On March 20, 2006 the Federal Reserve published in the Federal Register a final rule that amends Regulation K, International Banking Operations (12 CFR 211). The final rule requires Edge and agreement corporations and U.S. branches, agencies, and representative offices of foreign banks supervised by the Federal Reserve to establish and maintain procedures reasonably designed to ensure and monitor compliance with the Bank Secrecy Act ("BSA") and related regulations.1 The rule is effective April 19, 2006. These amendments do not impose new requirements; rather, they conform the Board's regulations to existing statutory and regulatory provisions of the BSA, as well as to long-standing supervisory expectations. Accordingly, the final rule should not impose material changes in business practices or increased expense or administrative burden on affected institutions.
The BSA generally requires both domestic and foreign financial institutions conducting business in the United States to comply with various recordkeeping, reporting, and other procedures for the principal purpose of preventing, detecting, and prosecuting money laundering and other financial crimes. The Board's final rule amends Regulation K to require Edge and agreement corporations and U.S. branches, agencies, and representative offices of foreign banks to implement and maintain compliance programs similar to those required for state member banks.
The BSA compliance program must include, at a minimum: (i) a system of internal controls to assure ongoing compliance; (ii) independent testing of compliance by the institution's personnel or by an outside party; (iii) the designation of an individual or individuals responsible for coordinating and monitoring day-to-day compliance; and (iv) training for appropriate personnel.
Reserve Banks are asked to distribute this SR letter to the foreign banking organizations supervised by the Federal Reserve in their districts as well as to supervisory and examination staff. Questions concerning these amendments to Regulation K may be directed to Shaswat K. Das, Counsel (202) 452-2428, Suzanne Williams, Manager (202) 452-3513, or Jennifer Sutton, Attorney (202) 452-3564.