On May 23, the federal court of appeals for the District of Columbia Circuit rejected an appeal by the majority shareholders in Banca Privada d’Andorra S.A. (“BPA”) regarding claims that FinCEN violated the Administrative Procedure Act when issuing a March 2015 Notice of Finding that the Andorran bank was a financial institution “of primary money
Bank Loses Stay of Court Judgment Upholding Broad FinCEN Discretion
“Sometimes, the third time really is the charm” wrote the District Court for the District of Columbia on April 14, 2017. In its opinion, the court upheld FinCEN’s imposition of the Patriot Act’s fifth special measure against FBME Bank Ltd., a Tanzanian chartered bank operating primarily out of Cyprus. The court previously had twice blocked FinCEN’s attempt to prevent FBME Bank from conducting banking business in the United States. However, the district court granted FinCEN’s motion for summary judgment and lifted the stay blocking FinCEN’s final rule. Last week, the D.C. Circuit refused to reinstate the full stay of judgment pending appeal noting simply that FBME Bank had “not satisfied the stringent requirements for a stay pending appeal,” without addressing any of the specific merits questions that remained before it. Thus, for the time being, the district court’s judgment upholding FinCEN’s rule finding that FBME Bank was “of primary money laundering concern” remains in place. FBME Bank may no longer utilize correspondent banks in the United States.
The potentially broader implications for other banks and future actions are as follows: under the logic of the judgment which the Court of Appeals just declined to stay, FinCEN does not need to look to comparative or other objective benchmarks involving other similarly-situated banks to support a claim in an enforcement action that transactions occurring at the bank in question involved an unacceptably high number of SAR filings, use of shell companies, or other indicia of suspicious activity. Rather, findings based on selected, absolute data may suffice.
Continue Reading Bank Loses Stay of Court Judgment Upholding Broad FinCEN Discretion
2016 Year in Review: District of Columbia District Court Again Stays Section 311 Action Against FBME Bank
Pursuant to Section 311 of the of the USA Patriot Act, FinCEN is authorized to designate foreign financial institutions as being “of primary money laundering concern” and to take any of five “special measures” against institutions so designated. FinCEN can impose the most severe, fifth special measure—allowing it to prohibit or restrict domestic financial institutions from opening or maintaining correspondent accounts for designated foreign financial institutions—only by issuing a regulation under the Administrative Procedure Act (APA). Ongoing litigation surrounding a Section 311 designation implicates the important question of how much FinCEN must explain itself under the APA, and the extent to which FinCEN must provide objective comparative benchmarks—such as the practices of other financial institutions—when it concludes that an institution has engaged in an unacceptably high degree of suspicious transactions.
On July 22, 2014, FinCEN issued a Notice of Finding designating FBME Bank Ltd., a Tanzanian- chartered bank operating primarily out of Cyprus, as an institution of primary money laundering concern based on its alleged involvement in money laundering and other illicit activity. FinCEN later promulgated a final rule imposing the special measure. Before the rule took effect, FBME brought suit against FinCEN seeking an order declaring the final rule unlawful and permanently enjoining its enforcement. FBME alleged, inter alia, that FinCEN violated the APA by failing to give FBME sufficient notice of the rule’s factual and legal basis and had acted arbitrarily and capriciously by failing to properly consider alternative measures against FBME.