PART 1024—RULES FOR MUTUAL FUNDS Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 and 5316-5332; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec. 701, Pub. L. 114-74, 129 Stat. 599. Source: 75 FR 65812, Oct. 26, 2010, unless otherwise noted. Subpart A—Definitions § 1024.100 Definitions. Refer to § 1010.100 of this chapter for general definitions not noted herein. To the extent there is a differing definition in § 1010.100 of this chapter, the definition in this section is what applies to part 1024. Unless otherwise indicated, for purposes of this part: (a) Account. (1) Account (2) Account (i) An account that a mutual fund acquires through any acquisition, merger, purchase of assets, or assumption of liabilities; or (ii) An account opened for the purpose of participating in an employee benefit plan established under the Employee Retirement Income Security Act of 1974. (b) Commission (c) Customer. (1) Customer (i) A person that opens a new account; and (ii) An individual who opens a new account for: (A) An individual who lacks legal capacity, such as a minor; or (B) An entity that is not a legal person, such as a civic club. (2) Customer (i) A financial institution regulated by a Federal functional regulator or a bank regulated by a State bank regulator; (ii) A person described in § 1020.315(b)(2) through (4) of this Chapter; or (iii) A person that has an existing account with the mutual fund, provided that the mutual fund has a reasonable belief that it knows the true identity of the person. (d) Financial institution Subpart B—Programs § 1024.200 General. Mutual funds are subject to the program requirements set forth and cross referenced in this subpart. Mutual funds should also refer to subpart B of part 1010 of this chapter for program requirements contained in that subpart which apply to mutual funds. § 1024.210 Anti-money laundering program requirements for mutual funds. (a) Effective July 24, 2002, each mutual fund shall develop and implement a written anti-money laundering program reasonably designed to prevent the mutual fund from being used for money laundering or the financing of terrorist activities and to achieve and monitor compliance with the applicable requirements of the Bank Secrecy Act (31 U.S.C. 5311, et seq. (b) The anti-money laundering program shall at a minimum: (1) Establish and implement policies, procedures, and internal controls reasonably designed to prevent the mutual fund from being used for money laundering or the financing of terrorist activities and to achieve compliance with the applicable provisions of the Bank Secrecy Act and implementing regulations thereunder; (2) Provide for independent testing for compliance to be conducted by the mutual fund's personnel or by a qualified outside party; (3) Designate a person or persons responsible for implementing and monitoring the operations and internal controls of the program; (4) Provide ongoing training for appropriate persons; and (5) Implement appropriate risk-based procedures for conducting ongoing customer due diligence, to include, but not be limited to: (i) Understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and (ii) Conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. For purposes of this paragraph (b)(5)(ii), customer information shall include information regarding the beneficial owners of legal entity customers (as defined in § 1010.230 of this chapter). [81 FR 29457, May 11, 2016, as amended at 82 FR 45187, Sept. 28, 2017] § 1024.220 Customer identification programs for mutual funds. (a) Customer identification program: minimum requirements In general. (2) Identity verification procedures. (i) Customer information required In general. ( 1 ( 2 ( 3 ( i ( ii ( iii ( 4 ( i ( ii Note to paragraph ( a i 4 ii When opening an account for a foreign business or enterprise that does not have an identification number, the mutual fund must request alternative government-issued documentation certifying the existence of the business or enterprise. (B) Exception for persons applying for a taxpayer identification number. (ii) Customer verification. (A) Verification through documents. ( 1 ( 2 (B) Verification through non-documentary methods. ( 1 ( 2 (C) Additional verification for certain customers. (iii) Lack of verification. (A) When the mutual fund should not open an account; (B) The terms under which a customer may use an account while the mutual fund attempts to verify the customer's identity; (C) When the mutual fund should file a Suspicious Activity Report in accordance with applicable law and regulation; and (D) When the mutual fund should close an account, after attempts to verify a customer's identity have failed. (3) Recordkeeping. (i) Required records. (A) All identifying information about a customer obtained under paragraph (a)(2)(i) of this section; (B) A description of any document that was relied on under paragraph (a)(2)(ii)(A) of this section noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date; (C) A description of the methods and the results of any measures undertaken to verify the identity of the customer under paragraph (a)(2)(ii)(B) or (C) of this section; and (D) A description of the resolution of any substantive discrepancy discovered when verifying the identifying information obtained. (ii) Retention of records. (4) Comparison with government lists. (5)(i) Customer notice. (ii) Adequate notice. (iii) Sample notice. Important Information About Procedures for Opening a New Account To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents. (6) Reliance on other financial institutions. (i) Such reliance is reasonable under the circumstances; (ii) The other financial institution is subject to a rule implementing 31 U.S.C. 5318(h) and is regulated by a Federal functional regulator; and (iii) The other financial institution enters into a contract requiring it to certify annually to the mutual fund that it has implemented its anti-money laundering program, and that it (or its agent) will perform the specific requirements of the mutual fund's CIP. (b) Exemptions. (c) Other requirements unaffected. Subpart C—Reports Required To Be Made By Mutual Funds § 1024.300 General. Mutual funds are subject to the reporting requirements set forth and cross referenced in this subpart. Mutual funds should also refer to subpart C of part 1010 of this chapter for reporting requirements contained in that subpart which apply to mutual funds. § 1024.310 Reports of transactions in currency. The reports of transactions in currency requirements for mutual funds are located in subpart C of part 1010 of this chapter and this subpart. § 1024.311 Filing obligations. Refer to § 1010.311 of this chapter for reports of transactions in currency filing obligations for mutual funds. § 1024.312 Identification required. Refer to § 1010.312 of this chapter for identification requirements for reports of transactions in currency filed by mutual funds. § 1024.313 Aggregation. Refer to § 1010.313 of this chapter for reports of transactions in currency aggregation requirements for mutual funds. § 1024.314 Structured transactions. Refer to § 1010.314 of this chapter for rules regarding structured transactions for mutual funds. § 1024.315 Exemptions. Refer to § 1010.315 of this chapter for exemptions from the obligation to file reports of transactions in currency for mutual funds. § 1024.320 Reports by mutual funds of suspicious transactions. (a) General. (2) A transaction requires reporting under this section if it is conducted or attempted by, at, or through a mutual fund, it involves or aggregates funds or other assets of at least $5,000, and the mutual fund 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 chapter or any other regulations promulgated under the Bank Secrecy Act; (iii) Has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the mutual fund knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or (iv) Involves use of the mutual fund to facilitate criminal activity. (3) More than one mutual fund may have an obligation to report the same transaction under this section, and other financial institutions may have separate obligations to report suspicious activity with respect to the same transaction pursuant to other provisions of this chapter. In those instances, no more than one report is required to be filed by the mutual fund(s) and other financial institution(s) involved in the transaction, provided that the report filed contains all relevant facts, including the name of each financial institution and the words “joint filing” in the narrative section, and each institution maintains a copy of the report filed, along with any supporting documentation. (b) Filing and notification procedures What to file. (2) Where to file. (3) When to file. (4) Mandatory notification to law enforcement. (5) Voluntary notification to the Financial Crimes Enforcement Network or the Securities and Exchange Commission. (c) Retention of records. (d) Confidentiality of SARs. (1) Prohibition on disclosures by mutual funds General rule. (ii) Rules of construction. (A) The disclosure by a mutual fund, or any director, officer, employee, or agent of a mutual fund, of: ( 1 ( 2 (B) The sharing by a mutual fund, or any director, officer, employee, or agent of the mutual fund, of a SAR, or any information that would reveal the existence of a SAR, within the mutual fund's corporate organizational structure for purposes consistent with Title II of the Bank Secrecy Act as determined by regulation or in guidance. (2) Prohibition on disclosures by government authorities. (e) Limitation on liability. (f) Compliance. (g) Applicability date. [75 FR 65812, Oct. 26, 2010, as amended at 76 FR 10519, Feb. 25, 2011; 81 FR 76865, Nov. 4, 2016] Subpart D—Records Required To Be Maintained By Mutual Funds § 1024.400 General. Mutual funds are subject to the recordkeeping requirements set forth and cross referenced in this subpart. Mutual funds should also refer to subpart D of part 1010 of this chapter for recordkeeping requirements contained in that subpart which apply to mutual funds. § 1024.410 Recordkeeping. Refer to § 1010.410 of this chapter. Subpart E—Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity § 1024.500 General. Mutual funds are subject to the special information sharing procedures to deter money laundering and terrorist activity requirements set forth and cross referenced in this subpart. Mutual funds should also refer to subpart E of part 1010 of this chapter for special information sharing procedures to deter money laundering and terrorist activity contained in that subpart which apply to mutual funds. § 1024.520 Special information sharing procedures to deter money laundering and terrorist activity for mutual funds. (a) Refer to § 1010.520 of this chapter. (b) [Reserved] § 1024.530 [Reserved] § 1024.540 Voluntary information sharing among financial institutions. (a) Refer to § 1010.540 of this chapter. (b) [Reserved] Subpart F—Special Standards of Diligence; Prohibitions; and Special Measures for Mutual Funds § 1024.600 General. Mutual funds are subject to the special standards of diligence; prohibitions; and special measures requirements set forth and cross referenced in this subpart. Mutual funds should also refer to subpart F of part 1010 of this chapter for special standards of diligence; prohibitions; and special measures contained in that subpart which apply to mutual funds. § 1024.610 Due diligence programs for correspondent accounts for foreign financial institutions. (a) Refer to § 1010.610 of this chapter. (b) [Reserved] § 1024.620 Due diligence programs for private banking accounts. (a) Refer to § 1010.620 of this chapter. (b) [Reserved] § 1024.630 Prohibition on correspondent accounts for foreign shell banks; records concerning owners of foreign banks and agents for service of legal process. (a) Refer to § 1010.630 of this chapter. (b) [Reserved] §§ 1024.640-1024.670 [Reserved]