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Sec. 1010.658 Special measures against FBME Bank, Ltd.

This section was added effective August 28, 2015. It was blocked by court order from taking effect. FinCEN republished the rule for further public comment, and published a new final rule on March 31, 2016, with an effective date of July 29, 2016. On July 22, 2016, the Court ordered that implementation of the Final Rule be stayed until further notice from the Court, noting that the Court required additional time beyond the Final Rule’s effective date to complete its review of the parties’ motions in the litigation. In its April 14, 2017, order granting FinCEN's motion for summary judgment, the U.S. District Court for the District of Columbia lifted the stay blocking the implementation of the March 31, 2016 Final Rule imposing a prohibition on opening or maintaining correspondent accounts for, or on behalf of, FBME Bank, Ltd. pursuant to Section 311 of the USA PATRIOT Act. On April 28, 2017, the U.S. Court of Appeals for the District of Columbia Circuit denied FBME's motion for a stay pending an appeal of the district court's decision. Accordingly, the Final Rule is in effect.

(a) Definitions. For purposes of this section:

(1) FBME Bank, Ltd. means all branches, offices, and subsidiaries of FBME Bank, Ltd. operating in any jurisdiction.

(2) Correspondent account has the same meaning as provided in §?1010.605(c)(1)(ii).

(3) Covered financial institution has the same meaning as provided in §?1010.605(e)(1).

(4) Subsidiary means a company of which more than 50 percent of the voting stock or analogous equity interest is owned by another company.

(b) Prohibition on accounts and due diligence requirements for covered financial institutions—(1) Prohibition on use of correspondent accounts. A covered financial institution shall not open or maintain a correspondent account in the United States for, or on behalf of, FBME Bank, Ltd.

(2) Special due diligence of correspondent accounts to prohibit use—(i) A covered financial institution shall apply special due diligence to its foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving FBME Bank, Ltd. At a minimum, that special due diligence must include:

(A) Notifying those correspondent account holders that the covered financial institution knows or has reason to know provide services to FBME Bank, Ltd., that such correspondents may not provide FBME Bank, Ltd. with access to the correspondent account maintained at the covered financial institution; and

(B) Taking reasonable steps to identify any use of its foreign correspondent accounts by FBME Bank, Ltd., to the extent that such use can be determined from transactional records maintained in the covered financial institution's normal course of business.

(ii) A covered financial institution shall take a risk-based approach when deciding what, if any, other due diligence measures it reasonably must adopt to guard against the use of its foreign correspondent accounts to process transactions involving FBME Bank, Ltd.

(iii) A covered financial institution that obtains knowledge that a foreign correspondent account may be being used to process transactions involving FBME Bank, Ltd. shall take all appropriate steps to further investigate and prevent such access, including the notification of its correspondent account holder under paragraph (b)(2)(i)(A) of this section and, where necessary, termination of the correspondent account.

(iv) A covered financial institution required to terminate a correspondent account pursuant to paragraph (b)(2)(iii) of this section:

(A) Should do so within a commercially reasonable time, and should not permit the foreign bank to establish any new positions or execute any transaction through such correspondent account, other than those necessary to close the correspondent account; and

(B) May reestablish a correspondent account closed pursuant to this paragraph if it determines that the correspondent account will not be used to provide banking services indirectly to FBME Bank Ltd.

(3) Recordkeeping and reporting. (i) A covered financial institution is required to document its compliance with the notice requirement set forth in paragraph (b)(2)(i)(A) of this section.

(ii) Nothing in this paragraph (b) shall require a covered financial institution to report any information not otherwise required to be reported by law or regulation.

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