Anti-Money Laundering Efforts Continue to Progress, July 2002

Washington, DC, July 24, 2002 - In a July 1 letter to the Treasury Department's Financial Crimes Enforcement Network (FinCEN), the Institute and 10 other financial services industry associations expressed support for federal efforts to deter and prevent money laundering and terrorist financing, but noted the need to ensure that proposed regulations-that would require certain financial institutions to adopt due diligence programs with respect to foreign accounts-do not hinder financial institutions' abilities to implement the proposed anti-money laundering requirements. The associations' concerns were:

that member companies could not finalize their anti-money laundering systems until the final terms of the rule are known;
that the proposed definitions of "correspondent account" and "foreign financial institution" would require member institutions to conduct due diligence with respect to practically all business relationships with foreign financial institutions and foreign banks;
that certain of the information required to comply with the proposed enhanced due diligence requirements will be difficult, or time-consuming, to obtain; and
that some member institutions may be wholly unfamiliar with anti-money laundering due diligence requirements.

The associations therefore recommended that the effective date of the proposed rule be delayed until 180 days after it is published in the Federal Register.

In response, the Treasury Department and FinCEN have adopted an interim final rule relating to the proposed due diligence regulations. The interim final rule temporarily defers the application of these regulations to mutual funds pending adoption of a final rule, which FinCEN anticipates by no later than October 25, 2002.

The release accompanying the interim final rule states that the temporary deferral does not in any way relieve any financial institution from compliance with the existing anti-money laundering and anti-terrorism requirements imposed by law, regulation, or self-regulatory organization rule. Treasury and FinCEN expect financial institutions proposed to be subject to the regulation to being immediately the process of evaluating their due diligence procedures when correspondent accounts or private banking accounts are opened or maintained on behalf of non-U.S. persons. The interim final rule became effective on July 23, 2002.