BILL NUMBER: AB 978	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 15, 2013

INTRODUCED BY   Assembly Member Blumenfield
    (   Coauthors:   Assembly Members 
 Brown,   Fox,   and Medina   ) 

                        FEBRUARY 22, 2013

   An act to  amend Section 500 of, and to  add Section 465
to  ,  the Financial Code, relating to financial
institutions.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 978, as amended, 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  to comply with  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
  that maintains a correspondent account or a
payable-through account to establish at every 12   -month
examination period that it  is not knowingly  engaged in
activities that are subject to sanctions under the federal act
  engaging with a foreign financial institution in
violation of the sanctions under the federal Comprehensive Iran
Sanctions, Accountability, and Divestment Act of 2010 and authorizes
the   commissioner to assess an administrative fine not
exceeding $100,000 per occurrence against a licensee that fails to
comply with this requirement. The bill would require the commissioner
to refer all pertinent information relative to possible violations
of the federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 to the Secretary of the United States Treasury
within 10 days of receipt and authorizes him or her to cooperate
with any federal investigation pursuant to the act. The bill would
also prohibit a licensee from maintaining a correspondent account or
a payable-through account with any foreign financial institution that
the United States Treasury Department's Office of Foreign Assets
Control has placed on the federal list of Foreign Financial
Institutions Subject to Part 561  .
   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) On December 21, 2011, President Obama signed into law H.R.
1540, the federal National Defense Authorization Act for Fiscal Year
2012 (Public Law 112-81), which, subject to certain exceptions,
places 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 a foreign financial institution
knowingly conducted or facilitated any significant financial
transaction with the Central Bank of Iran.  
   (d) 
    (e)  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) 
    (f)  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) 
    (g)  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) 
    (h)  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   to comply with  the
federal Comprehensive Iran Sanctions, Accountability, and Divestment
Act of 2010 (Public Law 111-195).  The regulations may include an
affirmative responsibility to notify the commissioner or other
official identified in the regulation of potential irregularities
that the licensee may come across during its normal course of
business.  
   (b) A licensee that maintains a correspondent account or a
payable-through account with a foreign financial institution shall
establish, at every 12-month examination period pursuant to
subdivision (d) of Section 500, that the licensee is not knowingly
engaging with a foreign financial institution in violation of the
sanctions under the federal Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010.  
   (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).  
   (c) No licensee shall maintain a correspondent account or a
payable-through account with any foreign financial institution that
the United States Treasury Department's Office of Foreign Assets
Control has placed on the federal list of Foreign Financial
Institutions Subject to Part 561.  
   (d) The commissioner shall review all federal regulations related
to financial institution compliance with the federal Comprehensive
Iran Sanctions, Accountability, and Divestment Act of 2010 within 60
days of implementation and consider modification of the regulations
subject to this section.  
   (e) The commissioner may assess an administrative fine of up to,
but not exceeding, one hundred thousand dollars ($100,000) per
occurrence against a licensee that fails to comply with subdivision
(b).  
   (f) The commissioner shall refer all pertinent information
relative to possible violations of the federal Comprehensive Iran
Sanctions, Accountability, and Divestment Act of 2010 to the
Secretary of the United States Treasury within 10 days of receipt.
The commission may cooperate with any federal investigation pursuant
to the federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010.  
   (b) 
    (g)  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.    Section 500 of the   Financial
Code   is amended to read: 
   500.  (a) (1) For purposes of this section, "foreign bank" means
the business in this state of every foreign (other nation) bank
licensed under Article 3 (commencing with Section 1800) of Chapter 20
of Division 1.1.
   (2) For purposes of this subdivision, an examination made by the
commissioner in conjunction with or with assistance from a bank
regulatory agency of the United States, of a state of the United
States, or of a foreign nation is deemed to be an examination caused
by the commissioner.
   (3) No provision of this subdivision shall be deemed to require
that the commissioner cause an examination to be made onsite at the
offices of a bank.
   (4) The commissioner shall cause every California state bank and
every foreign bank to be examined to the extent and whenever and as
often as the commissioner shall deem it advisable, but in no case
less frequently than once every 12 months, except that the following
banks shall be examined pursuant to federal law no less frequently
than state banks and foreign banks that meet the respective federal
criteria:
   (A) California state banks that meet the criteria set forth in
Section 1820(d)(4) of Title 12 of the United States Code.
   (B) Foreign banks that meet the criteria set forth in Section
211.26(c)(2) of Title 12 of the Code of Federal Regulations.
   (5) The examinations required by paragraph (4) may be conducted in
alternate examination periods, as appropriate, if the commissioner
determines that an examination of the state bank by the appropriate
federal regulator, insuring or guaranteeing corporation during the
intervening examination period carries out the purpose of this
section. The commissioner may not accept two consecutive
examinations, or two consecutive examination reports, made by federal
regulators, insuring or guaranteeing corporations, or agencies with
respect to the condition of the state bank.
   (6) The commissioner shall cause every California state trust
company to be examined to the extent and whenever and as often as the
commissioner shall deem it advisable, but in no case less frequently
than once every 24 months.
   (7) The commissioner may examine subsidiaries of every California
state bank, state trust company, and foreign (other nation) bank
licensed under Article 3 (commencing with Section 1800) of Chapter 20
of Division 1.1 to the extent and whenever and as often as the
commissioner shall deem it advisable.
   (b) The commissioner may at any time examine any of the following:

   (1) Any office of a bank organized under the laws of this state.
   (2) Any office of a foreign (other state) bank that maintains an
office in this state.
   (3) Any office of a foreign (other nation) bank that maintains an
office in this state.
   (c) The officers and employees of every California state bank,
California state trust company, and foreign bank being examined shall
exhibit to the examiners, on request, any or all of its securities,
books, records, and accounts and shall otherwise facilitate the
examination so far as it may be in their power. 
   (d) (1) The commissioner shall require that any licensee that
maintains a correspondent account or a payable-through account with a
foreign financial institution shall, when under examination pursuant
to paragraph (4) of subdivision (a), demonstrate that the licensee
is in compliance with state regulations for the implementation of the
federal Comprehensive Iran Sanctions, Accountability, and Divestment
Act of 2010 (Public Law 111-195).  
   (2) In any examination period in which the commissioner has
accepted an examination by an appropriate federal regulator for
compliance with paragraph (4) of subdivision (a), a licensee that
maintains a correspondent account or a payable-through account with a
foreign financial institution shall submit a declaration of
compliance with the regulations adopted pursuant to Section 465. The
declaration shall be submitted to the commissioner within 30 days of
the completion of the examination. 
   SEC. 3.   SEC. 4.   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.