Alert May 03, 2011

FinCEN Issues Proposed Rule Implementing Section 104(e) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010

FinCEN issued a proposed rule (the “ Proposed Rule“) that would implement section 104(e) of the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”) by requiring a U.S. bank (including a bank, savings bank, federal savings association, credit union, and certain other banking entities, each a “U.S. Bank”), within 30 days of receiving a specific written request from FinCEN, to report to FinCEN the following information about foreign banks (“Foreign Banks” and each a “Foreign Bank”) for which the U.S. Bank maintains a correspondent account: (1) whether the Foreign Bank maintains a correspondent account for an Iranian‑linked financial institution designated under the International Emergency Economic Powers Act (the “IEEPA”); (2) whether the Foreign Bank has processed one or more transfers of funds within the preceding 90 calendar days related to an Iranian-linked financial institution designated under the IEEPA, other than through a correspondent account; or (3) whether the Foreign Bank has processed one or more transfers of funds within the preceding 90 calendar days related to Iran’s Islamic Revolutionary Guard Corps (“IRGC”) or any of its agents or affiliates designated under the IEEPA.  If a U.S. Bank receives notification from a Foreign Bank that it has established a new correspondent account for an Iranian linked financial institution designated under the IEEPA, the U.S. Bank is required to report the information within 10 days of receiving that notification.  The Proposed Rule would also require that the Foreign Bank agree to notify the U.S. Bank if it subsequently established a new correspondent account for an Iranian‑linked financial institution designated under the IEEPA at any time within 365 calendar days from the date of the Foreign Bank’s initial response.  Additionally, when requested by FinCEN, the Proposed Rule would require a U.S. Bank to report instances in which the U.S. Bank does not maintain a correspondent account for a Foreign Bank specified by FinCEN in a written request.

Based on the reports, Treasury Officials would be able to take immediate action under Section 104(c) of CISADA, action that includes (but is not limited to) mandating the closure of the correspondent account or imposing sanctions against the U.S. Bank.  Treasury Officials could also, among other things, consult with a Foreign Bank that answered a request in the affirmative or that was unwilling to respond to a request.

Comments on the Proposed Rule are due by June 1, 2011.