The United States Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice of finding and proposed rule. The Director of FinCEN found that FBME Bank Ltd. (“FBME”), formerly known as Federal Bank of the Middle Ease, Ltd., is a financial institution operating outside of the United States that is of primary money laundering concern. In this notice of proposed rulemaking (“NPRM”), FinCEN seeks to impose a special measure against FBME. The special measure would proscribe covered financial institutions from opening or maintaining correspondent accounts for or on behalf of FBME.
On October 26, 2001, the President signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-money laundering provisions of the Bank Secrecy Act (“BSA”), codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314, 5316-5332, to promote the prevention, detection, and prosecution of international money laundering and the financing of terrorism. Regulations implementing the BSA appear at 31 CFR Chapter X.
The authority of the Secretary of the Treasury (the “Secretary”) to administer the BSA and its implementing regulations has been delegated to the Director of FinCEN. The Director of FinCEN has the authority, if reasonable grounds exist, to determine that a foreign jurisdiction, institution, class of transaction, or type of account is of “primary money laundering concern,” and can require domestic financial institutions and financial agencies to take certain “special measures” to address the primary money laundering concern. (31 U.S.C. 5318A).
FinCEN considered the following factors in deciding which special measures to impose:
- Whether Similar Action Has Been Or Will Be Taken By Other Nations Against FBME. FinCEN encourages other countries to take similar action, although none have so far.
- Whether Imposition Of The Measure Would Create Any Undue Burden For Financial Institutions In The United States. Only one U.S. covered financial institution currently maintains an account for FBME, thus FinCEN does not anticipate this measure will present an undue burden.
- The Extent To Which The Proposed Action Would Have A Significant Adverse Systemic Impact On The International Payment, Clearance, And Settlement System. FBME is not a major player in the international payment system, is not relied on by the international banking community for clearance or settlement services, has only $2 billion in assets, and is headquartered in Tanzania, thus FinCEN does not anticipate this measure will have a significant adverse systemic impact on the international payment, clearance, and settlement system.
- The Effect Of The Proposed Action On United States National Security. Imposing this measure against FBME would make it more challenging for money launderers, transnational organized crime, and terrorists to access the U.S. financial system, thus enhancing national security.
Based on weighing the above factors and finding FBME is a financial institution operating outside of the United States of primary money laundering concern, FinCEN proposes a special measure to proscribe covered financial institutions from opening or maintaining correspondent accounts for or on behalf of FBME.
Comments on all aspects of this NPRM are invited, and FinCEN specifically seeks comment on the following:
- The impact of the proposed special measure upon legitimate transactions utilizing FBME involving, in particular, U.S. persons and entities; foreign persons, entities, and governments; and multilateral organizations doing legitimate business.
- The form and scope of the notice to certain correspondent account holders that would be required under the rule;
- The appropriate scope of the proposed requirement for a covered financial institution to take reasonable steps to identify any use of its correspondent accounts to process transactions involving FBME; and
- The appropriate steps a covered financial institution should take once it identifies use of one of its correspondent accounts to process transactions involving FBME.
- Federal E-rulemaking Portal: http://www.regulations.gov or
- Mail: The Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183.