October 7, 2011 –
FinCEN Issues Final Rule to Implement Section 104(e) of CISADA

• Facilitates the Iranian Government’s acquisition of weapons of mass destruction or weapons delivery systems, or supports international terrorist organizations and activities;

• Facilitates the activities of persons subject to United Nations Security Counsel financial sanctions relating to Iran;

• Engages in money laundering;

• Facilitates the efforts of Iranian financial institutions, including the Central Bank of Iran, to support the activities listed above;

• Provides financial services to the Iranian Revolutionary Guard Corps or any of its agents or affiliates whose property or interests in property are blocked by the United States; or

• Provides financial services to a financial institution whose assets are blocked by the United States because of its support of Iran’s proliferation of weapons of mass destruction or weapons delivery systems or its support of international terrorism.

The Final Rules will require U.S. banks to inquire of the foreign bank, and report to FinCEN, information regarding correspondent accounts and transactions at the foreign bank related to Iran.  Among others, the Final Rule require a U.S. bank to report to FinCEN the following information about foreign banks for which the U.S. bank maintains a correspondent account:

• Whether the foreign bank maintains a correspondent account for an Iranian-linked financial institution designated under the International Emergency Economic Powers Act (“IEEPA”);

• Whether the foreign bank has processed one or more transfers of funds within the preceding ninety (90) calendar days related to an Iranian-linked financial institution designated under the IEEPA, other than through a correspondent account; or

• Whether the foreign bank has processed one or more transfers of funds within the proceeding ninety (90) calendar days related to Iran’s Islamic Revolutionary Guard Corps (“IRGC”) or any IRGC-linked person designated under IEEPA.

For the purposes of the Final Rule, an “Iranian-linked financial institution designated under IEEPA” means a financial institution designated by the United States Government pursuant to the International Emergency Economic Powers Act (or listed in an annex to an Executive order issued pursuant to such Act) in connection with Iran’s proliferation of  weapons of mass destruction or delivery systems for weapons of mass destruction, or in connection with Iran’s support for international terrorism.  “IRGC-linked person designated under IEEPA” means Iran’s Islamic Revolutionary Guard Corps or any of its agents or affiliates designated by the United States Government pursuant to the International Emergency Economic Powers Act (or listed in an annex to an Executive order issued pursuant to such Act).

In light of the above, U.S. banks should evaluate whether to revise their correspondent banking agreements to require foreign banks to disclose the information required under the Final Rule.  In fact, regulators may even suggest obtaining the foreign bank’s certification as a best practice irrespective of the receipt of a request from FinCEN.  Separately, foreign banks should prepare to be in a position that would require them to certify the information requested under the Final Rule.

To read a complete copy of the Final Rule on the FinCEN website, click here.