The Board of Governors of the Federal Reserve System has issued SR letter 06-6 to advise banking organizations under its supervision of new obligations relating to Commercial Bank of Syria imposed by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). On March 15, 2006, FinCEN issued a final rule that imposes special measures under section 311 of the USA PATRIOT Act (31 U.S.C. 5318A) against Commercial Bank of Syria.
These special measures apply to Commercial Bank of Syria and any of its branches, offices and subsidiaries in Syria or in any other jurisdiction. One such subsidiary, Syrian Lebanese Commercial Bank, is specifically identified in the rule. This final rule is effective as of April 14, 2006.
The final rule prohibits all covered financial institutions from opening or maintaining a correspondent account in the United States for, or on behalf of, Commercial Bank of Syria and its branches, offices and subsidiaries. Covered financial institutions are also required to apply special due diligence to their correspondent accounts for foreign banks that is reasonably designed to guard against the indirect use of the account by Commercial Bank of Syria.
At a minimum, special due diligence under the final rule must include two elements:
- First, a covered financial institution must notify its correspondent account holders that the account may not be used to provide Commercial Bank of Syria with access to the covered financial institution.
- Second, a covered financial institution must take reasonable steps to identify any indirect use of its correspondent accounts by Commercial Bank of Syria, to the extent that such indirect use can be determined from transactional records maintained in its normal course of business.
The final rule states that a covered financial institution should take a risk-based approach (based on factors such as the type of services it offers and the geographic locations of its correspondent account holders) when deciding what, if any, additional due diligence measures it adopts to guard against the indirect use of its correspondent accounts by Commercial Bank of Syria.
Pursuant to the final rule, a covered financial institution that obtains knowledge that its correspondent account is being used by a foreign bank to provide indirect access to Commercial Bank of Syria is expected to take all appropriate steps to prevent such indirect access, including, when necessary, terminating the correspondent account.
The final rule does not require a Suspicious Activity Report to be filed based solely on the fact that a transaction involves Commercial Bank of Syria. However, a banking organization should determine whether the transaction would otherwise be reportable under suspicious activity reporting rules.
See the SR letter and final rule below for full details and notes.