Bank Tied to Laundered Money Wins Injunction

     (CN) – A federal judge granted FBME Bank a preliminary injunction against a U.S. Treasury rule that the foreign bank describes as a “death sentence” for its business.
     The Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department, announced the rule last year after investigating FBME and branding it a “primary money laundering concern.”
     Formerly known as the Federal Bank of the Middle East, FBME has shown a “willingness to service the global criminal element,” FinCEN said in July 2014.
     An item in the Federal Register that month said FinCEN had found that FBME actively advertised itself to high-risk shell companies used to finance terrorism, organized crime, evade sanctions and otherwise fund illegal activity worldwide.
     It noted as an example that Teodoro Nguema Obiang Mangue – the son of the president of Equatorial Guinea – faces corruption claims. The U.S. Justice Department accused Obiang of having transferred $7.2 million out of his country’s treasury via FBME to a British shell company.
     With the U.S. Treasury rule set to take effect Aug. 28, FBME Bank filed suit earlier this month.
     Headquartered in Tanzania but operating primarily out of Cyprus, FBME characterizes FinCEN’s rule as “an adjudication of FBME” that amounts to “a death sentence.”
     U.S. District Judge Christopher Cooper granted the bank a preliminary injunction Thursday, one day before the rule was scheduled to take effect.
     The Washington, D.C., court acknowledged “the grave threat to national security that financing of terrorist activity and transnational crime poses.”
     Minimizing this danger, however, the government has conceded that FinCEN already hamstrung FBME with its notice of proposed rulemaking to impose this special measure.
     FBME has already been cut off from conducting business in U.S. dollars, or even significant business in any other currency, according to the ruling.
     When FinCEN announced its notice of finding that FBME facilitates money laundering, U.S. banks holding correspondent accounts on behalf of FBME closed the accounts, and foreign banks suspended FBME’s U.S. dollar correspondent accounts.
     “Put differently, FBME maintains that it currently exists in a state of purgatory, and will cross the Styx tomorrow,” Cooper said.
     FBME’s current inability to access the U.S. banking system means that issuing a preliminary injunction will not harm the public, the judge said.
     Though “not inclined to second guess” FinCEN, Cooper said the agency did not abide by the full procedural requirements of the Administrative Procedures Act. Its reliance on classified evidence requires that it “hew even more closely to the APA’s demands than it might have in a garden variety rulemaking,” the judge added.
     “These requirements included providing and enabling FMBE to respond to all the public information upon which FinCEN relied and explaining in the rule why potentially viable but less drastic alternative penalties were not chosen,” Cooper wrote. “Because the agency does not appear to have satisfied those requirements, and because FBME has demonstrated that it will likely be irreparably harmed should the Final Rule take effect, the court will grant FBME’s Motion for a Preliminary Injunction.”
     FBME had told the court that the rule “will permanently cut off the bank from the U.S. financial system, including U.S. dollar transactions and U.S. correspondent bank accounts,” a move that would put it out of business the same day.
     “Because the vast majority of FBME’s business consists of U.S. dollar transactions, so the Final Rule will fundamentally impair FBME’s business and imperil its survival,” the complaint alleged. “Foreign regulators have informed the Bank that they are initiating procedures to liquidate or sell the Bank, citing the Final Rule as justification.”

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