BILL NUMBER: AB 978	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Blumenfield

                        FEBRUARY 22, 2013

   An act to add Section 465 to the Financial Code, relating to
financial institutions.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 978, as introduced, Blumenfield. Financial institutions: Iran
sanctions.
   Existing law, the Financial Institutions Law, provides for the
regulation and licensure of financial institutions by the Department
of Financial Institutions and the Commissioner of Financial
Institutions. On July 1, 2013, the Governor's Reorganization Plan No.
2 of 2012 transfers the responsibilities of the department and
commissioner to the Department of Business Oversight and the
Commissioner of Business Oversight, as specified. A willful violation
of specified provisions of the Financial Institutions Law, or a rule
or order issued pursuant to the Financial Institutions Law by
certain licensees, is a crime.
   The federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 requires the Secretary of the Treasury to
prescribe regulations to prohibit, or impose strict conditions on,
the opening or maintaining in the United States of a correspondent
account or a payable-through account by a foreign financial
institution that the Secretary of the Treasury finds knowingly
engages in certain activities related to the Government of Iran,
subject to specified penalties. The federal act also requires the
Secretary of the Treasury to prescribe regulations to require a
domestic financial institution maintaining a correspondent account or
payable-through account in the United States for a foreign financial
institution to perform an audit of prohibited activities that may be
carried out by the foreign financial institution, report to the
Department of the Treasury with respect to transactions or other
financial services provided with respect to a prohibited activity,
certify that the foreign financial institution is not knowingly
engaging in any prohibited activity, to the best of its knowledge,
and establish due diligence policies, procedures, and controls
reasonably designed to detect whether the Secretary of the Treasury
has found the foreign financial institution to knowingly engage in
any prohibited activity.
   This bill would require the commissioner to prescribe regulations
to require a licensee under the Financial Institutions Law that
maintains a correspondent account or a payable-through account with a
foreign financial institution to establish due diligence policies,
procedures, and controls reasonably designed to determine whether the
Secretary of the Treasury has determined that the foreign financial
institution is knowingly engaged in activities that are subject to
sanctions under the federal Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010. The bill would also
require the commissioner to prescribe regulations to require a
licensee to certify annually to the commissioner that, to the best of
the knowledge of the licensee, the foreign financial institution is
not knowingly engaged in activities that are subject to sanctions
under the federal act.
   Because a willful violation of a regulation adopted by the
commissioner may be a crime, the bill would impose a state-mandated
local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature hereby finds and declares all of the
following:
   (a) In imposing United States sanctions on Iran, Congress and the
President have determined that the illicit nuclear activities of the
Government of Iran, combined with its development of unconventional
weapons and ballistic missiles, and its support of international
terrorism, represent a serious threat to the security of the United
States, Israel, and other United States allies in Europe, the Middle
East, and around the world.
   (b) On July 1, 2010, President Barack Obama signed into law H.R.
2194, the federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 (Public Law 111-195), which puts strict limits
on any foreign financial institution's ability to open or maintain a
correspondent account or a payable-through account with United
States financial institutions if the Secretary of the Treasury
determines that such a foreign financial institution knowingly does
any of the following:
   (1) Facilitates the efforts of the Government of Iran to acquire
or develop weapons of mass destruction or their delivery systems.
   (2) Provides support for organizations designated by the United
States as foreign terrorist organizations.
   (3) Facilitates the activities of persons subject to financial
sanctions pursuant to United Nations Security Council resolutions
imposing sanctions on Iran.
   (4) Engages in money laundering or carries out any activity listed
above.
   (5) Facilitates a significant transaction or transactions or
provides significant financial services for Iran's Revolutionary
Guard Corps or its agents or affiliates, or any financial institution
whose property or interests in property are blocked pursuant to
federal law in connection with Iran's proliferation of weapons of
mass destruction or their delivery systems, or Iran's support for
international terrorism.
   (c) The federal Comprehensive Iran Sanctions, Accountability and
Divestment Act (Public Law 111-195) imposes civil and criminal
penalties on United States financial institutions that know or should
have known that foreign financial institutions that maintain
correspondent accounts or payable-through accounts with them are
facilitating activities subject to sanctions.
   (d) The serious and urgent nature of the threat from Iran demands
that states work together with the federal government and American
allies to do everything possible, diplomatically, politically, and
economically to prevent Iran from acquiring a nuclear weapons
capability.
   (e) There are moral and reputational reasons for this state to not
engage in business with foreign companies that have business
activities benefitting foreign states, such as Iran, that commit
egregious violations of human rights, proliferate nuclear weapons
capabilities, and support terrorism.
   (f) In 2010, California enacted Chapter 573 of the Statutes of
2010 (Assembly Bill 1650 of the 2009-10 Regular Session) to prohibit
companies with certain investments in Iran from bidding on or
entering into contracts for goods or services with state or local
governments.
   (g) The concerns of the State of California regarding Iran are
strictly the result of the actions of the Government of Iran.
  SEC. 2.  Section 465 is added to the Financial Code, to read:
   465.  (a) (1) The commissioner shall prescribe regulations to
require a licensee that maintains a correspondent account or a
payable-through account with a foreign financial institution to
establish due diligence policies, procedures, and controls reasonably
designed to determine whether the Secretary of the Treasury has
determined that the foreign financial institution is knowingly
engaged in activities that are subject to sanctions under the federal
Comprehensive Iran Sanctions, Accountability, and Divestment Act of
2010 (Public Law 111-195).
   (2) The commissioner shall prescribe regulations to require a
licensee to certify annually to the commissioner that, to the best of
the knowledge of the licensee, the foreign financial institution is
not knowingly engaged in activities that are subject to sanctions
under the federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 (Public Law 111-195).
   (b) For purposes of this section, the terms "correspondent account"
and "payable-through account" have the same meanings as used in the
federal Comprehensive Iran Sanctions, Accountability, and Divestment
Act of 2010 (Public Law 111-195).
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.