International Trade Law News

The Financial Crimes Enforcement Network (FinCEN) yesterday issued two guidance notices to financial institutions.

The first guidance notice (FIN-2007-G002) contained information on accounts that law enforcement may have an interest in ensuring remain open notwithstanding suspicious or potential criminal activity in connection with the account. FinCEN noted that while there is no requirement that a financial institution maintain a particular account relationship, financial institutions should be mindful that complying with such a request may further law enforcement efforts to combat money laundering, terrorist financing and other crimes.

Specifically, FinCEN stated that if a law enforcement agency requests that a financial institution maintain a particular account, the financial institution should ensure that such a request be made in writing and should state the purpose and duration of the request.

Written requests by federal law enforcement agencies should be issued by a supervisory agent or by an attorney within a United States Attorney’s Office or another office of the Department of Justice. Requests from state or local law enforcement agencies should be issued by a supervisor of the state or local law enforcement agency or from an attorney within a state or local prosecutor’s office. Such requests from law enforcement to maintain accounts may not exceed six months, although additional requests can be issued after the expiration of the initial request. FinCEN also recommends that financial institutions maintain documentation of such requests for at least five years after the request has expired.

Finally, FinCEN noted that if a financial institution chooses to maintain the account at law enforcement's request it is still required to comply with all applicable Bank Secrecy Act recordkeeping and reporting requirements, including the requirement to file Suspicious Activity Reports.

FinCen's second guidance notice (FIN-2007-G003) related to the supporting documentation requirements for Suspicious Activity Reports (SAR). The guidance stated that when when a financial institution files a SAR, it is required to maintain a copy of the SAR and the original or business record equivalent of any supporting documentation for a period of five years from the date of filing the SAR. Financial institutions must also provide all documentation supporting the filing of a SAR upon request by FinCEN or an appropriate law enforcement or supervisory agency.

Labels: FinCen

The Securities and Exchange Commission today announced the availability of a useful compliance tool to assist broker-dealers in their anti-money laundering (AML) compliance efforts. The "AML Source Tool", which can be found on the SEC's website at: www.sec.gov/about/offices/ocie/amlsourcetool.htm, compiles and organizes key AML statutes, regulations and related guidance applicable to broker-dealers and provides links to these materials.

For example, the AML Source Tool includes links to statutes, regulations and source documents on the Bank Secrecy Act, USA PATRIOT Act, AML Compliance Programs, Customer Identification Programs, Due Diligence Programs for Private Banking Accounts, Suspicious Activity Reports and OFAC sanctions programs and other restricted party lists.

While the AML Source Tool is geared to broker-dealers, financial institutions and other entities subject to AML obligations will find this site useful.

Labels: FinCen, OFAC, SEC

Robert W. Werner, who has served as Director of the Treasury Department's Financial Crimes Enforcement Network (FinCEN) since March 2006, has announced that he will leave the agency at the end of this year to become head of Merrill Lynch's Monetary and Financial Control Group and its Bank Compliance Group. Prior to joining FinCen, Werner served as Director of the Treasury Department's Office of Foreign Assets Control (OFAC). Deputy Director William F. Baity will act as FinCEN Director effective upon Werner's departure.

Labels: FinCen, OFAC

Treasury Secretary John W. Snow today announced that Robert W. Werner will be the new Director of the Financial Crimes Enforcement Network (FinCEN). Werner currently serves as the Director of the Office of Foreign Assets Control (OFAC). Werner replaces William Fox, who departed FinCEN in January to pursue a career in the private sector. Barbara Hammerle, OFAC's Assistant Director, will serve as Acting OFAC Director.

Update: Robert Werner's testimony on OFAC's role in blocking weapons of mass destruction funding pursuant to Executive Order 13382 that was presented last week at a hearing held by the Oversight Subcommittee of the House Committee on Financial Services can be found at the following link.

Labels: FinCen, OFAC

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCen) and the Office of the Comptroller of the Currency announced that it has imposed a $24 million civil penalty on the New York branch of Jordan-based Arab Bank, PLC, for systemic Bank Secrecy Act failures. The penalty is the largest penalty imposed on a bank by the Treasury Department since the $25 million imposed on Riggs Bank in 2004 after it was discovered that Riggs had conducted business with officials in Equatorial Guinea former Chilean dictator Augusto Pinochet.

After the penalty was announced, Arab Bank accused U.S regulators of enforcing "confusing and constantly evolving" money-laundering laws and complaining that the $24 million payment was "unreasonably high."

Details on the alleged violations can be found at the following link: www.fincen.gov/arab081705.pdf.

Labels: FinCen

The U.S. Department of the Treasury has designated two Latvian financial institutions, Multibanka and VEF Bank, as "primary money laundering concerns" under Section 311 of the USA PATRIOT Act for money-laundering activities and financial abuse. As a result of this designation, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) will publish a Notice of Proposed rulemaking in the Federal Register on April 26, 2005 that, when finalized, will prohibit U.S. financial institutions from establishing, maintaining, administering or managing any correspondent account in the U.S. for or on behalf of these two banks.

-- Multibanka offers confidential banking services and numbered accounts for non-Latvian customers. Reports substantiate that a significant portion of its business involves wiring money out of the country on behalf of its accountholders.

-- Information available to the U.S. Government shows Multibanka has been used by Russian and other shell companies to facilitate financial crime by allowing criminals to disguise illegal proceeds in countries known for lax enforcement of anti-money laundering laws.

-- According to information available to the U.S. Government, certain criminals use accounts at Multibanka to facilitate financial fraud schemes. Specifically, an individual involved in financial fraud reported carrying out large sum transactions through his account at Multibanka. In addition, an individual arrested in 2004 for his involvement in an access device fraud ring used an account at Multibanka to launder proceeds of his criminal activities.

VEF, with headquarters in Riga, is one of the smallest of Latvia's 23 banks. It has one subsidiary, Veiksmes lîzings, which offers financial leasing and factoring services. In addition to its headquarters in Riga, VEF has one branch in Riga, and one representative office in the Czech Republic. The Notice of Proposed Rulemaking issued today identifies several reasons for the designation of VEF Bank as a primary money laundering concern:

-- VEF Bank lacks adequate controls and procedures to detect and combat money laundering. These deficiencies, coupled with the bank's dealings with foreign shell companies and provision of confidential banking services, make VEF vulnerable to money laundering and other financial crimes.

-- VEF Bank offers confidential banking services for non-Latvian customers. Less than 20 percent of these deposits are from individuals or companies located in Latvia, an indicator that a bank may be used to launder money.

To date, the Treasury Department has previously identified the following financial institutions as "primary money laundering concerns," pursuant to Section 311 of the USA PATRIOT Act:

-- The First Merchant Bank of the "Turkish Republic of Northern Cyprus" ("TRNC") and Infobank of Belarus in August 2004;

-- The Commercial Bank of Syria and its subsidiary Syrian Lebanese Commercial Bank in May 2004; and

-- Myanmar Mayflower Bank and Asia Wealth Bank in November 2003.

Labels: FinCen

Labels: FinCen

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) recently issued a comprehensive report containing an overview of Suspicious Activity Reports (SARs) filed by financial institutions, money services business, casinos and by the securities industry.

Labels: FinCen