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1 [1] (October 26, 2015)

handle is hein.crs/crsmthaafqc0001 and id is 1 raw text is: CRS Reports & Analysis Legal Sidebar Another Foreign Bank Claims FinCEN's Death Sentence Requires Better Procedures 10/26/2015 On October 6, 2015, shareholders of Banca Privada d'Andorra (BPA) filed suit against the Treasury Secretary and the Financial Crimes Enforcement Network (FinCEN), claiming that FinCEN acted unlawfully in proposing to bar the Andorran bank from the U.S. financial system. According to the complaint filed in the U. S. District Court for the District of Columbia, FinCEN acted arbitrarily and capriciously in violation of the procedures required under the dr mrA and under the f Am ndn to the U.S.Constitution. The case, Cierco v. Lew, et al., Civ. No. 15-cv-1641 (D.D.C.), began on March 13, 2015, when FinCEN, using authority under SgLLAi (Section 311), published a ft in i that BPA is a Financial Institution of Primary Money Laundering Concern. Among the specific bases for its finding, FinCEN cited three instances in which high level BPA managers took bribes or otherwise corruptly provided banking services in aid of criminals, organized crime, public corruption, human trafficking, or fraud. According to the FinCEN finding, BPA bank officials facilitated loans from a Spanish bank to Russians associated with international criminal organizations; BPA officials helped to set up shell organizations to hide criminal sources of funds funneled through BPA accounts; and BPA personnel aided criminals to move $4.2 billion in proceeds of public corruption offenses committed in violation of Venezuelan laws. At the same time as it issued its findings, FinCEN issued a 3n that would prohibit all U.S. financial institutions from opening or maintaining accounts for BPA and require them to exercise due diligence to prevent accounts held for other foreign banks (foreign correspondent accounts) from being used to process BPA transactions. The complaint of the BPA shareholders does not deny the basic underpinnings of the proposed regulation. Instead, the BPA shareholders claim that the specific instances cited by FinCEN had been reported by BPA and that efforts had been underway to correct deficiencies in the bank's anti-money laundering/anti-terrorist financing programs. Nonetheless, according to the complaint, the publication of the proposed regulation resulted in a rapid death spiral for BPA and its subsidiaries. The four U.S. banks holding accounts for BPA closed them, and BPA's regulators in Andorra, Panama, and Spain seized BPA and began liquidation proceedings for BPA and its subsidiaries. The BPA complaint comes on the heels of a similar case, described in an earlier Legal Sidebar pgt, in which Judge Christopher R. Cooper of the U.S. District Court for the District of Columbia issued a preliminary injunction on August 27, 2015, restraining FinCEN from implementing a rule that would cut off a Tanzanian Bank, FBME Bank Ltd. (FBME), from the U.S. financial system. The allegations in the BPA case echo those in the earlier case. This may indicate that the BPA shareholders believe that weaknesses in FinCEN' s procedures similar to those identified in the FBME case are egregious enough to convince a court to require FinCEN to set aside the order against BPA. Both cases involve institutions slated by FinCEN for imposition of the strictest enforcement action, or Special Measure, that may be imposed under Section 311 -cutting off an institution from the U.S. financial system. Both claim that FinCEN' s process was defective, that alternatives to the imposition of the strictest Special Measure were not adequately evaluated, that there was insufficient evidence to sustain the action, and that FinCEN did not provide all the evidence that constitutional Due Process requires. The BPA case, however, includes an additional claim-that FinCEN's action against BPA was not only not supported by the evidence, but that it was motivated by FinCEN's discontent with the Andorran government's implementation of anti-money laundering/anti-terrorist financing controls. In the complaint, the BPA shareholders allege: