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April 03, 2002
Special Information Sharing
Re: Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activities
Attention: Proposed Rule - Special Information Sharing - Section 314
I am writing this letter on behalf of National Futures Association, a registered futures association under the Commodity Exchange Act and self-regulatory organization for the United States futures industry. At this time, NFA appreciates the opportunity to address the Department of the Treasury -- Financial Crimes Enforcement Network's proposed rulemaking designed to implement provisions of the USA PATRIOT Act of 2001 related to information sharing.
As you know, the definition of financial institution under the Bank Secrecy Act has been expanded to include entities registered under the Commodity Exchange Act as futures commission merchants (FCMs), commodity pool operators (CPOs) and commodity trading advisors (CTAs). According to the USA Patriot Act, these registered entities are required to have an anti-money laundering program in place by April 24, 2002. As part of that program, these entities will be monitoring for suspicious activity related to money laundering and terrorist activity.
FinCEN's recent proposed rulemaking to implement the information sharing provisions of the USA PATRIOT Act includes FCMs, CPOs and CTAs in the definition of financial institution for purposes of information sharing with federal law enforcement agencies under Section 314(a) of the USA PATRIOT Act. As a result, these entities are exempt from the Right to Financial Privacy Act requirements for responses made to any request from FinCEN under the implementing regulations to Section 314(a) of the USA PATRIOT Act.
FCMs, CPOs and CTAs unlike registered broker-dealers are not, however, included in the definition of financial institution for purposes of voluntary information sharing among financial institutions under Section 314(b) of the USA PATRIOT Act. As a result, it appears that these entities will not receive the safe harbor from liability for sharing information provided in Section 314(b) of the Act and Section 103.110(d) of the implementing regulations.
NFA requests that FinCEN revise the definition of financial institution under Section 103.110(a) of the implementing regulations to include FCMs, CPOs and CTAs. These entities should be included in the definition of financial institution because the nature of their business may require them to share information among themselves in order to effectively monitor for suspicious activity. For example, a customer may do business through more than one FCM, with one FCM carrying the account and another FCM executing the transactions. In other instances, a CTA may open an account and have primary contact with the customer but the account must be carried on the books of an FCM. In any number of situations, these entities may need to share information regarding individuals, entities or organizations and it would be beneficial for FCMs, CPOs and CTAs to be covered by the safe harbor from liability provided by Section 103.110(d) of the Regulations.
Thank you for your consideration of this matter. If you have any questions or need additional information, please do not hesitate to contact me at (312)781-1413 or Carol Wooding at (312)781-1409.