should already be generated by the activities undertaken, thus the
safe harbor would not independently create an incremental necessity to
create and maintain records. For these reasons FinCEN has not assigned
any hours of recordkeeping burden to 31 CFR 1010.630(b).
(c) 31 CFR 1010.630 (c):
31 CFR 1010.630(c) clarifies that a covered financial institution
would need to request verification or correction of any information in
a (re)certification from its foreign correspondent bank if the covered
financial institution knows, suspects, or has reason to suspect that
information it previously received from the foreign bank or otherwise
relied upon to satisfy its original obligations under 31 CFR
1010.630(a) is no longer correct. The covered financial institution may
be required to take other appropriate measures to ascertain the
accuracy of the information in question or obtain correct information.
At this time FinCEN is not in possession of data or other information
that would enable it to estimate the frequency with which a covered
financial institution must engage in interim verification on a per
account basis for its foreign correspondent accounts, but preliminarily
does not expect the necessity to be pervasive or recurring because it
would be generally inconsistent with a financial institution's business
interests to routinely engage with clients from whom and about whom it
cannot maintain reliable and accurate information. FinCEN further
expects that a substantial portion of the activities undertaken, and
the artifacts memorializing those activities, to ascertain and maintain
the accuracy of the information required under 31 CFR 1010.630(a) would
not be readily distinguishable from other due diligence activities such
as those generally conducted in the course of business, required as
part of AML programs generally, and covered under 31 CFR 1010.610,
specifically. FinCEN is therefore not assigning an incremental
recordkeeping burden to this component under this OMB control number as
part of the current renewal but has included additional requests for
comment below that would help it assess the continued appropriateness
of this approach.\50\
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\50\ See Additional Requests for Comment below, specifically,
questions two and three.
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(d) 31 CFR 1010.630 (d):
31 CFR 1010.630(d) sets forth the requirements for account closure
in the absence of necessary and timely (re)certification and other
requisite verifications of information, as needed. FinCEN's estimate of
incremental burden per element of 31 CFR 1010.630(d) is discussed
below.
(d)(1): At the time of the initial regulatory adoption of the
requirements covered by this OMB control number, 31 CFR 1010.610(d)(1)
provides an accommodation with respect to foreign correspondent
accounts already in existence as of October 28, 2002, granting covered
financial institutions 154 calendar days (102 business days) to bring
such existing accounts into compliance with the requirements that
accounts established after October 28, 2002 would have only 30 calendar
days to comply with.
While this accommodation of additional time reflects FinCEN's past
efforts to balance a desire to reduce regulatory compliance burdens
with time-sensitive needs to implement policies in the interest of
national security, 31 CFR 1010.610(d)(1) is no longer expected to
meaningfully reduce burden because the accounts to which it applies
have now had the same requirements with respect to timely production of
information and/or (re)certification as newer accounts for over 22
years.
(d)(2): 31 CFR 1010.630(d)(2) concerns obtaining the
(re)certification or required information needed to prevent a foreign
bank's correspondent account closure. As discussed in Section I,
foreign correspondent accounts established after October 28, 2002, must
be closed within a commercially reasonable time and may not be used to
establish new positions or execute transactions other than those
transactions necessary to close the account if (re)certification or the
information necessary for (re)certification cannot be obtained within
30 days of the original establishment of the account and at least once
every three years thereafter. As such, the requirement to obtain
information and/or (re)certification with respect to foreign
correspondent accounts under 31 CFR 1010.630 flows, indirectly, from
the regulatory obligation to close any foreign correspondent account
for which the requisite (re)certification and other information can
either not be obtained timely or generally.
FinCEN is assigning a recordkeeping time burden of two hours
associated with the activities necessary to obtain the
(re)certification or required information needed to prevent a foreign
bank's correspondent account closure. This burden estimate, as a
reduction from prior renewals, reflects certain considerations for how
FinCEN anticipates compliance to be operationalized, including what
activities it considers incremental to other due diligence obligations,
who undertakes the activity unique to 31 CFR 1010.630, as well as what,
and to what extent, related records are incremental to other
recordkeeping activities.
Because it has provided an optional certification form that a
covered financial institution could employ to satisfy its obligations
under 31 CFR 1010.630, FinCEN assumes that a covered financial
institution would only elect to employ other means to meet its
regulatory requirements if the institution considered its alternative
approach to more appropriately or efficiently balance the costs and
benefits of its activities. FinCEN further expects that a covered
financial institution would not bear the primary burden of producing
the information or completing the optional FinCEN (re)certification
because it is expected to be completed by the foreign bank for whom the
covered financial institution maintains its correspondent account. The
paperwork burden that accrues to the foreign bank in connection with 31
CFR 1010.630 is not included in the estimates of this OMB control
renewal. In part, this is because FinCEN does not have: (1) the data
necessary to articulate the distribution of foreign banks who would
complete a (re)certification or otherwise provide the required
information to its U.S. covered financial institution, (2) information
on what types of labor the foreign bank employs to perform is reporting
activities, and (3) information on what the prevailing market rates are
for those employees' labor in the currencies in which they are
compensated or their corresponding U.S. dollar equivalents.
Additionally, it is unclear whether assessing a magnitude of
incremental burden to the foreign bank beyond a de minimis threshold is
appropriate. A foreign bank is, in the course of its ordinary business,
usually aware of its ownership, its U.S. agent for service of process,
and the characteristics of its clients that would need to be disclosed
in the optional (re)certification form it receives from the covered
financial institution that
[[Page 21993]]
maintains its correspondent account and would therefore not be forced
to undertake extensive incremental effort to provide this information
upon request. FinCEN is requesting comment on the reasonableness of
this approach as well as any data or anecdotal information that would
either support its approach or any alternative approach proposed as an
improvement.\51\
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\51\ See Additional Requests for Comment below, specifically,
questions seven and eight.
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(d)(3): 31 CFR 1010.630(d)(3) requires a covered financial
institution to close all correspondent accounts with any foreign bank
that fails to provide verification or corrected information within 90
days of when the covered financial institution first undertook its
inquiry. Once a foreign correspondent account is closed due to an
inability to timely obtain verification or revised information from the
foreign bank, a covered financial institution is not permitted to
reestablish the account or establish any new accounts with the foreign
bank. FinCEN is not assigning an incremental recordkeeping burden to
compliance with 31 CFR 1010.630(d)(3) because the records generated by
closing an existing account and/or not opening any new accounts when a
foreign bank does not provide verification or corrected information are
expected to be included in the records documenting a covered financial
institution's other extended due diligence activities.
(d)(4): 31 CFR 1010.630(d)(4) concerns reestablishment of accounts.
Once a foreign correspondent account is closed due to an inability to
timely obtain (re)certification or the information necessary for
(re)certification, a covered financial institution is not permitted to
reestablish the account or establish any new accounts with the foreign
bank until the covered financial institution receives the foreign
bank's requisite (re)certification. FinCEN does not, at this time, have
data or other information that would enable it to separately estimate
the number of (re)certifications pursued or obtained by covered
financial institutions per year in connection with (re)establishing
accounts otherwise prohibited by 31 CFR 1010.630(d)(4).\52\
Nevertheless, FinCEN's estimate of approximately 177
(re)certifications, on average, conducted by a given covered financial
institution per year is intended to include these (re)certifications.
The associated burden per (re)certification is expected to be four
hours, on average.\53\
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\52\ See Additional Requests for Comment below, specifically,
question 12.
\53\ Four hours per covered financial institution to obtain a
(re)certification is the summation of one hour to comply with 31 CFR
1010.630(a)(1); two hours to comply with 31 CFR 1010.630(d)(2) or
(d)(4); and one hour to comply with 31 CFR 1010.630(e).
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(d)(5): 31 CFR 1010.630(d)(5), as discussed above in Section I,
limits the liability of a covered financial institution in the event
that the termination of a correspondent account executed in compliance
with 1010.630(d) results in a court or arbitration proceeding. Because
the threat of liability, generally, introduces a degree of additional
uncertainty, it may, in some cases lead to overinvestment in activities
solely taken in a defensive posture; at the same time, it can create
incentives to permit activities that would otherwise not occur because
the expected private costs to litigation (or arbitration) would accrue
to the covered financial institution while the public harm from
forgoing such costs would be externalized. To the extent that
additional activities and documentation would otherwise have been
undertaken prophylactically, this provision is expected to reduce
paperwork and the compliance burden associated with 31 CFR 1010.630
generally. Concurrently, the provision is expected to reduce costs to
the public by better aligning the private incentives of a covered
financial institution with the level of account closures that is in the
public interest. FinCEN assigns zero incremental recordkeeping burden
to this component of the renewal.
(e) 31 CFR 1010.630(e):
31 CFR 1010.630(e) requires a covered financial institution to
retain the records necessary to demonstrate compliance with 31 CFR
1010.630 for no fewer than five years after the closing of a foreign
correspondent account, or longer if directed by the Secretary. The
records to be maintained include both any original documents provided
to a covered financial institution by a foreign bank, and either the
original or a copy of any other document the covered financial
institution relies upon to satisfy its regulatory requirements. FinCEN
is assigning one burden hour per foreign correspondent account for
which (re)certification is undertaken in a given year.
FinCEN is mindful that in some cases, covered financial
institutions may incur certain technology costs related to the
requesting, processing, and secure storage of account-related data and
information unique to FinCEN requirements. FinCEN is therefore
soliciting comments on the appropriateness of assigning a technology
cost to these requirements and invites the public to provide data
related to the incremental annual costs incurred by an affected covered
financial institution associated with this retention of records.
(f) 31 CFR 1010.630 (f)(1)-(3):
31 CFR 1010.630(f) presents special rules to facilitate a covered
financial institution's compliance with requirements to obtain
information and (re)certifications, and retain records (in 31 CFR
1010.630(f)(3)), subject to the applicable interim guidance (in 31 CFR
1010.630(f)(1)) regarding information requested before October 28, 2002
and received on or before December 26, 2002 (in 31 CFR 1010.630(f)(2)).
As FinCEN does not expect any current or future recordkeeping burden to
accrue in connection with information requested and/or received more
than 20 years ago, it is assigning a zero-burden hour estimate to this
component.
In sum, and in comparison to previous renewals, the scope of the
annual PRA burden and cost estimates in this renewal is limited to
recordkeeping associated with the following activities: (1) obtaining
certification forms and recertification forms; and (2) maintaining
records of the forms and any supporting documentation provided by
foreign banks or otherwise obtained by the covered financial
institution.
The annual hourly burden per affected covered financial institution
for each foreign bank for which it maintains a correspondent account is
four hours. This estimate covers the burden to a covered financial
institution to:
<bullet> obtain assurances from the foreign bank that it is not
providing banking services, directly or indirectly, to a foreign shell
bank (one hour, 1010.630(a)(1));
<bullet> obtain and review ownership information from the foreign
bank, if necessary, including the name of an agent based in the United
States who has agreed to accept service of legal process for records
regarding such correspondent account (two hours, 1010.630(d)(2) or
(d)(4)); and
<bullet> maintain records of all documentation associated with the
certification process for the foreign bank (one hour, 1010.630(e)).
FinCEN estimates the annual hourly burden for a covered financial
institution to obtain and maintain a recertification form from a
foreign bank for which it maintains a correspondent account is also
four hours. FinCEN believes the hourly burden estimate for a
recertification is the same as for a certification because the covered
financial institution can use the same certification form to reconfirm
all of the
[[Page 21994]]
information required in the initial certification.
As noted above, a covered financial institution is required to
obtain an initial certification and a recertification once every
subsequent three years from each foreign bank for which it maintains a
correspondent account. FinCEN estimates that there are approximately
104 covered financial institutions that maintain at least one
correspondent account for a foreign bank. FinCEN is using this number
to approximate the aggregate number of certifications and
recertifications expected affected covered financial institutions need
to conduct annually.
To estimate the average number of expected (re)certifications per
affected covered financial institution per year, FinCEN has consulted
publicly available sources of data on the number of active foreign
correspondent accounts in a given year. Select data in a report from
the Bank for International Settlements' (BIS) Committee on Payments and
Market Infrastructures (CPMI) suggests that there are hundreds of
thousands of correspondent banking relationships globally, though the
number has steadily declined over time. \54\ As measured by SWIFT
messaging flows, by the end of the most recent year for which data is
available (2022), approximately 90,000 bank pairs worldwide appear
active in a given month.\55\ Additional data from the BIS indicates
that, for countries in North America, the average number of direct
counterparty countries was 89.2 in 2022, representing a 12.9 percent
decrease over the period 2011-2022.\56\
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\54\ See BIS Committee on Payments and Market Infrastructures:
Correspondent Banking, 16 (Graph 3a) July 2016, <a href="https://www.bis.org/cpmi/publ/d147.pdf">https://www.bis.org/cpmi/publ/d147.pdf</a>; see also Rice, Tara and von Peter, Goetz and
Boar, Codruta, On the Global Retreat of Correspondent Banks (March
1, 2020). BIS Quarterly Review, March 2020.
\55\ See CPMI correspondent banking chartpack, Table 5.
Available at, <a href="https://www.bis.org/cpmi/paysysinfo/corr_bank_data/chartpack_2305.pdf">https://www.bis.org/cpmi/paysysinfo/corr_bank_data/chartpack_2305.pdf</a>, accessed May 5, 2025.
\56\ Id.
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FinCEN does not expect a covered financial institution to maintain
correspondent accounts for foreign banks from each of the approximately
90 countries suggested by the BIS estimate, as a given bank with
foreign correspondent account relationships would be expected to select
the foreign banks for which it will maintain a correspondent account
based on factors such as demand, transaction volume, compliance costs,
and money laundering risk.\57\ Some banks may maintain only a few
correspondent relationships, while others may maintain more. While
specific data on the number of foreign correspondent accounts per U.S.
covered financial institution is not publicly available, a recent study
by the European Central Bank found that among the fifteen banks
surveyed (all of which were large banks that maintained the highest
concentration of foreign correspondent accounts in Europe) the average
number of foreign banks for which surveyed the banks maintained
accounts in 2019 was approximately 500.\58\ Because the maintenance of
foreign correspondent accounts decreased by a larger amount in both
Northern and Southern Europe over the BIS period of study (2011-2022,
which includes the year of the ECB report (2019)), but for the full
period both regions maintained higher average numbers of direct
counterparty countries than North America,\59\ FinCEN conservatively
estimates that for purposes of its PRA estimates each covered bank or
broker-dealer with foreign correspondent accounts will maintain at
least the same number (500) of correspondent banking relationships for
foreign banks, on average, over a three year horizon and is requesting
comment on this approach.\60\
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\57\ See supra note 50.
\58\ See European Central Bank, Eleventh survey on correspondent
banking in euro, November 2020. https://www.ecb.europa.eu/pub/pdf/
other/
ecb.eleventhsurveycorrespondentbankingeuro202011~c280262151.en.pdf.
\59\ See, generally, CPMI correspondent banking chartpack,
available at <a href="https://www.bis.org/cpmi/paysysinfo/corr_bank_data/chartpack_2305.pdf">https://www.bis.org/cpmi/paysysinfo/corr_bank_data/chartpack_2305.pdf</a>, accessed May 5, 2025.
\60\ See Additional Requests for Comment below, specifically,
questions 1 and 9.
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Estimating the number of foreign correspondent account openings per
year for each bank that maintains them is also challenging. A study by
the World Bank indicates that countries often have hundreds of accounts
closures and openings per year.\61\ This research is also supported by
the International Monetary Fund (IMF), which reports similar
figures.\62\ Beginning new foreign correspondent relationships can be
challenging and often requires significant upfront deposits.\63\
However, these figures can vary by country, and a large economy like
the United States can be expected to have a significant number of
account closures and openings each year. FinCEN estimates that each
covered bank or broker-dealer with foreign correspondent accounts will
open approximately ten new correspondent accounts per year.
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\61\ The World Bank cited an example of one country whose banks
had closed 158 foreign correspondent accounts across 66 foreign
banks in 17 foreign countries in 2017. See The Decline in Access to
Correspondent Banking Services in Emerging Markets: Trends, Impacts,
and Solutions, World Bank (2018). <a href="https://thedocs.worldbank.org/en/doc/786671524166274491-0290022018/render/TheDeclineinAccesstoCorrespondentBanking.pdf">https://thedocs.worldbank.org/en/doc/786671524166274491-0290022018/render/TheDeclineinAccesstoCorrespondentBanking.pdf</a>.
\62\ A 2017 report by the IMF indicated that banks in Panama, a
relatively small economy, had opened 63 new foreign correspondent
accounts in 2016. See Recent Trends in Correspondent Banking
Relationships: Further Considerations, The International Monetary
Fund, 2017. <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2017/04/21/recent-trends-in-correspondent-banking-relationships-further-considerations">https://www.imf.org/en/Publications/Policy-Papers/Issues/2017/04/21/recent-trends-in-correspondent-banking-relationships-further-considerations</a>.
\63\ See The Decline in Access to Correspondent Banking Services
in Emerging Markets: Trends, Impacts, and Solutions, World Bank
(2018). <a href="https://thedocs.worldbank.org/en/doc/786671524166274491-0290022018/render/TheDeclineinAccesstoCorrespondentBanking.pdf">https://thedocs.worldbank.org/en/doc/786671524166274491-0290022018/render/TheDeclineinAccesstoCorrespondentBanking.pdf</a>.
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FinCEN's estimate of the annual PRA burden, therefore, is 73,632
hours, as detailed in table 3 below:
Table 3--Annual Hourly Burden for All Affected Covered Financial Institutions To Comply With 31 CFR 1010.630
----------------------------------------------------------------------------------------------------------------
Average number
Estimated number of
Compliance requirement under 31 CFR 1010.630 of affected Hourly burden correspondent Total burden
covered financial (hours) accounts per hours
institutions respondent
----------------------------------------------------------------------------------------------------------------
Obtain and record a certification per foreign \a\ 104 4 10 4,160
bank........................................
Obtain and record a recertification per 104 4 \b\ 167 69,472
foreign bank................................
------------------------------------------------------------------
Total.................................... ................. .............. .............. 73,632
----------------------------------------------------------------------------------------------------------------
\a\ See table 2.
\b\ 500 existing accounts requiring recertification once every three years (assuming one third of the accounts
are recertified each year) is 166.66 accounts per year.
[[Page 21995]]
To estimate the costs associated with the annual PRA burden hours,
FinCEN is utilizing the fully-loaded composite hourly wage rate of
$120.07, or rounded to the nearest dollar, $120.00.\64\ The total
estimated cost of the annual PRA burden is $8,835,840, as reflected in
table 4 below:
---------------------------------------------------------------------------
\64\ The wage rate applied here is a general composite hourly
wage ($85.55), scaled by a private-sector benefits factor of 1.42
($120.07 = $85.55 x 1.42), that incorporates the mean wage data
(available for download at <a href="https://www.bls.gov/oes/tables.htm">https://www.bls.gov/oes/tables.htm</a>, ``May
2023--National industry-specific and by ownership'') associated with
the six occupational codes (11-1010: Chief Executives; 11-3021:
Computer and Information Systems Managers; 11-3031: Financial
Managers; 13-1041: Compliance Officers; 23-1010: Lawyers and
Judicial Law Clerks; 43-3099: Financial Clerks, All Other) for each
of the nine groupings of NAICS industry codes that FinCEN determined
are most directly comparable to its eleven categories of covered
financial institutions as delineated in 31 CFR parts 1020 to 1030.
The benefit factor is 1 plus the benefit/wages ratio, where as of
June 2023, Total Benefits = 29.4 and Wages and salaries = 70.6
(29.4/70.6 = 0.42) based on the private industry workers series data
downloaded from <a href="https://www.bls.gov/news.release/archives/ecec_09122023.pdf,https://www.bls.gov/news.release/archives/ecec_09122023.pdf">https://www.bls.gov/news.release/archives/ecec_09122023.pdf,https://www.bls.gov/news.release/archives/ecec_09122023.pdf</a>, accessed December 22, 2024. Given that many
occupations provide benefits beyond cash wages (e.g., insurance,
paid leave, etc.), the private sector benefit is applied to reflect
the total cost to the employer.
Table 4--Total Cost of Annual PRA Burden
----------------------------------------------------------------------------------------------------------------
Compliance requirements under 31 CFR 1010.630 Burden hours Wage rate Total cost
----------------------------------------------------------------------------------------------------------------
Time taken for covered financial institutions to obtain \a\ 4,160 \b\ $120.00 $499,200
certifications from foreign banks, including recordkeeping.....
Time taken for covered financial institutions to obtain \c\ 69,472 $120.00 8,336,640
recertifications from foreign banks, including recordkeeping...
-----------------------------------------------
Total cost.................................................. .............. .............. 8,835,840
----------------------------------------------------------------------------------------------------------------
\a\ See table 3.
\b\ See footnote 64.
\c\ See table 3.
Estimated Recordkeeping Burden: The average estimated annual PRA
burden, measured in hours per correspondent account maintained by a
covered financial institution for a foreign bank, is four hours per
account for the purpose of fulfilling the covered financial
institution's initial certification and corresponding recordkeeping
obligations, and four hours per account for the purpose of fulfilling
the covered financial institution's recertification and corresponding
recordkeeping requirements every three years.
Estimated Number of Respondents/Responses: 104 covered financial
institutions maintain correspondent accounts for foreign banks.
Estimated Total Annual Recordkeeping Burden: The estimated total
annual PRA burden is 73,632 hours, as set out in table 3.
Estimated Total Annual Recordkeeping Cost: The estimated total
annual PRA cost is $8,835,840, as set out in table 4.
Under the PRA, FinCEN as a Federal agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid OMB
control number. Records required to be retained under the BSA must be
retained for five years.
Requests for Comment: Comments submitted in response to this notice
will be summarized and/or included in the request for OMB approval. All
comments will become a matter of public record.
General Request for Comments--Comments are invited on: (1) whether
the collection of information is necessary for the proper performance
of the functions of the agency, including whether the information shall
have practical utility; (2) the accuracy of FinCEN estimates of the
burden of the collection of information; (3) ways to enhance the
quality, utility, and clarity of the information to be collected; (4)
ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology; and (5) estimates
of capital or start-up costs and costs of operation, maintenance, and
purchase of services to provide information.
Additional Requests for Comment--In connection with a variety of
initiatives FinCEN is undertaking to implement the AML Act, FinCEN is
conducting ongoing, iterative assessments of the PRA burden associated
with BSA requirements. To assist with those activities, FinCEN is
accepting comments responsive to the specific requests included in the
most recent prior renewal and is requesting comments in response to the
additional questions listed below, which include modifications and
updates to questions from the previous renewal as well as new requests
that accompany the revised methodology and estimates in this notice.
(1) Are there additional sources of data (public, commercial, or
proprietary, for example) that would enable FinCEN to more precisely
estimate the number of correspondent accounts that covered financial
institutions maintain in a given year? Would the same sources, or other
sources, enable FinCEN to estimate the rate of new account openings
and/or closings of existing accounts on an annual basis as well?
(2) Consistent with the intentions communicated in the most recent
prior renewal notice, FinCEN is working to better harmonize its
collective burden estimates across the OMB control numbers in its
portfolio. In this renewal, it has modified recordkeeping burden
estimates, in part, to account for the implied per-institution burden
associated with 31 CFR 1010.610 (OMB control number 1506-0046). Is the
current allocation across the different regulatory requirements
generally consistent with current market practices in aggregate? Is it
generally accurate on an incremental or per-item basis? If not, please
provide actionable suggestions for improvements upon FinCEN's current
methods and estimates.
(3) FinCEN considered in the previous OMB control number renewal
notice, and continues to consider, the potential overlap in the burden-
generating activities associated with the overall due diligence
requirements with respect to correspondent accounts for foreign
financial institutions, including the related program requirements
detailed in 31 CFR 1010.610. Are there data, studies, reports, or
anecdotal information that would improve FinCEN's estimation and
allocation of PRA burdens to the respective elements of its regulatory
portfolio? If so, please
[[Page 21996]]
include or provide a reference in response.
(4) 31 CFR 1010.630(a)(2)(ii) and (iii) exempt foreign banks that
file a Form FR Y-7 or are publicly traded (as defined) from the
requirement to maintain lists of owners. The current notice does not
assign an incremental recordkeeping burden to obtaining the information
necessary to establish that an exemption is available for a given
foreign correspondent account. The current notice also does not attempt
to parse such exempted accounts from its estimate of the number of
correspondent accounts an expected affected financial institution
maintains. Is this assignment consistent with current market practices?
If not, please provide information about the methods, persons, and time
involved in establishing that an exemption applies.
(5) How does a financial institution identify potentially incorrect
information, and what steps does it take, if it has reason to suspect
that the information provided by a foreign bank in its certification or
recertification is incorrect? Are there any additional steps (beyond a
recertification request) taken by the financial institution with
respect to the foreign bank's correspondent account if the correct
information cannot be obtained that would generate documentation or
records that must be maintained but are currently unaccounted for in
FinCEN's estimates (for example, additional requests to the foreign
bank for additional information or notifications of account
termination)? What is the role or level of engagement with senior
management in this process?
(6) FinCEN notes above that it considers interim verifications to
be uncommon. What is the likelihood with any given correspondent
account that a financial institution would need to conduct an interim
verification, because it suspects a foreign bank's existing
certification information is no longer correct? How long does the
process take?
(7) To what extent do estimates that exclude the reporting and
recordkeeping burdens on foreign banks potentially underestimate the
full PRA burden associated with this OMB control number?
(8) Should FinCEN revise its PRA burden estimates to account for
the burden on affected foreign banks? Why or why not? If it should,
please suggest sources or provide data that would facilitate this
update.
(9) Please comment, preferably including, or with reference to, the
data relied upon to make such comments, on FinCEN's estimates of the
number of banks that maintain correspondent accounts for foreign banks.
In particular, FinCEN invites:
(a) public comment on the accuracy of its population estimates.
(b) submission of information about the characteristics of affected
U.S. banks (those that maintain foreign correspondent accounts) that
may affect those banks' ability to incur the reporting and
recordkeeping requirements associated with this FinCEN regulation (such
as size or operational constraints).
(10) Does your financial institution have a process to track
correspondent accounts for foreign banks for reasons other than to
comply with BSA requirements?
(11) Do covered financial institutions use the sample certification
form provided by FinCEN for compliance and recordkeeping purposes, or
is it more common to use a bespoke form or other method to obtain
either a statement of certification or other information required to
satisfy 31 CFR 1010.630 obligations? On average, how long does it take
to obtain and review the information provided by a foreign bank as part
of its certification or recertification?
(12) Are there instances where a foreign bank seeks to reestablish
a correspondent banking relationship with a covered financial
institution after the foreign bank's correspondent account was closed
due to a failure to certify or recertify? If so, how commonly does this
occur? Are there additional costs associated with these instances?
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2025-09162 Filed 5-21-25; 8:45 am]
BILLING CODE 4810-02-P
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</html>Indexed from Federal Register on May 22, 2025.
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