Anti-money laundering (AML) is one of the most dominant international legal issues of the day. Countries have dramatically increased AML efforts, requiring financial firms to spend tremendous amounts of time and money on compliance. Although banks may lament the expense—and the fact that such efforts do not guarantee success or at least protect banks from prosecution—two recent actions reveal just how serious the risks can be in failing to comply with AML measures. In each action, foreign banks resorted to suing the U.S. Treasury’s Financial Crime Enforcement Network (FinCEN) to try to stop it from barring them from the U.S. financial system. These cases illustrate the powerful tools available to FinCEN and other regulators and re-emphasize the need for serious AML compliance. But they also may signal increased judicial scrutiny of FinCEN’s powers.
The ‘Fifth Special Measure’
Pursuant to Section 311 of the PATRIOT Act of 2001 (31 U.S.C. §5318A), the Treasury can designate certain foreign financial institutions, accounts, or even jurisdictions as being “of primary money laundering concern,” and take action against them. The Treasury Secretary has delegated authority under this statute to FinCEN. FinCEN need only find that “reasonable grounds exist for concluding” that the jurisdiction or institution is of primary money laundering concern. It can then require domestic financial institutions such as banks and other financial institutions to take “special measures” regarding such entities.
