issue-1997-05-21•Federal Register proposed rules — 1997-05-21
Federal Register proposed rules — 1997-05-21
issue-1997-05-21Federal Register proposed rules — 1997-05-21Proposed Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 97-13368 Assessment and Collection of Regulatory Fees For Fiscal Year 1997
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Page 27710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13368]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 1
[MD Docket No. 96-186]
Assessment and Collection of Regulatory Fees For Fiscal Year 1997
May 16, 1997.
AGENCY: Federal Communications Commission.
ACTION: Notice of proposed rulemaking; availability of documents.
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SUMMARY: The Commission has placed several documents in the docket file
associated with this proceeding which provide background information
used in developing its regulatory fee proposals for FY 1997.
FOR FURTHER INFORMATION CONTACT: Peter W. Herrick, Office of Managing
Director at (202) 418-0443, or Terry D. Johnson, Office of Managing
Director at (202) 418-0445.
SUPPLEMENTARY INFORMATION:
Additional Cost of Service Information Related to Establishing
Regulatory Fees for Fiscal Year 1997 Available in MD Docket No. 96-186
The Office of the Managing Director, in response to a request by
Comsat International Communications, has provided to Comsat additional
documents related to the Commission's distribution of costs among
services and other information utilized in the development of its
annual regulatory fees. See letter to Robert A. Mansbach, Esquire from
Andrew S. Fishel, Managing Director, dated April 4, 1997. Relevant
information provided to Comsat and other information related to the
development of the Commission's regulatory fees, including actual FY
1996 payment information, has been placed in the docket file for the
Commission's proceeding to establish its regulatory fees for Fiscal
Year 1997. These materials are available for public inspection during
regular business hours in the Commission's Public Reference Room (Room
239) at its headquarters, 1919 M Street, N.W., Washington, D.C. See
notice of proposed rulemaking re assessment and collection of
regulatory fees for Fiscal Year 1997, MD Docket No. 96-186, 62 FR
10793, March 10, 1997. Copies of materials contained in the docket file
may be purchased from the Commission's copy contractor, International
Transcription Services (ITS), in Room 246 or by calling 202-857-3800.
Federal Communications Commission.
LaVera F. Marshall,
Acting Secretary.
[FR Doc. 97-13368 Filed 5-20-97; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 97-13325 Withdrawal From Federal Regulations of the Applicability to Alaska of Arsenic Human Health Criteria
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27707-27710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13325]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 131
[FRL-5827-8]
Withdrawal From Federal Regulations of the Applicability to
Alaska of Arsenic Human Health Criteria
AGENCY: Environmental Protection Agency.
ACTION: Proposed rule and request for comments.
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SUMMARY: In 1992, EPA promulgated federal regulations establishing
water quality criteria for toxic pollutants for several states,
including Alaska (40 CFR 131.36). In this action, EPA is proposing to
withdraw the applicability to Alaska of the federal human health
criteria for arsenic. EPA is providing an
[[Page 27708]]
opportunity for public comment on withdrawal of the federal criteria
because the state's arsenic criteria differ from the federal criteria.
DATES: EPA will accept public comments on its proposed withdrawal of
the human health criteria for arsenic applicable to Alaska until July
7, 1997. Comments postmarked after this date may not be considered.
ADDRESSES: An original plus 2 copies, and if possible an electronic
version of comments either in WordPerfect or ASCII format, should be
addressed to Sally Brough, U.S. EPA Region 10, Office of Water, 1200
Sixth Avenue, Seattle, Washington, 98101.
The official administrative record for the consideration of this
proposal for arsenic is available for public inspection at EPA Region
10, Office of Water, 1200 Sixth Avenue, Seattle, Washington, 98101,
between 8:00 a.m. and 4:30 p.m. Copies of the record are also available
for public inspection at EPA's Alaska Operations Offices: 222 West 7th
Avenue, Anchorage, AK and 410 Willoughby Avenue, Janeau, AK.
FOR FURTHER INFORMATION CONTACT: Fred Leutner at EPA Headquarters,
Office of Water (4305), 401 M Street, SW, Washington, DC, 20460
(telephone: 202-260-1542), or Sally Brough in EPA's Region 10
(telephone: 206-553-1295).
SUPPLEMENTARY INFORMATION:
Potentially Affected Entities
Citizens concerned with water quality in Alaska, and with
pollution from arsenic in particular, may be interested in this
proposed rulemaking. Since criteria are used in determining NPDES
permit limits, entities discharging arsenic to waters of the United
States in Alaska could be affected by this proposed rulemaking.
Potentially affected entities include:
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Examples of affected
Category entities
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Industry.................................. Industries discharging
arsenic to surface waters
in Alaska.
Municipalities............................ Publicly-owned treatment
works discharging arsenic
to surface waters in
Alaska.
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This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be affected by this
action. This table lists the types of entities that EPA is now aware
could potentially be affected by this action. Other types of entities
not listed in the table could also be affected. To determine whether
your facility could be affected by this action, you should carefully
examine the applicability criteria in Sec. 131.36 of title 40 of the
Code of Federal Regulations. If you have any questions regarding the
applicability of this action to a particular entity, consult the person
listed in the preceding FOR FURTHER INFORMATION CONTACT section.
Background
On December 22, 1992, the Environmental Protection Agency (EPA or
Agency) promulgated a rule to establish federal water quality criteria
for priority toxic pollutants applicable in 14 states. That rule, which
is commonly called the National Toxics Rule (NTR), is codified at 40
CFR 131.36. The specific requirements for Alaska are codified at
Sec. 131.36(d)(12) and among other criteria, include water quality
criteria for the protection of human health from arsenic. EPA
promulgated a human health criterion for Alaska of 0.18 g/L to
protect waters designated for water consumption (i.e., sources of
drinking water) plus the consumption of aquatic life which includes
fish and shellfish such as shrimp, clams, oysters and mussels. This
criterion is located in column D1 in the criteria matrix at section
131.36(b)(1). EPA also promulgated a criterion of 1.4 g/L for
waters designated for the human consumption of aquatic life without
considering water consumption. This criterion is located in column D2
in the criteria matrix. These concentrations are designed to not exceed
an excess lifetime cancer risk of 1 in 100,000 (or 10-5) and
reflects Alaska's preference in recent rule adoptions and in
correspondence with EPA's Region 10. See 57 FR 60848, 60867.
EPA's criteria for human health protection from arsenic toxicity
used in the NTR were based on carcinogenic effects. Alaska had adopted
by reference EPA's published Clean Water Act (CWA) section 304(a)
criteria for human health into the state's water quality standards.
However, EPA's criteria guidance for carcinogens was presented at 3
different cancer risk levels, and the state had never officially
adopted a specific cancer risk level. Accordingly, since Alaska did not
have human health criteria for arsenic in place, EPA promulgated such
criteria for the state in the NTR.
Subsequent to the promulgation of the NTR, a number of issues and
uncertainties arose concerning the health effects of arsenic. EPA
determined that these issues and uncertainties were sufficiently
significant to necessitate a careful evaluation of the risks of arsenic
exposure. Accordingly EPA has undertaken a number of activities aimed
at reassessing the risks to human health from arsenic. [See Basis and
Purpose section below.]
In light of EPA's review of the health effects of arsenic, the
State of Alaska has proposed that the Safe Drinking Water Act (SDWA)
maximum contaminant level (MCL) for arsenic of 50 g/L
currently in the state's water quality standards be used as meeting the
requirements of the Clean Water Act in lieu of the current human health
criteria in the NTR. As adopted by Alaska, the MCL for arsenic applies
to all fresh waters that have the public water supply designated use.
(According to the state, this includes all but 20 fresh-water
segments.) For the reasons discussed subsequently, EPA finds that the
MCL for arsenic in freshwaters designated for public water supply, in
conjunction with Alaska's aquatic life criteria for arsenic, meets the
requirements of the CWA, and accordingly proposes to withdraw the
applicability to Alaska of the human health criteria for arsenic
promulgated in the NTR.
If EPA removes the applicability of the NTR arsenic human health
criteria to Alaska, the state has in place a chronic marine aquatic
life criterion of 36 g/L, a chronic freshwater aquatic life
criterion of 190 g/L, and the freshwater criterion of the MCL
of 50 g/L for waters designated for public water supply
discussed above. The aquatic life criteria are in place for all of the
state's marine and estuarine waters, and in those few cases where the
MCL is not applicable in freshwaters.
Basis and Purpose
There are a number of ongoing national activities that may affect
and/or necessitate a future change in the arsenic criteria for both
ambient and drinking water in Alaska. The National Academy of Sciences
(NAS) has initiated a study of the health risks posed by arsenic in
water. Results of the study are expected in the Spring of 1998.
Moreover, EPA is in the process of re-evaluating the risk assessments
for arsenic as part of a pilot program for reconfiguring the Integrated
Risk Information System (IRIS). EPA originally planned this re-
evaluation to cover aspects of both cancer and non-cancer risks and to
include examination of data not previously reviewed. With the
initiation of the NAS study, EPA redirected the focus of the IRIS re-
evaluation to the application of the proposed revisions to EPA's
Guidelines for Cancer Risk Assessment. The IRIS re-evaluation of
arsenic is expected in
[[Page 27709]]
1997. EPA encourages the state to review its water quality criteria for
arsenic as this new information becomes available.
EPA has recognized the use of appropriate MCLs in establishing
water quality standards under the CWA. Agency guidance notes the
differences between the statutory factors for developing SDWA MCLs and
CWA section 304(a) criteria, but provides that where human consumption
of drinking water is the principal exposure to a toxic chemical, then
an existing MCL may be an appropriate concentration limit. See guidance
noticed in 54 FR 346, January 5, 1989. Similarly, the CWA section
304(a) human health guidelines are consistent with this position. See
45 FR 79318, November 28, 1980.
To determine whether the MCL could appropriately be used in lieu of
the NTR's human health criteria for arsenic, EPA has prepared an
exposure analysis to estimate the significance of human consumption of
fish and shellfish containing the amounts of inorganic arsenic
indicated as present in representative samples of fish and shellfish,
in conjunction with the consumption of water containing concentrations
of arsenic currently existing in the Nation's waters. See EPA's
``Arsenic and Fish Consumption Concerns'' in the administrative record
for this rulemaking. This analysis first recognizes that the most
important toxic form of arsenic is inorganic arsenic. Inorganic arsenic
is the principal form in surface waters and almost the exclusive form
in ground waters. However, the arsenic in fish and most shellfish is
largely present as organic arsenic (mostly arsenobetaine). Available
information indicates that arsenobetaine passes through these organisms
with minimal retention in the fish and shellfish tissues.
In the NTR, EPA based the promulgated criteria on the human health
criteria methodology contained in the 1980 human health guidelines. To
estimate the ambient water concentration of a pollutant that does not
represent a significant risk to the public (i.e., the criteria levels),
the methodology makes certain assumptions about human exposure to
pollutants. The methodology assumes that for most people, drinking
water intake is 2 liters per day, and that fish consumption is 6.5
grams per day (a little less than one-half pound per month). The
methodology incorporates a bioconcentration factor (BCF) to account for
a pollutant's concentration in fish and shellfish tissue versus its
concentration in the water. The methodology also assumes that all of
the water and fish consumed is contaminated at the criteria levels (the
``safe'' levels).
Using these same exposure factors from the methodology, EPA has
assessed the effect of using the arsenic MCL. Assuming that the
concentration of arsenic in water is at the MCL of 50 g/L,
most people would be exposed to 100 g of arsenic from their
drinking water intake (i.e., 2 L/day x 50 g/L = 100
g/day), and 0.6 g/day of inorganic arsenic from
consuming 6.5 grams of fish and shellfish collected from water at the
arsenic MCL concentration and assuming the BCF used in the NTR. (See
derivation in EPA's ``Arsenic and Fish Consumption Concerns'' in the
record.) The total estimated exposure would be 100.6 g/day
which could consist entirely of inorganic arsenic. EPA considers the
small increment of exposure from fish consumption to be insignificant.
EPA therefore concludes that when applied to fresh waters in Alaska,
use of 50 g/L generally provides a level of protection
equivalent to that provided by the MCL. A full characterization of
other exposure scenarios is contained in EPA's exposure analysis
described above. This analysis is in the administrative record for this
proposal and is currently undergoing external peer review. The results
of the peer review will be considered before final action is taken on
this rule.
For regions in Alaska where high levels of arsenic in the potable
water are accompanied by high levels of fish and shellfish consumption,
the State of Alaska should develop site-specific criteria for the
surface waters involved considering the arsenic content of the drinking
water and fish consumed. In developing site-specific criteria the state
should characterize the size and location of the population of concern
and determine their fish/shellfish and water intake rates. The fish and
shellfish consumption should consider the species and dietary intake on
a per species basis. Actual total arsenic and inorganic arsenic values
for the species consumed and actual concentrations in drinking water
should be used in the exposure calculations whenever possible.
The Agency solicits comment on whether there are any locations in
Alaska where the arsenic criteria in the NTR should not be removed. For
such locations, EPA solicits data documenting such existing conditions
which indicate that fish consumers may be at an unacceptable risk of
arsenic toxicity, and whether some other site-specific arsenic human
health criteria may be appropriate. EPA solicits any information such
as that described above concerning possible site-specific criteria to
be developed by the State of Alaska.
Regulatory Procedural Information
This proposed withdrawal of human health criteria for arsenic in
Alaska is deregulatory in nature and would impose no additional
regulatory requirements or costs. Therefore, it has been determined
that this proposed action is not a ``significant regulatory action''
under the terms of Executive Order 12866 and is therefore not subject
to OMB review.
Based on the fact that this action is deregulatory in nature and
would impose no regulatory requirements or costs, pursuant to section
605(b) of the Regulatory Flexibility Act, the Administrator certifies
that this action will not have a significant economic impact on a
substantial number of small entities. EPA has determined that this
action does not contain a Federal mandate that may result in
expenditures of $100 million or more for state, local and tribal
governments, in the aggregate, or to the private sector in any one
year. EPA has also determined that this action contains no regulatory
requirements that might significantly or uniquely affect small
governments. Thus, today's action is not subject to the requirements of
sections 202, 203 and 205 of the UMRA.
This proposed rule does not impose any requirement subject to the
Paperwork Reduction Act.
List of Subjects in 40 CFR Part 131
Environmental protection, Water pollution control, Water quality
standards.
Dated: May 14, 1997.
Carol M. Browner,
Administrator.
For the reasons set out in the preamble, title 40, chapter I, part
131 of the Code of Federal Regulations is proposed to be amended as
follows:
PART 131--WATER QUALITY STANDARDS
1. The authority citation for part 131 continues to read as
follows:
Authority: 33 U.S.C. 1251 et seq.
Sec. 131.36 [Amended]
2. In Sec. 131.36(d)(12)(ii) the table is amended under the heading
``Applicable Criteria'', in the entry for ``Column D1'' and three
entries for
[[Page 27710]]
``Column D2'' by removing the number ``2'' from the list of numbers.
[FR Doc. 97-13325 Filed 5-20-97; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 97-13322 National Emission Standards for Hazardous Air Pollutants, Proposed Rule for Pharmaceuticals Production
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Page 27707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13322]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 63
[AD-FRL-5828-4]
National Emission Standards for Hazardous Air Pollutants,
Proposed Rule for Pharmaceuticals Production
AGENCY: U.S. Environmental Protection Agency (U.S. EPA).
ACTION: Extension of public comment period.
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SUMMARY: The EPA is announcing the extension of the public comment
period on the proposed national emission standards for hazardous air
pollutants (NESHAP) for pharmaceuticals production (62 FR 15754), which
was published on April 2, 1997.
DATES: Written comments must be received on or before July 2, 1997.
ADDRESSES: Submit comments in duplicate if possible to: Air Docket
Section (LE-131), Attention: Docket No. A-96-03, U.S. Environmental
Protection Agency, 401 M Street, SW, Washington, DC 20460. The EPA
requests that separate copies be sent to the appropriate contact person
listed below. The docket may be inspected at the above address between
8:00 a.m. and 5:30 p.m. on weekdays, and a reasonable fee may be
charged for copying.
FOR FURTHER INFORMATION CONTACT: For information concerning the NESHAP,
contact Mr. Randy McDonald at (919)541-5402, Organic Chemicals Group,
Emission Standards Division (MD-13), U.S. Environmental Protection
Agency, Research Triangle Park, NC 27711. For information concerning
the effluent limitation guideline pretreatment standards or new source
performance standards, contact Dr. Frank Hund at (202) 260-7786,
Engineering and Analysis Division (4303), U.S. Environmental Protection
Agency, 401 M Street SW., Washington, DC 20406.
SUPPLEMENTARY INFORMATION: In response to a request from the
Pharmaceutical Research and Manufacturers of America (PhRMA), EPA is
extending the public comment period on the proposed standards from June
2, 1997 to July 2, 1997. The EPA agrees with PhRMA that an extension of
the comment period will provide for more meaningful, constructive
comments on the proposed rule. Having extended the comment period, EPA
nonetheless encourages commenters to submit their comments (or as many
of their comments as possible) before July 2; this would assist EPA in
its considerations of the issues raised. Because the EPA has continued
during the comment period to examine the issues outlined in the
solicitation of comments section in the preamble of the proposed rule,
EPA does not believe the extension of the comment period will disrupt
the Agency's schedule for promulgating this regulation.
List of Subjects in 40 CFR Part 63
Environmental protection, Air pollution control, Hazardous
substances, Reporting and recordkeeping requirements.
Dated: May 14, 1997.
Richard Wilson,
Acting Assistant Administrator for Air and Radiation.
[FR Doc. 97-13322 Filed 5-20-97; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 97-13304 Financial Crimes Enforcement Network; Proposed Amendment to the Bank Secrecy Act RegulationsDefinition and Registration of Money Services Businesses
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27890-27900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13304]
[[Page 27889]]
_______________________________________________________________________
Part V
Department of the Treasury
_______________________________________________________________________
31 CFR Part 103
Financial Crimes Enforcement Network; Bank Secrecy Act Regulations;
Proposed Rules
Federal Register / Vol. 62, No. 98 / Wednesday, May 21, 1997 /
Proposed Rules
[[Page 27890]]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA09
Financial Crimes Enforcement Network; Proposed Amendment to the
Bank Secrecy Act Regulations--Definition and Registration of Money
Services Businesses
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing to amend the regulations implementing the statute generally
referred to as the Bank Secrecy Act to require certain money services
businesses to register with the Department of the Treasury and to
maintain a current list of their agents for examination, on request, by
any appropriate law enforcement agency. As a corollary to the proposed
registration requirement, FinCEN is also proposing to amend the Bank
Secrecy Act regulations to revise, and group together in a separate
category called ``money services businesses,'' the definitions of
certain non-bank financial institutions. The revised definitions would
also modify the treatment of the United States Postal Service under the
regulations. The proposed rule regarding registration and maintenance
of an agent list reflects changes to the law made by the Money
Laundering Suppression Act of 1994.
DATES: Written comments on all aspects of the proposal are welcome and
must be received on or before August 19, 1997.
ADDRESSES: Written comments should be submitted to: Office of Legal
Counsel, Financial Crimes Enforcement Network, Department of the
Treasury, 2070 Chain Bridge Road, Vienna, VA 22182, Attention: NPRM--
MSB Registration. Comments also may be submitted by electronic mail to
the following Internet address: ``[email protected]'' with
the caption, in the body of the text, ``Attention: NPRM--MSB
Registration.'' For additional instructions on the submission of
comments, see SUPPLEMENTARY INFORMATION under the heading ``Submission
of Comments.''
Inspection of comments: Comments may be inspected at the Department
of the Treasury between 10 a.m. and 4 p.m., in the FinCEN reading room,
on the third floor of the Treasury Annex, 1500 Pennsylvania Avenue,
NW., Washington, DC 20220. Persons wishing to inspect the comments
submitted should request an appointment by telephoning (202) 622-0400.
FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director, and
Charles Klingman, Financial Institutions Policy Specialist, FinCEN, at
(703) 905-3920; Stephen R. Kroll, Legal Counsel, Joseph M. Myers,
Deputy Legal Counsel, Cynthia L. Clark, on detail to the Office of
Legal Counsel, Albert R. Zarate, Attorney-Advisor, and Eileen P. Dolan,
Legal Assistant, Office of Legal Counsel, FinCEN, at (703) 905-3590.
SUPPLEMENTARY INFORMATION:
I. Introduction
This document proposes a rule that would amend 31 CFR part 103 to
require money services businesses to register with the Department of
the Treasury and, as part of the registration requirement, to maintain
a current list of their agents in a central location for examination by
appropriate law enforcement agencies. Money services businesses
generally include businesses that provide check cashing, currency
exchange, or money transmitting services, or that issue or redeem money
orders, traveler's checks, or other similar instruments. The proposed
rule would implement the terms of 31 U.S.C. 5330, which was added to
the Bank Secrecy Act by section 408 of the Money Laundering Suppression
Act of 1994 (the ``Money Laundering Suppression Act''), Title IV of the
Riegle Community Development and Regulatory Improvement Act of 1994,
Public Law 103-325 (September 23, 1994).
In addition, this document proposes to amend 31 CFR part 103 by
revising the definition of financial institution in 31 CFR 103.11. The
revised definition would make changes to the term ``United States
Postal Service'' and would add a new term, ``money services business,''
under which would be grouped the types of businesses required to
register under the proposed rule (replacing and revising the present
definitions of those businesses in 31 CFR 103.11(n)).
Finally, this document proposes to revise the structure of 31 CFR
part 103. Under the new structure, subparts D through F would be
redesignated as subparts E through G, respectively. A new subpart D,
Special Rules for Money Services Businesses, would be added. The
sections in redesignated subparts E through G would also be
redesignated to reflect the addition of new subpart D, and
corresponding changes would be made to the references to such
redesignated sections in other portions of part 103.
II. Background
A. Statutory Provisions
The statute generally referred to as the ``Bank Secrecy Act,''
Titles I and II of Public Law 91-508, as amended, codified at 12 U.S.C.
1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330 authorizes the
Secretary of the Treasury, inter alia, to require financial
institutions to keep records and file reports that are determined to
have a high degree of usefulness in criminal, tax, and regulatory
matters, and to implement counter-money laundering programs and
compliance procedures. Regulations implementing Title II of the Bank
Secrecy Act (codified at 31 U.S.C. 5311-5330), appear at 31 CFR part
103. The authority of the Secretary to administer the Bank Secrecy Act
has been delegated to the Director of FinCEN.
Under 31 U.S.C. 5330, any person who owns or controls a money
services business (which the statute refers to as a ``money
transmitting business'' 1), whether or not the business is
licensed as a money services business in any State, must register the
business with the Secretary of the Treasury. 31 U.S.C. 5330(a). (A
money services business required to be registered under 31 U.S.C. 5330
remains subject to any State law requirements relating to the operation
of the business in the State.) The form and manner of registration must
be prescribed by regulations.
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\1\ The statute uses the term ``money transmitting business''
to name those businesses subject to registration. See 31 U.S.C. 5330
(a)(1) and (d)(1). However, FinCEN believes that the statute's use
of this term to refer to all the types of businesses subject to
registration and its later use of the nearly identical term ``money
transmitting service'' to refer to a particular type of business
subject to registration, compare 31 U.S.C. 5330(d)(1)(A) with 31
U.S.C. 5330(d)(2), may lead to confusion. Therefore, FinCEN has
adopted the term ``money services business'' in place of the term
``money transmitting business'' throughout this document and uses
the same terminology in the other rules it is proposing today.
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The purpose of the registration requirement is to assist
supervisory and law enforcement agencies in the enforcement of
criminal, tax, and regulatory laws and to prevent money services
businesses from engaging in illegal activities. See, section 408(a),
Public Law 103-325. In requiring the registration of money services
businesses, Congress recognized that such businesses are largely
unregulated and are frequently used in sophisticated schemes to
transfer large amounts of money that are the proceeds of unlawful
enterprises and to evade the requirements of Title II of the Bank
Secrecy Act, the Internal Revenue Code of 1986, and other laws of the
United
[[Page 27891]]
States. Congress also found that information on the identity of money
services businesses and the names of the persons who own or control, or
are officers or employees of, a money services business would have a
high degree of usefulness in criminal, tax, or regulatory
investigations and proceedings. Id.
The statute defines a money services business 2 as any
business, other than the United States Postal Service, that is required
to file reports under 31 U.S.C. 5313 and that provides check cashing,
currency exchange, or money transmitting or remittance
services,3 or issues or redeems money orders, traveler's
checks or other similar instruments. 31 U.S.C. 5330(d)(1). Depository
institutions (as defined in 31 U.S.C. 5313(g)), however, are not money
services businesses for purposes of the registration requirement. 31
U.S.C. 5330(d)(1)(C).
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\2\ Again, the statutory term is ``money transmitting
business,'' for which the term ``money services business'' is being
substituted by FinCEN. See footnote 1, supra.
\3\ Section 5330(d)(2) provides that the term ``money
transmitting service'' includes accepting currency or funds
denominated in the currency of any country and transmitting the
currency or funds, or the value of the currency or funds, by any
means through a financial agency or institution, a Federal Reserve
Bank or other facility of the Board of Governors of the Federal
Reserve System, or an electronic funds transfer network.
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Section 5330 requires the Secretary of the Treasury to issue
regulations treating certain agents of a money services business as
money services businesses for purposes of section 5330. 31 U.S.C.
5330(c)(2). Those regulations must establish a threshold, based on
criteria the Secretary determines to be appropriate, for treating an
agent as a registrable money services business.
Under section 5330, a money services business must be registered
not later than the end of the 180-day period beginning on the later of
the date of enactment of the Money Laundering Suppression Act of 1994
(September 23, 1994), and the date on which the business is
established. 31 U.S.C. 5330(a). On May 18, 1995, FinCEN issued a notice
explaining that regulations prescribing the form and manner of
registration would not require initial registration of money services
businesses before the 90th day following the effective date of the
implementing regulations. FinCEN Notice 95-1. The notice further
explained that no penalty or other compliance sanction would be imposed
under the provisions of the Bank Secrecy Act on account of the failure
of any money services business to register before the last date for
initial registration specified by regulation.
Section 5330 specifies the information that must be included as
part of the registration. 31 U.S.C. 5330(b). The required information
is--
(1) The name and location of the business;
(2) The name and address of each person who owns or controls the
business, is a director or officer of the business, or otherwise
participates in the conduct of the affairs of the business;
(3) The name and address of any depository institution at which the
business maintains a transaction account (as defined in section
19(b)(1)(C) of the Federal Reserve Act);
(4) An estimate of the volume of business in the coming year, which
shall be reported annually to the Secretary; and
(5) Such other information as the Secretary of the Treasury may
require.
Under section 5330, a money services business must maintain a list
containing the names and addresses of its agents and such other
information about the agents as the Secretary may require. 31 U.S.C.
5330(c). Section 5330 requires a money services business to make the
list available on request to any appropriate law enforcement agency.
Section 5330 prescribes a civil penalty for any person who fails to
comply with any requirement of 31 U.S.C. 5330 or the regulations
thereunder. The penalty is $5,000 for each violation; each day a
violation of 31 U.S.C. 5330 or the regulations thereunder continues
constitutes a separate violation. 31 U.S.C. 5330(e).
A failure to comply with 31 U.S.C. 5330 or the regulations under
section 5330 may also result in a criminal penalty under 18 U.S.C.
1960. See the discussion of proposed 31 CFR 103.41(e), below.
B. Money Services Businesses--General
This is the first of a set of three notices of proposed rulemaking
being published in this separate part of the Federal Register that deal
with the application of the Bank Secrecy Act to money services
businesses. In proposing these rules, FinCEN and the Department of the
Treasury are not only following the mandate of Congress in the Money
Laundering Suppression Act and the Annunzio-Wylie Anti-Money Laundering
Act, Title XV of the Housing and Community Development Act of 1992,
Public Law 102-550, but are more generally responding to the need to
update and more carefully tailor the application of the Bank Secrecy
Act to a major, if little understood, part of the financial sector in
the United States.4
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\4\ The Congress has long-recognized the need generally to
address problems of abuse by money launderers of ``non-bank''
financial institutions. See, e.g., Permanent Subcommittee on
Investigations, Senate Comm. on Governmental Affairs, Current Trends
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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``Money services business'' is a newly-coined term that refers to
five distinctive types of financial services providers: currency
dealers or exchangers; check cashers; issuers of traveler's checks,
money orders, or stored value; sellers or redeemers of traveler's
checks, money orders, or stored value; and money transmitters. (The
five types of financial services are complementary and are often
provided together at a common location.) These businesses are quite
numerous; based on a study performed for FinCEN by Coopers & Lybrand,
L.L.P., they comprise approximately 158,000 5 outlets or
selling locations, and provide financial services involving
approximately $200 billion annually. To a significant extent, the
customer base for such businesses lies in that part of the population
that does not use, either in whole or in part, traditional financial
institutions, primarily banks.
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\5\ The number does not include Post Offices (which sell money
orders), participants in stored value product trials, or sellers of
various stored value or smart cards in use in, e.g., public
transportation systems.
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Money services businesses, like banks, can be large or small. It is
estimated that approximately eight business enterprises account for the
bulk of money service business financial products (that is, money
transmissions, money orders, traveler's checks, and check cashing and
currency exchange availability) sold within the United States, and also
account, through systems of agents, for the bulk of locations at which
these financial products are sold. Members of this first group include
large firms, with significant capitalization, that are publicly traded
on major securities exchanges.
A far larger group of (on average) far smaller enterprises compete
with the eight largest firms in a highly bifurcated market for money
services. In some cases, these small enterprises are based in one
location with two to four employees. Moreover, the members of this
second group may provide both financial services and unrelated products
or services 6 to the same sets of customers. Far less is
known about this
[[Page 27892]]
second tier of firms than about the major providers of money service
products.7
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\6\ E.g., as a travel agency, courier service, convenience
store, grocery or liquor store.
\7\ For example, according to the Coopers & Lybrand study, two
money transmitters and two traveler's check issuers make up
approximately 97 percent of their respective known markets for non-
bank money services. Three enterprises make up approximately 88
percent of the $100 billion in money orders sold annually (through
approximately 146,000 locations). The retail foreign currency
exchange sector is somewhat less concentrated, with the top two non-
bank market participants accounting for 40 percent of a known market
that accounts for $10 billion. Check cashing is the least
concentrated of the business sectors; the two largest non-bank check
cashing businesses make up approximately 20 percent of the market,
with a large number of competitors.
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Because money services businesses primarily serve individuals, they
have grown to provide a set of financial products, albeit in large part
for non-depository customers, that others look to banks to provide. For
example, a money services business customer who receives a paycheck can
take his check to a check casher to have it converted to cash. He can
then purchase money orders to pay his bills. Finally, he may choose to
send funds to relatives abroad, using the services of a money
transmitter.
III. Section-by-Section Analysis
A. Definitions.
1. 31 CFR 103.11(n)(3)--Definition of financial institution to
include ``money services business''. This proposed section adds a new
category called ``money services business'' to the definition of
financial institution. This new category collects, with revisions
discussed below, the financial institutions now defined at 31 CFR
103.11(n) (3), (4), (5), and (9). The change will permit these
institutions to be referred to, when necessary, by one convenient term.
FinCEN believes this restructuring of the definition of financial
institution will clarify, and facilitate flexibility in the
administration of, the Bank Secrecy Act regulations. (As a result of
this restructuring, current 31 CFR 103.11(n) (3), (4), (5), and (9)
will be deleted, and current 31 CFR 103.11(n) (6), (7), and (8) will be
redesignated as 31 CFR 103.11(n) (4), (5), and (6)).
2. 31 CFR 103.11(uu)--Definition of money services business. This
proposed section defines money services business. The term includes
each agent, agency, branch, or office within the United States of any
person doing business, whether or not on a regular basis or as an
organized business concern, in one or more of the capacities listed in
(1)-(6) below. (It should be noted that only one registration form per
money services business is required.)
(1) Currency dealer or exchanger. A currency dealer or exchanger
(other than a person who does not exchange currency in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day).
(2) Check casher. A person engaged in the business of cashing
checks (other than a person who does not cash checks in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day).
Proposed 31 CFR 103.11 (uu)(1) and (uu)(2) would replace the
definition of financial institution in existing 31 CFR 103.11(n)(3);
that section is proposed to be broken into two sections, one dealing
with currency dealers or exchangers 8 and one dealing with
check cashers, for ease of reference. In addition, unlike existing 31
CFR 103.11(n)(3), which contains no dollar floor, proposed 31 CFR
103.11 (uu)(1) and (uu)(2) generally treat currency dealers or
exchangers and check cashers as financial institutions only if they
engage in transactions involving more than $500 for any person any day.
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\8\ This document would retain the definition of currency dealer
or exchanger at 31 CFR 103.11(i). FinCEN specifically invites
comments on whether the definition at 31 CFR 103.11(i) is still
necessary for its carve out of banks from the recordkeeping
requirements of 31 CFR 103.37.
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The addition of explicit floors in the definitions relating to
currency exchange and check cashing businesses is proposed in an
attempt to eliminate from Bank Secrecy Act treatment those businesses,
such as grocery stores and hotels, that cash checks or exchange
currency as an accommodation to customers who are otherwise purchasing
goods, services, or lodging from the businesses involved. (Of course,
exceeding the threshold has other, more immediate consequences if the
amounts involved are sufficiently high to implicate particular Bank
Secrecy Act reporting or recordkeeping thresholds.) Treasury invites
comments on the appropriateness of the proposed $500 floor.
In determining whether the $500 floor is met in the case of a
particular definition, different money services provided by the same
business are not aggregated. Thus, for example, a hotel that limits its
check cashing services to $250 for a customer on any day and limits its
currency exchange services to $300 for a customer on any day does not
meet the $500 floor for check cashers or for currency exchangers.
(3) Issuer of traveler's checks, money orders, or stored value. An
issuer of traveler's checks or money orders or stored value or similar
instruments (other than a person who does not issue such checks or
money orders or stored value or similar instruments in an amount
greater than $500 in currency or monetary or other negotiable
instruments to any person any day).
Proposed 31 CFR 103.11(uu)(3) would replace the treatment of money
order and traveler's check businesses in existing 31 CFR 103.11(n)(4).
The definition of issuer of traveler's checks or money orders has been
separated from the definition of seller or redeemer of traveler's
checks or money orders in the proposed regulations, for ease of
reference. In addition, unlike existing 31 CFR 103.11(n)(4), which
contains no dollar floor for an issuer, the proposed definition
generally treats an issuer of traveler's checks or money orders as a
financial institution only if it engages in transactions involving more
than $500 for any person any day.
(4) Seller or redeemer of traveler's checks, money orders, or
stored value. A seller or redeemer of traveler's checks or money orders
or stored value or similar instruments (other than a person who does
not sell or redeem such checks or money orders or stored value or
similar instruments in an amount greater than $500 in currency or
monetary or other negotiable instruments to (or in the case of
redemption, for) any person any day).
The $500 floor in proposed 31 CFR 103.11(uu)(4) is designed to
replace the definitional floor (of $150,000 sold in instruments per 30-
day period) for selling agents in present 31 CFR 103.11(n)(4). The
$150,000 limitation produces a great deal of unnecessary complexity
(dealing with the movement of particular businesses into or out of the
scope of the Bank Secrecy Act) and does not, in FinCEN's view, any
longer provide a meaningful threshold for distinguishing between
businesses that ought to, and that need not, incorporate appropriate
Bank Secrecy Act rules into their operations (or the operations they
undertake on behalf of their principals). The definition in proposed 31
CFR 103.11(uu)(4) extends to ``redeemers'' of money orders and
traveler's checks only insofar as the instruments involved are redeemed
for monetary value--that is, for currency or monetary or other
negotiable instruments. The taking of the instruments in exchange for
goods or services is not a redemption for purposes of these rules.
(See, however, 26 CFR 1.6050I-1(c)(1)(ii)(B) for situations in which
certain traveler's checks or money orders (among other instruments) may
be treated as currency, if taken in exchange for certain goods or
services, for purposes of the requirement that non-financial
[[Page 27893]]
businesses report transactions in currency in excess of $10,000.)
(5) Money transmitter. (i) Any person, whether or not licensed or
required to be licensed, who accepts currency, or funds denominated in
currency, and transmits the currency or funds, or the value of the
currency or funds, by any means through a financial agency or
institution, a Federal Reserve Bank or other facility of the Board of
Governors of the Federal Reserve System, or an electronic funds
transfer network, or
(ii) Any other person engaged as a business in the transfer of
funds.
Proposed 31 CFR 103.11(uu)(5) revises the definition in existing 31
CFR 103.11(n)(5), which simply treats as a financial institution ``a
licensed transmitter of funds, or other person engaged in the business
of transmitting funds.'' The substitute definition proposed is that of
the registration statute for a ``money transmitting service,'' expanded
to include ``any other person engaged as a business in the transfer of
funds.'' See 31 U.S.C. 5330(d)(2).9 Particular classes or
subclasses of money transmitters can be excluded from the operation of
the definition for particular substantive rules (as for example the
rule proposed today relating to the reporting of suspicious activities
by money transmitters excludes from its coverage sellers or
transmitters of stored value or other advanced electronic payment
system products).
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\9\ The term ``money transmitter'' in proposed 31 CFR
103.11(uu)(5) is not necessarily synonymous with the term
``transmittor's financial institution'' in existing 31 CFR
103.11(mm). As explained above, the term money transmitter follows
the statutory definition of money transmitter in 31 U.S.C.
5330(d)(2), with one change, designed to flesh out the statutory
phrase ``money transmitting or remittance services.'' The term
``transmittor's financial institution'' in existing 31 CFR
103.11(mm) was designed with a narrower purpose in mind--``to
preserve as much uniformity as possible'' between the special rules
for recordkeeping for wire transfers and the language of Article 4A
of the Uniform Commercial Code. See 60 FR 220 (January 3, 1995).
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FinCEN recognizes that the statutory definition is very broad and
can encompass activities far beyond the traditional enterprises thought
of popularly as money transmitters. For example, financial and other
professionals that control the management of funds for their principals
may in certain cases be money transmitters under the definition. Thus,
Treasury specifically invites comments about whether it is necessary or
appropriate specifically to exclude certain activities from the scope
of registration of money services businesses (and perhaps as well from
the definition of money transmitter for purposes of the Bank Secrecy
Act regulations generally).
(6) United States Postal Service. The United States Postal Service,
except with respect to the sale of postage or philatelic products.
This proposed parargraph revises the part of the definition of
financial institution concerning the United States Postal Service,
currently at 31 CFR 103.11(n)(9). Unlike the current regulation, which
treats the United States Postal Service as a financial institution only
with respect to the sale of money orders, the proposed rule would treat
the Postal Service as a financial institution with respect to its
provision of any money services products.
3. 31 CFR 103.11(vv)--Definition of stored value. This proposed
section defines stored value as funds or monetary value represented in
digital electronics format (whether or not specially encrypted) and
stored or capable of storage on electronic media in such a way as to be
retrievable and transferable electronically.
The inclusion in the rule of a specific definition of ``stored
value'' and the cross-references to the stored value definition in the
language of the definition of ``money services business'' is the first
step in the characterization of stored value and other advanced
electronic payment system products for purposes of the Bank Secrecy
Act. The Department of the Treasury believes that stored value products
are generally comprehended within the statutory reference to other
instruments ``similar'' to money orders and traveler's checks and that
businesses that operate systems that permit the transmission of stored
value or other electronic representations of funds are comprehended
within the statutory definition of money transmitting services, see 31
U.S.C. 5330(d)(2), which is carried over into the regulatory definition
of money transmitter in proposed 31 CFR 103.11(uu)(5).10
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\10\ It should be clearly understood that the treatment of
stored value and similar products as instruments ``similar'' to
money orders and traveler's checks for purposes of the operation of
31 U.S.C. 5330 is solely a matter of federal law and cannot be taken
as the expression of any view by the Department of the Treasury on
the issue whether particular money services businesses are (or,
indeed, should be) within the scope of state laws requiring the
registration of money transmitters, check cashers, currency exchange
businesses, or issuers, sellers, or redeemers of money orders or
traveler's checks.
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Thus, under the proposed rule, most offerors of stored value
products and operators of other advanced electronic payment systems
would be treated as ``money services businesses'' for purposes of the
Bank Secrecy Act. To fail to deal in any manner with stored value
products and other such systems, in the context of a rule designed to
implement 31 U.S.C. 5330, would belie the importance of such systems,
would run contrary to the Congressional intent that the statutory term
``money transmitter'' be construed broadly, and would adopt yesterday's
concepts to tomorrow's issues.
The other proposed rules being published today dealing with money
services businesses do not affect advanced electronic payment systems.
The proposed suspicious activity reporting rules for money transmitters
and issuers, sellers, and redeemers of money orders and traveler's
checks specifically exclude stored value and similar products from the
scope of the reporting obligation at present; the difference in
treatment reflects the fact that the treatment of stored value and
similar systems in the money services business registration rule is
intended to constitute for the most part the beginning of the policy
cycle for determining the most effective way to deal with advanced
electronic payment systems under the Bank Secrecy Act.
Of course, the definitions in proposed 31 CFR 103.11(uu) apply for
all purposes under the Bank Secrecy Act, and thus the proposed language
would eliminate any lingering doubt that offerors and operators of
advanced electronic payments systems are subject to the Bank Secrecy
Act. That treatment could cause such persons to become subject to
existing Bank Secrecy Act requirements if, for example, they engaged in
transactions in currency in excess of $10,000, or initiated funds
transmittals of at least $3,000.
The Department of the Treasury naturally recognizes that as
mechanisms for the issuance or transmission of stored value or other
electronic representations of funds develop, the appropriateness of any
particular characterization for Bank Secrecy Act purposes may change.
It also recognizes that the characteristics of advanced electronic
payment systems may present special issues that need to be considered
as specific Bank Secrecy Act recordkeeping and reporting requirements
for such systems are formulated. Comments are specifically invited on:
1. The manner in which the rules of the Bank Secrecy Act should be
applied to advanced electronic payment systems;
2. The potential impact of Bank Secrecy Act compliance on the
design and operation of such systems
[[Page 27894]]
(including, if possible, estimates of costs); and
3. Whether products such as telephone cards (``closed system''
products), or products that are limited to facilitating very small
transactions (so-called ``micro'' transactions) should be treated
differently than other stored value products for purposes of the
registration requirements of the proposed rule.11
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\11\ Stored value systems may be loosely characterized as
``closed'' or ``open'' systems. In a purely closed system, the
stored value card is accepted only by a single merchant or entity
and operates as prepayment for specific goods and services, such as
public transportation or telephone calls. In contrast, an open
system permits stored value cards (issued by one or more issuers of
such cards) to be accepted by multiple merchants, or other
consumers, and operates as a general payment and value transfer
system. Certain arrangements--for example a university or stadium
card system that permits payments to multiple merchants within a set
geographic area--may contain aspects of both ``closed'' and ``open''
systems.
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B. Registration of Money Services Businesses
1. 31 CFR 103.41(a)(1)--Registration requirement; In general.
Proposed paragraph (a)(1) contains the requirement that a money
services business (whether or not licensed as a money services business
by any State) must register with the Department of the Treasury and, as
part of that registration, must maintain a list of its agents.
Proposed paragraph (a)(1) excludes from the registration and list
requirement the following persons: the United States Postal Service; a
depository institution (as defined in 31 U.S.C. 5313(g)); the United
States, any State or political subdivision of a State; or a broker or
dealer in securities or commodities (to the extent of such activities)
registered with, and regulated or examined by, the Securities and
Exchange Commission (SEC) or the Commodity Futures Trading Commission
(CFTC). Thus, for example, even though the United States Postal Service
is a money services business as defined in 31 CFR 103.11(uu), it is not
required to register as a money services business. Similarly, banks,
and brokers registered with the SEC under the Securities and Exchange
Act of 1934, are not required to register as such. However, if a bank
has a non-bank subsidiary or affiliate (e.g., a brother-sister
subsidiary owned by the bank's holding company) that itself engages in
a money services business (or a broker-dealer has a non-broker-dealer
affiliate that engages in a money services business), the affiliate
must register even though the bank (or broker-dealer) is not required
to register. FinCEN specifically invites comments on whether there are
other persons who should be excluded from the registration
requirements.
The information required to be included on the registration form
for a money services business and the agent list maintained by the
business may include privileged and confidential trade secrets,
commercial, and financial information. Congress has affirmed that
confidential proprietary or trade secret information provided by
registrants may be disclosed only subject to applicable law. H. R.
Conf. Rep. No. 652, 103d Cong., 2d Sess. 192-93 (1994). At the same
time, however, Congress recognized that some of the registration data
will have legitimate uses outside of law enforcement. Thus, Congress
has indicated that it intends that such latter information will be made
available to the public in a manner that balances the need to protect
confidential business information and the need of the public to have
access to information about businesses on which it relies. Id. at 193.
FinCEN specifically invites comments on how to make such information
available to the public in as much detail as possible without revealing
confidential business information.
2. 31 CFR 103.41(a)(2)--Agents treated as registrable money
services businesses. Proposed paragraph (a)(2) sets forth the threshold
(registration threshold) an agent must meet before it is itself treated
as a money services business that must independently register with the
Department of the Treasury and maintain a list of its own agents. The
registration threshold focuses on both the extent and the dollar amount
of the agent's money services business activities. An agent meets the
registration threshold if the agent satisfies any of the following four
paragraphs--
(i) The agent's primary business is a business described in 31 CFR
103.11(uu), and the agent's money services gross transaction amount is
more than $50,000 for any month;
(ii) The agent engages in more than one of the businesses described
in 31 CFR 103.11(uu) as an agent for one money services business, and
the agent's money services gross transaction amount is more than
$50,000 for any month;
(iii) The agent is an agent for more than one money services
business, and the agent's money services gross transaction amount is
more than $50,000 for any month; or
(iv) The agent has subagents, and the agent's money services gross
transaction amount is more than $50,000 for any month.
The money services gross transaction amount is the agent's combined
gross amount (excluding fees and commissions) received from
transactions in all its businesses described in 31 CFR 103.11(uu).
Thus, for example, if an agent sells a $600 money order, charging an
$18 fee and receiving a $6 commission on the sale, the agent's gross
transaction amount is $600. An agent is not required to compute a gross
transaction amount for any month beginning before the effective date of
the final regulations to which this notice of proposed rulemaking
relates are published in the Federal Register.
FinCEN realizes that the registration threshold, as proposed, may
require registration by certain agents, for example, grocery or retail
food stores, that have a high volume of transactions, none of which
individually exceeds the $500 floor in 31 CFR 103.11 (uu)(1)-(uu)(4)
that would cause the agent to be a money services business in its own
right under 31 CFR 103.11 (uu)(1)-(uu)(4). FinCEN specifically invites
comments on whether the registration threshold should include a floor
for individual transactions by these agents like the floor in 31 CFR
103.11 (uu)(1)-(uu)(4).
3. 31 CFR 103.41(b)(1)--Registration procedures in general.
Proposed paragraph (b)(1) provides that a money services business must
be registered by filing such form as FinCEN may specify with the
Detroit Computing Center of the Internal Revenue Service. The
information required by 31 U.S.C. 5330(b) and any other information
required by the form must be reported in the manner required by the
form.
A branch office or location or an agent of a money services
business is not required to file a registration form for the business,
except for agents treated as a money services business because they
meet the registration threshold. A money services business must,
however, report information about its branch locations or offices as
provided by the instructions to the registration form.
A money services business must retain a copy of any registration
form it files (and any registration number that the Detroit Computing
Center may assign to the business) at a central location in the United
States reported on the form and for the 5-year period specified in
Sec. 103.38(d).
4. 31 CFR 103.41(b)(2)--Registration period. Proposed paragraph
(b)(2) provides that after an initial registration period of two
calendar years (initial registration period), the registration must be
renewed every two years (renewal period). The initial registration
[[Page 27895]]
period is the two-calendar-year period beginning with the calendar year
in which the money services business is first required to be
registered. Each two-calendar-year period following the initial
registration period is a renewal period.
5. 31 CFR 103.41(b)(3)--Due date. Proposed paragraph (b)(3) sets
forth the due date for filing the registration form for the initial
registration period and each renewal period. For the initial
registration period, the registration form must be filed by the end of
the 180-day period beginning on the later of (i) the date on which the
final regulations to which this notice of proposed rulemaking relates
are published in the Federal Register, and (ii) the date the business
is established. In the case of an agent required to be registered under
this section, the registration form for the initial registration period
must be filed not later than the end of the 180-day period beginning on
the date the agent meets the registration threshold. The registration
form for a renewal period must be filed on or before the last day of
the calendar year preceding the renewal period.
6. 31 CFR 103.41(b)(4)--Special rule for agents treated as money
services businesses. Proposed paragraph (b)(4) clarifies that once an
agent meets the registration threshold, it must be registered for the
initial registration period and each renewal period, even if its money
services gross transaction amount later falls below $50,000.
7. 31 CFR 103.41(b)(5)--Events requiring re-registration. Proposed
paragraph (b)(5) requires a money services business to be re-registered
before the end of a registration period upon the occurrence of certain
events. Re-registration is required if the money services business
experiences a change in ownership or control that requires re-
registration under a State law registration program for money services
businesses, more than 10 per cent of its voting power or equity
interests is transferred, or the number of its agents increases by more
than 50 per cent during any registration period. The form for the re-
registration must be filed not later than 180 days after such change in
ownership, transfer of voting power or equity interests, or increase in
agents. The calendar year in which the change, transfer, or increase
occurs is treated as the first year of a new two-year registration
period.
8. 31 CFR 103.41(c)--Persons required to file registration form.
Proposed paragraph (c) provides that, as required by 31 U.S.C. 5330(a),
any person who owns or controls a money services business shares the
responsibility for seeing that the business is registered as required
by this rule. Only one registration form, however, is required to be
filed for each registration period. Proposed paragraph (c) further
provides that if more than one person owns or controls a money services
business, the owning or controlling persons may enter into an agreement
designating one of them to register the business. The failure of the
designated person to register the money services business does not,
however, relieve any of the other persons who own or control the
business of liability for the failure to register the business.
9. 31 CFR 103.41(d)(1)--List of agents; In general. Proposed
paragraph (d)(1) provides that a money services business must prepare
and maintain a list of its agents. Proposed paragraph (d)(1) then
explains the time and manner of preparing and maintaining the agent
list. The initial list of agents must be prepared by the time the
initial registration form is filed and must be revised each calendar
quarter to contain current information. The list is not filed with the
registration form but is maintained at the location in the United
States reported on the registration form. Upon request, a money
services business must make its list of agents available to FinCEN and
any other appropriate law enforcement agency (including, without
limitation, the examination function of the Internal Revenue Service in
its capacity as delegee of Bank Secrecy Act examination authority). The
original list of agents and any revised list must be retained for five
years, as specified in 31 CFR 103.38(d).
The proposed rule does not contain a specific definition of the
term ``agent'' for purposes of the money services business registration
rules, including the requirement that a list of agents be maintained by
each money services business as part of its registration requirement.
Instead the proposed rule speaks simply of a list of ``agents.''
Treasury understands that the relationships between money services
businesses and their outlets may take many forms, some of which reflect
traditional agency agreements while others are styled by the parties as
creating independent contractor or similar relationships for state law
purposes. Treasury intends that the concept of ``agent'' for the list
requirement should be as broad as the common law of agency would allow,
that is, it would extend to any relationship that would be deemed to
create obligations of principal and agent at common law. Thus, for
example, it is likely that virtually all independent contractor
arrangements for money services business--whatever their
characterization for employment law or income tax purposes--would be
treated as creating principal-agent relationships to define the
parameters of the rights, obligations, and direct and derivative
liabilities of the parties. See Restatement (Second) of Agency,
Sections 2(c) and 14N.
Distribution mechanism involving outlets other than agents. 31
U.S.C. 5330 speaks only of money services businesses and ``agents'' of
those businesses. Congress intended that the registration requirement
of the Money Laundering Suppression Act should be implemented in a
manner that eliminated the need for direct registration of all the
businesses--in many cases small businesses--through which money
services products created and backed by others are offered to the
public.12 Thus, FinCEN specifically invites comments on
whether, and how, the language of the proposed rule could be altered to
treat money services businesses in the distribution chain for financial
services products that are not technically agents within the meaning of
31 U.S.C. 5330 and the proposed regulations in the same manner as
agents for purposes of the registration requirements.
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\12\``The intent of the Conferees is to eliminate the need for
all agents of money transmitting businesses to register with the
Secretary. Such massive registration of thousands of agents would
only create another needless and costly administrative burden.''
H.R. Conf. Rep. No. 652, 103 Cong., 2d Sess. 193 (1994).
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10. 31 CFR 103.41(d)(2)--Information included on the list of
agents. Proposed paragraph (d)(2) sets forth the information with
respect to each agent that must be included on the list (including any
revised list) of agents. This information is--
(i) The name of the agent, including any trade names or doing-
business-as names,
(ii) The address of the agent, including street address, city,
state, and ZIP code,
(iii) The telephone number of the agent,
(iv) The type of service or services (sale or redemption of money
orders, traveler's checks, stored value, check sales, check cashing,
currency exchange, and money transmitting) the agent provides,
(v) The year in which the agent first became an agent of the money
services business,
(vi) The number of branches or subagents the agent has, and
(vii) The name and address of any depository institution at which
the
[[Page 27896]]
agent maintains a transaction account (as defined in 12 U.S.C.
461(b)(1)(C)) for all or part of the funds received in or for its money
services business whether in the agent's or principal's name.
11. 31 CFR 103.41(e)--Consequences of failing to comply with 31
U.S.C. 5330 or the regulations thereunder. Proposed paragraph (e)
explains that it is unlawful to do business without complying with 31
U.S.C. 5330 and the regulations thereunder, and that under 31 U.S.C.
5320, the Secretary of the Treasury may bring a civil action to enjoin
the violation. Proposed paragraph (e) also explains the penalties that
may be imposed for failing to comply with 31 U.S.C. 5330 or the
regulations thereunder. Any person who fails to comply with any
requirement of 31 U.S.C. 5330 or the regulations thereunder is liable
for a civil penalty. Such a failure includes the filing of false or
materially incomplete information in connection with the registration
of a money services business. The penalty is $5,000 for each violation;
each day a violation of 31 U.S.C. 5330 or the regulations thereunder
continues constitutes a separate violation.
A person may also be liable for a criminal penalty under 18 U.S.C.
1960 for operating a money services business without complying with the
registration requirements of 31 U.S.C. 5330 and regulations issued
thereunder. 18 U.S.C. 1960 provides in part that any person who
conducts, controls, manages, supervises, directs, or owns all or part
of a money transmitting business 13 knowing that the
business affects interstate or foreign commerce in any manner or degree
and that the business has failed to comply with the registration
requirements of 31 U.S.C. 5330 or the regulations thereunder is subject
to a fine, imprisonment for not more than five years, or both.
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\13\ As indicated above, this document, and the rules proposed
herein and in the related notices of proposed rulemaking published
today, generally use the phrase ``money services business'' as the
equivalent of the definition of ``money transmitting business,'' in
31 U.S.C. 5330(d)(1)(A), in order to avoid confusion between the
latter phrase and the statutory definition of ``money transmitting
service,'' in 31 U.S.C. 5330(d)(2). In quoting the terms of 18
U.S.C. 1960(b)(1)(B), however, the text naturally uses the statutory
language.
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18 U.S.C. 1960 imposes penalties not only upon operating a money
transmitting business without compliance with the registration
requirements of 31 U.S.C. 5330 (and its implementing regulations), see
18 U.S.C. 1960(b)(1)(B), but also upon the knowing operation of such a
business without an appropriate money transmitting license in any state
in which operation without a license is a crime, see 18 U.S.C.
1960(b)(1)(A). References to 18 U.S.C. 1960 in this preamble, and in
proposed 31 CFR 103.41(e), naturally concern exclusively the
relationship of 31 U.S.C. 5330 to 18 U.S.C. 1960. That relationship,
and the meaning of the relevant terms of 31 U.S.C. 5330, of 18 U.S.C.
1960(b)(1)(B), and of the rules proposed by this document, are solely
matters of federal law. As also specifically noted in the discussion
above of stored value products and other advanced electronic payment
systems, the rules proposed by this document should not be taken as the
expression of any view by the Department of the Treasury on the issue
whether particular money services businesses are (or, indeed, should
be) within the scope of state laws requiring the registration of money
transmitters, check cashers, currency exchange businesses, or issuers,
sellers, or redeemers of money orders or traveler's checks.
12. 31 CFR 103.41(f)--Effective date. Proposed paragraph (f) would
make the regulations effective on [the date on which the final
regulations to which this notice of proposed rulemaking relates are
published in the Federal Register]. That publication date would start
the running of the 180-day period for filing the form for the initial
registration of a money services business.
IV. Submission of Comments
An original and four copies of any comment (other than one sent
electronically) must be submitted. All comments will be available for
public inspection and copying, and no material in any such comments,
including the name of any person submitting comments, will be
recognized as confidential. Accordingly, material not intended to be
disclosed to the public should not be submitted.
V. Regulatory Flexibility Act
FinCEN certifies that this proposed regulation will not have a
significant economic impact on a substantial number of small entities.
FinCEN anticipates that the provisions of the proposed rule generally
excluding agents of money services businesses from registration will
limit the impact of the proposed registration rule on small businesses.
Further, most of the recordkeeping and reporting requirements that
would be imposed by this proposed regulation concern information
already found in routine business records. For example, as part of
their business records, money services businesses (to the extent such
businesses are small entities) will generally have information needed
for the required agent list, such as the name and address of their
agents and agent transaction account information, because such
information is necessary to establish and maintain the relationship
between the businesses and their agents. In addition to recordkeeping
and reporting requirements, other requirements of the proposed
regulation may also be satisfied with information that is currently
available. For example, many businesses currently have policies in
place regarding the maximum dollar amount of a money service
transaction they will perform for a customer, such as the maximum check
the business will cash, which may help (assuming the policy is
observed) them determine whether they have exceeded the $500 floor in
several of the definitions in the proposed regulation. Further, agents
will generally have information currently available to help them
determine whether they meet the $50,000 element of the registration
threshold, for example, the monthly statement for the bank account they
maintain pursuant to agreement with the money services business for
which they are an agent.
VI. Paperwork Reduction Act Notices
Registration for Money Services Businesses
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information on the Registration for Money Services Businesses form is
presented to assist those persons wishing to comment on the information
collection.
FinCEN anticipates that this proposed rule, if enacted as proposed,
would result in a total of 25,000 Registration for Money Services
Businesses forms to be filed annually. This result is an estimate,
based on a projection of the size and volume of the industry.
Title: Registration for Money Services Businesses.
OMB Number: to be determined.
Description of Respondents: Money Services Businesses.
Estimated Number of Respondents: 25,000.
Frequency: Once every two years, or as required to be updated.
Estimate of Burden: Reporting average of 45 minutes per response;
recordkeeping average of 3 hours per response.
Estimate of Total Annual Burden on Respondents: 25,000 responses.
[[Page 27897]]
Reporting burden estimate = 18,750 hours; recordkeeping burden estimate
= 75,000 hours. Estimated combined total of 93,750 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$1,875,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: New.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
Recordkeeping Requirements of 31 CFR 103.41
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information as required by 31 CFR 103.41 is presented to assist those
persons wishing to comment on the information collection.
Title: Registration of Money Services Businesses.
OMB Number: 1506-0006.
Description of Respondents: Money Services Businesses.
Estimated Number of Respondents: 25,000.
Frequency: Once every two years, or as required.
Estimate of Burden: Recordkeeping average of 100 hours per Money
Service Business.
Estimate of Total Annual Burden on Respondents: Recordkeeping
burden estimate = 2,500,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$50,000,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: Extension.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
VII. Executive Order 12866
The Department of the Treasury has determined that this proposed
rule is not a significant regulatory action under Executive Order
12866.
VIII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act), March 22, 1995, requires that an agency
prepare a budgetary impact statement before promulgating a rule that
includes a federal mandate that may result in expenditure by state,
local and tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year. If a budgetary impact
statement is required, section 202 of the Unfunded Mandates Act also
requires an agency to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule. FinCEN has
determined that it is not required to prepare a written statement under
section 202 and has concluded that on balance this proposal provides
the most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Investigations, Law enforcement, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
Accordingly, 31 CFR part 103 is proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. Section 103.11 is amended by--
a. Removing paragraphs (n)(3), (n)(4), (n)(5), and (n)(9),
b. Adding a new paragraph (n)(3),
c. Redesignating paragraphs (n)(6), (n)(7), and (n)(8) as
paragraphs (n)(4), (n)(5), and (n)(6), respectively,
d. In newly redesignated paragraph (n)(6), removing ``;.'' and
adding a period in its place, and
e. Adding new paragraphs (uu) and (vv).
The added paragraphs read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(n) Financial institution. * * *
(3) A money services business as defined in paragraph (uu) of this
section.
* * * * *
(uu) Money services business. Each agent, agency, branch, or office
within the United States of any person doing business, whether or not
on a regular basis or as an organized business concern, in one or more
of the capacities listed as follows--
(1) Currency dealer or exchanger. A currency dealer or exchanger
(other than a person who does not exchange currency in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day);
(2) Check casher. A person engaged in the business of a check
casher (other than a person who does not cash checks in an amount
greater than $500 in currency or monetary or other negotiable
instruments for any person any day);
(3) Issuer of traveler's checks, money orders, or stored value. An
issuer of traveler's checks, money orders, stored value, or similar
instruments (other than a person who does not issue such checks or
money orders or stored value or similar instruments in an amount
greater than $500 in currency or monetary or other negotiable
instruments to any person any day);
(4) Seller or redeemer of traveler's checks, money orders, or
stored value. A
[[Page 27898]]
seller or redeemer of traveler's checks or money orders or stored value
or similar instruments (other than a person who does not sell or redeem
such checks or money orders or stored value or similar instruments in
an amount greater than $500 in currency or monetary or other negotiable
instruments to (or in the case of redemption, for) any person any day);
(5) Money transmitter. (i) Any person, whether or not licensed or
required to be licensed, who accepts currency, or funds denominated in
currency, and transmits the currency or funds, or the value of the
currency or funds, by any means through a financial agency or
institution, a Federal Reserve Bank or other facility of the Board of
Governors of the Federal Reserve System, or an electronic funds
transfer network; or
(ii) Any other person engaged as a business in the transfer of
funds; or
(6) United States Postal Service. The United States Postal Service,
except with respect to the sale of postage or philatelic products.
(vv) Stored value. Funds or monetary value represented in digital
electronics format (whether or not specially encrypted) and stored or
capable of storage on electronic media in such a way as to be
retrievable and transferable electronically.
3. Part 103 is further amended by redesignating the following
subparts and sections as follows--
Old Subparts and Sections
Subpart D
103.41
103.42
103.43
103.44
103.45
103.46
103.47
103.48
103.49
103.50
103.51
103.52
103.53
103.54
Subpart E
103.61
103.62
103.63
103.64
103.65
103.66
103.67
Subpart F
103.70
103.71
103.72
103.73
103.74
103.75
103.76
103.77
New Subparts and Sections
Subpart E
103.51
103.52
103.53
103.54
103.55
103.56
103.57
103.58
103.59
103.60
103.61
103.62
103.63
103.64
Subpart F
103.71
103.72
103.73
103.74
103.75
103.76
103.77
Subpart G
103.80
103.81
103.82
103.83
103.84
103.85
103.86
103.87
4. Add a new subpart D to Part 103 to read as follows:
Subpart D--Special Rules for Money Services Businesses
Sec.
103.41 Registration of money services businesses.
Subpart D--Special Rules for Money Services Businesses
Sec. 103.41 Registration of money services businesses.
(a) Registration requirement--(1) In general. Except as provided in
paragraph (a)(2) of this section, relating to agents, each money
services business (whether or not licensed as a money services business
by any State) must register with the Department of the Treasury and, as
part of that registration, maintain a list of its agents as required by
31 U.S.C. 5330 and this section. This section does not apply to the
United States Postal Service, to a depository institution as defined in
31 U.S.C. 5313(g), to the United States, any State or political
subdivision of a State, or to a person registered with, and regulated
or examined by, the Securities and Exchange Commission or the Commodity
Futures Trading Commission.
(2) Agents treated as money services businesses--(i) Registration
threshold. For purposes of this section, an agent of a money services
business is itself a money services business and is required to
register with the Department of the Treasury and maintain a list of its
agents only if the agent meets the registration threshold in this
paragraph (a)(2)(i). (See, however, Sec. 103.11(uu), which, for other
purposes of the Bank Secrecy Act, provides that an agent of a money
services business is a money services business whether or not the agent
meets the registration threshold.) An agent meets the registration
threshold if--
(A) The agent's primary business is a business described in
Sec. 103.11(uu), and the agent's money services gross transaction
amount is more than $50,000 for any month;
(B) The agent engages in more than one of the businesses described
in Sec. 103.11(uu) as an agent for one money services business, and the
agent's money services gross transaction amount is more than $50,000
for any month;
(C) The agent is an agent for more than one money services
business, and the agent's money services gross transaction amount is
more than $50,000 for any month; or
(D) The agent has subagents, and the agent's money services gross
transaction amount is more than $50,000 for any month.
(ii) Money services gross transaction amount. The money services
gross transaction amount is the agent's gross amount (excluding fees
and commissions) received from transactions by all its businesses
described in Sec. 103.11(uu). Thus, for example, if an agent sells a
$600 money order, charging an $18 fee and receiving a $6 commission on
the sale, the agent's gross transaction amount is $600.
(iii) Transition rule. An agent is not required to compute a money
services gross transaction amount for any month beginning before the
effective date in paragraph (f) of this section.
(b) Registration procedures--(1) In general. (i) A money services
business must be registered by filing such form as FinCEN may specify
with the Detroit Computing Center of the Internal Revenue Service. The
information required by 31 U.S.C. 5330(b) and any other information
required by the form must be reported in the manner required by the
form.
[[Page 27899]]
(ii) A branch office or location or an agent of a money services
business is not required to file a registration form for the business,
except for agents treated as a money services business under paragraph
(a)(2) of this section. A money services business must, however, report
information about its branch locations or offices as provided by the
instructions to the registration form.
(iii) A money services business must retain a copy of any
registration form filed under this section and any registration number
that the Detroit Computing Center may assign to the business at a
central location in the United States reported on the form and for the
period specified in Sec. 103.38(d).
(2) Registration period. A money services business must be
registered for the initial registration period and each renewal period.
The initial registration period is the two-calendar-year period
beginning with the calendar year in which the money services business
is first required to be registered. Each two-calendar-year period
following the initial registration period is a renewal period.
(3) Due date. The registration form for the initial registration
period must be filed not later than the end of the 180-day period
beginning on the later of [the date on which the final regulations to
which this notice of proposed rulemaking relates are published in the
Federal Register], or the date the business is established. In the case
of an agent required to be registered under this section, the
registration form for the initial registration period must be filed not
later than the end of the 180-day period beginning on the date the
agent meets the registration threshold. The registration form for a
renewal period must be filed on or before the last day of the calendar
year preceding the renewal period.
(4) Special rule for agents treated as money services businesses.
An agent treated as a money services business under paragraph (a)(2) of
this section must be registered during each renewal period, even though
its money services gross transaction amount falls below the
registration threshold after the agent's initial registration.
(5) Events requiring re-registration. If a money services business
registered as such under the laws of any State experiences a change in
ownership or control that requires the business to be re-registered
under State law, the money services business must also be re-registered
under this section. In addition, if more than 10 percent of the voting
power or equity interests of a money services business is transferred,
the money services business must be re-registered under this section.
Finally, if a money services business experiences a more than 50
percent increase in the number of its agents during any registration
period, the money services business must be re-registered under this
section. The registration form must be filed not later than 180 days
after such change in ownership, transfer of voting power or equity
interests, or increase in agents. The calendar year in which the
change, transfer, or increase occurs is treated as the first year of a
new two-year registration period.
(c) Persons required to file the registration form. Under 31 U.S.C.
5330(a), any person who owns or controls a money services business is
responsible for registering the business; however, only one
registration form is required to be filed for each registration period.
If more than one person owns or controls a money services business, the
owning or controlling persons may enter into an agreement designating
one of them to register the business. The failure of the designated
person to register the money services business does not, however,
relieve any of the other persons who own or control the business of
liability for the failure to register the business. See paragraph (e)
of this section, relating to consequences of the failure to comply with
31 U.S.C. 5330 or this section.
(d) List of agents--(1) In general. A money services business must
prepare and maintain a list of its agents. The initial list of agents
must be prepared by the time the initial registration form is filed and
must be revised each calendar quarter to contain current information.
The list is not filed with the registration form but must be maintained
at the location in the United States reported on the registration form
under paragraph (b)(1) of this section. Upon request, a money services
business must make its list of agents available to FinCEN and any other
appropriate law enforcement agency (including, without limitation, the
examination function of the Internal Revenue Service in its capacity as
delegee of Bank Secrecy Act examination authority). The original list
of agents and any revised list must be retained for the period
specified in Sec. 103.38(d).
(2) Information included on the list of agents. A money services
business must include the following information with respect to each
agent on the list (including any revised list) of its agents--
(i) The name of the agent, including any trade names or doing-
business-as names;
(ii) The address of the agent, including street address, city,
state, and ZIP code;
(iii) The telephone number of the agent;
(iv) The type of service or services (money orders, traveler's
checks, stored value, check sales, check cashing, currency exchange,
and money transmitting) the agent provides;
(v) The year in which the agent first became an agent of the money
services business;
(vi) The number of branches or subagents the agent has; and
(vii) The name and address of any depository institution at which
the agent maintains a transaction account (as defined in 12 U.S.C.
461(b)(1)(C)) for all or part of the funds received in or for its money
services business whether in the agent's or principal's name.
(e) Consequences of failing to comply with 31 U.S.C. 5330 or the
regulations thereunder. It is unlawful to do business without complying
with 31 U.S.C. 5330 and this section. A failure to comply with the
requirements of 31 U.S.C 5330 or this section includes the filing of
false or materially incomplete information in connection with the
registration of a money services business. Any person who fails to
comply with any requirement of 31 U.S.C. 5330 or this section shall be
liable for a civil penalty of $5,000 for each violation. Each day a
violation of 31 U.S.C. 5330 or this section continues constitutes a
separate violation. In addition, under 31 U.S.C. 5320, the Secretary of
the Treasury may bring a civil action to enjoin the violation. See 18
U.S.C. 1960 for a criminal penalty for failure to comply with the
registration requirements of 31 U.S.C. 5330 or this section.
(f) Effective date. This section is effective on [the date on which
the final regulations to which this notice of proposed rulemaking
relates are published in the Federal Register].
Sec. 103.36 [Amended]
5. Paragraph (b)(10) of Sec. 103.36 is amended by removing the
language ``Sec. 103.54(a)'' and adding the language ``Sec. 103.64(a)''
in its place.
Sec. 103.56 [Amended]
6. Paragraph (b)(7) of newly redesignated Sec. 103.56 is amended by
removing the language ``Sec. 103.48'' and adding the language
``Sec. 103.58'' in its place.
Sec. 103.57 [Amended]
7. Newly redesignated Sec. 103.57 is amended by:
[[Page 27900]]
a. In paragraph (d) removing the language ``Sec. 103.48'' and
adding the language ``Sec. 103.58'' in its place.
b. In the first sentence of paragraph (e) removing the language
``Sec. 103.53'' and adding the language ``Sec. 103.63'' in its place.
Sec. 103.72 [Amended]
8. Newly redesignated Sec. 103.72 is amended by removing the
language ``Sec. 103.61'' from the introductory text and adding the
language ``Sec. 103.71'' in its place.
Sec. 103.73 [Amended]
9. Newly redesignated Sec. 103.73 is amended by:
a. In paragraph (a) introductory text removing the language
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
b. In paragraph (a)(1) removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
c. In paragraph (b) introductory text removing the language
``Sec. 103.61'' and adding the language ``Sec. 103.71'' in its place.
d. In paragraph (b)(1) removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
Sec. 103.74 [Amended]
10. Newly redesignated Sec. 103.74 is amended by removing the
language ``Sec. 103.62'' from paragraph (a) and adding the language
``Sec. 103.72'' in its place.
Sec. 103.75 [Amended]
11. Newly redesignated Sec. 103.75 is amended by:
a. In the first sentence of paragraph (a) removing the language
``Sec. 103.62'' and adding the language ``Sec. 103.72'' in its place.
b. In paragraph (c) introductory text removing the language
``103.62(a)'' and adding the language ``103.72(a)'' in its place and
removing the language ``Sec. 103.62 (b) or (c)'' and adding the
language ``Sec. 103.72 (b) or (c)'' in its place.
Sec. 103.76 [Amended]
12. Newly redesignated Sec. 103.76 is amended by:
a. In the first sentence removing the language ``Sec. 103.62'' and
adding the language ``Sec. 103.72'' in its place.
b. In the second sentence removing the language ``Sec. 103.62(a)''
and adding the language ``Sec. 103.72(a)'' in its place.
Sec. 103.82 [Amended]
13. Newly redesignated Sec. 103.82 is amended by removing the
language ``Sec. 103.71'' from the first sentence and adding the
language ``Sec. 103.81'' in its place.
Sec. 103.83 [Amended]
14. Paragraph (b) of newly redesignated Sec. 103.83 is amended by:
a. In the first sentence removing the language ``Sec. 103.71'' and
adding the language ``Sec. 103.81'' in its place.
b. In the last sentence removing the language ``Sec. 103.71'' and
adding the language ``Sec. 103.81'' in its place.
Sec. 103.85 [Amended]
15. Newly redesignated Sec. 103.85 is amended by removing the
language ``Sec. 103.71'' from the first sentence and adding the
language ``Sec. 103.81'' in its place.
Sec. 103.86 [Amended]
16. Newly redesignated Sec. 103.86 is amended by:
a. In paragraph (a) introductory text removing the language
``Sec. 103.75'' and adding the language ``Sec. 103.85'' in its place.
b. In the second sentence of paragraph (b) removing the language
``Sec. 103.71'' and adding the language ``Sec. 103.81'' in its place.
Dated: May 16, 1997.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 97-13304 Filed 5-16-97; 4:32 pm]
BILLING CODE 4820-03-P
Complete official Federal Register PDF
FR Doc. 97-13303 Financial Crimes Enforcement Network; Proposed Amendment to the Bank Secrecy Act RegulationsRequirement of Money Transmitters and Money Order and Traveler's Check Issuers, Sellers, and Redeemers To Report Suspicious Transactions
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27900-27909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13303]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA20
Financial Crimes Enforcement Network; Proposed Amendment to the
Bank Secrecy Act Regulations--Requirement of Money Transmitters and
Money Order and Traveler's Check Issuers, Sellers, and Redeemers To
Report Suspicious Transactions
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing to amend the Bank Secrecy Act regulations to require money
transmitters, and issuers, sellers, and redeemers, of money orders and
traveler's checks, to report suspicious transactions involving at least
$500 in funds or other assets. The proposal is a further step in the
creation of a comprehensive system (to which banks are already subject)
for the reporting of suspicious transactions by financial institutions.
Such a system is a core component of the counter-money laundering
strategy of the Department of the Treasury.
DATES: Written comments on all aspects of the proposal are welcome and
must be received on or before August 19, 1997.
ADDRESSES: Written comments should be submitted to: Office of Legal
Counsel, Financial Crimes Enforcement Network, Department of the
Treasury, 2070 Chain Bridge Road, Vienna, Virginia 22182, Attention:
NPRM--Suspicious Transaction Reporting--Money Services Businesses.
Comments also may be submitted by electronic mail to the following
Internet address: ``[email protected]'' with the caption, in
the body of the text, ``Attention: NPRM--Suspicious Transaction
Reporting--Money Services Businesses.'' For additional instructions on
the submission of comments, see SUPPLEMENTARY INFORMATION under the
heading ``Submission of Comments.''
Inspection of comments. Comments may be inspected at the Department
of the Treasury between 10:00 a.m. and 4:00 p.m., in the FinCEN reading
room, on the third floor of the Treasury Annex, 1500 Pennsylvania
Avenue, NW., Washington, DC 20220. Persons wishing to inspect the
comments submitted should request an appointment by telephoning (202)
622-0400.
FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director, and
Charles Klingman, Financial Institutions Policy Specialist, FinCEN, at
(703) 905-3920; Stephen R. Kroll, Legal Counsel, Joseph M. Myers,
Deputy Legal Counsel, Albert R. Zarate, Attorney-Advisor, Cynthia L.
Clark, detailed to the Office of Legal Counsel of FinCEN, and Eileen P.
Dolan, Legal Assistant, Office of Legal Counsel, FinCEN, at (703) 905-
3590.
SUPPLEMENTARY INFORMATION:
I. Introduction
This document proposes to add a new section 103.20 to 31 CFR part
103, to require (i) money transmitters, (ii) issuers, sellers, and
redeemers of money orders, and (iii) issuers, sellers, and redeemers of
traveler's checks, to report to the Department of the Treasury any
suspicious transaction relevant to a possible violation of law or
regulation. The proposal would extend to these ``money services
businesses,'' which are part of the universe of financial institutions
subject to the Bank Secrecy Act, the suspicious transaction reporting
regime to which the nation's banks,
[[Page 27901]]
thrift institutions, and credit unions have been subject since April 1,
1996.1
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\1\ The suspicious transaction reporting rules for banks are
found at 31 CFR 103.21 (which this notice of proposed rulemaking
proposes to renumber as 31 CFR 103.18). The term bank, for purposes
of the Bank Secrecy Act regulations, includes all depository
institutions. See 31 CFR 103.11(c).
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II. Background
A. Statutory Provisions
The Bank Secrecy Act, Public Law 91-508, as amended, codified at 12
U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330, authorizes
the Secretary of the Treasury, inter alia, to issue regulations
requiring financial institutions to keep records and file reports that
are determined to have a high degree of usefulness in criminal, tax,
and regulatory matters, and to implement counter-money laundering
programs and compliance procedures. Regulations implementing Title II
of the Bank Secrecy Act (codified at 31 U.S.C. 5311-5330), appear at 31
CFR part 103. The authority of the Secretary to administer the Bank
Secrecy Act has been delegated to the Director of FinCEN.
The authority to require reporting of suspicious transactions is
contained in 31 U.S.C. 5318(g). That subsection was added to the Bank
Secrecy Act by section 1517 of the Annunzio-Wylie Anti-Money Laundering
Act (the ``Annunzio-Wylie Anti-Money Laundering Act''), Title XV of the
Housing and Community Development Act of 1992, Public Law 102-550; it
was expanded by section 403 of the Money Laundering Suppression Act of
1994 (the ``Money Laundering Suppression Act''), Title IV of the Riegle
Community Development and Regulatory Improvement Act of 1994, Public
Law 103-325, to require designation of a single government recipient
for reports of suspicious transactions.
The provisions of 31 U.S.C. 5318(g) deal with the reporting of
suspicious transactions by financial institutions subject to the Bank
Secrecy Act and the protection from liability to customers of persons
who make such reports. Subsection (g)(1) states generally:
The Secretary may require any financial institution, and any
director, officer, employee, or agent of any financial institution,
to report any suspicious transaction relevant to a possible
violation of law or regulation.
Subsection (g)(2) provides further:
A financial institution, and a director, officer, employee, or
agent of any financial institution, who voluntarily reports a
suspicious transaction, or that reports a suspicious transaction
pursuant to this section or any other authority, may not notify any
person involved in the transaction that the transaction has been
reported.
Subsection (g)(3) provides that neither a financial institution,
nor any director, officer, employee, or agent
that makes a disclosure of any possible violation of law or
regulation or a disclosure pursuant to this subsection or any other
authority * * * shall * * * be liable to any person under any law or
regulation of the United States or any constitution, law, or
regulation of any State or political subdivision thereof, for such
disclosure or for any failure to notify the person involved in the
transaction or any other person of such disclosure.
Finally, subsection (g)(4) requires the Secretary of the Treasury,
``to the extent practicable and appropriate,'' to designate ``a single
officer or agency of the United States to whom such reports shall be
made.'' 2 The designated agency is in turn responsible for
referring any report of a suspicious transaction to ``any appropriate
law enforcement or supervisory agency.'' Id., at subsection (g)(4)(B).
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\2\ This designation is not to preclude the authority of
supervisory agencies to require financial institutions to submit
other reports to the same agency or another agency ``pursuant to any
other applicable provision of law.'' 31 U.S.C. 5318(g)(4)(C).
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B. Importance of Suspicious Transaction Reporting in the Treasury's
Counter-Money Laundering Program
The Congressional mandate to require reporting of suspicious
transactions recognizes two basic points that are central to Treasury's
counter-money laundering and anti-financial crime programs. First, it
is to financial institutions that money launderers must go, either
initially or eventually. Second, the officials of those institutions
are more likely than government officials to have a sense as to which
transactions appear to lack commercial justification or otherwise
cannot be explained as falling within the usual methods of legitimate
commerce. Moreover, because money laundering transactions are designed
to appear legitimate in order to avoid detection, the creation of a
meaningful system for detection and prevention of money laundering is
impossible without the cooperation of financial institutions. Indeed,
many non-banks have come increasingly to recognize the increased
pressure that money launderers have come to place upon their operations
and the need for innovative programs of training and monitoring
necessary to counter that pressure.
The reporting of suspicious transactions is also a key to the
emerging international consensus on the prevention of money laundering.
One of the central recommendations of the Financial Action Task Force--
recently updated and reissued--is that:
If financial institutions suspect that funds stem from a
criminal activity, they should be required to report promptly their
suspicions to the competent authorities.
Financial Action Task Force Annual Report (June 28,
1996),3 Annex 1 (Recommendation 15). The recommendation,
which applies equally to money services businesses as to banks, revises
the original recommendation, issued in 1990, that required institutions
to be either ``permitted or required'' to make such reports. (Emphasis
supplied.) The revised recommendation makes clear the international
consensus that a mandatory suspicious transaction reporting system is
essential to an effective counter-money laundering program.
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\3\ The FATF is an inter-governmental body whose purpose is
development and promotion of policies to combat money laundering.
Originally created by the G-7 nations, its membership now includes
Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan,
Luxembourg, the Kingdom of the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, the United
Kingdom, and the United States, as well as the European Commission
and the Gulf Cooperation Council.
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Similarly, the European Community's Directive on prevention of the
use of the financial system for the purpose of money laundering calls
for member states to
ensure that credit and financial institutions and their directors
and employees cooperate fully with the authorities responsible for
combating money laundering * * * by [in part] informing those
authorities, on their own initiative, of any fact which might be an
indication of money laundering.
EC Directive, O.J. Eur. Comm. (No. L 166) 77 (1991), Article 6.
Accord, the Model Regulations Concerning Laundering Offenses Connected
to Illicit Drug Trafficking and Related Offenses of the Organization of
American States, OEA/Ser. P. AG/Doc. 2916/92 rev. 1 (May 23, 1992),
Article 13, section 2.4 All of these documents recognize the
importance of extending the counter-money laundering controls to ``non-
traditional'' financial institutions, not simply to banks, both to
ensure fair competition in the marketplace and to
[[Page 27902]]
recognize that non-banks as well as depository institutions are an
attractive mechanism for, and are threatened by, money launderers. See,
e.g., Financial Action Task Force Annual Report, supra, Annex 1
(Recommendation 8).
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\4\ The OAS reporting requirement is linked to the provision of
the Model Regulations that institutions ``shall pay special
attention to all complex, unusual or large transactions, whether
completed or not, and to all unusual patterns of transactions, and
to insignificant but periodic transactions, which have no apparent
economic or lawful purpose.'' OAS Model Regulation, Article 13,
section 1.
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C. Suspicious Transaction Reporting by Money Services Businesses
This notice of proposed rulemaking, the second of the notices of
proposed rulemaking being published in this separate part of the
Federal Register dealing with application of the Bank Secrecy Act to
money services businesses, would generally require money transmitters,
businesses issuing, selling, or redeeming money orders, and businesses
issuing, selling, or redeeming traveler's checks, to report suspicious
transactions to the Department of the Treasury.5 Money
services businesses have not in the past been the subject of the same
concentrated attention as banks in the administration of the Bank
Secrecy Act.6 The Annunzio-Wylie Anti-Money Laundering and
Money Laundering Suppression Acts were crafted by the Congress in
significant part to give the Treasury flexible tools to deal with non-
bank institutions, and today's notices of proposed rulemaking represent
an attempt by the Department of the Treasury to design Bank Secrecy Act
rules that address the problems encountered by law enforcement agents,
regulators, and money services businesses themselves, in fighting money
laundering in this part of the financial sector. The notice and its
timing reflect both the general course of Treasury's counter-money
laundering program and specific developments that indicate the need for
immediate extension of updated and appropriately-tailored Bank Secrecy
Act rules to money services businesses, especially to money
transmitters, but also to money order and traveler's check
services.7
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\5\ Readers of the discussion that follows may wish to refer to
the Notice of Proposed Rulemaking entitled ``Amendment to the Bank
Secrecy Act Regulations--Definition and Registration of Money
Services Businesses,'' for a general description of money services
businesses in the United States.
\6\ The placement of illegally-derived currency into the
financial system and the smuggling of such currency out of the
country remain two of the most serious issues facing financial law
enforcement efforts in the United States and around the world. But
banks, in cooperation with law enforcement agencies and federal and
state banking regulators, have responded in many positive ways to
the challenges posed by money laundering. It is now far more
difficult than in the past to pass large amounts of cash directly
into the nation's banks unnoticed and far easier to identify and
isolate those banks and officials still willing to assist or ignore
money launderers.
\7\ The Congress has long-recognized the need generally to
address problems of abuse by money launderers of ``non-bank''
financial institutions. See, e.g., Permanent Subcommittee on
Investigations, Senate Comm. on Governmental Affairs, Current Trends
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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It should be emphasized at the outset that, as in the case of the
nation's banks and securities firms, most money service business
operators and agents are completely law-abiding and as interested in
cost-effective financial law enforcement as the Treasury itself.
Money Transmitters. Since last August, a large group of money
transmitters (now 23 licensed transmitters and their approximately
3,200 agents) in the New York Metropolitan Area have been the subject
of a Geographic Targeting Order (the ``Order''), issued pursuant to 31
U.S.C. 5326 and 31 CFR 103.26, that is directed at the remission of
funds to Colombia.8 The original 60-day period of the Order
has been extended several times under the statutory rules, and the
Order is at present set to expire on June 2, 1997. The Order, first
directed against 12 money transmitters and 1,600 agents, was expanded
in October 1996 and again in April 1997.
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\8\ The Order was issued by Raymond W. Kelly, Under Secretary
(Enforcement) of the Department of the Treasury, in response to an
application from the United States Attorneys for the Eastern
District of New York, the Southern District of New York, and the
District of New Jersey, and senior officials of the Customs Service
and the Internal Revenue Service. (The statute allows such orders to
be issued either upon such a request, from an appropriate law
enforcement authority, or by the Treasury upon its own initiative.)
Issuance of an Order requires a finding, amply documented in this
case, that there is reason to believe that special reporting or
record keeping requirements are necessary to carry out the purposes,
or prevent evasions, of the Bank Secrecy Act.
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The Order requires daily reporting by agents of the 23 money
transmitters, and weekly reporting by their principals (i.e., state-
licensed money transmission companies), of information about the
senders and recipients of all money remittances of $750 or more to
Colombia paid for with currency or bearer monetary instruments, as well
as the reporting of any transactions or patterns of transactions that
appear suspicious. Special verification of identity rules for such
transactions are also imposed by the Order.
The Order was issued against a backdrop of several years of
intensive investigative work conducted by the Customs and Internal
Revenue Service-led El Dorado Task Force, which had uncovered
widespread laundering of narcotics funds within segments of the money
transmitter industry in New York. El Dorado agents have been able
repeatedly to show the complicity of money remitter agents in the
simple scheme of structuring of large cash transactions to evade the
existing Bank Secrecy Act reporting and recordkeeping obligations
applicable to such transactions, using, for example, false invoices and
fabricated identities of senders and recipients.9 One major
licensed money transmitter had itself pled guilty to money laundering
charges,10 and investigations of several other transmitters
and their agents were underway.11
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\9\ Over the years preceding the issuance of the Order, El
Dorado's ``Operation Wire Drill'' investigations led to the
conviction of 97 persons and the seizure and forfeiture of over $10
million associated with money laundering through the licensed money
transmitters.
\10\ United States v. Vigo Remittance Corp., No. 96-575 (J.S.)
(E.D.N.Y.) (July 24, 1996) (entry of plea). It is fair to note that
since its guilty plea, Vigo has sought to strengthen its Bank
Secrecy Act compliance measures significantly.
\11\ See, e.g., United States v. Remesas America Oriental, Inc.,
No. S1 96 Cr. 919 (TPG) (S.D.N.Y.).
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But a number of other factors also supported the Order's issuance.
Perhaps most strikingly, the New York area money transmitters' business
volume to Colombia was strikingly out of harmony with legitimate
demographic expectations: New York State Banking Department figures
indicated that the 12 originally targeted transmitters had been sending
approximately $1.2 billion annually to South America; about two thirds
of this amount, or approximately $800 million, went to Colombia. To
account for this figure, each of the approximately 25,500 Colombian
households in the New York area (earning an average gross annual income
of $27,000) would have had to send approximately $30,000 per year
through money transmitters to Colombia.
The Order almost immediately caused dramatic changes in the volume
and character of money transmissions, indicating a major reduction in
the amount of illicit funds moving through New York money
transmitters.12 Analysis of data generated by the Order is
ongoing, but the targeted money transmitters' business volume to
Colombia appears to have dropped approximately 30 percent. (Three of
the money transmitters subject to the Order have simply stopped sending
any funds to Colombia.) Most of the money that would in the past have
been placed abroad through the use of money transmission services
appears to have been physically removed from the New York Metropolitan
area, either for transfer through money transmitters operating in other
American cities, or for bulk smuggling out of the United States. The
change demonstrates
[[Page 27903]]
graphically both that narcotics money launderers have been extensively
abusing a segment of the relatively unsupervised money transmitter
industry, and that the underground market does respond to regulatory
and enforcement pressures.
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\12\ One money transmitter surrendered its license to the New
York State Banking Department upon being served with the Order.
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Ancillary results of the Order have also been significant. The
Treasury has observed a dramatic increase in Customs Service
interdiction and seizure activity at air and seaports, on common
carriers, and on highways--over $36 million during the first six months
of the Order's operation, a figure approximately four times higher than
for comparable periods in prior years.
Despite the Order, it is clear that a not insubstantial number of
money transmitter agents have been willing to structure transactions
beneath the Order's $750 reporting threshold, in an attempt to move
narcotics-tainted funds abroad even during a period of known
surveillance of the industry and its agents. (At the same time, at
least one money transmitter has itself worked with federal authorities
during this period to identify suspicious transactions, even those
involving its own agents.) The number of transactions in amounts below
$750 has risen sharply, and the amount of funds transferred to Colombia
in such increments appears to have almost doubled. The El Dorado Task
Force has already executed search warrants on 22 money transmitter
agents suspected of intentionally structuring transactions in violation
of the Order; all but five businesses served have closed, five people
have been indicted, and four people have already pleaded guilty. Three
additional arrest warrants are outstanding. The Task Force is
continuing to pursue investigations of this type, and the Treasury will
consider imposing civil penalties against violators who are not pursued
criminally.
The New York GTO experience is not an isolated phenomenon. The
Texas Attorney General's office began investigating so-called ``giro
Houses'' in the Houston area in the early 1990s. Giro houses are
independent money transmitters that also provide ancillary services
such as cargo shipment and long distance telephone access. Before 1991,
there were as many as 100 giro houses in Houston processing over $450
million per year in wire transfers, primarily to Colombia. The Texas
Attorney General's Office, working with the Texas Department of Banking
and the Houston office of the IRS, opened formal investigations of a
number of giro houses. These investigations, like the El Dorado Task
Force's investigations in New York, revealed a pattern of money
laundering through false invoices designed to justify the large
currency deposits at local banks.
From late 1994 through 1995 the Texas Attorney General's Office
obtained and executed 11 search warrants at Houston giro houses. Many
businesses closed while under investigation, and the overall effect of
the Texas investigations on illegitimate trade was dramatic. A recent
count of giro houses lists eight sending funds to Colombia, and the
total amount of money processed through giro houses has dropped to
approximately $10 million.
Money Order Sellers. The use by money launderers of money orders,
whether issued by the United States Postal Service or private
companies, is well-documented. As one example, a Postal Inspection
Service investigation beginning in the late 1980s and early 1990s,
whose offshoots continue to this day, revealed a multiple step scheme
in which money orders, in individual amounts of $1,000 or less, were
purchased from New York area banks and post office outlets (often in
bulk), sent abroad for negotiation or deposit, and then repatriated to
the United States for clearance or deposit into banks from which the
aggregated funds were again to be wired abroad. The scheme involved
some 99,000 money orders worth approximately $70 million that were
deposited into three bank accounts in New York and Miami; it resulted
in the 1992 guilty plea of two individuals, and the 1993 forfeiture of
approximately $2.1 million.
The ease with which money orders can be redeemed or negotiated--the
very factors that make them attractive commercially--also make them an
attractive tool for money launderers. The orders are negotiable, may be
made out to ``cash,'' and operate as virtually the equivalent of cash,
especially when backed by the credit of the Postal Service or one of
the two major commercial money order issuers that, together with the
Postal Service, dominate the money order market. Money order issuers
have made major strides in recognizing their obligations to report
suspicious activity and in designing computer systems to, e.g.,
identify suspicious sequential money order purchases, and to that
extent today's proposal recognizes those developments and makes clear
that the protective provisions of 31 U.S.C. 5318(g) (2)-(3) apply
equally to reports by money order issuers, sellers, and redeemers as to
reports by banks. Despite that fact, however, the extremely large
number of agents and other businesses that deal in money orders as
financial instruments makes the promulgation of a general suspicious
transaction reporting rule for such businesses essential.
Traveler's Checks. Traveler's checks raise the same issues as money
orders. Clearly, the requirement that traveler's checks be counter-
signed on issuance and at the time they are negotiated makes them more
difficult to abuse, but the counter-signature requirement can be evaded
by a corrupt sales agent and may have less force abroad than in the
United States. Traveler's checks are already included within the
definition of monetary instruments at 31 CFR 103.11(u)(ii), and their
potential for abuse was recognized in the 1992 amendments to the
definition of ``cash'' for purposes of the reporting of cash purchases
of goods and services valued over $10,000. See 26 U.S.C. 6050I(d)(2);
26 CFR 6050I-1(c)(1)(ii); 56 FR 57974, 57977 (Nov. 15, 1991).
Special Structural Problems Affecting Money Services Businesses. In
issuing this notice of proposed rulemaking, the Department of the
Treasury is again expressing its judgment that reporting of suspicious
transactions in a timely fashion is a component of the flexible and
cost-efficient compliance system required to prevent the use of the
nation's financial system--in this case money services businesses--for
illegal purposes. Implementation of a comprehensive counter-money
laundering strategy for money services businesses, however, raises
significant issues not present in devising counter-money laundering
strategies for banks, largely due to unique structural factors
affecting money services businesses.
First, most money services businesses operate through the medium of
independent enterprises that agree to serve as agents for the
businesses' products or services; thus the public often does not deal
directly with the businesses that issue or back the instruments, or
actually perform the services, purchased. Second, and as a corollary,
money services businesses permit performance of a specific function--
the conversion of money into a money order or traveler's check, or the
sending of money to a distant location--but generally neither offer nor
are capable of maintaining continuing account relationships. Third,
money services businesses are not subject generally to federal
regulation and are regulated, in differing degrees, by some, but not
all, states.13 Finally, and perhaps
[[Page 27904]]
most important, the rules of the Bank Secrecy Act have not been
appropriately tailored to reflect the particular operating realities,
problems, and potential for abuse of an industry that deals in sums far
below $10,000 per transaction. For all of these reasons, the
assumptions that underlay design of a suspicious transaction reporting
system for banks cannot be assumed to apply with equal force to the
money services businesses with which this notice of proposed rulemaking
deals.
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\13\ Section 407 of the Money Laundering Suppression Act, 31
U.S.C. 5311 note, states the sense of the Congress that, ``[f]or
purposes of preventing money laundering and protecting the payment
system from fraud and abuse,'' the states should ``establish uniform
laws for licensing and regulating'' the businesses which are
referred to as money services businesses in the proposed amendments
to the Bank Secrecy Act regulations published today, and ``provide
sufficient resources * * * to enforce such laws * * *.'' Section
407(c) calls for the Secretary of the Treasury to study the progress
of the states in meeting the Congressional goal and section 407(d)
requires the Secretary to report to Congress on the results of its
study and any recommendations flowing therefrom.
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Check Cashers and Currency Exchangers. Check cashers and currency
exchangers would not be subject to the suspicious transaction reporting
requirement contained in this proposed rulemaking. Because the
operations of those businesses generally involve disbursement rather
than receipt of funds, the appropriate definition of suspicious
activity involves issues not present to the same degree in the case of
money transmitters and money order and traveler's check services.
A reporting money services business is subject to this section only
with respect to transactions that involve or relate to the business
activities described in Sec. 103.11(uu) (3), (4), (5), or (6). Thus,
for example, a seller of money orders (a money services business
described in Sec. 103.11(uu)(4)) that is also a check casher (a money
services business described in Sec. 103.11(uu)(2)) is not required to
report under this section with respect to its check cashing activities
in general, although it would be required to report check cashing
activity that was part of a series of transactions that led to, for
example, the purchase of money orders if the money order purchases were
required to be reported hereunder. In addition, check cashing and
currency exchange services may be subject to the suspicious activity
rules to the extent they redeem either money orders or traveler's
checks for currency (U.S. or other) or other monetary or negotiable
instruments and hence qualify as redeemers of money orders or
traveler's checks, to whom the proposed rules do apply. See proposed
section 103.11(uu)(4), which would treat as a redeemer of money orders
and traveler's checks, respectively, any enterprise that redeems such
instruments ``in an amount greater than $500 in currency or monetary
instruments per person per day.'' 14
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\14\ In addition, of course, a business that engages in business
as a money transmitter, or in covered money order or traveler's
check services, as well as check cashing or currency exchange
services, would be subject to the suspicious transaction reporting
rules with respect to the former services, even if not to the
latter.
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Stored Value Products. As noted in the preamble to the Registration
Rule, the Department of the Treasury believes that a business that
issues or facilitates the digital transfer of electronically-stored
value 15 is a money services business covered by the Bank
Secrecy Act.16 However, it is not appropriate, given the
infancy of the use of stored value products in the United States, to
propose a rule specifically dealing with suspicious transaction
reporting by non-banks with respect to stored value products at this
time. Thus, proposed paragraph (a)(4) would exempt transactions solely
involving such products from the operation of the rule at present.
Treasury invites specific comments about the manner in which the
suspicious transaction reporting rules for money services businesses
should apply to transactions involving stored value products.
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\15\ See proposed 31 CFR 103.11(vv), which defines stored value.
\16\ It should be clearly understood that the treatment of
stored value and similar products for purposes of the operation of
31 U.S.C. 5330 and the Registration Rule is solely a matter of
federal law and cannot be taken as the expression of any view by the
Department of the Treasury on the issue whether particular money
services businesses are (or, indeed, should be) within the scope of
state laws requiring the registration of money transmitters, check
cashers, currency exchange businesses, or issuers, sellers, or
redeemers of money orders or traveler's checks.
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III. Specific Provisions 17
A. 103.11(ii)--Transaction
The definition of ``transaction'' in the Bank Secrecy Act
regulations for purposes of suspicious transaction reporting conforms
generally to the definition Congress added to 18 U.S.C. 1956 when it
criminalized money laundering in 1986. See Pub. L. 99-570, Title XIII,
1352(a), 100 Stat. 3207-18 (Oct. 27, 1986). This notice proposes to
amend that definition explicitly to include the purchase of any money
order and the payment or order for any money remittance or transfer. No
similar amendment is necessary in the case of traveler's checks, which
are already defined clearly as monetary instruments in 31 CFR
103.11(u)(ii). This definition of transaction is broad enough to cover
all activity that should be reported under the proposed rule.
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\17\ Because proposed Sec. 103.20 reflects the terms of the
reporting rule for banks, readers of this document may wish to
consult the notice of proposed rulemaking and the document
containing the final reporting rule for banks, at 60 FR 46556
(September 7, 1995) (proposed rule) and 61 FR 4326 (February 5,
1996) (final rule). The bank suspicious activity reporting rule is
found at Sec. 103.21, but proposed by this notice to be renumbered
as Sec. 103.18).
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B. 103.15--Determination by the Secretary
Section 103.20 is redesignated as section 103.15 in order to make
room in part 103 for the proposed rule and to create space for future
changes to the Bank Secrecy Act regulations.
C. 103.18--Reports by Banks of Suspicious Transactions
Section 103.21 is redesignated as section 103.18 to make room in
subpart B, ``Reports Required To Be Made,'' for the suspicious
transaction reporting requirement proposed in this notice.
D. 103.20--Reports of Suspicious Transactions, General
Proposed section 103.20 contains the rules setting forth the
obligation of certain money services businesses to file reports of
suspicious transactions involving at least $500 in funds or other
assets. Paragraph (a) contains the general statement of the obligation
to file, and a general definition of the term ``suspicious
transaction.'' It is important to recognize that transactions are
reportable under this rule and 31 U.S.C. 5318(g) whether or not they
involve currency.
The choice of a $500 threshold for suspicious transaction reporting
by reporting money services businesses reflects the judgment, discussed
more generally above, that the levels of reporting appropriate for
other financial institutions, for example, the $5,000 suspicious
activity reporting threshold for banks, are not appropriate given the
patterns of transactions prevalent in such money services businesses.
The threshold reflects FinCEN's understanding of normal transaction
levels for the businesses involved. Given the fact that one of the
purposes of suspicious transaction reporting is to identify
structuring, a higher reporting threshold would significantly limit the
effectiveness of the proposed rule, in light of the reporting levels
proposed for special currency transaction reporting by money
transmitters, in the third of the related notices of proposed
rulemaking relating to money services businesses that are being
published today.
Reporting Institutions. Any enterprise that is a money services
business,
[[Page 27905]]
within the definition proposed today, because it is a money transmitter
or an issuer, seller, or redeemer 18 of money orders or
traveler's checks (including the Postal Service), is subject to the
proposed suspicious activity reporting rule. However, banks, broker-
dealers, and casinos are not subject to the proposed rule.
---------------------------------------------------------------------------
\18\ Under the definition in proposed Sec. 103.11(uu)(4), a
person is a ``redeemer'' of money orders and traveler's checks only
insofar as the instruments involved are redeemed for monetary
value--that is, for currency or monetary instruments. The taking of
the instruments in exchange for goods or services is not a
redemption for purposes of the rules proposed today.
---------------------------------------------------------------------------
Reportable Transactions. The proposed rule designates three classes
of transactions as requiring reporting. The first class, described in
proposed paragraph (a)(2)(i), includes transactions involving funds
derived from illegal activity or intended or conducted in order to hide
or disguise funds or assets derived from illegal activity. The second
class, described in proposed paragraph (a)(2)(ii), involves
transactions designed, whether through structuring or other means, to
evade the requirements of the Bank Secrecy Act. The third class,
described in proposed paragraph (a)(2)(iii), involves transactions that
appear to serve no business or apparent lawful purpose, and for which
the money services business knows of no reasonable explanation after
examining the available facts relating thereto.
The operating circumstances of money services businesses,
especially the absence of account relationships, necessarily make the
standards by which transactions are to be evaluated less easy to apply
than in the case of banks in many situations. For that reason, and
given the differences in structure, operation, and regulation between
banks and money services businesses, the proposed rule contains
specific illustrations (noted below) of the sorts of transactions for
which reporting is sought within the text of the rule itself.
Paragraph (a)(2)(iii) provides the following examples (by way of
illustration, but not limitation) of such transactions:
A. The contemporaneous purchase of multiple remittances to the
same beneficiary or city by the same purchaser;
B. The purchase of multiple instruments or remittances in the
same or similar amounts by the same person;
C. A large volume of transactions, sequential invoices, or both,
directed to one correspondent from one agent (operating either
through a single or multiple offices) on a single day;
D. Patterns of remittances to the same city or correspondent
purchased at approximately the same time;
E. The deposit of large numbers of instruments, especially
sequentially-numbered instruments, into or through the same or
related bank or other financial institution accounts;
F. Patterns of instruments or remittances purchased just below
the dollar thresholds for particular Bank Secrecy Act reporting or
recordkeeping requirements;
G. Presentation for redemption or encashment of third-party
endorsed instruments, or of blocks of instruments purchased by the
party seeking redemption, in either case in sums outside of normal
commercial or personal usage;
H. Significant changes or fluctuations in volume at one or more
of the business' agents or branches;
I. Significant variations in the size of the average remittance
at a business' agents or branches; and
J. Multiple senders of remittances using the same recipient's
last name, address, or telephone number.
Of course, determinations as to whether a report is required must
be based on all the facts and circumstances relating to the transaction
and the money services customer in question. Different fact patterns
will require different types of judgments. In some cases, the
circumstances of the transaction or pattern of transactions may clearly
indicate the need to report. For example, an individual's seeking
regularly to purchase or redeem instruments in bulk, or to purchase
transmissions to multiple overseas locations, all to the same named
beneficiary should, in the absence of unique qualifying circumstances,
place the money services business on notice that a suspicious
transaction is underway. Similarly, the fact that a customer refuses to
provide information necessary for the money services business to make
reports or keep records required by 31 CFR 103 or other regulations,
provides information that a money services business determines to be
false, or seeks to change or cancel the transaction after such person
is informed of currency transaction reporting or information
verification or recordkeeping requirements relevant to the transaction
or of the money services business' intent to file a currency
transaction report with respect to the transaction, would all indicate
that a SAR-MSB should be filed. (Of course, as the proposed rule makes
clear, the money services business may not notify the customer that it
intends to file or has filed a suspicious transaction report with
respect to the customer's activity.)
Treasury ultimately must rely on creation of a working partnership
with the various types of money services business that will assist
those businesses to apply their knowledge of both their customers and
business patterns to identify and report suspicious activity. FinCEN
hopes and expects to enter into a dialogue with the money services
businesses to which this rule would apply about the manner in which a
combination of government guidance, training programs, and government-
industry information exchange can smooth the way for operation of the
new suspicious activity reporting system in as flexible and cost-
efficient a way as possible.
Treatment of Agents. 31 U.S.C. 5318(g)(1) authorizes Treasury to
require suspicious transaction reporting not only by financial
institutions but by ``any director, officer, employee, or agent of any
financial institution.'' The authorization parallels the definition of
financial institution itself in 31 U.S.C. 5312 (a)(2) and (b), and 31
CFR 103.11(n). The operating realities of money services businesses
place special importance on the relationships between the operators of
the money services businesses involved and the otherwise unrelated
businesses that, in many cases, sell the financial products involved,
in the case of money orders or traveler's checks, or that serve, in the
case of money remissions, as receivers of the funds to be transmitted.
Thus, paragraph (a)(3) places responsibility for reporting on each
money services business, as well as its agents,
regardless of whether, and the terms on which, the money services
business treats such person as an agent or independent contractor
for other purposes.
It is important to recognize that the definition of money services
business for this purpose is broader than it is for purposes of the
registration rules proposed to be added to part 103 as 31 CFR 103.41.
Thus, an agent of a money transmitter may (indeed usually will) itself
be a money services business for purposes of the reporting rule
(although not necessarily for purposes of the registration rule).
Certain patterns of suspicious dealing that may not be apparent to
a particular agent may become visible when various remission or
instrument purchase activities are aggregated by the principal
business. In other situations, a principal may, upon reviewing
transaction records, uncover an indication of patterns of suspicious
transactions at a particular agent that, unfortunately, arise because
of the cooperation of the agent with money launderers. Thus, it is
impossible to specify the particular method for reporting that will
[[Page 27906]]
comprehend all situations. The same issues arise, of course, when
headquarters or central processing facility bank compliance officials
uncover a pattern of suspicious dealing at or through a bank branch.
The allocation of principal-agent liability in particular cases,
under the governing terms of the Bank Secrecy Act, is too complex a
subject to be dealt with in this notice of proposed rulemaking.
However, the Department of the Treasury believes that at a minimum the
operators of money services businesses have a duty to know their agents
sufficiently well to be able to satisfy the reporting obligations
involved in compliance with the proposed rule. As in the case of the
rules for suspicious activity reporting by banks, the proposed rule is
intended to introduce a concept of due diligence into the reporting
procedures, and that diligence applies equally to review of the actions
of agents of money services businesses as to review of the transactions
of customers of those businesses. Treasury invites comments on:
1. Whether the rule should contain more detailed procedures or
rules dealing with the allocation of responsibility between principals
(the issuers of the money orders or traveler's checks, and the
companies actually arranging for the remission of funds) and agents;
2. Whether language should be added to the rule to make it clear
that a money services business's duty of diligence extends not only to
supervision of its agents but also to supervision of money services
businesses in the distribution chain for financial services products
that may not technically be either agents under the broad definition
used in the proposed rule or independent contractors; and
3. Whether the rule should contain more specific rules for
compliance programs that recognize the realities of the business
operations in this part of the financial sector.
Filing Procedures. Paragraph (b) sets forth the filing procedures
to be followed by money services businesses making reports of
suspicious transactions. Within 30 days after a money services business
becomes aware of a suspicious transaction, the business must report the
transaction by completing a Suspicious Activity Report-MSB
19 and filing it in a central location, to be determined by
FinCEN. The SAR-MSB will resemble the SAR now used by banks to report
suspicious transactions, and a draft form will be made available for
comment when ready.
---------------------------------------------------------------------------
\19\ The term ``MSB'' is an abbreviation for ``money services
businesses'' and is used to distinguish the form from forms for
reporting by other non-bank institutions.
---------------------------------------------------------------------------
Supporting documentation relating to each SAR-MSB is to be
collected and maintained separately by the money services business and
made available to law enforcement and regulatory agencies upon request.
Special provision is made for situations requiring immediate attention,
in which case money services businesses are to telephone the
appropriate law enforcement authority in addition to filing a SAR-MSB.
Reports filed under the terms of the proposed rule will be lodged
in a central data base (on the model of the data base used to process,
analyze, and retrieve bank suspicious activity reports). Information
will be made electronically available to federal and state law
enforcement and regulatory agencies, to enhance the ability of those
agencies to carry out their mandates to fight financial crime.
Maintenance of Records. Paragraph (c) provides that filing money
services businesses must maintain copies of SAR-MSBs and the original
related documentation for a period of five years from the date of
filing. As indicated above, supporting documentation is to be made
available to FinCEN and appropriate law enforcement authorities on
request.
Safe Harbor from Civil Liability. Paragraph (d) incorporates the
terms of 31 U.S.C. 5318 (g)(2) and (g)(3). This paragraph thus
specifically prohibits persons filing SAR-MSBs from making any
disclosure, except to law enforcement and regulatory agencies, about
either the reports themselves, the information contained therein, or
the supporting documentation. The paragraph also restates the broad
protection from liability for making reports of suspicious
transactions, and for failures to disclose the fact of such reporting,
contained in the statute. The regulatory provisions do not extend the
scope of either the statutory prohibition or the statutory protection;
however, because Treasury recognizes the importance of these statutory
provisions to the overall effort to encourage meaningful reports of
suspicious transactions, they are described in the regulation in order
to remind compliance officers and others of their existence.
Auditing and Enforcement. Paragraph (e) notes that compliance with
the obligation to report suspicious transactions will be audited, and
provides that failure to comply with the rule may constitute a
violation of the Bank Secrecy Act and the Bank Secrecy Act regulations,
which may subject non-complying money services businesses to
enforcement action.
Effective Date. Finally, paragraph (f) provides that the new
suspicious activity reporting rules are effective 30 days after [the
date on which the final regulations to which this notice of proposed
rulemaking relates are published in the Federal Register].
IV. Submission of Comments
An original and four copies of any written hard copy comment (other
than one sent electronically) must be submitted. All comments will be
available for public inspection and copying, and no material in any
such comments, including the name of any person submitting comments,
will be recognized as confidential. Accordingly, material not intended
to be disclosed to the public should not be submitted.
V. Regulatory Flexibility Act
FinCEN certifies that this proposed regulation will not have a
significant economic impact on a substantial number of small entities.
The average money order sold is approximately $102, and the average
money transmission is approximately $240 within the United States and
approximately $320 outside the United States. Both of these amounts are
substantially below the $500 threshold that triggers reporting under
the proposed rule. Thus, FinCEN believes that the threshold has been
set at a level that will avoid a significant economic burden on small
entities.
VI. Paperwork Reduction Act Notices
Suspicious Activity Report for Certain Money Services Businesses.
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
part 1320, the following information concerning the collection of
information on Suspicious Activity Report--Money Services Businesses is
presented to assist those persons wishing to comment on the information
collection.
FinCEN anticipates that this proposed rule, if enacted as proposed,
would result in a total of 10,000 Suspicious Activity Report--Money
Services Businesses forms to be filed annually. This result is an
estimate, based on a projection of the size and volume of the industry.
Title: Suspicious Activity Report--Money Services Businesses
OMB Number: To be determined.
[[Page 27907]]
Description of Respondents: Money transmitters, and issuers,
sellers, and redeemers of money orders or traveler's checks, and their
agents.
Estimated Number of Respondents: 10,000.
Frequency: As required.
Estimate of Burden: Reporting average of 20 minutes per response;
recordkeeping average of 10 minutes per response.
Estimate of Total Annual Burden on Respondents: 10,000 responses.
Reporting burden estimate = 3,333 hours; recordkeeping burden estimate
= 1,667 hours. Estimated combined total of 5,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$100,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: New.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
Recordkeeping Requirements of 31 CFR 103.20
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information as required by 31 CFR 103.20 is presented to assist those
persons wishing to comment on the information collection.
Title: Suspicious Activity Report--Money Services Businesses.
OMB Number: 1506-0006.
Description of Respondents: Specified Money Services Businesses.
Money transmitters, and issuers, sellers, and redeemers of money orders
or traveler's checks, and their agents.
Estimated Number of Respondents: 10,000.
Frequency: As required.
Estimate of Burden: Recordkeeping average of 100 hours per Money
Service Business.
Estimate of Total Annual Burden on Respondents: Recordkeeping
burden estimate = 1,000,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$20,000,000.
Estimate of Total Other Annual Costs to Respondents: $100 for each
report of suspicious transactions made.
Type of Review: Extension.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
VII. Executive Order 12866
The Department of the Treasury has determined that this proposed
rule is not a significant regulatory action under Executive Order
12866.
VIII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act), March 22, 1995, requires that an agency
prepare a budgetary impact statement before promulgating a rule that
includes a federal mandate that may result in expenditure by state,
local and tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year. If a budgetary impact
statement is required, section 202 of the Unfunded Mandates Act also
requires an agency to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule. FinCEN has
determined that it is not required to prepare a written statement under
section 202 and has concluded that on balance this proposal provides
the most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Investigations, Law enforcement, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
For the reasons set forth above in the preamble, 31 CFR Part 103 is
proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for Part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. Section 103.11(ii)(1) is revised to read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(ii) Transaction. (1) Except as provided in paragraph (ii)(2) of
this section, transaction means a purchase, sale, loan, pledge, gift,
transfer, delivery or other disposition, and with respect to a
financial institution includes a deposit, withdrawal, transfer between
accounts, exchange of currency, loan, extension of credit, purchase or
sale of any stock, bond, certificate of deposit, or other monetary
instrument or investment security, purchase or redemption of any money
order, payment or order for any money remittance or transfer, or any
other payment, transfer, or delivery by, through, or to a financial
institution, by whatever means effected.
* * * * *
[[Page 27908]]
Secs. 103.20 and 103.21 [Redesignated as Secs. 103.15 and 103.18]
3. In Subpart B, redesignate Secs. 103.20 and 103.21 as
Secs. 103.15 and 103.18, respectively, and add new Sec. 103.20 to read
as follows:
Sec. 103.20 Reports by money services businesses of suspicious
transactions.
(a) General. (1) Every money services business, other than a bank,
a broker-dealer, or a casino, described in Sec. 103.11(uu) (3), (4),
(5), or (6) (for purposes of this section, a ``reporting money services
business''), shall file with the Treasury Department, to the extent and
in the manner required by this section, a report of any suspicious
transaction relevant to a possible violation of law or regulation. Any
money services business may also file with the Treasury Department, by
using the Suspicious Activity Report-MSB specified in paragraph (b)(1)
of this section, or otherwise, a report of any suspicious transaction
that it believes is relevant to the possible violation of any law or
regulation but whose reporting is not required by this section.
(2) A transaction requires reporting under the terms of this
section if it is conducted or attempted by, at, or through the money
services business, involves or aggregates at least $500 in funds or
other assets, and the money services business knows, suspects, or has
reason to suspect that the transaction (or a pattern of transactions of
which the transaction is a part):
(i) Involves funds derived from illegal activity or is intended or
conducted in order to hide or disguise funds or assets derived from
illegal activity (including, without limitation, the ownership, nature,
source, location, or control of such funds or assets) as part of a plan
to violate or evade any federal law or regulation or to avoid any
transaction reporting requirement under federal law or regulation;
(ii) Is designed, whether through structuring or other means, to
evade any requirements of this Part or of any other regulations
promulgated under the Bank Secrecy Act, Pub. L. 91-508, as amended,
codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-
5330; or
(iii) Serves no business or apparent lawful purpose, as, for
example, in the case of--
(A) The contemporaneous purchase of multiple remittances to the
same beneficiary or city by the same purchaser;
(B) The purchase of multiple instruments or remittances in the same
or similar amounts by the same person;
(C) A large volume of transactions, sequential invoices, or both,
directed to one correspondent from one agent (operating either through
a single or multiple offices) on a single day;
(D) Patterns of remittances to the same city or correspondent
purchased at approximately the same time;
(E) The deposit of large numbers of instruments, especially
sequentially-numbered instruments, into or through the same or related
bank or other financial institution accounts;
(F) Patterns of instruments or remittances purchased just below the
dollar thresholds for particular Bank Secrecy Act reporting or
recordkeeping requirements;
(G) Presentation for redemption or encashment of third-party
endorsed instruments or of blocks of instruments purchased by the party
seeking redemption, in either case in sums outside of normal commercial
or personal usage;
(H) Significant change or fluctuations in volume at one or more of
the business' agents or branches;
(I) Significant variations in the size of the average remittance at
a business' agents or branches;
(J) Multiple senders of remittances using the same recipient's last
name, address, or telephone number; and, in each case, the money
services business knows of no reasonable explanation for the
transaction or circumstance involved, after examining the available
facts relating thereto.
(3) The obligation to identify and properly and timely to report a
suspicious transaction rests with the money services business as well
as any agents of the money services business involved, regardless of
whether, and the terms on which, the money services business treats
such person as an agent or independent contractor for other purposes.
(4) Notwithstanding the provisions of this section, a transaction
that involves solely the issuance, or facilitation of the transfer, of
stored value or the issuance, sale, or redemption of stored value shall
not be subject to reporting under this paragraph (a), until the
promulgation of rules specifically relating to such reporting.
(b) Filing procedures--(1) What to file. A suspicious transaction
shall be reported by completing a Suspicious Activity Report-MSB
(``SAR-MSB''), and collecting and maintaining supporting documentation
as required by paragraph (c) of this section.
(2) Where to file. The SAR-MSB shall be filed with FinCEN in a
central location, to be determined by FinCEN, as indicated in the
instructions to the SAR-MSB.
(3) When to file. A reporting money services business is required
to file each SAR-MSB no later than 30 calendar days after the date of
the initial detection by the reporting money services business of facts
that may constitute a basis for filing a SAR-MSB under this section. In
situations involving violations that require immediate attention, such
as ongoing money laundering schemes, the reporting money services
business shall immediately notify by telephone an appropriate law
enforcement authority in addition to filing a SAR-MSB.
(c) Retention of records. A reporting money services business shall
maintain a copy of any SAR-MSB filed and the original or business
record equivalent of any supporting documentation for a period of five
years from the date of filing the SAR-MSB. Supporting documentation
shall be identified as such and maintained by the reporting money
services business, and shall be deemed to have been filed with the SAR-
MSB. A reporting money services business shall make all supporting
documentation available to FinCEN and any other appropriate law
enforcement agencies or supervisory agencies upon request.
(d) Confidentiality of reports; limitation of liability. No
financial institution, and no director, officer, employee, or agent of
any financial institution, who reports a suspicious transaction under
this Part, may notify any person involved in the transaction that the
transaction has been reported. Thus, any person subpoenaed or otherwise
requested to disclose a SAR-MSB or the information contained in a SAR-
MSB, except where such disclosure is requested by FinCEN or an other
appropriate law enforcement or supervisory agency, shall decline to
produce the SAR-MSB or to provide any information that would disclose
that a SAR-MSB has been prepared or filed, citing this paragraph and 31
U.S.C. 5318(g)(2), and shall notify FinCEN of any such request and its
response thereto. A reporting money services business, and any
director, officer, employee, or agent of such reporting money services
business, that makes a report pursuant to this section (whether such
report is required by this section or made voluntarily) shall be
protected from liability for any disclosure contained in, or for
failure to disclose the fact of, such report, or both, to the extent
provided by 31 U.S.C. 5318(g)(3).
(e) Compliance. Compliance with this section shall be audited by
the
[[Page 27909]]
Department of the Treasury, through FinCEN or its delegees under the
terms of the Bank Secrecy Act. Failure to satisfy the requirements of
this section may constitute a violation of the reporting rules of the
Bank Secrecy Act and of this part.
(f) Effective date. This section is effective [30 days after the
date on which the final regulations to which this notice of proposed
rulemaking relates are published in the Federal Register].
Dated: May 16, 1997.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 97-13303 Filed 5-16-97; 4:32 pm]
BILLING CODE 4820-03-P
Complete official Federal Register PDF
FR Doc. 97-13302 Financial Crimes Enforcement Network; Proposed Amendments to the Bank Secrecy Act RegulationsSpecial Currency Transaction Reporting Requirement for Money Transmitters
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27909-27917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13302]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA19
Financial Crimes Enforcement Network; Proposed Amendments to the
Bank Secrecy Act Regulations--Special Currency Transaction Reporting
Requirement for Money Transmitters
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing to amend the regulations implementing the Bank Secrecy Act to
require money transmitters and their agents to report and retain
records of transactions in currency or monetary instruments of at least
$750 but not more than $10,000 in connection with the transmission or
other transfer of funds to any person outside the United States, and to
verify the identity of senders of such transmissions or transfers. The
proposed rule is intended to address the misuse of money transmitters
by money launderers and is in addition to the existing rule requiring
currency transaction reports for amounts exceeding $10,000.
DATES: Written comments on all aspects of the proposal are welcome and
must be received on or before August 19, 1997.
ADDRESSES: Written comments should be submitted to: Office of Legal
Counsel, Financial Crimes Enforcement Network, Department of the
Treasury, 2070 Chain Bridge Road, Vienna, Virginia 22182, Attention:
NPRM--Money Transmitters--Special CTR Rule. Comments also may be
submitted by electronic mail to the following Internet address:
``[email protected],'' with the caption, in the body of the
text, ``Attention: NPRM--Money Transmitters--Special CTR Rule.'' For
additional instructions on the submission of comments, see
SUPPLEMENTARY INFORMATION under the heading ``Submission of Comments.''
Inspection of comments. Comments may be inspected at the Department
of the Treasury between 10:00 a.m. and 4:00 p.m., in the FinCEN reading
room, on the third floor of the Treasury Annex, 1500 Pennsylvania
Avenue, NW., Washington, DC 20220. Persons wishing to inspect the
comments submitted should request an appointment by telephoning (202)
622-0400.
FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director, and
Charles Klingman, Financial Institutions Policy Specialist, FinCEN, at
(703) 905-3920; Stephen R. Kroll, Legal Counsel, Joseph M. Myers,
Deputy Legal Counsel, Cynthia L. Clark, on detail to the Office of
Legal Counsel, Albert R. Zarate, Attorney-Advisor, and Eileen P. Dolan,
Legal Assistant, Office of Legal Counsel, FinCEN, at (703) 905-3590.
SUPPLEMENTARY INFORMATION:
I. Introduction
This document contains a proposed rule that would amend 31 CFR part
103 to impose requirements on money transmitters and their agents to
report and retain records of transactions in currency or monetary
instruments of at least $750 but not more than $10,000 in connection
with the transmission or other transfer of funds to any person outside
the United States. The proposed rule also would amend the regulations
implementing the Bank Secrecy Act to require that money transmitters
verify the identity of the sender of the kind of transmission described
above. Treasury has been moved to this unusual step by continuing
evidence of serious abuses of the money transmitting industry by money
launderers.
II. Background
A. Statutory Provisions
The Bank Secrecy Act, Titles I and II of Public Law 91-508, as
amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31
U.S.C. 5311-5330, authorizes the Secretary of the Treasury, inter alia,
to issue regulations requiring financial institutions to keep records
and file reports that are determined to have a high degree of
usefulness in criminal, tax, and regulatory matters, and to implement
counter-money laundering programs and compliance procedures.
Regulations implementing Title II of the Bank Secrecy Act (codified at
31 U.S.C. 5311-5330) appear at 31 CFR Part 103. The authority of the
Secretary to administer Title II of the Bank Secrecy Act has been
delegated to the Director of FinCEN.
Section 5313 grants the Secretary of the Treasury broad authority
to require financial institutions to report domestic transactions in
coins or currency. Paragraph (a) of that section states:
When a domestic financial institution is involved in a
transaction for the payment, receipt, or transfer of United States
coins or currency (or other monetary instruments the Secretary of
the Treasury prescribes), in an amount, denomination, or amount and
denomination, or under circumstances the Secretary prescribes by
regulation, the institution and any other participant in the
transaction the Secretary may prescribe shall file a report on the
transaction at the time and in the way the Secretary prescribes. A
person acting for another person shall make the report as the agent
or bailee of the person and identify the person for whom the
transaction is being made.
Under 31 CFR 103.22, which was issued under the broad authority of
section 5313(a), financial institutions generally are required to
report transactions in currency in excess of $10,000. Under the Bank
Secrecy Act, the term ``financial institution'' at present (that is,
before the changes proposed to be made today) includes, inter alia,
``licensed transmitter[s] of funds, or other person[s] engaged in the
business of transmitting funds.'' 31 CFR 103.11(n)(5).
In 1992, Congress amended the Bank Secrecy Act to allow the
Secretary to require financial institutions to carry out anti-money
laundering programs. See 31 U.S.C. 5318(h) (added to the Bank Secrecy
Act by section 1517 of the Annunzio-Wylie Anti-Money Laundering Act,
Title XV of the Housing and Community Development Act of 1992, Pub. L.
102-550 (October 28, 1992)). Under section 5318(h), anti-money
laundering programs must at a minimum include, inter alia, the
``development of internal policies, procedures, and controls.'' In
1994, Congress again amended the Bank Secrecy Act, this time to require
the registration of money services businesses. See 31 U.S.C. 5330
(added to the Bank Secrecy Act by section 408 of the Money Laundering
Suppression Act of 1994, Title IV of the Riegle Community Development
and Regulatory Improvement Act of 1994, Pub. L. 103-325 (September 23,
1994)). Section 5330 defines a money services
[[Page 27910]]
business 1 as any business, other than a bank or the United
States Postal Service, that is required to file reports under 31 U.S.C.
5313 and that provides check cashing, currency exchange, or money
transmitting services, or issues or redeems money orders, traveler's
checks, and other similar instruments. In requiring the registration of
money services businesses, Congress recognized that such businesses are
``frequently used in sophisticated schemes to * * * transfer large
amounts of money which are the proceeds of unlawful enterprise.'' 31
U.S.C. 5330 (Historical and Statutory Notes).2
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\1\ The statute uses the term ``money transmitting business'' to
name those businesses subject to registration. See 31 U.S.C.
5330(a)(1) and (d)(1). However, FinCEN believes that the statutes's
use of this term to refer to all the types of businesses subject to
registration and its later use of the nearly identical term ``money
transmitting service'' to refer to a particular type of business
subject to registration, compare 31 U.S.C. 5330(d)(1)(A) with 31
U.S.C. 5330(d)(2), may lead to confusion. Therefore, FinCEN has
adopted the term ``money services business'' in place of the term
``money transmitting business'' throughout this document and uses
the same terminology in the other rules it is proposing today.
\2\ See also, H. Conf. Rep. 652, 103d Cong., 191 (1994).
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B. Nature of the Problem
1. Money Transmitters--General
This notice is the third in a set of three notices of proposed
rulemaking being published in this separate part of the Federal
Register that deal with the application of the Bank Secrecy Act to
money services businesses. The first of these notices relates to the
registration of money services businesses (the ``Registration Rule'').
The second would impose on some of these businesses a requirement to
report suspicious transactions (the ``Suspicious Transaction Rule'').
In proposing these rules, the Department of the Treasury is responding
to the need to update and more carefully tailor the application of the
Bank Secrecy Act to a major, if little understood, part of the
financial sector in the United States.3
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\3\ The Congress has long-recognized the need generally to
address problems of abuse by money launders of ``non-bank''
financial institutions. See, e.g., Permanent Subcommittee on
Investigations, Senate Comm. on Governmental Affairs, Current Trends
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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``Money services business'' is a newly coined term that refers to
five distinctive types of financial services providers: currency
dealers or exchangers; check cashers; issuers of traveler's checks,
money orders, or stored value; sellers or redeemers of traveler's
checks, money orders, or stored value; and money transmitters. These
businesses are quite numerous; based on a study performed for FinCEN by
Coopers & Lybrand, L.L.P., they comprise approximately 158,000
4 outlets or selling locations, and provide financial
services involving approximately $200 billion. To a significant extent,
the customer base for such businesses lies in that part of the
population that does not use, either in whole or in part, traditional
financial institutions, primarily banks.
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\4\ The number does not include Post Offices (which sell money
orders), participants in stored value product trials, or sellers of
various stored value or smart cards in use in, e.g., public
transportation systems.
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The proposed special reporting rule contained in this document
relates to money transmitters, a class of money services businesses.
For purposes of this notice of proposed rulemaking, and consistent with
the definition proposed in the Registration Rule, a money transmitter
is
(i) any person, whether or not licensed or required to be
licensed, who accepts currency, or funds denominated in currency,
and transmits the currency or funds, or the value of the currency or
funds, by any means through a financial agency or institution, a
Federal Reserve Bank or other facility of the Board of Governors of
the Federal Reserve System, or an electronic funds transfer network;
or (ii) [a]ny other person engaged as a business in the transfer of
funds.
Based on the study performed by Coopers & Lybrand, L.L.P., several
broad generalizations can be made about the money transmitting industry
in the United States. Due to the global trend of rapidly increasing
electronic commerce and the increase in the number of persons who use
international transfer services to send money to family and friends,
the United States market for money transmission services has grown
steadily over the last ten years. Money transmitters in the United
States remitted approximately $10.8 billion in 1996, exclusive of fees,
each year, through approximately 43,000 locations nationwide. The
international component of the money transmission market has been
growing at a rate of at least 20 per cent per year for the last five
years. Even these estimates are believed to be low, because there is by
all accounts a significant, ``informal'' international money transfer
market.
The ``formal'' part of the non-bank money transmitter industry is
highly concentrated: the vast majority of the formal funds transfers
are handled by two major national companies through their network of
agents. Most of the money transmission outlets are concentrated in six
major states: California, New York, Texas, New Jersey, Florida, and
Illinois. There appears to be a disproportionately large number of
outlets as well in Georgia, Michigan, North Carolina, and Pennsylvania.
Most of the smaller money transmitters in competition with the
major national companies are oriented toward particular markets and
rely on their own service infrastructures for transferring funds and
for communications and settlement among outlets. These niche
transmitters often are bilingual, with outlets located in urban
communities. Their customers are willing to pay a premium for value
added services, such as receiving informal news from other countries.
State regulators have been monitoring the growing money
transmission market with great interest. Twenty-three states now have
licensing requirements for money transmitters. Some states, such as New
York, also require each licensed money transmitter to register the
names and locations of each of its legal agents or vendors, but in
general, state regulations vary a great deal, and are primarily focused
on consumer protection issues.
2. Use of Money Transmitters by Money Launderers
Work of the El Dorado Task Force. Since 1992, the El Dorado Task
Force (the ``Task Force'') has been conducting an investigation into
the money transmitting industry in the New York metropolitan area and
its use by drug traffickers to return drug proceeds to narcotics source
countries.5 In the course of its work, the Task Force
uncovered widespread abuse within segments of the money transmitter
industry in New York.6 One major money transmitter has
itself pled guilty to money laundering charges,7 and
investigations of several other
[[Page 27911]]
transmitters and their agents are underway.8
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\5\ The Task Force was established by Treasury law enforcement
agencies in 1992 specifically to investigate narcotics related money
laundering in the New York metropolitan area. The Task Force is a
joint effort of federal, state, and local authorities, and includes
approximately 140 agents, police officers and administrative
personnel from the Customs Service, the Criminal Investigative
Division of the Internal Revenue Service, the Secret Service, the
New York State Banking Department, the New York City Police
Department, and a number of other local police authorities.
\6\ The Task Force's investigations have led to the conviction
of 97 persons and the seizure and forfeiture of over $10 million
associated with money laundering through the licensed money
transmitters.
\7\ United States v. Vigo Remittance Corp., No. 96-575
(J.S.)(E.D.N.Y.)(July 24, 1996)(entry of plea). It is fair to note
that, since its guilty plea, Vigo has strengthened its Bank Secrecy
Act compliance measures significantly.
\8\ See, e.g., United States v. Remesas America Oriental, No. S1
96 Cr. 919 (S.D.N.Y. 1996).
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The results of the Task Force's investigations confirm that the
money transmitting industry in New York shares many common
characteristics with the industry nationwide. First, the typical
legitimate customer of a money transmitter in New York is someone who,
because of lack of access for credit reasons or lack of sufficient
documentation, has decided not to use banks to obtain financial
services.
Second, with rare exceptions, almost all licensed money
transmitters in New York operate through agents. Agents of the licensed
money transmitters receive the transmitted funds from the sender, along
with sender information, such as name, address, and telephone number,
and recipient information, usually name and telephone number. The
agents enter this information into computers provided by the money
transmitters, and invoices are generated. The agents then send the
information to the money transmitters by computer (or by fax, if the
particular agent does not have a computer).
The agents must deposit the funds to be transmitted into bank
accounts set up for the agents but controlled by the money
transmitters. On a daily basis, each money transmitter will transfer
all of the money it intends to transmit into one of several main
transmission accounts maintained at a financial institution with access
to CHIPS and FEDWIRE.9 The funds are then moved through the
domestic and foreign banking system by way of wire transfer. Once the
transmitted funds have arrived at their destinations, foreign
correspondents notify the recipients that their money is available to
be picked up.
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\9\ Clearing House Interbank Payments System (CHIPS) and FEDWIRE
are commonly-used funds transfer systems.
---------------------------------------------------------------------------
The primary method of laundering funds through money transmitters
in New York that has come to light to date is the structuring of
transactions beneath the thresholds for recordkeeping and reporting
imposed by existing Bank Secrecy Act rules. Corrupt agents accept
illicit funds, in amounts greater than $3,000 or $10,000, structure the
funds to avoid the recordkeeping and reporting requirements, and then
deposit the funds into accounts controlled by the money transmitter.
The money transmitter then transmits the funds to the designated
recipient locations.
Most often, the traffickers bring the agents large amounts of
currency which need to be returned to a drug source country. The agents
create invoices which make it appear as if the money had been brought
in by a number of different senders, in amounts below the recordkeeping
and reporting thresholds. These corrupt agents also provide the money
transmitters with lists of recipient names in the foreign countries for
each remittance, again using a different name for each remittance. In
this way, each time it appears as if there were a number of smaller,
unrelated remittances instead of one remittance, in excess of $3,000,
that would trigger the recordkeeping rules of 31 CFR 103.33, or in
excess of $10,000, which would trigger the filing of a Currency
Transaction Report (``CTR'').
New York Geographic Targeting Order. Based in large part on the
evidence produced by the Task Force, a large group of money
transmitters (now 23 licensed transmitters and their approximately
3,200 agents) in the New York Metropolitan Area have been the subject
of a Geographic Targeting Order (the ``Order''). Issued last August,
the Order is grounded in 31 U.S.C. 5326 and 31 CFR 103.26, and is
directed at the remittance of funds to Colombia.10 The
Order, first directed against 12 money transmitters and 1,600 agents,
was expanded in October 1996, and again in April 1997. Its original 60-
day period has been extended several times under the statutory rules,
and the Order is at present set to expire on June 2, 1997.
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\10\ The Order was issued by Raymond W. Kelly, Under Secretary
(Enforcement) of the Department of the Treasury, in response to an
application from the United States Attorneys for the Eastern
District of New York, the Southern District of New York, and the
District of New Jersey and senior officials of the Customs Service
and the Internal Revenue Service. (The statute allows such orders to
be issued either upon a request from an appropriate law enforcement
authority, or by the Treasury upon its own initiative.) Issuance of
an order requires a finding, amply documented in this case, that
there is reason to believe that special reporting or recordkeeping
requirements are necessary to carry out the purposes, or prevent
evasions of, the Bank Secrecy Act.
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The Order requires daily reporting by agents of the 23 money
transmitters, and weekly reporting by their principals (i.e., state-
licensed money transmission companies), of information about the
senders and recipients of all money transmissions of $750 or more to
Colombia paid for with currency or bearer monetary instruments, as well
as the reporting of any transactions or patterns of transactions that
appear suspicious. Special verification of identity rules for such
transactions are also imposed by the Order.
A number of factors in addition to the direct evidence adduced by
the Task Force supported the Order's issuance. Perhaps most strikingly,
the New York area money transmitters' business volume to Colombia was
significantly out of harmony with legitimate demographic expectations.
New York State Banking Department figures indicated that the 12
originally targeted transmitters had been sending approximately $1.2
billion annually to South America; about two thirds of this amount, or
approximately $800 million, went to Colombia. To account for this
figure, each of the approximately 25,500 Colombian households in the
New York area (earning an average gross annual income of $27,000) would
have had to send approximately $30,000 per year through money
transmitters to Colombia.
Implementation of the Order almost immediately caused dramatic
changes in the volume and character of money transmissions, indicating
a major reduction in the amount of illicit funds moving through New
York money transmitters.11 Analysis of data generated by the
Order is ongoing, but the targeted money transmitters' business volume
to Colombia appears to have dropped approximately 30 percent. (Three of
the money transmitters subject to the Order have simply stopped sending
any funds to Colombia.) Most of the money that would in the past have
been placed abroad through the use of money transmitters appears to
have been physically removed from the New York Metropolitan area,
either for transfer through money transmitters operating in other
American cities, or for bulk smuggling out of the United States. The
change demonstrates graphically both that narcotics money launderers
have been extensively abusing a segment of the relatively unsupervised
money transmitter industry, and that the underground market does
respond to regulatory and enforcement pressures.
---------------------------------------------------------------------------
\11\ One money transmitter surrendered its license to the New
York Banking Department immediately before the Order became
effective. Two other money transmitters subject to the Order simply
stopped sending any funds to Colombia.
---------------------------------------------------------------------------
Ancillary results of the Order also have been significant. The
Treasury has observed a dramatic increase in Customs Service
interdiction and seizure activity at air and seaports, on common
carriers, and on highways--over $50 million during the first seven
months of the Order's operation, a figure over three times higher than
that for comparable periods in prior years. Also significant is the
fact that the cost of sending funds to Colombia through money
transmitters in New York has dropped, from 7 percent to 5 percent of
[[Page 27912]]
the value of the transfer, since the Order was put in place.
At the same time, it is clear that a significant number of money
transmitter agents have been willing to structure transactions beneath
the Order's $750 reporting threshold, in an attempt to move narcotics-
tainted funds abroad even during a period of known surveillance of the
industry and its agents. (At least one money transmitter has itself
actively worked with federal authorities during this period to identify
suspicious transactions, even those involving its own agents.) The
number of transactions in amounts below $750 has risen sharply, and the
amount of funds transferred to Colombia in such increments appears to
have almost doubled. The Task Force has already executed search
warrants on twenty-two money transmitter agents suspected of
intentionally structuring transactions in violation of the Order; all
but five businesses served have closed, five people have been indicted,
and four people have already pleaded guilty. Three additional arrest
warrants are outstanding. The Task Force is continuing to pursue
investigations of this type, and the Treasury will consider imposing
civil penalties against violators who are not pursued criminally.
Texas State Investigations. The New York GTO experience is not an
isolated phenomenon. The Texas Attorney General's office began
investigating so called ``giro houses'' in the Houston area in the
early 1990s. Giro houses are independent money transmitters that also
provide ancillary services such as cargo shipment and long distance
telephone access. Before 1991, there were as many as 100 giro houses in
Houston processing over $450 million per year in wire transfers,
primarily to Colombia. The Texas Attorney General's Office, working
with the Texas Department of Banking and the Houston office of the
Internal Revenue Service, opened formal investigations of a number of
giro houses. These investigations, like the El Dorado Task Force's
investigations in New York, revealed a pattern of money laundering
through false invoices designed to justify the large currency deposits
at local banks.
From late 1994 through 1995 the Texas Attorney General's Office
obtained and executed 11 search warrants at Houston giro houses. Many
businesses closed while under investigation, and the overall effect of
the Texas investigations on the illegitimate trade was dramatic. A
recent count of giro houses lists eight sending funds to Colombia, and
the total amount of money processed through giro houses has dropped to
approximately $10 million.
A significant factor in the Texas investigations has been the state
requirement that any wire transaction over $1,000 be recorded on a
receipt that includes driver's license and social security or other
photo identification numbers, birth date and address of the sender.
Because false identification and addresses are commonly used by money
launderers sending funds in excess of $1,000, the identification
requirement has provided a clear mechanism for detecting and proving
illegal behavior. In the case of businesses that are willing to
structure transactions beneath the $1,000 threshold, surveillance has
been used to document the deviation between the number of people
observed patronizing the business and the number of customers reflected
in business records during the surveillance period.
C. Need for Special Reporting and Recordkeeping Rules for Money
Transmitters
This notice proposes to amend the Bank Secrecy Act regulations to
require money transmitters and their agents to report and keep records
of, and verify the identity of senders of, transactions in currency or
monetary instruments of at least $750 but not more than $10,000 in
connection with a transmission or other transfer of funds to any person
outside the United States. While Treasury recognizes the significance
of this proposed action, it believes that the step is nevertheless
clearly warranted based on the potential, and the record of actual,
abuse of the money transmission industry documented, inter alia, by the
Task Force's investigations and the results of the Order.
As indicated above, the Order and the Texas investigations have had
a significant impact in providing crucial information to the Treasury
as well as disrupting the flow to Colombia, through money transmitters,
of illegally-derived funds. But geographic targeting orders are by
their nature relatively temporary measures, intended to illuminate,
rather than solve, long-term enforcement problems. Given the structural
factors that created the situation to which the Order was addressed
(plus the evidence of extensive structuring that has taken place to
avoid even the Order-imposed threshold of $750), the likelihood that
launderers are now moving large sums through other money transmitters
in other cities, and will resume doing so in New York once the Order
expires, cannot responsibly be discounted, let alone ignored.
The Task Force's investigations and the Order focused on money
transmitters in the New York Metropolitan Area. But the Texas giro
house investigations and the consensus of law enforcement officials
simply confirms what the New York situation itself would lead one to
expect, namely that elements of the money transmission industry, given
a combination of factors, are very susceptible to systematic misuse,
extending unfortunately in some cases to infiltration and corruption,
by money launderers.
It should be emphasized at the outset that, as in the case of the
nations's banks and securities firms, most money services business
operators and agents are completely law-abiding and as interested in
cost-effective financial law enforcement as the Treasury itself. A
number of major national money remitters and issuers of traveler's
checks and money orders have already taken their own steps to devise
anti-money laundering compliance programs.
The challenges for reasonable implementation of the Bank Secrecy
Act posed by the situation the New York Order illuminates are daunting.
Implementation of a comprehensive counter-money laundering strategy for
money transmitter and other money services businesses raises
significant issues not present in devising counter-money laundering
strategies for banks, largely due to unique structural factors
affecting money services businesses. Money transmitters (like other
money services businesses) operate largely through the medium of
independent enterprises that agree to serve as agents for the
businesses' products or services.
Thus, the public does not deal directly with the businesses that
issue the instruments, or actually perform the services, purchased, and
the activities of the agents are subject to less systematic control
than in the case, for example, of branch banks or brokerage offices.
Even more important, the experience encountered in New York and
Texas indicates that the rules of the Bank Secrecy Act are not now
appropriately tailored to reflect the particular operating realities,
problems, and potential for abuse of an industry that deals in sums far
below $10,000 per transaction. Given a truly ``cash'' industry, that
moves impressively large sums in the aggregate, with few of the
structural controls in place that banks and their regulators impose,
and that is not subject to the sorts of market discipline to which
banks are subject with respect to avoiding collaboration
[[Page 27913]]
with criminals, a single strategy does not easily suggest itself.
The issue facing the Treasury is how to move from the world of a
temporary geographic targeting order to stabilize the situation of this
industry. The decision to propose a $750 currency transaction reporting
requirement for outbound transmissions reflects two determinations. The
first is that such a rule, while in effect, will create a source of
information that should help nationwide to stop the relatively
uncontrolled outflow of narcotics proceeds through money transmitters.
The second is that such a rule will allow more long-term (and less
absolute) measures, most important, heightened industry procedures and
programs based on a mandatory suspicious transaction reporting regime,
backed by nation-wide registration of money services businesses, the
time to become effective.
Treasury has considered a number of alternatives in seeking to
craft the proposed rule. The value of reporting in this situation is
plain. Mandatory reporting creates a critical source of information for
Treasury enforcement and bank regulators about the transactions that
move through money transmitters. That the reporting requirement also
creates a deterrent effect and drives launderers from the system,
cannot, Treasury believes, be seriously debated.
No Bank Secrecy Act requirement other than the New York Order (and
previous geographic targeting orders, in Phoenix in 1989 and Houston in
1991) has ever keyed reporting requirements or special recordkeeping
requirements at a level as low as $750. The next standard rung in the
ladder is $3,000; money transmitters, like other financial
institutions, currently are subject to a requirement to maintain
records of funds transfers of $3,000 or more, see 31 CFR 103.33, and to
a requirement to report transactions in currency of more than $10,000.
See 31 CFR 103.22(a). It is, in part, the evasion of the $3,000
recordkeeping requirement that the New York Order was put in place to
prevent.
In addition, enforcement and regulatory analyses increasingly
confirm what the experience under the Order amply demonstrates, namely
that a $3,000 threshold has small relevance to an industry that most
commonly deals in sums far below that amount. A study by Coopers &
Lybrand concluded that the average transaction amount for funds
transferred by money transmitters to persons outside the United States
is approximately $320. The fact that $750 is more than twice the amount
of the average transaction decreases the likelihood that legitimate
transactions will be put off track by this simple reporting
requirement.
Another issue is whether the rule should apply to transfers to all
destinations outside the United States, rather than, say, applying only
to transmissions to particular countries. Any rule directed at
transmissions to a particular nation would simply move the process to
create a switching station in some third country, for funds ultimately
bound to the country designated. (For example, there is some basis for
a conclusion that funds destined for Colombia, once the New York Order
was in place, were simply routed through transmitters in other Latin
American nations, on their way to their ultimate destination in
Colombia.) Not only is singling out a particular country likely to be
ineffective, but it could also contravene international agreements to
which the United States is a party.
Money transmitters provide a valuable service, especially in lower-
income communities in which access to banks may be limited. In issuing
this notice of proposed rulemaking, Treasury has sought to avoid
imposing undue hardship on any segment of the United States population.
On the contrary, by establishing a reporting threshold more than double
the average amount of funds transferred outside the United States by a
money transmitter, it is targeting the criminals who misuse money
transmitters to send the profits of their illegal activity to drug
source countries. Indeed, if the New York experience holds true, a
lower reporting threshold may actually lead to a reduction in the cost
to customers of remitting funds abroad through money transmitters.
As indicated above, it is not necessarily the case that any special
$750 reporting rule, once made final, would be permanent. The
Department of the Treasury intends carefully to review the experience
of the industry and the results of reporting under the blanket $750
reporting rule. The Department of the Treasury intends, at the same
time that its programs emphasize a government-industry thrust to bring
counter-money laundering programs in the money services industry up to
a workable standard, to determine whether, and to what extent, a
special reporting rule continues to be necessary.
D. Authority for Special Reporting and Recordkeeping Rule for Money
Transmitters
This notice of proposed rulemaking is grounded in the broad
authority granted the Secretary of the Treasury by section 5313(a) and
section 5318(h). Section 5313(a) authorizes the Secretary to require a
domestic financial institution to report transactions involving coins,
currency or other monetary instruments. Section 5318(h) authorizes the
Secretary to require a financial institution to carry out anti-money
laundering programs, including at a minimum the development of internal
policies, procedures, and controls.
While 31 CFR 103.22(a) imposes a general reporting and
recordkeeping threshold of more than $10,000 for domestic financial
institutions, section 5313(a) does not mandate any single threshold
amount. Instead, the statute grants the Secretary the discretion to
require reports of transactions ``in an amount, denomination, or amount
and denomination'' as the Secretary may prescribe. FinCEN believes this
language permits the Secretary to impose a reporting threshold lower
than $10,000, where the circumstances warrant.12
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\12\ This plain reading of section 5313(a) is consistent with
the statute's relevant legislative and administrative histories.
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Similarly, the statute is silent on whether the Secretary may set a
different reporting threshold for different kinds of financial
institutions. Section 5313(a) does state, however, that reports of
transactions may be required ``under circumstances the Secretary
prescribes by regulation.'' FinCEN reads this broadly-stated language
as permitting the Secretary to set a reporting threshold for money
transmitters that is different than the reporting threshold for other
financial institutions.13
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\13\ Again, the relevant legislative and administrative
histories of section 5313(a) do not conflict with this plain reading
of the statute.
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The proposal contained in this document that would lower the
general reporting threshold of more than $10,000 has historical
antecedents. Both Congress and the Department of the Treasury have in
the past each drafted a law or proposed a rule that would have lowered
the $10,000 reporting threshold generally applicable to financial
institutions. On these occasions, FinCEN is unaware of any challenge
ever being made to Treasury's legal authority under the Bank Secrecy
Act or its implementing regulations to make such a change.
In August 1986, the House of Representatives considered legislation
(HR 5484) aimed at countering the misuse of financial institutions by
narcotics launderers. One provision of that bill would have authorized
the Secretary of the Treasury to order domestic financial institutions
to report
[[Page 27914]]
and retain records of any transaction of more than $3,000 involving
currency or other monetary instruments. The version of the bill
containing this provision was never enacted into law.14
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\14\ Nevertheless, certain amendments to the Bank Secrecy Act
(e.g., making structuring a crime) eventually were made by the Money
Laundering Control Act of 1986, Subtitle H of the Anti-Drug Abuse
Act of 1986, Pub. L. 99-570 (October 27, 1986).
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When HR 5484 was introduced, the Department of the Treasury issued
a notice of proposed rulemaking that would have amended the Bank
Secrecy Act regulations to require domestic financial institutions to
report and retain records of certain transactions in currency less than
$10,000. See 51 FR 30233 (August 25, 1986). Specifically, the notice
would have required that financial institutions obtain and retain a
report from each purchaser of any official bank check, cashier's check,
money order or traveler's check, if the purchase involved a transaction
in currency of $3,000 or more. The rule then proposed would have
required that each such report be signed by the purchaser and certify
whether or not the purchaser had purchased more than $10,000 of these
kinds of instruments in any one day. Under the notice, the selling
financial institution would have been required to treat any affirmative
certification, or refusal to certify, as a reportable transaction, that
would require the financial institution to file a CTR. Based on
Treasury's conclusions that these proposals were ``not advisable at
this time,'' the proposals were eventually withdrawn. See 58 FR 6611
(February 29, 1988).
The notice of proposed rulemaking containing these proposals
generated approximately 300 comments. While most commenters objected to
lowering the reporting threshold from $10,000 to $3,000 for
transactions involving the kinds of instruments listed above, no
commenter questioned Treasury's legal authority under the Bank Secrecy
Act and its implementing regulations to establish either a reporting
threshold other than $10,000 or a different reporting threshold for
different kinds of transactions.
III. Specific Provisions
A. 31 CFR 103.22(i)(1) General
Proposed paragraph (i)(1) states the special reporting rule for
money transmitters. It provides that money transmitters and their
agents must report transactions in currency or monetary instruments of
at least $750 but not more than $10,000 in connection with a
transmission or other transfer of funds to any person outside the
United States.
Reporting Institutions
Any enterprise that is a money transmitter, within the definition
proposed in the Registration Rule, or agent of a money transmitter, is
subject to the proposed special reporting rule contained in this
document.
As proposed, the special reporting rule would not apply to
depository institutions, despite the fact that some depository
institutions accept funds transmission business from non-customers.
Depository institutions are subject to national examination by the
federal financial supervisory agencies for, inter alia, compliance with
the Bank Secrecy Act and adequacy of systems to prevent money
laundering. They are also subject to the obligation to report
suspicious transactions to the Department of the Treasury, and FinCEN
will be issuing a suspicious transaction report advisory to banks with
respect to the potential for abuse of the funds transmittal system by
non-account customers in the near future. In addition, FinCEN does not
possess information about the segment of the money transmission
business that involves bank transmissions for non-account customers
that indicates the sorts of abuses demonstrated, in the case of some
non-bank money transmitters and their agents, by the New York Order,
the Texas investigations, other enforcement activities, and industry
analyses.
Under these circumstances, and in the absence of demonstrated abuse
of the bank non-customer segment of the money transmission industry,
the Department of the Treasury is not proposing the extension to
depository institutions, at this time, of the rules proposed for other
money transmitters by this notice of proposed rulemaking. However,
comments are specifically requested on the question whether either
competitive or other factors make it necessary for the special
reporting rules to apply to banks, for non-customers, as well as to
other money transmitters.
Reportable Transactions
The proposed reporting rule applies to transactions in currency or
monetary instruments of at least $750 but not more than $10,000 in
connection with a transmission or other transfer of funds to any person
outside the United States. (At the more than $10,000 level, the normal
reporting rules apply.) The $750 threshold for reporting under the
proposed rule reflects information about the money transmitting
industry provided voluntarily by the industry, collected by Coopers &
Lybrand, L.L.P., and confirmed by the Task Force's investigations and
the results of the Order. Law enforcement sources agree that, across
the industry and throughout the United States, the average legitimate
funds transfer to Colombia ranges in amount between $200 and
$500.15 Thus, reports about transfers of $750 or more should
impose neither an undue burden on the legitimate business conducted by
money transmitters nor an undue government intrusion into the financial
affairs of their legitimate customers. In this regard, it is worth
noting that the maximum available value of a U.S. Postal Service money
order--a monetary instrument widely used for bill paying by the same
part of the population that has a legitimate need for the services of
money transmitters such as those targeted by the proposed special
reporting rule--is $700.
---------------------------------------------------------------------------
\15\ According to the Coopers & Lybrand study, noted above, the
average amount of a funds transfer from the United States to another
country is approximately $320.
---------------------------------------------------------------------------
Any transmission or other transfer of funds to any person outside
the United States of at least $750 but not more than $10,000 would be
subject to the proposed reporting rule. As discussed above, any
limitation of the rule's attention to a particular country or group of
countries would ignore the reality that organized financial crime and
its money-moving circuits are worldwide in scope and would likely raise
far more problems than it solved. Any such limitation would be both
unfair and ill-tailored to the realities of the money laundering
problem.
The reporting range for this proposed special reporting rule has
been set at an amount of at least $750 but no more than $10,000 to
avoid any overlap with the general reporting requirement of 31 CFR
103.22(a) to report transactions in currency of $10,000 or more.
Moreover, the proposed special reporting rule does not affect in any
way the obligation of money transmitters to comply with the suspicious
transaction reporting requirements, as set forth in the Suspicious
Transaction Rule. The proposed rule further does not affect the
obligation for money transmitters to comply with the recordkeeping
requirements for funds transfers as set forth in 31 CFR 103.33.
B. 31 CFR 103.22(i)(2) Identification Required
Proposed paragraph (i)(2) requires that before any money
transmitter or agent completes a transaction in currency of at least
$750 but not more
[[Page 27915]]
than $10,000 in connection with any transmission or other transfer of
funds to any person outside the United States, the money transmitter or
agent involved must verify and record the name and address of the
sender of the funds and satisfy with respect to such transaction the
requirements of 31 CFR 103.28, provided that for purposes of the
special reporting requirement, only a drivers license, passport, alien
registration card or state-issued identification card, containing a
photograph of the individual involved, may be accepted for verification
of identity.
C. 31 CFR 103.22(i)(3) Person Required To File and Keep Records
As is the case with the Suspicious Transaction Rule, proposed
paragraph (i)(3) places responsibility for reporting on each money
transmitter, as well as on its agents,
regardless of whether, and the terms on which, the money transmitter
treats such person as an agent or independent contractor for other
purposes.
The allocation of principal-agent liability in particular cases,
under the governing terms of the Bank Secrecy Act, is too complex a
subject to be dealt with in this notice of proposed rulemaking.
However, the Department of the Treasury believes that at a minimum the
operators of money transmitters have a duty to know their agents
sufficiently well to be able to fulfill the reporting and recordkeeping
obligations involved in compliance with the proposed rule. As in the
case of the rules for suspicious activity reporting by banks, 31 CFR
103.21, and exemptions from the requirement to report transactions in
currency by banks, 31 CFR 103.22(h), the proposed rule is intended to
introduce a concept of due diligence into the reporting procedures, and
that diligence applies equally to a review of activities of agents as
to a review (by both principals and agents) of transactions of
consumer-customers of money transmitters.
Treasury invites comments on whether the rule should contain more
detailed procedures or rules dealing with the allocation of
responsibility between principals (the money transmitters) and agents,
as well as specific rules for compliance programs that recognize the
realities of the business operations in this part of the financial
sector.
D. 31 CFR 103.22(i)(4) Recordkeeping
Proposed paragraph (i)(4) makes it clear that records maintained by
a money transmitter or its agent in compliance with and administration
of the rules of this paragraph (i) must be maintained in accordance
with the recordkeeping provisions of 31 CFR 103.38, which, inter alia,
requires that records be maintained for a period of five years.
E. 31 CFR 103.27(a)(3)
Proposed paragraph (a)(3) states the filing deadline applicable to
any report required to be filed by proposed paragraph (i)(1). Any such
report must be filed within 30 days following the day on which the
reportable transaction occurred.
IV. Proposed Effective Date
The amendments to 31 CFR Part 103 contained in this notice of
proposed rulemaking will become effective 30 days following the
publication in the Federal Register of the final rule to which this
notice of proposed rulemaking relates.
V. Submission of Comments
An original and four copies of any comment (other than one sent
electronically) must be submitted. All comments will be available for
public inspection and copying, and no material in any such comments,
including the name of any person submitting comments, will be
recognized as confidential. Accordingly, material not intended to be
disclosed to the public should not be submitted.
VI. Regulatory Flexibility Act
FinCEN certifies that the proposed rule contained in this document
will not have a significant economic impact on a substantial number of
small entities. The average money transmission from the United States
to another country is approximately $320. This amount is substantially
below the $750 threshold that triggers reporting under the proposed
rule. Thus, FinCEN believes that the threshold has been set at a level
that will avoid a significant economic burden on small businesses.
VII. Paperwork Reduction Act Notices
Special Currency Transaction Report for Money Transmitters
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3501, et seq., and its implementing regulations, 5 CFR
part 1320, the following information concerning the collection of
information on International Transmission of Funds Report is presented
to assist those persons wishing to comment on the information
collection.
FinCEN anticipates that this proposed rule, if enacted as proposed,
would result in a total of 300,000 International Transmission of Funds
Report forms to be filed. This result is an estimate, based on a
projection of the size and volume of the industry.16
---------------------------------------------------------------------------
\16\ Given the state of our knowledge of the industry and
patterns of illegal transactions, these estimates are extremely hard
to generate.
---------------------------------------------------------------------------
Title: International Transmission of Funds Report.
OMB Number: To be determined.
Description of Respondents: Money transmitters.
Estimated Number of Respondents: 100,000.
Frequency: As required.
Estimate of Burden: Reporting average of 19 minutes per response;
recordkeeping average of 5 minutes per response.
Estimate of Total Annual Burden on Respondents: 300,000 responses.
Reporting burden estimate = 95,000 hours; recordkeeping burden estimate
= 25,000 hours. Estimated combined total of 120,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated at
$2,400,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: New.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
Recordkeeping Requirements of 31 CFR 103.22(i)
In accordance with requirements of the Paperwork Reduction Act of
1995,
[[Page 27916]]
44 U.S.C. 3501, et seq., and its implementing regulations, 5 CFR Part
1320, the following information concerning the collection of
information as required by 31 CFR 103.22(i) is presented to assist
those persons wishing to comment on the information collection.
Title: Currency transaction special reporting.
OMB Number: 1506-0006.
Description of Respondents: All financial institutions.
Estimated Number of Respondents: 100,000.
Frequency: As required.
Estimate of Burden: Recordkeeping average of 10 minutes per
response; 300,000 responses.
Estimate of Total Annual Burden on Respondents: Recordkeeping
burden estimate = 50,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$1,000,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: Extension.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on cost should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
Comments may be submitted to FinCEN, at the address specified at
the beginning of this document, Attention: Paperwork Reduction Act.
Responses to this request for comments under the Paperwork
Reduction Act will be summarized and included in the request for Office
of Management and Budget approval. All comments will become a matter of
public record.
VIII. Executive Order 12866
The Department of the Treasury has determined that this proposed
rule is not a significant regulatory action under Executive Order
12866.
IX. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an
agency prepare a budgetary impact statement before promulgating a rule
that includes a federal mandate that may result in expenditure by
state, local and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 202 of the Unfunded Mandates Act
also requires an agency to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule. FinCEN has
determined that it is not required to prepare a written statement under
section 202 because it believes that the proposed amendments will not
result in the expenditure of $100 million or more in any one year by
either state, local and tribal governments, in the aggregate, or by the
private sector.
List of Subjects in 31 CFR Part 103
Administrative practice and procedure, Authority delegations
(Government agencies), Banks, banking, Currency, Foreign banking,
Foreign currencies, Gambling, Investigations, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Securities, Taxes.
Proposed Amendments to the Regulations
For the reasons set forth above in the preamble, 31 CFR 103 is
proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for Part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. Paragraph (i) of section 103.22 is added to read as follows:
Sec. 103.22 Reports of currency transactions.
* * * * *
(i) Reporting of the transmission or other transfer of funds
outside the United States--(1) General. In addition to any reports
required by paragraph (a) of this section, each money transmitter or
its agent shall file a report, in such manner as FinCEN may prescribe,
of any transaction or attempted transaction in currency or monetary
instruments in an amount of at least $750 but not more than $10,000, in
connection with a request or order for the transmission or other
transfer of funds, directly or indirectly, to any person outside the
United States. For purposes of the preceding sentence, multiple
transactions in currency shall be treated as a single transaction if
the money transmitter or its agent has knowledge that the transactions
are by or on behalf of any person and result in the transmission or
other transfer of funds of at least $750 but not more than $10,000 on a
single calendar day.
(2) Identification required. Before concluding any transaction
described in paragraph (i)(1) of this section, a money transmitter or
its agent must verify and record the name and address of the individual
presenting such transaction and satisfy with respect to such
transaction the requirements of Sec. 103.28, provided that for purposes
of this paragraph (i), only a drivers license, passport, alien
registration card, state-issued identification card, containing a
photograph of the individual involved, may be accepted for verification
of identity.
(3) Person required to file and keep records. The obligation to
report each transaction that is described in paragraph (i)(1) of this
section and to maintain records as described in paragraph (i)(4) of
this section, rests with the money transmitter involved and its agent,
regardless of whether, and the terms on which, the money transmitter
treats such person as an agent or independent contractor for other
purposes. Notwithstanding this paragraph (i)(3), the filing of a report
and maintaining of records by either the money transmitter involved or
its agent satisfies the obligations imposed by this paragraph (i). If
an agent of a money transmitter completes and files a report, a copy of
the report also must be sent to the money transmitter for which the
agent is acting.
(4) Recordkeeping. The records maintained by a money transmitter or
its agent to document its compliance with and administration of the
rules of this paragraph (i) shall be maintained in accordance with the
provisions of Sec. 103.38.
(5) Excluded persons. This paragraph (i) does not require reporting
by depository institutions as defined in 31 U.S.C. 5313(g).
[[Page 27917]]
(6) Effective date. This paragraph (i) is effective [30 days
following the publication in the Federal Register of the final rule to
which this notice of proposed rulemaking relates].
3. In Sec. 103.27, paragraphs (a)(3) and (a)(4) are redesignated as
paragraphs (a)(4) and (a)(5), respectively, and new paragraph (a)(3) is
added to read as follows:
Sec. 103.27 Filing of reports.
(a) * * *
(3) A report required by Sec. 103.22(i) shall be filed within 30
days following the day on which the reportable transaction occurred.
* * * * *
Dated: May 16, 1997.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 97-13302 Filed 5-16-97; 4:32 pm]
BILLING CODE 4820-03-P
Complete official Federal Register PDF
FR Doc. 97-13297 Radio Broadcasting Services; Lake City, MN
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27711-27712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13297]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MM Docket No. 97-133, RM-9086]
Radio Broadcasting Services; Lake City, MN
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This document requests comments on a petition filed by Phoenix
Media Group, Inc., proposing the allotment of Channel 235A at Lake
City, Minnesota, as that community's second FM broadcast service. The
coordinates for Channel 235A at Lake City are 44-22-58 and 92-21-45.
There is a site restriction 10.6 kilometers (6.6 miles) southwest of
the community.
DATES: Comments must be filed on or before July 7, 1997, and reply
comments on or before July 22, 1997.
ADDRESSES: Federal Communications Commission, Washington, DC. 20554. In
addition to filing comments with the FCC, interested parties should
serve the petitioner, as follows: Steven T. Moravec, President, Phoenix
Media Group, Inc., 1407 Sumner Street, Suite 200, St. Paul, Minnesota
55116-2645.
FOR FURTHER INFORMATION CONTACT: Kathleen Scheuerle, Mass Media Bureau,
(202) 418-2180.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rule Making, MM Docket No. 97-133, adopted May 7, 1997, and
released May 16, 1997. The full text of this Commission decision is
available for inspection and copying during normal business hours in
the Commission's Reference Center (Room
[[Page 27712]]
239), 1919 M Street, NW., Washington, DC. The complete text of this
decision may also be purchased from the Commission's copy contractors,
International Transcription Services, Inc., 2100 M Street, NW., Suite
140, Washington, DC. 20037, (202) 857-3800.
Provisions of the Regulatory Flexibility Act of 1980 do not apply
to this proceeding.
Members of the public should note that from the time a Notice of
Proposed Rule Making is issued until the matter is no longer subject to
Commission consideration or court review, all ex parte contacts are
prohibited in Commission proceedings, such as this one, which involve
channel allotments. See 47 CFR 1.1204(b) for rules governing
permissible ex parte contact.
For information regarding proper filing procedures for comments,
see 47 CFR 1.415 and 1.420.
List of Subjects in 47 CFR Part 73
Radio broadcasting.
Federal Communications Commission.
John A. Karousos,
Chief, Allocations Branch, Policy and Rules Division, Mass Media
Bureau.
[FR Doc. 97-13297 Filed 5-20-97; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 97-13292 Radio Broadcasting Services; Mesquite, NV
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Page 27711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13292]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MM Docket No. 97-132, RM-9081]
Radio Broadcasting Services; Mesquite, NV
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Commission requests comments on a petition filed by Will
Kemp to allot Channel 244C to Mesquite, NV, as the community's second
local and first competitive FM service. Channel 244C can be allotted to
Mesquite in compliance with the Commission's minimum distance
separation requirements with a site restriction of 5.4 kilometers (3.4
miles) north, at coordinates 36-51-15 North Latitude and 114-03-30 West
Longitude, to avoid a short-spacing to the outstanding construction
permit (BMPH-960607IH) of Station KTVF, Channel 244C2, Williams, AZ,
and to a pending application (ARN-950825MB) for Channel 244C2 at Lake
Havasu City, AZ.
DATES: Comments must be filed on or before July 7, 1997, and reply
comments on or before July 22, 1997.
ADDRESSES: Federal Communications Commission, Washington, DC 20554. In
addition to filing comments with the FCC, interested parties should
serve the petitioner, or its counsel or consultant, as follows: James
A. Koerner, Baraff, Koerner & Olender, P.C., Three Bethesda Metro
Center, Suite 640, Bethesda, MD 20814-5392 (Counsel to petitioner).
FOR FURTHER INFORMATION CONTACT: Leslie K. Shapiro, Mass Media Bureau,
(202) 418-2180.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Notice of Proposed Rule Making, MM Docket No. 97-132, adopted May 7,
1997, and released May 16, 1997. The full text of this Commission
decision is available for inspection and copying during normal business
hours in the FCC Reference Center (Room 239), 1919 M Street, NW.,
Washington, DC. The complete text of this decision may also be
purchased from the Commission's copy contractor, International
Transcription Services, Inc., (202) 857-3800, 2100 M Street, NW, Suite
140, Washington, DC 20037.
Provisions of the Regulatory Flexibility Act of 1980 do not apply
to this proceeding.
Members of the public should note that from the time a Notice of
Proposed Rule Making is issued until the matter is no longer subject to
Commission consideration or court review, all ex parte contacts are
prohibited in Commission proceedings, such as this one, which involve
channel allotments. See 47 CFR 1.1204(b) for rules governing
permissible ex parte contacts.
For information regarding proper filing procedures for comments,
see 47 CFR 1.415 and 1.420.
List of Subjects in 47 CFR Part 73
Radio broadcasting.
Federal Communications Commission.
John A. Karousos,
Chief, Allocations Branch, Policy and Rules Division, Mass Media
Bureau.
[FR Doc. 97-13292 Filed 5-20-97; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 97-13291 Radio Broadcasting Services; Galesburg, IL and Ottumwa, IA
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27710-27711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13291]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MM Docket No. 97-130; RM-8751]
Radio Broadcasting Services; Galesburg, IL and Ottumwa, IA
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Commission requests comments on a petition filed by
Northern Broadcast Group proposing the substitution of Channel 224B1
for Channel 224A at Galesburg, Illinois, and the modification of
Station WGBQ(FM)'s license accordingly. To accommodate the upgrade,
petitioner also requests that the allotment reference coordinates for
now vacant and unapplied-for Channel 224C3 at Ottumwa, Iowa, be
modified. Channel 224B1 can be allotted to Galesburg, in compliance
with the Commission's minimum distance separation requirements with a
site restriction of 13.4 kilometers (8.3 miles) northwest at
petitioner's requested site. The coordinates for Channel 224B1 at
Galesburg are North Latitude 41-02-50 and West Longitude 90-27-30. See
Supplementary Information, infra.
DATES: Comments must be filed on or before July 7, 1997 and reply
comments on or before July 22, 1997.
ADDRESSES: Federal Communications Commission, Washington, D.C. 20554.
In addition to filing comments with the
[[Page 27711]]
FCC, interested parties should serve the petitioner, or its counsel or
consultant, as follows: Dawn M. Sciarrino, Fisher, Wayland, Cooper,
Leader & Zaragoza, L.L.P., 2001 Pennsylvania Ave., NW., Suite 400,
Washington, DC 20006-1851 (Counsel for Petitioner).
FOR FURTHER INFORMATION CONTACT: Sharon P. McDonald, Mass Media Bureau,
(202) 418-2180.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Notice of Proposed Rule Making, MM Docket No. 97-130, adopted May 7,
1997, and released May 16, 1997. The full text of this Commission
decision is available for inspection and copying during normal business
hours in the FCC Reference Center (Room 239), 1919 M Street, NW.,
Washington, DC. The complete text of this decision may also be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW, Suite
140, Washington, DC 20037.
Additionally, the reference coordinates for vacant Channel 224C3 at
Ottumwa, Iowa, can be modified consistent with the Commission's spacing
requirements with a site restriction of 12.2 kilometers (7.6 miles)
west. The modified coordinates for Channel 224C3 at Ottumwa are North
Latitude 41-00-00 and West Longitude 92-33-10. In accordance with
Section 1.420(g)(3) of the Commission's Rules, we will not accept
competing expressions of interest in the use of Channel 224B1 at
Galesburg, Illinois, or require the petitioner to demonstrate the
availability of an additional equivalent class channel for use by such
parties.
Provisions of the Regulatory Flexibility Act of 1980 do not apply
to this proceeding.
Members of the public should note that from the time a Notice of
Proposed Rule Making is issued until the matter is no longer subject to
Commission consideration or court review, all ex parte contacts are
prohibited in Commission proceedings, such as this one, which involve
channel allotments. See 47 CFR 1.1204(b) for rules governing
permissible ex parte contacts.
For information regarding proper filing procedures for comments,
see 47 CFR 1.415 and 1.420.
List of Subjects in 47 CFR Part 73
Radio broadcasting.
Federal Communications Commission
John A. Karousos,
Chief, Allocations Branch, Policy and Rules Division, Mass Media
Bureau.
[FR Doc. 97-13291 Filed 5-20-97; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 97-13285 Radio Broadcasting Services; Twin Falls, ID
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Page 27710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13285]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MM Docket No. 97-131, RM-9078]
Radio Broadcasting Services; Twin Falls, ID
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This document requests comments on a petition for rule making
filed on behalf of JTL Communications Corporation requesting the
allotment of Channel 294A to Twin Falls, Idaho, as an additional local
FM broadcast service at that community. Coordinates used for Channel
294A at Twin Falls are 42-33-42 and 114-28-12.
DATES: Comments must be filed on or before July 7, 1997, and reply
comments on or before July 22, 1997.
ADDRESSES: Secretary, Federal Communications Commission, Washington, DC
20554. In addition to filing comments with the FCC, interested parties
should serve the petitioner's counsel, as follows: J. Frederick Mack
and Bradley J. Wiskirchen, Esqs., Holland & Hart, Suite 1400, U.S. Bank
Plaza, 101 South Capitol Boulevard, PO Box 2527, Boise, ID 83701.
FOR FURTHER INFORMATION CONTACT: Nancy Joyner, Mass Media Bureau, (202)
418-2180.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Notice of Proposed Rule Making, MM Docket No. 97-131, adopted May 7,
1997, and released May 16, 1997. The full text of this Commission
decision is available for inspection and copying during normal business
hours in the FCC's Reference Center (Room 239), 1919 M Street, NW.,
Washington, DC. The complete text of this decision may also be
purchased from the Commission's copy contractors, International
Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite
140, Washington, DC 20037.
Provisions of the Regulatory Flexibility Act of 1980 do not apply
to this proceeding.
Members of the public should note that from the time a Notice of
Proposed Rule Making is issued until the matter is no longer subject to
Commission consideration or court review, all ex parte contacts are
prohibited in Commission proceedings, such as this one, which involve
channel allotments. See 47 CFR 1.1204(b) for rules governing
permissible ex parte contacts.
For information regarding proper filing procedures for comments,
See 47 CFR 1.415 and 1.420.
List of Subjects in 47 CFR Part 73
Radio broadcasting.
Federal Communications Commission.
John A. Karousos,
Chief, Allocations Branch, Policy and Rules Division, Mass Media
Bureau.
[FR Doc. 97-13285 Filed 5-20-97; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 97-13262 Establishment of Class E Airspace; Cooperstown, ND, Cooperstown Municipal Airport
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27705-27706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13262]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 62, No. 98 / Wednesday, May 21, 1997 /
Proposed Rules
[[Page 27705]]
=======================================================================
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Airspace Docket No. 97-AGL-18]
Establishment of Class E Airspace; Cooperstown, ND, Cooperstown
Municipal Airport
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This notice proposes to establish Class E airspace at
Cooperstown, ND. A Global Positioning System (GPS) standard instrument
approach procedure (SIAP) to Runway 13 and a GPS SIAP to Runway 31 have
been developed for Cooperstown Municipal Airport. Controlled airspace
extending upward from 700 to 1200 feet above ground level (AGL) is
needed to contain aircraft executing the approach. The intended affect
of this proposal is to provide segregation of aircraft using instrument
approach procedures in instrument conditions from other aircraft
operating in visual weather conditions.
DATES: Comments must be received on or before July 7, 1997.
ADDRESSES: Send comments on the proposal in triplicate to: Federal
Aviation Administration, Office of the Assistant Chief Counsel, AGL-7,
Rules Docket No. 97-AGL-18, 2300 East Devon Avenue, Des Plaines,
Illinois 60018.
The official docket may be examined in the Office of the Assistant
Chief Counsel, Federal Aviation Administration, 2300 East Devon Avenue,
Des Plaines, Illinois. An informal docket may also be examined during
normal business hours at the Air Traffic Division, Operations Branch,
Federal Aviation Administration, 2300 East Devon Avenue, Des Plaines,
Illinois.
FOR FURTHER INFORMATION CONTACT: Manuel A. Torres, Air Traffic
Division, Operations Branch, AGL-530, Federal Aviation Administration,
2300 East Devon Avenue, Des Plaines, Illinois 60018, telephone (847)
294-7568.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested parties are invited to participate in this proposed
rulemaking by submitting such written data, views, or arguments as they
may desire. Comments that provide the factual basis supporting the
views and suggestions presented are particularly helpful in developing
reasoned regulatory decisions on the proposal. Comments are
specifically invited on the overall regulatory, aeronautical, economic,
environmental, and energy-related aspects of the proposal.
Communications should identify the airspace docket number and be
submitted in triplicate to the address listed above. Commenters wishing
the FAA to acknowledge receipt of their comments on this notice must
submit with those comments a self-addressed, stamped postcard on which
the following statement is made: ``Comments to Airspace Docket No. 97-
AGL-18.'' The postcard will be date/time stamped and returned to the
commenter. All communications received on or before the specified
closing date for comments will be considered before taking action on
the proposed rule. The proposal contained in this notice may be changed
in light of comments received. All comments submitted will be available
for examination in the Rules Docket, FAA, Great Lakes Region, Office of
the Assistant Chief Counsel, 2300 East Devon Avenue, Des Plaines,
Illinois, both before and after the closing date for comments. A report
summarizing each substantive public contact with FAA personnel
concerned with this rulemaking will be filed in the docket.
Availability of NPRM's
Any person may obtain a copy of the Notice of Proposed Rulemaking
(NPRM) by submitting a request to the Federal Aviation Administration,
Office of Public Affairs, Attention: Public Inquiry Center, APA-230,
800 Independence Avenue, S.W., Washington, DC 20591, or by calling
(202) 267-3484. Communications must identify the notice number of this
NPRM. Persons interested in being placed on a mailing list for future
NPRM's should also request a copy of Advisory Circular No. 11-2A, which
describes the application procedure.
The Proposal
The FAA is considering an amendment to part 71 of the Federal
Aviation Regulations (14 CFR part 71) to establish Class E airspace at
Cooperstown, ND; this proposal would provide adequate Class E airspace
for operators executing the GPS Runway 13 SIAP and GPS Runway 31 at
Cooperstown Municipal Airport. Controlled airspace extending upward
from 700 to 1200 feet AGL is needed to contain aircraft executing the
approach. The intended affect of this action is to provide segregation
of aircraft using instrument approach procedures in instrument
conditions from other aircraft operating in visual weather conditions.
The area would be depicted on appropriate aeronautical charts thereby
enabling pilots to circumnavigate the area or otherwise comply with IFR
procedures. Class E airspace designations for airspace areas extending
upward from 700 feet or more above the surface of the earth are
published in paragraph 6005 of FAA Order 7400.9D dated September 4,
1996, and effective September 16, 1996, which is incorporated by
reference in 14 CFR 71.1. The Class E airspace designation listed in
this document would be published subsequently in the Order.
The FAA has determined that this proposed regulation only involves
an established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
Therefore this, proposed regulation--(1) Is not a ``significant
regulatory action'' under Executive Order 12866; (2) is not a
``significant rule'' under DOT Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3) does not warrant preparation of a
Regulatory Evaluation as the anticipated impact is so minimal. Since
this is a routine matter that will only affect air traffic procedures
and air navigation, it is certified that this proposed rule will not
have a significant economic impact on a substantial number of small
entities under the criteria of the Regulatory Flexibility Act.
[[Page 27706]]
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
The Proposed Amendment
Accordingly, pursuant to the authority delegated to me, the Federal
Aviation Administration proposes to amend part 71 of the Federal
Aviation Regulations (14 CFR part 71) as follows:
PART 71--[AMENDED]
1. The authority citation for part 71 continues to read as follows:
Authority: 40 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9D, Airspace Designations and
Reporting Points, dated September 4, 1996, and effective September 16,
1996, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet or more above the surface of the earth.
* * * * *
AGL ND E5 Cooperstown, ND [New]
Cooperstown Municipal Airport, ND
(Lat. 47 deg.25'22'' N, long. 98 deg.06'21'' W)
Devils Lake VORTAC
(Lat. 48 deg.06'48'' N, long. 98 deg.54'29'' W)
Grand Forks Air Force Base, ND
(Lat. 47 deg.57'40'' N, long. 97 deg.24'04'' W)
Valley City Barnes County Municipal Airport
(Lat. 46 deg.56'28'' N, long. 98 deg.01'03'' W)
Jamestown VOR/DME
(Lat. 46 deg.55'58'' N, long. 98 deg.40'44'' W)
That airspace extending upward from 700 feet above the surface
within a 6.3-mile radius of the Cooperstown Municipal Airport and
that airspace extending upward from 1,200 feet above the surface
within an area bounded on the east by longitude 97 deg.49'30'' W, on
the south by the 7.9-mile radius of the Valley City Barnes County
Municipal Airport and by V2-510, on the southwest by the 16.5-mile
radius of the Jamestown VOR/DME and on the west by V561; and that
airspace bounded on the northwest by the 34-mile arc of the Grand
Forks Air Force Base, on the east by V561, on the southwest by the
16.5-mile radius of the Jamestown VOR/DME and V170, and on the west
by V55; and that airspace bounded on the north by V430, on the east
by the 34-mile arc of the Grand Forks Air Force Base, on the south
by V55, on the west by V170, and on the northwest by the 22-mile
radius of the Devils Lake VORTAC.
* * * * *
Issued in Des Plaines, Illinois on May 7, 1997.
Maureen Woods,
Manager, Air Traffic Division.
[FR Doc. 97-13262 Filed 5-20-97; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 97-13261 Establishment of Class E Airspace; South Dakota
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27706-27707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13261]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Airspace Docket No. 97-AGL-19]
Establishment of Class E Airspace; South Dakota
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This notice proposes to establish Class E airspace within the
State of South Dakota, west of Winner, SD. This airspace action will
allow more flexibility for Part 135 and air ambulance operators and
will provide a safer environment for all aircraft flying in the
described controlled airspace. Controlled airspace extending upward
from 1200 feet above ground level (AGL) is needed to contain aircraft
executing instrument flight rules (IFR) operations. The intended effect
of this proposal is to provide segregation of aircraft using instrument
approach procedures in instrument conditions from other aircraft
operating in visual weather conditions.
DATES: Comments must be received on or before July 7, 1997.
ADDRESSES: Send comments on the proposal in triplicate to: Federal
Aviation Administration, Office of the Assistant Chief Counsel, AGL-7,
Rules Docket No. 97-AGL-19, 2300 East Devon Avenue, Des Plaines,
Illinois 60018.
The official docket may be examined in the Office of the Assistant
Chief Counsel, Federal Aviation Administration, 2300 East Devon Avenue,
Des Plaines, Illinois. An informal docket may also be examined during
normal business hours at the Air Traffic Division, Operations Branch,
Federal Aviation Administration, 2300 East Devon Avenue, Des Plaines,
Illinois.
FOR FURTHER INFORMATION CONTACT:
Manuel A. Torres, Air Traffic Division, Operations Branch, AGL-530,
Federal Aviation Administration, 2300 East Devon Avenue, Des Plaines,
Illinois 60018, telephone (847) 294-7568.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested parties are invited to participate in this proposed
rulemaking by submitting such written data, views, or arguments as they
may desire. Comments that provide the factual basis supporting the
views and suggestions presented are particularly helpful in developing
reasoned regulatory decisions on the proposal. Comments are
specifically invited on the overall regulatory, aeronautical, economic,
environmental, and energy-related aspects of the proposal.
Communications should identify the airspace docket number and be
submitted in triplicate to the address listed above. Commenters wishing
the FAA to acknowledge receipt of their comments on this notice must
submit with those comments a self-addressed, stamped postcard on which
the following statement is made: ``Comments to Airspace Docket No. 97-
AGL-19.'' The postcard will be date/time stamped and returned to the
commenter. All communications received on or before the specified
closing date for comments will be considered before taking action on
the proposed rule. The proposal contained in this notice may be changed
in light of comments received. All comments submitted will be available
for examination in the Rules Docket, FAA, Great Lakes Region, Office of
the Assistant Chief Counsel, 2300 East Devon Avenue, Des Plaines,
Illinois, both before and after the closing date for comments. A report
summarizing each substantive public contact with FAA personnel
concerned with this rulemaking will be filed in the docket.
Availability of NPRM's
Any person may obtain a copy of the Notice of Proposed Rulemaking
(NPRM) by submitting a request to the Federal Aviation Administration,
Office of Public Affairs, Attention: Public Inquiry Center, APA-230,
800 Independence Avenue, S.W., Washington, DC 20591, or by calling
(202) 267-3484. Communications must identify the notice number of this
NPRM. Persons interested in being placed on a mailing list for future
NPRM's should also request a copy of Advisory Circular No. 11-2A, which
describes the application procedure.
The Proposal
The FAA is considering an amendment to part 71 of the Federal
Aviation Regulations (14 CFR part 71) to establish Class E airspace
within the state of South Dakota, west of Winner, SD; this proposal
would provide adequate Class E airspace for operators executing IFR
operations within the described airspace. Controlled airspace extending
upward from 1200 feet AGL is needed to contain aircraft executing IFR
operations. The intended affect of this action is to provide
segregation of aircraft using instrument approach procedures in
instrument conditions
[[Page 27707]]
from other aircraft operating in visual weather conditions. The area
would be depicted on appropriate aeronautical charts thereby enabling
pilots to circumnavigate the area or otherwise comply with IFR
procedures. Class E airspace designations for airspace areas extending
upward from 700 feet or more above the surface of the earth are
published in paragraph 6005 of FAA order 7400.9D dated September 4,
1996, and effective September 16, 1996, which is incorporated by
reference in 14 CFR 71.1. The Class E airspace designation listed in
this document would be published subsequently in the Order.
The FAA has determined that this proposed regulation only involves
an established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
Therefore this proposed regulation--(1) Is not a ``significant
regulatory action'' under Executive Order 12866; (2) is not a
``significant rule'' under DOT Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3) does not warrant preparation of a
Regulatory Evaluation as the anticipated impact is so minimal. Since
this is a routine matter that will only affect air traffic procedures
and air navigation, it is certified that this proposed rule will not
have a significant economic impact on a substantial number of small
entities under the criteria of the Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
The Proposed Amendment
Accordingly, pursuant to the authority delegated to me, the Federal
Aviation Administration proposes to amend part 71 of the Federal
Aviation Regulations (14 CFR part 71) as follows:
PART 71--[AMENDED]
1. The authority citation for part 71 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9D, Airspace Designations and
Reporting Points, dated September 4, 1996, and effective September 16,
1996, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet or more above the surface of the earth.
* * * * *
AGL SD E5 South Dakota, SD [New]
That airspace extending upward from 1,200 feet above the surface
within an area bounded on the north by latitude 43 deg.40'00'' N, on
the east by longitude 100 deg.05'00'' W, on the south by the South
Dakota, Nebraska border, an on the west by longitude 102 deg.00'00''
W.
* * * * *
Issued in Des Plaines, Illinois on May 7, 1997.
Maureen Woods,
Manager, Air Traffic Division.
[FR Doc. 97-13261 Filed 5-20-97; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 97-13260 Qualification of Pipeline Personnel
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Page 27715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13260]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Research and Special Programs Administration
49 CFR Parts 192 and 195
[Docket No. PS-94; Notice 7]
RIN 2137-AB38
Qualification of Pipeline Personnel
AGENCY: Research and Special Programs Administration (RSPA), DOT.
ACTION: Notice of public meeting.
-----------------------------------------------------------------------
SUMMARY: This announces the second meeting of RSPA's Negotiated
Rulemaking Committee. The Committee is in the process of developing a
proposed rule on qualification of those performing certain safety-
related functions on pipelines subject to the pipeline safety
regulations. The committee is composed of persons who represent the
interests that would be affected by the rule, such as gas pipeline
operators, hazardous liquid and carbon dioxide pipeline operators,
representatives of state and federal governments, labor organizations,
and other interested parties.
DATES: The next Committee meeting will be held from 9 a.m. to 5 p.m. on
May 21-22, 1997.
ADDRESSES: The meeting will be held in Room 10234-35 at the U.S.
Department of Transportation, Nassif Building, 400 7th Street SW.,
Washington, DC.
FOR FURTHER INFORMATION CONTACT: Eben M. Wyman, (202) 366-0918,
regarding the subject matter of this notice; or the Dockets Unit, Room
8421, 400 7th Street, SW., Washington, DC, telephone (202) 366-4453,
for copies of this document or other material in the docket.
SUPPLEMENTARY INFORMATION: At the initial meeting of the Committee,
considerable explanation and training in the Negotiated Rulemaking
process was provided by FMCS. The Committee also addressed many
procedural issues, such as ground rules for Committee discussion and
addressing comments from the audience, development of the new notice of
proposed rulemaking, the procedure for keeping a record or ``minutes''
of the meetings), and a schedule for distribution of minutes for review
and concurrence prior to placing them in the public docket.
Members of the RSPA Negotiated Rulemaking Committee
1. American Gas Association.
2. American Petroleum Institute.
3. Interstate Natural Gas Association of America.
4. American Public Gas Association.
5. National Propane Gas Association.
6. Association of Texas Intrastate Natural Gas Pipelines.
7. Midwest Gas Association.
8. National Association of Corrosion Engineers.
9. National Association of Pipeline Safety Representatives.
10. National Association of Regulatory Utility Commissioners.
11. National Association of Fire Marshals.
12. International Union of Operating Engineers.
13. International Brotherhood of Electrical Workers.
14. Office of Pipeline Safety.
Conduct of Meeting
The meeting will be held over a two-day period, and may conclude
early on the second day depending on the progress of the Committee.
These meetings are open to the public, and a time for brief comments
from the audience will be on each meeting's agenda.
Issued in Washington, DC, on May 15, 1997.
Cesar De Leon,
Deputy Associate Administrator for Pipeline Safety.
[FR Doc. 97-13260 Filed 5-20-97; 8:45 am]
BILLING CODE 4910-06-P
Complete official Federal Register PDF
FR Doc. 97-13209 Protection of Stratospheric Ozone
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27874-27888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13209]
[[Page 27873]]
_______________________________________________________________________
Part IV
Environmental Protection Agency
_______________________________________________________________________
40 CFR Part 82
Protection of Stratospheric Ozone; Proposed Rule
Federal Register / Vol. 62, No. 98 / Wednesday, May 21, 1997 /
Proposed Rules
[[Page 27874]]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 82
[FRL-5827-2]
RIN 2060-AG12
Protection of Stratospheric Ozone
AGENCY: Environmental Protection Agency.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This action proposes restrictions or prohibitions on
substitutes for ozone depleting substances (ODSs) under the U.S.
Environmental Protection Agency's (EPA) Significant New Alternatives
Policy (SNAP) program. SNAP implements section 612 of the amended Clean
Air Act of 1990, which requires EPA to evaluate substitutes for the
ODSs to reduce overall risk to human health and the environment.
Through these evaluations, SNAP generates lists of acceptable and
unacceptable substitutes for each of the major industrial use sectors.
The intended effect of the SNAP program is to expedite movement away
from ozone depleting compounds while avoiding a shift into substitutes
posing other environmental problems.
On March 18, 1994, EPA promulgated a final rulemaking setting forth
its plan for administering the SNAP program, and issued decisions on
the acceptability and unacceptability of a number of substitutes. In
this Notice of Proposed Rulemaking (NPRM), EPA is issuing its
preliminary decisions on the acceptability of certain substitutes not
previously reviewed by the Agency. To arrive at determinations on the
acceptability of substitutes, the Agency completed a cross-media
evaluation of risks to human health and the environment by sector end-
use.
DATES: Written comments or data provided in response to this document
must be submitted by June 20, 1997.
ADDRESSES: Written comments and data should be sent to Docket A-91-42,
Central Docket Section, South Conference Room 4, U.S. Environmental
Protection Agency, 401 M Street, SW., Washington, DC 20460. The docket
may be inspected between 8:00 a.m. and 4:00 p.m. on weekdays. Telephone
(202) 260-7549; fax (202) 260-4400. As provided in 40 CFR part 2, a
reasonable fee may be charged for photocopying. To expedite review, a
second copy of the comments should be sent to Carol Weisner,
Stratospheric Protection Division, Office of Atmospheric Programs, U.S.
EPA, 401 M Street, SW., 6205-J, Washington, DC 20460. Information
designated as Confidential Business Information (CBI) under 40 CFR,
part 2 subpart B must be sent directly to the contact person for this
document. However, the Agency is requesting that all respondents submit
a non-confidential version of their comments to the docket as well.
FOR FURTHER INFORMATION CONTACT: Carol Weisner at (202) 233-9193 or fax
(202) 233-9665, Substitutes Analysis and Review Branch, Stratospheric
Protection Division, Office of Atmospheric Programs, Office of Air and
Radiation (6205-J), Washington, DC 20460. Overnight or courier
deliveries should be sent to our 501-3rd Street, NW, Washington, DC
20001 location.
SUPPLEMENTARY INFORMATION:
I. Overview of This Action
This action is divided into six sections, including this overview:
I. Overview of This Action
II. Section 612 Program
A. Statutory Requirements
B. Regulatory History
III. Proposed Listing of Substitutes
IV. Administrative Requirements
V. Additional Information
II. Section 612 Program
A. Statutory Requirements
Section 612 of the Clean Air Act authorizes EPA to develop a
program for evaluating alternatives to ozone-depleting substances. EPA
is referring to this program as the Significant New Alternatives Policy
(SNAP) program. The major provisions of section 612 are:
Rulemaking--Section 612(c) requires EPA to promulgate rules making
it unlawful to replace any class I (chlorofluorocarbon, halon, carbon
tetrachloride, methyl chloroform, methyl bromide, and
hydrobromofluorocarbon) or class II (hydrochlorofluorocarbon) substance
with any substitute that the Administrator determines may present
adverse effects to human health or the environment where the
Administrator has identified an alternative that (1) Reduces the
overall risk to human health and the environment, and (2) is currently
or potentially available.
Listing of Unacceptable/Acceptable Substitutes--Section 612(c) also
requires EPA to publish a list of the substitutes unacceptable for
specific uses. EPA must publish a corresponding list of acceptable
alternatives for specific uses.
Petition Process--Section 612(d) grants the right to any person to
petition EPA to add a substitute to or delete a substitute from the
lists published in accordance with section 612(c). The Agency has 90
days to grant or deny a petition. Where the Agency grants the petition,
EPA must publish the revised lists within an additional six months.
90-day Notification--Section 612(e) requires EPA to require any
person who produces a chemical substitute for a class I substance to
notify the Agency not less than 90 days before new or existing
chemicals are introduced into interstate commerce for significant new
uses as substitutes for a class I substance. The producer must also
provide the Agency with the producer's unpublished health and safety
studies on such substitutes.
Outreach--Section 612(b)(1) states that the Administrator shall
seek to maximize the use of federal research facilities and resources
to assist users of class I and II substances in identifying and
developing alternatives to the use of such substances in key commercial
applications.
Clearinghouse--Section 612(b)(4) requires the Agency to set up a
public clearinghouse of alternative chemicals, product substitutes, and
alternative manufacturing processes that are available for products and
manufacturing processes which use class I and II substances.
B. Regulatory History
On March 18, 1994, EPA published the Final Rulemaking (FRM) (59 FR
13044) which described the process for administering the SNAP program
and issued EPA's first acceptability lists for substitutes in the major
industrial use sectors. These sectors include: Refrigeration and air
conditioning; foam blowing; solvent cleaning; fire suppression and
explosion protection; sterilants; aerosols; adhesives, coatings and
inks; and tobacco expansion. These sectors comprise the principal
industrial sectors that historically consume large volumes of ozone-
depleting compounds.
The Agency defines a ``substitute'' as any chemical, product
substitute, or alternative manufacturing process, whether existing or
new, that could replace a class I or class II substance.
Anyone who produces a substitute must provide the Agency with
health and safety studies on the substitute at least 90 days before
introducing it into interstate commerce for significant new use as an
alternative. This requirement applies to chemical manufacturers, but
may include importers, formulators or end-users when they are
responsible for introducing a substitute into commerce.
III. Proposed Listing of Substitutes
To develop the lists of unacceptable and acceptable substitutes,
EPA conducts screens of health and
[[Page 27875]]
environmental risks posed by various substitutes for ozone-depleting
compounds in each use sector. The outcome of these risks screens can be
found in the public docket, as described above in the ADDRESSES portion
of this document.
Under section 612, the Agency has considerable discretion in the
risk management decisions it can make in SNAP. The Agency has
identified five possible decision categories: Acceptable; acceptable
subject to use conditions; acceptable subject to narrowed use limits;
unacceptable; and pending. Fully acceptable substitutes (i.e. no
restrictions) can be used for all applications within the relevant
sector end-use. Conversely, it is illegal to replace an ODS with a
substitute listed by SNAP as unacceptable. A pending listing represents
substitutes for which the Agency has not received complete data or has
not completed its review of the data.
After reviewing a substitute, the Agency may make a determination
that a substitute is acceptable only if certain conditions of use are
met to minimize risks to human health and the environment. Use of such
substitutes in ways that are inconsistent with such use conditions
renders these substitutes unacceptable.
Even though the Agency can restrict the use of a substitute based
on the potential for adverse effects, it may be necessary to permit a
narrowed range of use within a sector end-use because of the lack of
alternatives for specialized applications. Users intending to adopt a
substitute acceptable with narrowed use limits must ascertain that
other acceptable alternatives are not technically feasible. Companies
must document the results of their evaluation, and retain the results
on file for the purpose of demonstrating compliance. This documentation
shall include descriptions of substitutes examined and rejected,
processes or products in which the substitute is needed, reason for
rejection of other alternatives, e.g., performance, technical or safety
standards, and the anticipated date other substitutes will be available
and projected time for switching to other available substitutes. Use of
such substitutes in application and end-uses which are not specified as
acceptable in the narrowed use limit renders these substitutes
unacceptable.
In this Notice of Proposed Rulemaking (NPRM), EPA is issuing its
preliminary decision on the acceptability of certain substitutes not
previously reviewed by the Agency. As described in the final rule for
the SNAP program (59 FR 13044), EPA believes that notice-and-comment
rulemaking is required to place any alternative on the list of
prohibited substitutes, to list a substitute as acceptable only under
certain use conditions or narrowed use limits, or to remove an
alternative from either the list of prohibited or acceptable
substitutes.
EPA does not believe that rulemaking procedures are required to
list alternatives as acceptable with no limitations. Such listings do
not impose any sanction, nor do they remove any prior license to use a
substitute. Consequently, EPA adds substitutes to the list of
acceptable alternatives without first requesting comment on new
listings. Updates to the acceptable and pending lists are published as
separate notices of acceptability in the Federal Register.
Parts A. through F. below present a detailed discussion of the
proposed substitute listing determinations by major use sector. Tables
summarizing listing decisions in this Notice of Proposed Rulemaking are
in Appendix E. The comments contained in Appendix E to Subpart G of 40
CFR part 82 provide additional information on a substitute. Since
comments are not part of the regulatory decision, they are not
mandatory for use of a substitute. Nor should the comments be
considered comprehensive with respect to other legal obligations
pertaining to the use of the substitute. However, EPA encourages users
of acceptable substitutes to apply all comments in their application of
these substitutes. In many instances, the comments simply allude to
sound operating practices that have already been identified in existing
industry and/or building-code standards. Thus, many of the comments, if
adopted, would not require significant changes in existing operating
practices for the affected industry.
A. Refrigeration and Air Conditioning--Class I
1. Acceptable Subject to Use Conditions. a. CFC-12 Automobile and
Non-automobile Motor Vehicle Air Conditioners, Retrofit and New (1)
Notification Requirements for Existing Refrigerants.
In previous rulemakings, EPA has imposed conditions on the use of
MVAC refrigerants, including the requirement that they be used with
unique fittings and that vehicles be labeled when retrofitted to a new
refrigerant. In addition, new refrigerants must be submitted with
designs for fittings, and samples of both fittings and labels. EPA now
proposes to apply these submission requirements to the following
existing refrigerants: HFC-134a, FRIGC, Freezone, Ikon, R-406A, GHG-X4,
Hot Shot, GHG-HP, and Freeze-12, each of which was previously listed as
acceptable subject to use conditions. In accordance with the
requirements for new refrigerants, EPA proposes that the manufacturers
must submit, within 30 days of the effective date of the final rule
resulting from this NPRM:
Designs for service ports and hose connections, including
both high-side and low-side fittings;
Sample fittings of each type;
Sample labels, printed in the unique color chosen by the
manufacturer.
EPA will review the fittings and test for cross-connections between
the new fitting and existing fittings for other refrigerants. At the
same time, EPA will compare the background color of the sample label to
those of other refrigerants. If the fittings are unique and cannot be
mechanically cross-threaded, and the label color is unique to that
refrigerant, EPA will issue a letter to the manufacturer confirming
that the fittings and labels meet the use conditions. This confirmation
letter will be sent within 30 days of receipt of the submission. EPA
will then update a package of materials containing specifications for
existing fittings. This package will be provided to manufacturers of
new refrigerants and others who request it, to lower the risk of
duplicating fittings already in use.
If the fittings or the label color are not, in fact, unique, EPA
will issue a letter to the manufacturer indicating so. Continued use of
the refrigerant with the non-unique fittings will constitute a
violation of the unique fittings use condition.
EPA does not anticipate that these provisions will affect the
majority of the existing refrigerants because the manufacturers have
already submitted designs and sample labels and fittings for review.
However, it is necessary to formalize these submission requirements to
level the playing field and ensure that EPA has official submissions on
which to base future actions. For example, EPA will rely on designs and
samples to determine whether the submitted versions are actually being
used on cars. Similarly, EPA will rely on the submissions to determine
whether a given fitting satisfies the uniqueness criteria proposed
below.
(2) Criteria for Uniqueness of Fittings. In previous rulemakings,
EPA has relied on refrigerant manufacturers to design unique fittings
with no further guidance. In this NPRM, EPA clarifies minimum criteria
for uniqueness. EPA proposes that all fittings for alternative
[[Page 27876]]
refrigerants must meet the following requirements:
High-side screw-on fittings for each refrigerant must
differ from high-side screw-on fittings for all other refrigerants,
including CFC-12;
Low-side screw-on fittings for each refrigerant must
differ from low-side screw-on fittings for all other refrigerants,
including CFC-12;
High-side screw-on fittings for a given refrigerant must
differ from low-side screw-on fittings for that refrigerant, to protect
against connecting a low-pressure system to a high-pressure one;
High-side screw-on fittings for each alternative
refrigerant must differ from low-side screw-on fittings for CFC-12;
High-side quick-connect fittings for each refrigerant must
differ from high-side quick-connect fittings for all other
refrigerants, including CFC-12;
Low-side quick-connect fittings for each refrigerant must
differ from low-side quick-connect fittings for all other refrigerants,
including CFC-12;
High-side quick-connect fittings for a given refrigerant
must differ from low-side quick-connect fittings for that refrigerant,
to protect against connecting a low-pressure system to a high-pressure
one;
For each type of container, the fitting for each
refrigerant must differ from the fitting for that type of container for
all other refrigerants, including CFC-12.
For screw-on fittings, EPA proposes that ``differ'' means that
either the diameter must differ by at least \1/16\ inch or the thread
direction must be reversed (i.e. right-handed vs. left-handed). Simply
changing the thread pitch is not sufficient. An additional requirement
for screw-on fittings, and the essential one for quick-connect
fittings, is that a person using normal force and normal tools
(including wrenches) must not be able to cross-connect fittings.
Following are some examples:
A \3/8\ (\6/16\) inch outside diameter screw-on fitting
with a right-hand thread differs from a \5/16\ inch outside diameter
screw-on fitting with a right-hand thread;
A \3/8\ inch outside diameter screw-on fitting with a
left-hand thread differs from a \3/8\ inch outside diameter screw-on
fitting with a right-hand thread;
A \3/8\ inch outside diameter screw-on fitting with a
right-hand thread pitch of 18 threads/inch does not differ from a \3/8\
inch outside screw-on diameter fitting with a right-hand thread pitch
of 24 threads/inch;
A quick-connect fitting differs from another quick-connect
fitting if all combinations of the same type male and female parts
(high, low, small can, 30-lb. cylinder) will not connect using normal
tools.
(i) All previously listed refrigerants and all future refrigerants.
For refrigerants previously listed as acceptable subject to use
conditions, and for refrigerants submitted in the future, the use
conditions in force for retrofitted systems are proposed to apply to
new vehicles. In addition, the criteria for uniqueness of fittings
discussed above are proposed to apply, and all labels must meet UL
Standard 969-1995.
Since only HFC-134a is currently being used in new cars, the use
conditions were originally worded in such a way that a reasonable
interpretation would exclude their applicability to new cars. This
proposal extends the unique fittings and labels requirements to new
cars. EPA does not anticipate that this clarification will result in
any additional burden, since all new cars already use HFC-134a fittings
and labels. However, EPA invites comment on this proposal. Note that
the use conditions above replace only the fittings, labeling, and
``top-off'' conditions applicable to previously listed refrigerants.
Other conditions, such as the requirement to replace existing hoses
with barrier hoses, still apply to various refrigerants as listed in
the original rule.
In addition, as explained above, EPA believes it is necessary to
provide criteria for the uniqueness of fittings. This use condition
will apply these criteria formally to existing refrigerants. Finally,
the UL standard relates to permanence of labels, and is already part of
the applicable Society of Automotive Engineers (SAE) standard.
(ii) HFC-134a, FRIGC FR-12, Freezone, Ikon, R-406A, GHG-X4, Hot
Shot, GHG-HP, and Freeze-12. For these refrigerants, all of which have
previously been found acceptable subject to use conditions, the
submission requirements discussed above are proposed to apply.
As discussed above, EPA believes that applying these requirements
formally will level the playing field between existing refrigerants and
new submissions. In addition, formal submissions of designs and sample
labels and fittings will allow EPA to monitor compliance with the other
use conditions.
2. Unacceptable Substitutes. a. NARM-502.
NARM-502, which consists of HCFC-22, HFC-23, and HFC-152a, is
proposed unacceptable as a substitute for R-502 in all new and
retrofitted end-uses.
HFC-23 has a lifetime of 250 years, and its 100-year global warming
potential (GWP) is 11,700. Both of these characteristics are
considerably higher than other HFCS and HCFCS. Numerous other
acceptable R-502 substitutes do not contain such high global warming
components. The Climate Change Action Plan directs EPA to reduce the
use of high global warming gases. Therefore, the use of this blend as
an R-502 substitute is proposed unacceptable.
b. NARM-12. NARM-12, which consists of HCFC-22, HFC-23, and HFC-
152a, is proposed unacceptable as a substitute for CFC-12 in all new
and retrofitted end-uses.
HFC-23 has a lifetime of 250 years, and its 100-year GWP is 11,700.
Both of these characteristics are considerably higher than other HFCs
and HCFCs. Numerous other acceptable R-502 substitutes do not contain
such high global warming components. The Climate Change Action Plan
directs EPA to reduce the use of high global warming gases. Therefore,
the use of this blend as an R-502 substitute is proposed unacceptable.
B. Refrigeration and Air Conditioning--Class II
1. Unacceptable Substitutes. a. NARM-22. NARM-22, which consists of
HCFC-22, HFC-23, and HFC-152a, is proposed unacceptable as a substitute
for HCFC-22 in all new and retrofitted end-uses.
NARM-22 contains HCFC-22. EPA does not believe it is appropriate to
replace a class II refrigerant with a blend containing a class II
refrigerant. Listing this blend as acceptable would be a barrier to a
smooth transition away from ozone-depleting refrigerants. Other
alternatives to HCFC-22 are already acceptable that do not contain any
ozone-depleting refrigerants.
In addition, HFC-23 has a lifetime of 250 years, and its 100-year
GWP is 11,700. Both of these characteristics are considerably higher
than other HFCs and HCFCs. Other acceptable HCFC-22 substitutes do not
contain such high global warming components. The 1993 Climate Change
Action Plan directs EPA to reduce the use of high global warming gases.
For this reason, and the fact that NARM-22 contains HCFC-22, the use of
this blend as an HCFC-22 substitute is proposed unacceptable.
C. Solvents Cleaning
1. Chlorobromomethane. Chlorobromomethane (CBM) has been used as a
fire suppressant and has the designation of Halon 1011. EPA has
received notification that it can also be used as a solvent and a
potential
[[Page 27877]]
substitute for the ozone depleting solvents CFC-113, methyl chloroform
(MCF) and HCFC-141b. EPA received a SNAP submission requesting
consideration of CBM as an acceptable substitute for CFC-113 and MCF in
solvents cleaning of metals and electronics and in precision cleaning.
Analysis of the available toxicity data base for CBM raises significant
questions concerning its suitability as a solvent substitute for CFC-
113, or methyl chloroform, or HCFC-141b in metals cleaning, electronics
cleaning, and precision cleaning; and as a solvent agent in aerosols
and in adhesives, coatings and inks. In a subchronic study, at a dose
level of 500 parts per million (ppm), adverse effects were evident in
the livers of rats. At 1000 ppm, both guinea pigs and rabbits showed
decreased spermatogenesis, but no studies of reproductive or
developmental effects have been conducted. In addition, mutagenicity
tests with CBM in microorganisms yielded consistently positive results.
In mammalian systems, CBM induced sister chromatid exchanges. Thus the
mutagenic effects of CBM are unmistakable.
In 1989, EPA established a one day health advisory for water
contaminated with CBM at 50 ppm. A longer term health advisory was
established at 4.57 ppm for this compound in drinking water. OSHA
established an occupational Permissible Exposure Limit (PEL) of 200 ppm
based on the ``grandfathered'' Threshold Limit Value (TLV) which dates
back to 1961. This compound was not reviewed by OSHA in the 1989
proposed revision process. In 1991, the only use noted for this
chemical by American Conference of Governmental Industrial Hygienists
(ACGIH) was as a liquid (streaming agent) fire suppressant. They
recommended an 8 hour TLV of 200 ppm consistent with the PEL. The
potential widespread use of CBM as a solvent substitute in the light of
its toxicity profile and significant data gaps imply a much lower
workplace limit. Based upon the lowest observed adverse effect level of
500 ppm in rats, the SNAP evaluation suggests a more appropriate
occupational exposure limit (OEL) to lie in the range of 2 and 5 ppm,
making this compound unsuitable for use as a solvent.
Recent authoritative research establishes an ozone depletion
potential (ODP) range for CBM of 0.17 to 0.28. Other alternatives exist
with much lower or no ODP and do not pose a comparable risk. As a
result of these recent ODP findings and the potential widespread use of
CBM in occupational settings unable to meet an OEL of 5 ppm, EPA
proposes this agent as unacceptable. Relevant reports and analyses on
these issues have been placed in the public docket for this SNAP
submission.
2. Acceptable Subject to Use Conditions. a. Metals Cleaning.
(1) HFC-4310mee.
HFC-4310mee is proposed as an acceptable substitute for CFC-113 and
methyl chloroform (MCF) in metals cleaning subject to a 200 ppm time-
weighted average workplace exposure standard and a 400 ppm workplace
exposure ceiling. This chemical does not deplete the ozone layer since
it does not contain chlorine or bromine. Review under the SNAP program
and the PMN program determined that a time-weighted average workplace
exposure standard of 200 ppm and a workplace exposure ceiling of 400
ppm would be adequately protective of human health and that companies
can meet these exposure limits using the types of equipment specified
in the product safety information provided by the chemical
manufacturer.
These workplace standards are designed to protect worker safety
until the Occupational Health and Safety Administration (OSHA) sets its
own standards under Pub. L. 91-596. The existence of the EPA standards
in no way bars OSHA from standard-setting under OSHA authorities as
defined in Public Law 91-596.
3. Unacceptable Substitutes. a. Metals Cleaning.
(1) Chlorobromomethane.
Chlorobromomethane is proposed unacceptable as a substitute for
CFC-113, methyl chloroform (MCF), and HCFC-141b in metals cleaning.
Recent authoritative research establishes an ozone depletion potential
(ODP) range for CBM of 0.17 to 0.28, and toxicity concerns exist based
on potential widespread use in occupational settings not meeting an
appropriate OEL of 5 ppm. Other alternatives exist with much lower ODP
and do not pose a comparable risk.
b. Electronics Cleaning.
(1) Chlorobromomethane.
Chlorobromomethane is proposed unacceptable as a substitute for
CFC-113, methyl chloroform, and HCFC-141b in electronics cleaning.
Recent authoritative research establishes an ODP range for CBM of 0.17
to .28, and toxicity concerns exist based on potential widespread use
in occupational settings not meeting an appropriate OEL of 5 ppm. Other
alternatives exist with much lower ODP and do not pose a comparable
risk. For example, hydrofluoroethers (HFE) and HFC-4310 mee do not
contain chlorine and have no ODP.
c. Precision Cleaning.
(1) Chlorobromomethane.
Chlorobromomethane is proposed unacceptable as a substitute for
CFC-113, MCF, and HCFC-141b in precision cleaning. Recent authoritative
research establishes an ODP range for CBM of 0.17 to 0.28, and toxicity
concerns exist based on potential widespread use in occupational
settings not meeting an appropriate OEL of 5 ppm. Other alternatives
exist with much lower ODP and do not pose a comparable risk. For
example, hydrofluoroethers (HFE) and HFC-4310 mee do not contain
chlorine and have no ODP.
D. Fire Suppression and Explosion Protection
1. Chlorobromomethane. As discussed in Solvents Cleaning above, CBM
has been used for fire suppression and explosion inertion, and is
designated Halon 1011. In the fire suppression and explosion protection
sector, Halon 1011 has been used as a total flooding agent, in lieu of
Halon 1301, for the purpose of preventing fires in the engine nacelles
of aircraft, principally in the military. EPA understands the use of
Halon 1011 for this purpose has been extremely limited, and demand for
its future use is likely to be very small, given other alternatives.
Recent authoritative research establishes an ODP range for CBM of 0.17
to 0.28. Other alternatives exist for total flooding applications with
much lower or no ODP and do not pose a comparable risk. For example,
HFC-134a and HFC-227ea, as well as several inert gases, have no ODP. As
a result of these recent ODP findings, EPA proposes this agent
unacceptable as a substitute for Halon 1301.
2. Petition. EPA has received a Petition asking for reconsideration
of the wording of use conditions for PFCs and other long-lived gases.
The Petitioner believes that while it is EPA's stated intent that PFCs
be used as the agent of last resort when no other agent is acceptable
due to performance or safety requirements, the regulatory language is
unclear, potentially resulting in some users adopting PFCs
inappropriately. The regulatory language in the March 18, 1994,
Rulemaking (59 FR 13044, 13159) states the following:
C4F10 is acceptable as a Halon 1301
substitute where other alternatives are not technically feasible due
to performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
approach cardiosensitization levels or result in other
[[Page 27878]]
unacceptable health effects under normal operating conditions.
This same language applies for use of other PFCs in this sector as
well.
EPA has discussed this language in rulemakings, letters and public
forums to ensure that the public understands that a PFC may be used if
no other commercially available agent will provide adequate protection
against the specific fire hazard given the technical or environmental
constraints of the application or if the use of other agents in the
application in question would exceed safe toxicity levels. For
halocarbons, cardiac sensitization is the primary endpoint of concern,
and for inert gases, hypoxia is the relevant endpoint. The SNAP
rulemaking describes the concentrations at which each agent can be
safely used.
The Petitioner suggests the following changes to the use conditions
for long-lived gases to allay confusion:
PFCs or other long-lived gases may only be used ``* * * (1) when
physical or chemical properties necessitate their use, or (2) when
the use of another SNAP accepted alternative would result in
exposures beyond its applicable use conditions (e.g., below the
minimum O2 content, egress times greater than 30 seconds
with design concentrations greater than LOAEL,) or (3) when the use
of other SNAP accepted alternatives would permanently impair the
health of those in the discharge area.
EPA agrees that the choice of words ``may approach
cardiosensitizations levels'' may be confusing to the public and thus
proposes to accept the petitioner's suggestion by substituting the
phrase ``may result in failure to meet applicable use conditions.''
Applicable use conditions refer to the cardiac sensitization levels
stipulated in the SNAP use conditions for halocarbons, minimum oxygen
and maximum CO2 levels stipulated in the use conditions for
inert gas systems, or other use conditions as may be stipulated in a
SNAP rulemaking. The new language is consistent with the intent of the
current conditions as it was discussed in the preamble to the March 18,
1994, rulemaking. Thus, this change reflects no change in policy but
only clarification, and would apply to all PFCs currently listed under
the SNAP program, including C4F10,
C6F14, and C3F8. The use
condition proposed for PFCs would read as follows:
CxFy is proposed acceptable as a Halon
[1211 or 1301] substitute where other alternatives are not
technically feasible due to performance or safety requirements: (a)
Due to their physical or chemical properties or (b) where human
exposure to the agents may result in failure to meet applicable use
conditions or in other unacceptable health effects under normal
operating conditions.
The Petitioner did not make a cogent case for changing the phrase
``or result in other unacceptable health effects under normal operating
conditions'' and thus EPA rejects suggested changes to that phrase at
this time.
3. Proposed Acceptable Subject to Use Conditions. a. Total Flooding
Agents.
(1) C3F8.
C3F8 is proposed acceptable as a Halon 1301
substitute where other alternatives are not technically feasible due to
performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
result in failure to meet applicable use conditions or in other
unacceptable health effects under normal operating conditions.
See the preceding discussion of the changes made to the use
condition on this agent.
(2) C4F10.
C4F10 is proposed acceptable as a Halon 1301
substitute where other alternatives are not technically feasible due to
performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
result in failure to meet applicable use conditions or in other
unacceptable health effects under normal operating conditions.
See the preceding dicussion of the changes made to the use
condition on this agent.
(3) HFC-236fa.
HFC-236fa is proposed acceptable as a Halon 1301 substitute when
manufactured using any process that does not convert
perfluoroisobutylene (PFIB) directly to HFC-236fa in a single step.
HFC-236fa may be used in explosion suppression and explosion inertion
applications, and may be used in fire suppression applications where
other non-PFC agents or alternatives are not technically feasible due
to performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
result in failure to meet applicable use conditions or in other
unacceptable health effects under normal operating conditions.
In the event of the development of acceptable alternatives which
EPA finds should not only replace Halon 1301 and HFC-236a in new
systems, EPA may grandfather existing uses but only to the extent
warranted by cost and timing as outlined in the original SNAP rule
discussion of grandfathering of unacceptable substitutes (59 FR 13057).
As discussed in the initial SNAP rulemaking (58 FR 13044, March 18,
1994), until OSHA establishes applicable workplace requirements, total
flooding agents are acceptable by the Agency for use in occupied areas
only under the following conditions:
1. Where egress from an area cannot be accomplished within one
minute, the employer shall not use the agent in concentrations
exceeding its NOAEL.
2. Where egress takes greater than 30 seconds but less than one
minute, the employer shall not use the agent in a concentration greater
than its LOAEL.
3. Agent concentrations greater than the LOAEL are only permitted
in areas not normally occupied by employees provided that any employee
in the area can escape within 30 seconds.
The employer shall assure that no unprotected employees enter the
area during agent discharge. These conditions will no longer apply once
OSHA establishes applicable workplace requirements.
The cardiac sensitization NOAEL of HFC-236fa is 10.0 per cent and
its LOAEL is 15 per cent. Cup burner tests with heptane indicate that
the extinguishment concentration for this agent is 5.3 per cent, thus
making its calculated design concentration 6.4 per cent. Compared to
the cardiac sensitization values, these concentrations provide a
sufficient margin of safety for use in a normally occupied area.
In the March 18, 1994 final SNAP rule (58 FR 13044), EPA required
manufacturers to submit information on manufacturing processes to allow
an assessment of the risks posed to the general public and workers. EPA
clarified in that action that acceptability determinations made on the
basis of one company's submission would apply to the same chemical
produced by other manufacturers, obviating the need for duplicative
reporting requirements and review. However, manufacturers who believe a
given manufacturing process may pose additional risks beyond those
posed by other processes were required to alert EPA to that increased
hazard. The February 8, 1996 (61 FR 4736) Notice of Acceptability
specifically discussed the manufacturing process used in making HFC-
236fa, and that discussion is repeated below.
EPA is aware of several methods for manufacturing HFC-236fa,
including one that produces HFC-236fa directly from PFIB. PFIB is an
extremely toxic substance that could pose risks in very small
concentrations. Thus, EPA believes it is appropriate to distinguish
among the different methods for producing HFC-236fa. This acceptability
determination does not prohibit the manufacture of HFC-236fa directly
from PFIB. Rather, it finds
[[Page 27879]]
acceptable the production of HFC-236fa in processes that do not convert
PFIB directly to HFC-236fa in a single step. If a manufacturer wishes
to produce HFC-236fa directly from PFIB, it must submit that process to
EPA for review under SNAP.
HFC-236fa can replace Halon 1301 at a ratio of 1.3 by weight and
1.5 by volume. Due to its relatively high boiling point of minus 1.6
degrees centigrade, this agent may not be suitable in a low temperature
environment. Its greatest potential appears to be in explosion
suppression and in applications benefited by a misting or liquid
discharge.
HFC-236fa does not deplete stratospheric ozone, however, it has an
atmospheric lifetime of 250 years and a 100-year GWP of 6300. Concerns
have been raised about this agent's potential atmospheric effects.
Thus, this agent should be handled so as to minimize unnecessary
emissions. Ways to minimize emissions include: Avoiding discharge
testing and training; providing a high level of maintenance to avoid
leaks and accidental discharges; recovering HFC-236fa from the fire
protection equipment in conjunction with testing or servicing; and
destroying HFC-236fa or recycling it for later use.
While HFC-236fa may be used without prejudice in explosion
protection applications, before users adopt it for general fire
suppression applications they must first ascertain that other non-PFC
substitutes or alternatives are not technically feasible due to
performance or safety requirements. That is, if a PFC is the only other
substitute that is technically feasible due to performance or safety
requirements, then this agent may be used in a general fire suppression
application. Potential users are expected to evaluate the technical
feasibility of other non-PFC substitutes or alternatives to determine
their adequacy to control the particular fire risk. Such assessment may
include an evaluation of the performance or functional effectiveness of
the non-PFC agents' effectiveness for the intended applications as well
as the risk to personnel potentially exposed to the agents. Similarly,
use of HFC-236fa due to toxicological concerns would be appropriate
where use of other non-PFC substitutes or alternatives would violate
the workplace safety use conditions set forth in the SNAP rulemakings
(58 FR 13044).
To assist users in their evaluation for general fire suppression
applications, EPA has prepared a list of vendors manufacturing halon
substitutes and alternatives. Although users are not required to report
the results of their investigation to EPA, companies must retain these
results in company files for future reference.
4. Proposed Acceptable Subject to Narrowed Use Limits. a. Streaming
Agents. (1) C6F14
C6F14 is proposed acceptable as a Halon 1211
substitute where other alternatives are not technically feasible due to
performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
result in failure to meet applicable use conditions or in other
unacceptable health effects under normal operating conditions.
See the preceding discussion of the changes made to the use
condition on this agent.
(2) HFC-236fa.
HFC-236fa is acceptable as a Halon 1211 substitute in non-
residential applications when manufactured using any process that does
not convert perfluoroisobutylene (PFIB) directly to HFC-236fa in a
single step. The cardiac sensitization NOAEL of HFC-236fa is 10.0 per
cent and its LOAEL is 15 per cent. Cup burner tests with heptane
indicate that the extinguishment concentration for this agent is 5.3
per cent. Compared to Halon 1211, HFC-236fa has a weight equivalence of
1.1 to 1.5.
As discussed above, HFC-236fa does not deplete stratospheric ozone,
however, it has an atmospheric lifetime of 250 years and a 100-year GWP
of 6300. Concerns have been raised about this agent's potential
atmospheric effects. Thus, EPA recommends that users minimize
unnecessary emissions by limiting testing only to that which is
essential to meet safety or performance requirements; recovering HFC-
236fa from the fire protection equipment in conjunction with testing or
servicing; and destroying HFC-236fa or recycling it for later use. EPA
encourages manufacturers to develop aggressive product stewardship
programs to help users avoid such unnecessary emissions.
Further, this agent may not be used in residential applications,
e.g., by a private individual in applications in or around a permanent
or temporary household, during recreation, or for any personal use or
enjoyment. Use in watercraft or aircraft is excluded from the
definition of residential use.
(3) HFC-227ea.
HFC-227ea is acceptable as a Halon 1211 substitute in
nonresidential applications. The weight equivalence of this agent is
1.66 pounds per pound of Halon 1211. It has a cardiac sensitization
NOAEL of 9.0 per cent, and a LOAEL of 10.5% or greater. Its cup burner
extinguishment value is 5.8%.
This agent has no ozone depletion potential, a 100-year GWP of 2050
relative to carbon dioxide, and an atmospheric lifetime of 31 years. It
is already listed as acceptable for use in total flooding applications
as an alternative to Halon 1301 (March 18, 1994, 59 FR 13107).
b. Total Flooding Agents.
(1) C3F8.
C3F8 is proposed acceptable as a Halon 1301
substitute where other alternatives are not technically feasible due to
performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
result in failure to meet applicable use conditions or in other
unacceptable health effects under normal operating conditions.
See the preceding discussion of the changes made to the use
condition on this agent.
(2) C4F10. C4F10 is
proposed acceptable as a Halon 1301 substitute where other alternatives
are not technically feasible due to performance or safety requirements:
(a) Due to their physical or chemical properties or (b) where human
exposure to the agents may result in failure to meet applicable use
conditions or in other unacceptable health effects under normal
operating conditions.
See the preceding discussion of the changes made to the use
condition on this agent.
(3) HFC-236fa. HFC-236fa is acceptable as a Halon 1301 substitute
when manufactured using any process that does not convert
perfluoroisobutylene (PFIB) directly to HFC-236fa in a single step.
HFC-236fa may be used in explosion suppression and explosion inertion
applications, and may be used in fire suppression applications where
other non-PFC agents or alternatives are not technically feasible due
to performance or safety requirements: (a) Due to their physical or
chemical properties or (b) where human exposure to the agents may
result in failure to meet applicable use conditions or result in other
unacceptable health effects under normal operating conditions. Please
see the section on ``Proposed Acceptable Subject to Use Conditions''
for a complete discussion of this agent. This agent is subject to the
use conditions delineated in the above section.
5. Unacceptable Substitutes. a. Total Flooding Agents. (1)
Chlorobromomethane.
[[Page 27880]]
Chlorobromomethane is proposed unacceptable as a substitute for Halon
1301 in total flooding applications. Recent authoritative research
establishes an ODP range for CBM of 0.17 to 0.28. Other alternatives
exist for total flooding applications with lower or no ODP and do not
pose a comparable risk. For example, HFC-134a and HFC-227ea, as well as
several inert gases, have no ODP.
E. Aerosols
1. Chlorobromomethane. Chlorobromomethane (CBM) has been used as a
fire suppressant and has the designation of Halon 1011. EPA has
received notification that it can also be used as a solvent and a
potential substitute for the ozone depleting solvents CFC-113, methyl
chloroform (MCF) and HCFC-141b. EPA received a SNAP submission
requesting consideration of CBM as an acceptable substitute for CFC-113
and MCF in solvents cleaning of metals and electronics and in precision
cleaning. Analysis of the available toxicity data base for CBM raises
significant questions concerning its suitability as a solvent
substitute for CFC-113, or methyl chloroform, or HCFC-141b in metals
cleaning, electronics cleaning, and precision cleaning; and as a
solvent agent in aerosols and in adhesives, coatings and inks. In a
subchronic study, at a dose level of 500 ppm, adverse effects were
evident in the livers of rats. At 1000 ppm, both guinea pigs and
rabbits showed decreased spermatogenesis, but no studies of
reproductive or developmental effects have been conducted. In addition,
mutagenicity tests with CBM in microorganisms yielded consistently
positive results. In mammalian systems, CBM induced sister chromatid
exchanges. Thus the mutagenic effects of CBM are unmistakable.
In 1989, EPA established a one day health advisory for water
contaminated with CBM at 50 ppm. A longer term health advisory was
established at 4.57 ppm for this compound in drinking water. OSHA
established an occupational Permissible Exposure Limit (PEL) of 200 ppm
based on the ``grandfathered'' Threshold Limit Value (TLV) which dates
back to 1961. This compound was not reviewed by OSHA in the 1989
proposed revision process. In 1991, the only use noted for this
chemical by American Conference of Governmental Industrial Hygienists
(ACGIH) was as a liquid (streaming agent) fire suppressant. They
recommended an 8 hour TLV of 200 ppm consistent with the PEL. The
potential widespread use of CBM as a solvent substitute in the light of
its toxicity profile and significant data gaps imply a much lower
workplace limit. Based upon the lowest observed adverse effect level of
500 ppm in rats, the SNAP evaluation suggests a more appropriate
occupational exposure limit (OEL) to lie in the range of 2 and 5 ppm,
making this compound unsuitable for use as a solvent.
Recent authoritative research establishes an ozone depletion
potential (ODP) range for CBM of 0.17 to 0.28. Other alternatives exist
with much lower or no ODP and do not pose a comparable risk. As a
result of these recent ODP findings and the potential widespread use of
CBM in occupational settings unable to meet an OEL of 5 ppm, EPA
proposes this agent as unacceptable.
2. Acceptable Subject to Use Conditions. a. Solvents. (1) HFC-
4310mee HFC-4310mee is proposed as an acceptable substitute for CFC-113
and methyl chloroform (MCF) in aerosols subject to a 200 ppm time-
weighted average workplace exposure standard and a 400 ppm workplace
exposure ceiling. This chemical does not deplete the ozone layer since
it does not contain chlorine or bromine. Review under the SNAP program
and the PMN program determined that a time-weighted average workplace
exposure standard of 200 ppm and a workplace exposure ceiling of 400
ppm would be adequately protective of human health. Based on the
results of exposure assessment studies, it is EPA's opinion that
companies can meet the 200 ppm limit of the HFC-4310mee in defluxing
and cleaning providing that the standard operating procedures and
employee work habits are conducted in accordance with the procedures
specified in the product safety information provided by the chemical
manufacturer.
These workplace standards are designed to protect worker safety
until the Occupational Health and Safety Administration (OSHA) sets its
own standards under Pub. L. 91-596. The existence of the EPA standards
in no way bars OSHA from standard-setting under OSHA authorities as
defined in Pub. L. 91-596.
(2) HCFC-225 ca/cb. HCFC-225 ca/cb is proposed as an acceptable
substitute for CFC-113 and methyl chloroform (MCF) in aerosols subject
to a 25 ppm time-weighted average workplace exposure standard of the
HCFC-225ca isomer. HCFC-225 ca/cb HCFC-225 ca/cb blend is offered as a
45%-ca/55%-cb blend. The company-set exposure limit of the -ca isomer
is 25 ppm. The company-set exposure limit of the -cb isomer is 250 ppm.
Based on the results of exposure assessment studies, it is EPA's
opinion that companies can meet the 25 ppm limit of the HCFC-225 ca
isomer in defluxing and cleaning providing that the standard operating
procedures and employee work habits are conducted in accordance with
the procedures specified in the product safety information provided by
the chemical manufacturer.
These workplace standards are designed to protect worker safety
until the Occupational Health and Safety Administration (OSHA) sets its
own standards under Pub. L. 91-596. The existence of the EPA standards
in no way bars OSHA from standard-setting under OSHA authorities as
defined in Pub. L. 91-596.
3. Unacceptable Substitutes. a. Solvents. (1) Chlorobromomethane
Chlorobromomethane is proposed unacceptable as a substitute for CFC-113
and methyl chloroform in aerosols. Recent authoritative research
establishes an ODP range for CBM of 0.17 to 0.28, and toxicity concerns
exist based on potential widespread use in occupational settings not
meeting an appropriate OEL of 5 ppm. Other alternatives exist with much
lower ODP and do not pose a comparable risk.
F. Adhesives, coatings and inks
1. Chlorobromomethane. Chlorobromomethane (CBM) has been used as a
fire suppressant and has the designation of Halon 1011. EPA has
received notification that it can also be used as a solvent and a
potential substitute for the ozone-depleting solvents CFC-113, methyl
chloroform (MCF) and HCFC-141b. EPA received a SNAP submission
requesting consideration of CBM as an acceptable substitute for CFC-113
and MCF in solvents cleaning of metals and electronics and in precision
cleaning. Analysis of the available toxicity data base for CBM raises
significant questions concerning its suitability as a solvent
substitute for CFC-113, or methyl chloroform, or HCFC-141b in metals
cleaning, electronics cleaning, and precision cleaning; and as a
solvent agent in aerosols and in adhesives, coatings and inks. In a
subchronic study, at a dose level of 500 ppm, adverse effects were
evident in the livers of rats. At 1000 ppm, both guinea pigs and
rabbits showed decreased spermatogenesis, but no studies of
reproductive or developmental effects have been conducted. In addition,
mutagenicity tests with CBM in microorganisms yielded consistently
positive results. In mammalian systems, CBM induced sister chromatid
[[Page 27881]]
exchanges. Thus the mutagenic effects of CBM are unmistakable.
In 1989, EPA established a one day health advisory for water
contaminated with CBM at 50 ppm. A longer term health advisory was
established at 4.57 ppm for this compound in drinking water. OSHA
established an occupational Permissible Exposure Limit (PEL) of 200 ppm
based on the ``grandfathered'' Threshold Limit Value (TLV) which dates
back to 1961. This compound was not reviewed in the 1989 proposed
revision process. In 1991, the only use noted for this chemical by
American Conference of Governmental Industrial Hygienists (ACGIH) was
as a liquid (streaming agent) fire suppressant. They recommended an 8
hour TLV of 200 ppm consistent with the PEL. The potential widespread
use of CBM as a solvent substitute in the light of its toxicity profile
and significant data gaps imply a much lower workplace limit. Based
upon the lowest observed adverse effect level of 500 ppm in rats, the
SNAP evaluation suggests a more appropriate occupational exposure limit
(OEL) to lie in the range of 2 and 5 ppm, making this compound
unsuitable for use as a solvent.
Recent authoritative research establishes an ozone depletion
potential (ODP) range for CBM of 0.17 to 0.28. Other alternatives exist
with much lower or no ODP and do not pose a comparable risk. As a
result of these recent ODP findings and the potential widespread use of
CBM in occupational settings unable to meet an OEL of 5 ppm, EPA
proposes this potential substitute, CBM, as unacceptable.
2. Unacceptable Substitutes. a. Solvents. (1) Chlorobromomethane.
Chlorobromomethane is proposed unacceptable as a substitute for CFC-113
and methyl chloroform in adhesives, coatings and inks. Recent
authoritative research establishes an ODP range for CBM of 0.17 to
0.28, and toxicity concerns exist based on potential widespread use in
occupational settings not meeting an appropriate OEL of 5 ppm. Other
alternatives exist with much lower ODP and do not pose a comparable
risk. For example, water-based formulations and other acceptable
solvent formulations with no ODP are broadly used and readily
available.
IV. Administrative Requirements
A. Executive Order 12866
Under Executive Order 12866, (58 FR 51735; October 4, 1993) the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to OMB review and the requirements of the
Executive Order. The Order defines ``significant regulatory action'' as
one that is likely to result in a rule that may: (1) Have an annual
effect on the economy of $100 million or more or adversely affect in a
material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities; (2) create a serious
inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) materially alter the budgetary impact of
entitlement, grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.''
Pursuant to the terms of Executive Order 12866, OMB notified EPA
that it considers this a ``significant regulatory action'' within the
meaning of the Executive Order and EPA submitted this action to OMB for
review. Changes made in response to OMB suggestions or recommendations
have been documented in the public record.
B. Unfunded Mandates Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
EPA to prepare a budgetary impact statement before promulgating a rule
that includes a Federal mandate that may result in expenditure by
state, local, and tribal governments, in aggregate, or by the private
sector, of $100 million or more in any one year. Section 203 requires
the Agency to establish a plan for obtaining input from and informing
any small governments that may be significantly or uniquely affected by
the rule. Section 205 requires that regulatory alternatives be
considered before promulgating a rule for which a budgetary impact
statement is prepared. The Agency must select the least costly, most
cost effective, or least burdensome alternative that achieves the
rule's objectives, unless there is an explanation why this alternative
is not selected or this alternative is inconsistent with law.
Because this proposed rule is estimated to result in the
expenditure by State, local, and tribal governments or the private
sector of less than $100 million in any one year, the Agency has not
prepared a budgetary impact statement or specifically addressed the
selection of the least costly, most cost-effective, or least burdensome
alternative. Because small governments will not be significantly or
uniquely affected by this rule, the Agency is not required to develop a
plan with regard to small governments. However, this proposed rule has
the net effect of reducing burden from part 82, Stratospheric
Protection regulations, on regulated entities.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, small not-for-profit enterprises, and small governmental
jurisdictions. This proposed rule would not have a significant impact
on a substantial number of small entities because costs of the SNAP
requirements as a whole are expected to be minor. In fact, this
proposed rule offers regulatory relief to small businesses by providing
acceptable alternatives to phased-out ozone-depleting substances.
Additionally, the SNAP rule exempts small sectors and end-uses from
reporting requirements and formal agency review. To the extent that
information gathering is more expensive and time-consuming for small
companies, the actions proposed herein may well provide benefits for
small businesses anxious to examine potential substitutes to any ozone-
depleting class I and class II substances they may be using, by
requiring manufacturers to make information on such substitutes
available. Therefore, I certify that this action will not have a
significant economic impact on a substantial number of small entities.
D. Paperwork Reduction Act
EPA has determined that this proposed rule contains no information
requirements subject to the Paperwork Reduction Act, 44 U.S.C. 3501 et
seq., that are not already approved by the Office of Management and
Budget (OMB). OMB has reviewed and approved two Information Collection
Requests by EPA which are described in the March 18, 1994 rulemaking
(59 FR 13044, at 13121, 13146-13147) and in the October 16, 1996
rulemaking (61 FR 54030, at 54038-54039). The OMB Control Numbers are
2060-0226 and 2060-0350.
V. Additional Information
For copies of the comprehensive SNAP lists or additional
information on SNAP, contact the Stratospheric Protection Hotline at 1-
800-296-1996,
[[Page 27882]]
Monday-Friday, between the hours of 10 a.m. and 4 p.m. (EST).
For more information on the Agency's process for administering the
SNAP program or criteria for evaluation of substitutes, refer to the
SNAP final rulemaking published in the Federal Register on March 18,
1994 (59 FR 13044). Federal Register notices can be ordered from the
Government Printing Office Order Desk (202) 783-3238; the citation is
the date of publication. Notices and rulemaking under the SNAP program
can also be retrieved electronically from EPA's Technology Transfer
Network (TTN), Clean Air Act Amendment Bulletin Board. The access
number for users with a 1200 or 2400 bps modem is (919) 541-5742. For
users with a 9600 bps modem the access number is (919) 541-1447. For
assistance in accessing this service, call (919) 541-5384 during normal
business hours (EST). Finally, all EPA publications on protection of
stratospheric ozone are available from the Ozone World Wide Web site at
http://www.epa.gov/docs/ozone/index.html.
List of Subjects in 40 CFR Part 82
Environmental protection, Administrative practice and procedure,
Air pollution control, Reporting and recordkeeping requirements.
Dated: May 14, 1997.
Carol M. Browner,
Administrator.
For the reasons set out in the preamble, 40 CFR part 82 is proposed
to be amended as follows:
PART 82--PROTECTION OF STRATOSPHERIC OZONE
1. The authority citation for part 82 continues to read as follows:
Authority: 42 U.S.C. 7414, 7601, 7671-7671q.
2. Subpart G is amended by adding the following appendix E to read
as follows:
Subpart G--Significant New Alternatives Policy Program
* * * * *
Appendix E to Subpart G--Substitutes Subject to Use Restrictions
and Unacceptable Substitutes Listed in the [FR publication date] final
rule, effective [30 days after FR publication date].
Refrigeration and Air Conditioning
Each refrigerant may only be used with a set of fittings
that is unique to that refrigerant. These fittings (male or female, as
appropriate) must be designed by the manufacturer of the refrigerant.
Specifications for the fittings similar to those found in SAE J639 and
samples of all fittings must be submitted to EPA at the same time as
the initial SNAP submission, or the submission will be considered
incomplete. These fittings must be designed to mechanically prevent
cross-charging with another refrigerant.
The fittings must be used on all containers of the refrigerant, on
can taps, on recovery, recycling, and charging equipment, and on all
air conditioning system service ports. A refrigerant may only be used
with the fittings and can taps specifically intended for that
refrigerant and designed by the manufacturer of the refrigerant. Using
a refrigerant with a fitting designed by anyone else, even if it is
different from fittings used with other refrigerants, will be a
violation of this use condition. Using an adapter or deliberately
modifying a fitting to use a different refrigerant will be a violation
of this use condition.
Fittings shall meet the following criteria, derived from Society of
Automotive Engineers (SAE) standards and recommended practices:
--When existing CFC-12 service ports are retrofitted, conversion
assemblies shall attach to the CFC-12 fitting with a thread lock
adhesive and/or a separate mechanical latching mechanism in a manner
that permanently prevents the assembly from being removed.
--All conversion assemblies and new service ports must satisfy the
vibration testing requirements of sections 3.2.1 or 3.2.2 of SAE J1660,
as applicable, excluding references to SAE J639 and SAE J2064, which
are specific to HFC-134a.
--In order to prevent discharge of refrigerant to the atmosphere,
systems shall have a device to limit compressor operation before the
pressure relief device will vent refrigerant. This requirement is
waived for systems that do not feature such a pressure relief device.
--All CFC-12 service ports not retrofitted with conversion assemblies
shall be rendered permanently incompatible for use with CFC-12 related
service equipment by fitting with a device attached with a thread lock
adhesive and/or a separate mechanical latching mechanism in a manner
that prevents the device from being removed.
A label must be used as follows:
--The person conducting the retrofit or installing the system must
apply a label to the air conditioning system in the engine compartment
that contains the following information:
* the name and address of the technician and the company performing
the retrofit
* the date of the retrofit
* the trade name, charge amount, and, when applicable, the ASHRAE
refrigerant numerical designation of the refrigerant
* the type, manufacturer, and amount of lubricant used
* if the refrigerant is or contains an ozone-depleting substance,
the phrase ``ozone depleter''
* if the refrigerant displays flammability limits as measured
according to ASTM E681 at normal atmospheric pressure and 25 degrees
Celsius, the statement ``This refrigerant is FLAMMABLE. Take
appropriate precautions.''
--This label must be large enough to be easily read and must be
permanent.
--The background color must be unique to the refrigerant.
--The label must be affixed to the system over information related to
the previous refrigerant, in a location not normally replaced during
vehicle repair.
--Information about the previous refrigerant that cannot be covered by
the new label must be rendered permanently unreadable.
No substitute refrigerant may be used to ``top-off'' a
system that uses another refrigerant. The original refrigerant must be
recovered in accordance with regulations issued under section 609 of
the CAA prior to charging with a substitute.
Refrigeration and Air Conditioning Proposed Unacceptable Substitutes
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Comments
----------------------------------------------------------------------------------------------------------------
All CFC-12 end uses, retrofit and NARM-12................ Proposed Unacceptable.. This blend contains HFC-
new. 23, which has an
extremely high GWP and
lifetime. Other
substitutes for CFC-12
exist that do not
contain HFC-23.
[[Page 27883]]
All R-502 end uses, retrofit and new NARM-502............... Proposed Unacceptable.. This blend contains HFC-
23, which has an
extremely high GWP and
lifetime. Other
substitutes for R-502
exist that do not
contain HFC-23.
All HCFC-22 end uses, retrofit and NARM-22................ Proposed Unacceptable.. This blend contains HCFC-
new. 22, and it is
inappropriate to use
such a blend as a
substitute for HCFC-22.
In addition, this blend
contains HFC-23, which
has an extremely high
GWP and lifetime. Other
substitutes for HCFC-22
exist that do not
contain HFC-23.
----------------------------------------------------------------------------------------------------------------
Solvents Cleaning Proposed Acceptable Subject to Use Conditions
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Conditions
----------------------------------------------------------------------------------------------------------------
Metals cleaning w/CFC-113........... HFC-4310mee............ Proposed Acceptable.... Subject to a 200 ppm
time-weighted average
workplace exposure
standard and a 400 ppm
workplace exposure
ceiling.
Metals cleaning w/MCF............... HFC-4310mee............ Proposed Acceptable.... Subject to a 200 ppm
time-weighted average
workplace exposure
standard and a 400 ppm
workplace exposure
ceiling.
----------------------------------------------------------------------------------------------------------------
Solvents Cleaning Proposed Unacceptable Substitutes
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Comments
----------------------------------------------------------------------------------------------------------------
Metals cleaning with CFC-113........ Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Metals cleaning with methyl Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
chloroform (MCF). concerns; other
alternatives exist.
Metals cleaning with HCFC-141b...... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Electronics cleaning with CFC-113... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Electronics cleaning with MCF....... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Electronics cleaning with HCFC-141b. Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Precision cleaning with CFC-113..... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Precision cleaning with MCF......... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
Precision cleaning with HCFC-141b... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
----------------------------------------------------------------------------------------------------------------
Fire Suppression and Explosion Protection Streaming Agents Proposed Acceptable Subject to Narrowed Use Limits
------------------------------------------------------------------------
FR Doc. 97-13209 Protection of Stratospheric Ozone
--------------------------------------------------------------------------------
End use Substitute Decision Conditions Comments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Halon 1211.......................... HFC-227ea................. Proposed Acceptable in ...................... See comments 1, 2.
nonresidential uses
only.
Streaming Agents.................... HFC-236fa................. Proposed Acceptable in ...................... See comments 1, 2.
nonresidential uses
when manufactured
using any process that
does not convert
perfluoroisobutylene
(PFIB) directly to HFC-
236fa in a single step.
[[Page 27884]]
C6F14..................... Acceptable for ...................... Users must observe the limitations on
nonresidential uses PFC acceptability by taking the
where other following measures:
alternatives are not (i) conduct an evaluation of
technically feasible foreseeable conditions of end use;
due to performance or (ii) determine that the physical or
safety requirements:. chemical properties or other
a. due to the physical technical constraints of the other
or chemical properties available agents preclude their use;
of the agent, or and
b. where human exposure (iii) determine that human exposure
to the extinguishing to the other alternative
agent may result in extinguishing agents may result in
failure to meet failure to meet applicable use
applicable use conditions or in other unacceptable
conditions or in other health effects under normal
unacceptable health operating conditions.
effects under normal Documentation of such measures must
operating conditions. be available for review upon
request.
The principal environmental
characteristic of concern for PFCs
is that they have high GWPs and long
atmospheric lifetimes. Actual
contributions to global warming
depend upon the quantities of PFCs
emitted.
For additional guidance regarding
applications in which PFCs may be
appropriate, users should consult
the description of potential uses
which is included in the March 18,
1994 Final Rulemaking (59 FR 13044).
See additional comments 1, 2.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Additional Comments:
1--Discharge testing and training should be strictly limited only to that which is essential to meet safety or performance requirements.
2--The agent should be recovered from the fire protection system in conjunction with testing or servicing, and recycled for later use or destroyed.
Total Flooding Agents Proposed Acceptable Subject to Narrowed use Limits
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Conditions Comments
----------------------------------------------------------------------------------------------------------------
Halon 1301.................... HFC-236fa........... Proposed Until OSHA The comparative
Total Flooding Agents......... Acceptable. establishes design concentration
o when applicable based on cup burner
manufactured workplace values is
using any requirements:. approximately 6.4%.
process that For occupied Users must observe
does not convert areas from the limitations on
perfluoroisobuty which personnel HFC-236fa
lene (PFIB) cannot be acceptability by
directly to HFC- evacuated in taking the following
236fa in a one minute, use measures:
single step.. is permitted (i) conduct an
o for use in only up to evaluation of
explosion concentrations foreseeable
suppression and not exceeding conditions of end
explosion the use;
inertion cardiotoxicity (ii) determine that
applications, NOAEL of 10%.. human exposure to
and. For occupied the other
o for use in fire areas from alternative
suppression which personnel extinguishing agents
applications can be may result in
where other non- evacuated or failure to meet
PFC agents or egress can applicable use
alternatives are occur between conditions or in
not technically 30 and 60 other unacceptable
feasible due to seconds, use is health effects under
performance or permitted up to normal operating
safety a concentration conditions; and
requirements:. not exceeding (iii) determine that
a. due to their the LOAEL of the physical or
physical or 15%.. chemical properties
chemical All personnel or other technical
properties, or. must be constraints of the
b. where human evacuated other available
exposure to the before agents preclude
extinguishing concentration their use.
agents may of HFC-236fa Documentation of such
result in exceeds 15%.. measures must be
failure to meet Design available for review
applicable use concentration upon request.
conditions or in must result in Feasible for use in a
other oxygen levels normally occupied
unacceptable of at least area.
health effects 16%.. See additional
under normal comments 1, 2, 3, 4.
operating
conditions..
[[Page 27885]]
C4F10............... Proposed Until OSHA The comparative
Acceptable where establishes design concentration
other applicable based on cup burner
alternatives are workplace values is
not technically requirements:. approximately 8.8%.
feasible due to For occupied Users must observe
performance or areas from the limitations on
safety which personnel PFC acceptability by
requirements:. cannot be taking the following
a. due to their evacuated in measures:
physical or one minute, use (i) conduct an
chemical is permitted evaluation of
properties, or. only up to foreseeable
b. where human concentrations conditions of end
exposure to the not exceeding use;
extinguishing the (ii) determine that
agents may cardiotoxicity human exposure to
result in NOAEL of 30%.. the other
failure to meet Although no alternative
use conditions LOAEL has been extinguishing agents
or in other established for may result in
unacceptable this product, failure to meet
health effects standard OSHA applicable use
under normal requirements conditions or in
operating apply, i.e., other unacceptable
conditions.. for occupied health effects under
areas from normal operating
which personnel conditions; and
can be (iii) determine that
evacuated or the physical or
egress can chemical properties
occur between or other technical
30 and 60 constraints of the
seconds, use is other available
permitted up to agents preclude
a concentration their use.
not exceeding Documentation of such
the LOAEL.. measures must be
All personnel available for review
must be upon request.
evacuated The principal
before environmental
concentration characteristic of
of C4F10 concern for PFCs is
exceeds 40%.. that they have high
Design GWPs and long
concentration atmospheric
must result in lifetimes. Actual
oxygen levels contributions to
of at least global warming
16%.. depend upon the
quantities of PFCs
emitted.
For additional
guidance regarding
applications in
which PFCs may be
appropriate, users
should consult the
description of
potential uses which
is included in the
March 18, 1994 Final
Rulemaking (59 FR
13044.)
See additional
comments 1, 2, 3, 4.
Halon 1301.................... C3F8................ Proposed Until OSHA The comparative
Total Flooding Agents......... Acceptable where establishes design concentration
other applicable based on cup burner
alternatives are workplace values is
not technically requirements:. approximately 8.8%.
feasible due to For occupied Users must observe
performance or areas from the limitations on
safety which personnel PFC acceptability by
requirements:. cannot be taking the following
a. due to their evacuated in measures:
physical or one minute, use (i) conduct an
chemical is permitted evaluation of
properties, or. only up to foreseeable
b. where human concentrations conditions of end
exposure to the not exceeding use;
extinguishing the (ii) determine that
agents may cardiotoxicity human exposure to
result in NOAEL of 30%.. the other
failure to meet Although no alternative
use conditions LOAEL has been extinguishing agents
or in other established for may result in
unacceptable this product, failure to meet
health effects standard OSHA applicable use
under normal requirements conditions or in
operating apply, i.e., other unacceptable
conditions.. for occupied health effects under
areas from normal operating
which personnel conditions; and
can be (iii) determine that
evacuated or the physical or
egress can chemical properties
occur between or other technical
30 and 60 constraints of the
seconds, use is other available
permitted up to agents preclude
a concentration their use.
not exceeding Documentation of such
the LOAEL.. measures must be
All personnel available for review
must be upon request.
evacuated The principal
before environmental
concentration characteristic of
of C3F8 exceeds concern for PFCs is
30%.. that they have high
Design GWPs and long
concentration atmospheric
must result in lifetimes. Actual
oxygen levels contributions to
of at least global warming
16%.. depend upon the
quantities of PFCs
emitted.
For additional
guidance regarding
applications in
which PFCs may be
appropriate, users
should consult the
description of
potential uses which
is included in the
March 18, 1994 Final
Rulemaking (59 FR
13044.)
See additional
comments 1, 2, 3, 4.
----------------------------------------------------------------------------------------------------------------
Additional Comments
1--Must conform with OSHA 29 CFR 1910 Subpart L Section 1910.160 of the U.S. Code.
2--Per OSHA requirements, protective gear (SCBA) must be available in the event personnel must reenter the area.
3--Discharge testing should be strictly limited only to that which is essential to meet safety or performance
requirements.
4--The agent should be recovered from the fire protection system in conjunction with testing or servicing, and
recycled for later use or destroyed.
[[Page 27886]]
Total Flooding Agents Proposed Acceptable Subject to Use Conditions
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Conditions Comments
----------------------------------------------------------------------------------------------------------------
Halon 1301.................... HFC-236fa........... Proposed Until OSHA The comparative
Total Flooding Agents......... Acceptable. establishes design concentration
when manufactured applicable based on cup burner
using any workplace values is
process that requirements: approximately 6.4%.
does not convert For occupied Users must observe
perfluoroisobuty areas from the limitations on
lene (PFIB) which personnel HFC-236fa
directly to HFC- cannot be acceptability by
236fa in a evacuated in taking the following
single step one minute, use measures:
for use in is permitted (i) conduct an
explosion only up to evaluation of
suppression and concentrations foreseeable
explosion not exceeding conditions of end
inertion the use;
applications, cardiotoxicity (ii) determine that
and NOAEL of 10%. human exposure to
for use in fire For occupied the other
suppression areas from alternative
applications which personnel extinguishing agents
where other non- can be may result in
PFC agents or evacuated or failure to meet
alternatives are egress can applicable use
not technically occur between conditions or in
feasible due to 30 and 60 other unacceptable
performance or seconds, use is health effects under
safety permitted up to normal operating
requirements: a concentration conditions; and
a. due to their not exceeding (iii) determine that
physical or the LOAEL of the physical or
chemical 15%. chemical properties
properties, or All personnel or other technical
b. where human must be constraints of the
exposure to the evacuated other available
extinguishing before agents preclude
agents may concentration their use.
result in of HFC-236fa Documentation of such
failure to meet exceeds 15%. measures must be
applicable use Design available for review
conditions or in concentration upon request.
other must result in Feasible for use in a
unacceptable oxygen levels normally occupied
health effects of at least 16%. area.
under normal See additional
operating comments 1, 2, 3, 4.
conditions.
Halon 1301.................... C3F8................ Proposed Until OSHA The comparative
Total Flooding Agents......... Acceptable where establishes design concentration
other applicable based on cup burner
alternatives are workplace values is
not technically requirements: approximately 8.8%.
feasible due to For occupied Users must observe
performance or areas from the limitations on
safety which personnel PFC acceptability by
requirements: cannot be undertaking the
a. due to their evacuated in following measures:
physical or one minute, use (i) conduct an
chemical is permitted evaluation of
properties, or only up to foreseeable
b. where human concentrations conditions of end
exposure to the not exceeding use;
extinguishing the (ii) determine that
agents may cardiotoxicity human exposure to
result in NOAEL of 30% the other
failure to meet Although no alternative
use conditions LOAEL has been extinguishing agents
or in other established for may result in
unacceptable this product, failure to meet
health effects standard OSHA applicable use
under normal requirements conditions or in
operating apply, i.e., other unacceptable
conditions. for occupied health effects under
areas from normal operating
which personnel conditions; and
can be (iii) determine that
evacuated or the physical or
egress can chemical properties
occur between or other technical
30 and 60 constraints of the
seconds, use is other available
permitted up to agents preclude
a concentration their use.
not exceeding Documentation of such
the LOAEL. measures must be
All personnel available for review
must be upon request.
evacuated The principal
before environmental
concentration characteristic of
of C3F8 exceeds concern for PFCs is
30%. that they have high
Design GWPs and long
concentration atmospheric
must result in lifetimes. Actual
oxygen levels contributions to
of at least 16%. global warming
depend upon the
quantities of PFCs
emitted.
For additional
guidance regarding
applications in
which PFCs may be
appropriate, users
should consult the
description of
potential uses which
is included in the
March 18, 1994 Final
RUlemaking (59 FR
13044.)
See additional
comments 1, 2, 3, 4.
[[Page 27887]]
C4F10............... Proposed Until OSHA The comparative
Acceptable where establishes design concentration
other applicable based on cup burner
alternatives are workplace values is
not technically requirements: approximately 8.8%.
feasible due to For occupied Users must observe
performance or areas from the limitations on
safety which personnel PFC acceptability by
requirements: cannot be undertaking the
a. due to their evacuated in following measures:
physical or one minute, use (i) conduct an
chemical is permitted evaluation of
properties, or only up to foreseeable
b. where human concentrations conditions of end
exposure to the not exceeding use;
extinguishing the (ii) determine that
agents may cardiotoxicity human exposure to
result in NOAEL of 30%. the other
failure to meet Although no alternative
use conditions LOAEL has been extinguishing agents
or in other established for may result in
unacceptable this product, failure to meet
health effects standard OSHA applicable use
under normal requirements conditions or in
operating apply, i.e., other unacceptable
conditions for occupied health effects under
areas from normal operating
which personnel conditions; and
can be (iii) determine that
evacuated or the physical or
egress can chemical properties
occur between or other technical
30 and 60 constraints of the
seconds, use is other available
permitted up to agents preclude
a concentration their use.
not exceeding Documentation of such
the LOAEL. measures must be
All personnel available for review
must be upon request.
evacuated The principal
before Design environmental
concentration characteristic of
of C4F10 concern for PFCs is
exceeds 40%. that they have high
Design GWPs and long
concentration atmospheric
must result in lifetimes. Actual
oxygen levels contributions to
of at least 16%. global warming
depend upon the
quantities of PFCs
emitted.
For additional
guidance regarding
applications in
which PFCs may be
appropriate, users
should consult the
description of
potential uses which
is included in the
March 18, 1994 Final
Rulemaking (59 FR
13044.)
See additional
comments 1, 2, 3, 4.
----------------------------------------------------------------------------------------------------------------
Additional Comments
1--Must conform with OSHA 29 CFR 1910 Subpart L Section 1910.160 of the U.S. Code.
2--Per OSHA requirements, protective gear (SCBA) must be available in the event personnel must reenter the area.
3--Discharge testing should be strictly limited only to that which is essential to meet safety or performance
requirements.
4--The agent should be recovered from the fire protection system in conjunction with testing or servicing, and
recycled for later use or destroyed.
Fire Suppression and Explosion Protection Proposed Unacceptable Substitutes
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Comments
----------------------------------------------------------------------------------------------------------------
Halon 1301 Total Flooding Agents.... Chlorobromomethane..... Proposed Unacceptable.. High ODP; other
alternatives exist.
----------------------------------------------------------------------------------------------------------------
Aerosols Proposed Acceptable Subject to Use Conditions
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Conditions
----------------------------------------------------------------------------------------------------------------
Solvent in aerosols w/ CFC-113...... HFC-4310 mee........... Proposed Acceptable.... Subject to a 200 ppm
time-weighted average
workplace exposure
standard and a 400 ppm
workplace exposure
ceiling.
Solvent in aerosols w/ MCF.......... HFC-4310 mee........... Proposed Acceptable.... Subject to a 200 ppm
time-weighted average
workplace exposure
standard and a 400 ppm
workplace exposure
ceiling.
Solvent in aerosols w/ CFC-113...... HCFC-225ca/cb.......... Proposed Acceptable.... Subject to a time
weighted average
exposure limit of 25
ppm for the HCFC-225 ca
isomer.
Solvent in aerosols w/ MCF.......... HCFC-225ca/cb.......... Proposed Acceptable.... Subject to a time
weighted average
exposure limit of 25
ppm for the HCFC-225 ca
isomer.
----------------------------------------------------------------------------------------------------------------
Aerosols Proposed Unacceptable Substitutes
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Comments
----------------------------------------------------------------------------------------------------------------
Solvent in aerosols with CFC-113.... Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
[[Page 27888]]
Solvent in aerosols with MCF........ Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
concerns; other
alternatives exist.
----------------------------------------------------------------------------------------------------------------
Adhesives, Coatings, and Inks Proposed Unacceptable Substitutes
----------------------------------------------------------------------------------------------------------------
End use Substitute Decision Comments
----------------------------------------------------------------------------------------------------------------
Solvent in adhesive, coatings, and Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
inks with CFC-113. concerns; other
alternatives exist.
Solvent in adhesives, coatings, and Chlorobromomethane..... Proposed Unacceptable.. High ODP, toxicity
inks with MCF. concerns; other
alternatives exist.
----------------------------------------------------------------------------------------------------------------
[FR Doc. 97-13209 Filed 5-20-97; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 97-13207 Acquisition Regulation
[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27712-27715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13207]
=======================================================================
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
48 CFR Part 1515
[FRL-5827-3]
Acquisition Regulation
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This document proposes to revise the EPA Acquisition
Regulation (EPAAR) on calculation of profit or fee. This action is the
result of an Agency reassessment of its regulatory guidelines for
determination of contractor profit or fee. A significant policy change
will be for the contracting officer not to consider the profit/fee of
any subcontractor in determining the Government's profit/fee objective.
In addition, several changes are proposed to update, to streamline and
to make the guidelines more closely address acquisitions for
professional and technical services.
DATES: Comments should be submitted not later than July 21, 1997.
ADDRESSES: Environmental Protection Agency, Office of Acquisition
Management (3802F), 401 M Street SW., Washington, DC 20460.
FOR FURTHER INFORMATION CONTACT: Larry Wyborski, Telephone: (202) 260-
6482.
SUPPLEMENTARY INFORMATION:
I. Executive Order 12866
This is not a significant regulatory action under Executive Order
12866; therefore, no review is required at the Office of Information
and Regulatory Affairs within OMB.
II. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because this rule does
not contain information collection requirements for the approval of the
Office of Management and Budget (OMB) under 44 U.S.C. 3501, et seq.
III. Regulatory Flexibility Act
The EPA certifies that this rule does not exert a significant
economic impact on a substantial number of small entities. There are no
requirements for contractor compliance under the proposed rule.
IV. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) Public
Law 104-4, establishes requirements for Federal agencies to assess
their regulatory actions on State, local, and tribal governments, and
the private sector.
EPA has determined that this rule does not contain a Federal
mandate that may result in expenditures of $100 million or more for
State, local, and tribal governments, in the aggregate, or the private
sector in any one year. Any private sector costs for this action relate
to paperwork requirements and associated expenditures that are far
below the level established for UMRA applicability. Thus, the rule is
not subject to the requirements of sections 202 and 205 of the UMRA.
V. Regulated Entities
EPA contractors are entities potentially regulated by this action.
------------------------------------------------------------------------
Category Regulated entity
------------------------------------------------------------------------
Industry................................ EPA Contractors.
------------------------------------------------------------------------
List of Subjects in 48 CFR Part 1515
Government procurement.
For the reasons set forth in the preamble, Chapter 15 of Title 48
Code of Federal Regulations 1515 is proposed to be amended as follows:
1. The authority citation for 1515 continues to read as follows:
Authority: Sec. 205(c), 63 Stat. 390 as amended, 40 U.S.C.
486(c).
2. Subpart 1515.9 is revised to read as follows:
Subpart 1515.9--Profit
1515.900 Scope of subpart.
1515.902 Policy.
1515.903 Cost realism.
1515.905 Profit-analysis factors.
1515.970 EPA structured approach for developing profit or fee
objectives.
1515.970-1 General.
1515.970-2 EPA staructured system.
Subpart 1515.9--Profit
1515.900 Scope of subpart.
This subpart implements FAR subpart 15.9, and prescribes the EPA
structured approach for determining profit or fee prenegotiation
objectives.
1515.902 Policy.
(a) EPA structured approach. The purpose of EPA's structured
approach is:
(1) To provide a standard method of evaluation;
(2) To ensure consideration of all relevant factors;
(3) To provide a basis for documentation and explanation of the
profit or fee negotiation objective;
(4) To allow contractors to earn profits commensurate with the
assumption of risk; and
(5) To reward contractors who undertake more difficult work
requiring higher risks.
(b) Other methods. (1) Contracting officers may use methods other
than those prescribed in 1515.970 for establishing profit or fee
objectives under the following types of contracts and circumstances:
(i) Architect-engineering contracts;
(ii) Personal service contracts;
(iii) Management contracts, e.g., for maintenance or operation of
Government facilities;
(iv) Termination settlements;
(v) Professional/technical services under labor-hour and time and
material contracts which provide for payment on an hourly, daily, or
monthly basis, and where the contractor's contribution constitutes the
furnishing of personnel.
(vi) Construction contracts; and
(vii) Cost-plus-award-fee contracts.
(2) Generally, it is expected that such methods will:
(i) Provide the contracting officer with a technique that will
ensure consideration of the relative value of the appropriate profit
factors described under ``Profit Factors,'' in 1515.970-2, and
(ii) Serve as a basis for documentation of the profit or fee
objective.
(c) Under unusual circumstances, the CCO may specifically waive the
[[Page 27713]]
requirement for the use of the guidelines. Such exceptions shall be
justified in writing, and authorized only in situations where the
guidelines method is unsuitable.
(d) The contracting officer may not consider subcontractor profit/
fee as part of the basis for determining the contractor's profit/fee.
1515.903 Cost realism.
The EPA structured approach is not required when the contracting
officer is evaluating cost realism in a competitive acquisition.
1515.905 Profit-analysis factors.
Profit-analysis factors prescribed in the EPA structured approach
for analyzing profit or fee include those prescribed by FAR 15.905-1,
and additional factors authorized by FAR 15.905-2 to foster achievement
of program objectives. These profit or fee factors are prescribed in
1515.970-2.
1515.970 EPA structured approach for developing profit or fee
objectives.
1515.970-1 General.
(a) The Agency's policy is to utilize profit to attract contractors
who possess talents and skills necessary to the accomplishment of the
objectives of the Agency, and to stimulate efficient contract
performance. In negotiating profit/fee, it is necessary that all
relevant factors be considered, and that fair and reasonable amounts be
negotiated which give the contractor a profit objective commensurate
with the nature of the work to be performed, the contractor's input to
the total performance, and the risks assumed by the contractor.
(b) To properly reflect differences among contracts, and to select
an appropriate relative profit/fee in consideration of these
differences, weightings have been developed for application by the
contracting officer to standard measurement bases representative of the
prescribed profit factors cited in FAR 15.905 and EPAAR 1515.970-
2(a)(1). Each profit factor or subfactor, or its components, has been
assigned weights relative to their value to the contract's overall
effort, and the range of weights to be applied to each profit factor.
1515.970-2 EPA structured system.
(a)(1) Profit/fee factors. The factors set forth below, and the
weighted ranges listed after each factor, shall be used in all
instances where the profit/fee is negotiated.
Contractor's Input to Total Performance
------------------------------------------------------------------------
Weight range (percent)
------------------------------------------------------------------------
Direct material............................ 1 to 4
Professional/technical services............ 8 to 15
Professional/technical overhead............ 6 to 9
Subcontractors............................. 1 to 4
Other direct costs......................... 1 to 3
General and administrative expenses........ 5 to 8
Contractor's assumption of contract cost 0 to 6
risk.
------------------------------------------------------------------------
(2) The contracting officer shall first measure the ``Contractor's
Input to Total Performance'' by the assignment of a profit percentage
within the designated weight ranges to each element of contract cost.
Such costs are multiplied by the specific percentages to arrive at a
specific dollar profit or fee.
(3) The amount calculated for facilities capital cost of money
(FCCM) shall not be included as part of the cost base for computation
of profit or fee (see FAR 15.903(c)). The profit or fee objective shall
be reduced by an amount equal to the amount of facilities capital cost
of money allowed. A complete discussion of the determination of
facilities capital cost of money and its application and administration
is set forth in FAR 31.205-10, and appendix B of the FAR (48 CFR
9904.404).
(4) After computing a total dollar profit or fee for the
Contractor's Input to Total Performance, the contracting officer shall
calculate the specific profit dollars assigned for cost risk and
performance. This is accomplished by multiplying the total Government
cost objective, exclusive of any FCCM, by the specific weight assigned
to cost risk and performance. The contracting officer shall then
determine the profit or fee objective by adding the total profit
dollars for the Contractor's Input to Total Performance to the specific
dollar profits assigned to cost risk and performance. The contracting
officer shall use EPA Form 1900-2 to facilitate the calculation of the
profit or fee objective.
(5) The weight factors discussed above are designed for arriving at
profit or fee objectives for other than nonprofit and not-for-profit
organizations. Nonprofit and not-for-profit organizations are addressed
as follows:
(i) Nonprofit and not-for-profit organizations are defined as those
business entities organized and operated:
(A) Exclusively for charitable, scientific, or educational
purposes;
(B) Where no part of the net earnings inure to the benefit of any
private shareholder or individual;
(C) Where no substantial part of the activities is for propaganda
or otherwise attempting to influence legislation or participating in
any political campaign on behalf of any candidate for public office;
and
(D) Which are exempt from Federal income taxation under Section 51
of the Internal Revenue Code.
(ii) For contracts with nonprofit and not-for-profit organizations
where fees are involved, a special factor of -3 percent shall be
assigned in all cases.
(b) Assignment of values to specific factors--
(1) General. In making a judgment on the value of each factor, the
contracting officer should be governed by the definition, description,
and purpose of the factors, together with considerations for evaluation
set forth in this paragraph.
(2) Contractor's input to total performance. This factor is a
measure of how much the contractor is expected to contribute to the
overall effort necessary to meet the contract performance requirements
in an efficient manner. This factor, which is separate from the
contractor's responsibility for contract performance, takes into
account what resources are necessary, and the creativity and ingenuity
needed for the contractor to perform the statement of work
successfully. This is a recognition that within a given performance
output, or within a given sales dollar figure, necessary efforts on the
part of individual contractors can vary widely in both value, quantity,
and quality, and that the profit or fee objective should reflect the
extent and nature of the contractor's contribution to total
performance. Greater profit opportunity should be provided under
contracts requiring a high degree of professional and managerial skill
and to prospective contractors whose skills, facilities, and technical
assets can be expected to lead to efficient and economical contract
performance. The evaluation of this factor requires an analysis of the
cost content of the proposed contract as follows:
(i) Direct material (purchased parts and other material). (A)
Analysis of these cost items shall include an evaluation of the
managerial and technical effort necessary to obtain the required
material. This evaluation shall include consideration of the number of
orders and suppliers, and whether established sources are available or
new sources must be developed. The contracting officer shall also
determine whether the contractor will, for
[[Page 27714]]
example, obtain the materials by routine orders or readily available
supplies (particularly those of substantial value in relation to the
total contract costs), or by detailed subcontracts for which the prime
contractor will be required to develop complex specifications involving
creative design.
(B) Consideration should be given to the managerial and technical
efforts necessary for the prime contractor to administer subcontracts,
and to select subcontractors, including efforts to break out
subcontracts from sole sources, through the introduction of
competition.
(C) Recognized costs proposed as direct material costs such as
scrap charges shall be treated as material for profit evaluation.
(D) If intracompany transfers are accepted at price, in accordance
with FAR 31.205-26(e), they should be excluded from the profit or fee
computation. Other intracompany transfers shall be evaluated by
individual components of cost, i.e., material, labor, and overhead.
(E) Normally, the lowest weight for direct material is 2 percent. A
weighting of less than 2 percent would be appropriate only in unusual
circumstances when there is a minimal contribution by the contractor in
relation to the total cost of the material.
(ii) Professional/Technical Services. Analysis of the professional/
technical services should include evaluation of the comparative quality
and level of the talents and experience to be employed. In evaluating
professional/technical services for the purpose of assigning profit
dollars, consideration should be given to the amount of notable
scientific talent or unusual or scarce talent needed, in contrast to
journeyman effort or supporting personnel. The diversity, or lack
thereof, of scientific and engineering specialties required for
contract performance, and the corresponding need for professional/
technical supervision and coordination, should also be evaluated.
(iii) Overhead and general and administrative expenses.
(A) Where practicable, analysis of these overhead items of cost
should include the evaluation of the individual elements of these
expenses, and how much they contribute to contract performance. This
analysis should include a determination of the amount of labor within
these overhead pools, and how this labor would be treated if it were
considered as direct labor under the contract. The allocable labor
elements should be given the same profit consideration as if they were
direct labor. The other elements of indirect cost pools should be
evaluated to determine whether they are routine expenses such as
utilities, depreciation, and maintenance, and therefore given less
profit consideration.
(B) The contractor's accounting system need not break down its
overhead expenses within the classification of professional/technical
overhead, and general and administrative expenses. A contractor's
accounting system which only reflects one overhead rate on all direct
labor need not be modified to correspond with all of the above
classifications. Where practicable, the contracting officer's
evaluation of such an overhead rate should break out the applicable
sections of the composite rate which could be classified as
professional/ technical overhead and general and administrative
expenses, and follow the appropriate evaluation technique.
(C) The contracting officer need not make a separate profit
evaluation of overhead expenses in connection with each acquisition for
substantially the same product with the same contractor. Once an
analysis of the profit weight to be assigned the overhead pool has been
made, the weight assigned may be used for future acquisitions with the
same contractor, until there is a change in the cost composition of the
overhead pool or in the contract circumstances.
(iv) Subcontractors.
(A) Subcontract costs should be analyzed from the standpoint of the
talents and skills of the subcontractors. The analysis should consider
if the contractor normally should be expected to have people with
comparable expertise employed as full-time staff, or if the contract
requires skills not normally available in an employer-employee
relationship. Where the contractor is using subcontractors to perform
services which would normally be expected to be done in-house, the
rating factor should generally be at or near 1 percent. Where
exceptional expertise is retained, or the contractor is participating
in the mentor-protege program, the assigned weight should be nearer to
the high end of the range.
(B) In accordance with EPAAR 1515.902(d), the contracting officer
may not consider subcontractor profit/fee as part of the basis for
determining the contractors profit/fee.
(v) Other direct costs. Items of costs, such as travel and
subsistence, should generally be assigned a rating of 1 to 3 percent.
The analysis of these costs should be similar to the analysis of direct
material.
(3) Contractor's assumption of contract cost risk. (i) The risk of
contract costs should be shifted to the fullest extent practicable to
contractors, and the Government should assign a rating that reflects
the degree of risk assumption. Evaluation of this risk requires a
determination of the degree of cost responsibility the contractor
assumes, the reliability of the cost estimates in relation to the task
assumed, and the chance of the contractor's success or failure. This
factor is specifically limited to the risk of contract costs. Thus,
such risks of losing potential profits in other fields are not within
the scope of this factor.
(ii) The first determination of the degree of cost responsibility
assumed by the contractor is related to the sharing of total risk of
contract cost by the Government and the contractor, depending on
selection of contract type. The extremes are a cost-plus-fixed-fee
contract requiring only that the contractor use its best efforts to
perform a task, and a firm-fixed-price contract for a complex item. A
cost-plus-fixed-fee contract would reflect a minimum assumption of cost
responsibility by the contractor, whereas a firm-fixed-price contract
would reflect a complete assumption of cost responsibility by the
contractor. Therefore, in the first step of determining the value given
for the contractor's assumption of contract cost risk, a low rating
would be assigned to a proposed cost-plus-fixed-fee best efforts
contract, and a higher rating would be assigned to a firm-fixed-price
contract.
(iii) The second determination is that of the reliability of the
cost estimates. Sound price negotiation requires well-defined contract
objectives and reliable cost estimates. An excessive cost estimate
reduces the possibility that the cost of performance will exceed the
contract price, thereby reducing the contractor's assumption of
contract cost risk.
(iv) The third determination is that of the difficulty of the
contractor's task. The contractor's task may be difficult or easy,
regardless of the type of contract.
(v) Contractors are likely to assume greater cost risks only if the
contracting officer objectively analyzes the risk incident to the
proposed contract, and is willing to compensate contractors for it.
Generally, a cost-plus-fixed-fee contract would not justify a reward
for risk in excess of 1 percent, nor would a firm-fixed-price contract
normally justify a reward of less than 4 percent. Where proper contract
type selection has been made, the reward for risk by contract type
would usually fall into the following percentage ranges:
[[Page 27715]]
------------------------------------------------------------------------
Type of contract Percentage ranges
------------------------------------------------------------------------
Cost-plus-fixed-fee........................ 0 to 1
Prospective price determination............ 4 to 5
Firm-fixed-price........................... 4 to 6
------------------------------------------------------------------------
(A) These ranges may not be appropriate for all acquisitions. The
contracting officer might determine that a basis exists for high
confidence in the reasonableness of the estimate, and that little
opportunity exists for cost reduction without extraordinary efforts.
The contractor's willingness to accept ceilings on their burden rates
should be considered as a risk factor for cost-plus-fixed-fee
contracts.
(B) In making a contract cost risk evaluation in an acquisition
that involves definitization of a letter contract, consideration should
be given to the effect on total contract cost risk as a result of
partial performance under a letter contract. Under some circumstances,
the total amount of cost risk may have been effectively reduced by the
existence of a letter contract. Under other circumstances, it may be
apparent that the contractor's cost risk remained substantially as
great as though a letter contract had not been used. Where a contractor
has begun work under an anticipatory cost letter, the risk assumed is
greater than normal. To be equitable, the determination of a profit
weight for application to the total of all recognized costs, both those
incurred and those yet to be expended, must be made with consideration
to all relevant circumstances, not just to the portion of costs
incurred or percentage of work completed prior to definitization.
Dated: May 9, 1997.
Diane M. Balderson,
Acting Director, Office of Acquisition Management.
[FR Doc. 97-13207 Filed 5-20-97; 8:45 am]
BILLING CODE 6560-50-P
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