WASHINGTON — After being forced by a court to withdraw its enforcement action against Tanzanian bank FBME, the Treasury Department's Financial Crimes Enforcement Network has once again finalized a rule requiring U.S. institutions to cut off ties with the bank.
In a rule
But FBME has sworn that it will appeal the action again through an ongoing lawsuit.
-
The Financial Crimes Enforcement Network's revocation of orders finding certain foreign banks to pose substantial money laundering risk shows the agency is trying to evade scrutiny as it pushes the banks out of business, according to observers.
March 1 -
The largest bank in Tanzania has sued the U.S. Treasury Department to halt a rule that designates the bank as a "primary money laundering concern," which cuts off its access to dollar funding and may prove to be a death sentence for the institution.
August 26 -
A foreign bank that sued the U.S. Treasury's Financial Crimes Enforcement Network won a preliminary injunction suspending an action that would have cut off the bank's access to dollar funding.
August 28
"Fincen has effectively repeated the same mistakes and returned to the same flawed evidence in its latest incarnation of its final rule," the company said in a statement. "FBME has every right and intention now to challenge the legality of the 'final rule' so that the U.S. court can decide whether it should ever take effect."
In response to Fincen's first rule against the bank in July 2015, FBME filed suit in U.S. District Court. In August, just a day before the original order was due to take effect, U.S. District Judge Christopher Cooper enjoined the agency to cut the process short. It later granted Fincen's request to re-initiate the proceeding.
In both instances, Fincen invoked Section 311 of the USA Patriot Act, a controversial measure that critics say has given the agency a tool to sink small foreign banks suspected of money-laundering activities without due process.
The agency argues that it made efforts to make its decision more transparent this time around. As ordered by the judge, Fincen published unclassified material, making it available for public comment before issuing its final rule.
Experts agree that Fincen's new proceeding shows the lawsuit has compelled the agency to change how it issues Section 311 orders.
"I believe that this was the first time anyone had initiated a legal action against Treasury to reverse a finding and [the agency] lost," said John Byrne, the executive vice-president at Association of Certified Anti-Money Laundering Specialists.
Eric Lorber, a senior associate at the Financial Integrity Network, said in a note that "this approach — of providing significant details — will be likelier moving forward," as a way to protect the agency against future litigation. It's "a real step forward in how much information Fincen was willing to share."
But FBME said the rule is still subject to the judge's approval.
It "is not in fact 'final' at all," the bank said. In a November order, Cooper wrote that the agency's action must be "stayed ending completion of the remand proceedings," and that he expected a "joint status report" from Treasury and FBME within two weeks of the final rule.
Lorber noted, however, that Fincen still went with the most stringent measure it can invoke under Section 311: a moratorium on correspondent banking ties, which would effectively cut FBME from the U.S. banking system.
Fincen said in its rule that the more lenient measures "inherently rely on FBME to provide accurate, credible, and reliable information to the party responsible for assuring compliance."
But, the agency wrote, FBME's history of "AML deficiencies" has given Fincen "a reasonable basis to doubt the accuracy, credibility, or reliability of any information that FBME would provide."
That argument is "a bit hard to swallow," said Lorber, as it could be justify the imposition of the correspondent banking measure under almost any circumstances. "In effect, it's something of a circular argument."
