(a) Definitions. For purposes of this section:
(1) North Korean banking institution means any bank organized under North Korean law, or any agency, branch, or office located outside the United States of such a bank.
(2) North Korean financial institution means all branches, offices, or subsidiaries of any foreign financial institution, as defined at § 1010.605(f), chartered or licensed by North Korea, wherever located, including any branches, offices, or subsidiaries of such a financial institution operating in any jurisdiction, and any branch or office within North Korea of any foreign financial institution.
(3) Foreign bank has the same meaning as provided in § 1010.100(u).
(4) Correspondent account has the same meaning as provided in § 1010.605(c)(1)(i).
(5) Covered financial institution has the same meaning as provided in § 1010.605(e)(1).
(6) Subsidiary means a company of which more than 50 percent of the voting stock or analogous equity interest is owned by another company.
(b) Prohibition on accounts and due diligence requirements for covered financial institutions -
(1) Opening or maintenance of correspondent accounts for a North Korean banking institution. A covered financial institution shall not open or maintain in the United States a correspondent account for, or on behalf of, a North Korean banking institution.
(2) Prohibition on use of correspondent accounts involving North Korean financial institutions. A covered financial institution shall take reasonable steps to not process a transaction for the correspondent account of a foreign bank in the United States if such a transaction involves a North Korean financial institution.
(3) Special due diligence of correspondent accounts to prohibit use.
(i) A covered financial institution shall apply special due diligence to its foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving North Korean financial institutions. At a minimum, that special due diligence must include:
(A) Notifying those foreign correspondent account holders that the covered financial institution knows or has reason to believe provide services to a North Korean financial institution that such correspondents may not provide a North Korean financial institution with access to the correspondent account maintained at the covered financial institution; and
(B) Taking reasonable steps to identify any use of its foreign correspondent accounts by a North Korean financial institution, to the extent that such use can be determined from transactional records maintained in the covered financial institution's normal course of business.
(ii) A covered financial institution shall take a risk-based approach when deciding what, if any, other due diligence measures it reasonably must adopt to guard against the use of its foreign correspondent accounts to process transactions involving North Korean financial institutions.
(iii) A covered financial institution that knows or has reason to believe that a foreign bank's correspondent account has been or is being used to process transactions involving a North Korean financial institution shall take all appropriate steps to further investigate and prevent such access, including the notification of its correspondent account holder under paragraph (b)(3)(i)(A) of this section and, where necessary, termination of the correspondent account.
(4) Recordkeeping and reporting.
(i) A covered financial institution is required to document its compliance with the notice requirement set forth in paragraph (b)(3)(i)(A) of this section.
(ii) Nothing in this paragraph (b) shall require a covered financial institution to report any information not otherwise required to be reported by law or regulation.
[81 FR 78721, Nov. 9, 2016]