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Thursday, June 20, 2024 | Back issues
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U.S. Money-Laundering Penalties Face Do-Over

(CN) - Blocked from penalizing foreign banks it suspects of enabling money laundering, the U.S. Treasury has opted for "do-over," rather than an appeal, a federal judge said.

The case stems from an investigation that the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department, ran last year on FBME Bank.

Branding FBME a "primary money laundering concern," FinCEN said in July 2014 that the institution formerly known as the Federal Bank of the Middle East has shown a "willingness to service the global criminal element."

That month, an item in the Federal Register 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.

FinCEN issued a proposed rule cutting FBME off from the U.S. banking system, based on its findings, many of which remain classified.

FBME Bank filed suit in Washington, D.C., characterizing FinCEN's rule as "an adjudication of FBME" that amounts to "a death sentence."

One day before the rule was scheduled to take effect in August, U.S. District Judge Christopher Cooper granted the bank a preliminary injunction.

The 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, which cut the bank off from doing business in U.S. dollars.

FinCEN requested a voluntary remand to take its rule back to the drawing board, and Judge Cooper complied on Friday, over FBME's objection.

"The court concludes that FinCEN has identified concerns that may be alleviated by a voluntary remand, that such a remand will serve the interests of judicial economy, and that FBME will not be prejudiced as a result," the nine-page opinion states.

Cooper said there was no evidence that FinCEN made its request in bad faith.

"FinCEN's proposed course of action demonstrates proper agency conduct when an agency is confronted with its own procedural mistakes: offering, in good faith, to take further action to remedy those mistakes consistent with the correct legal standards," he said.

Given that the rule is currently enjoined, FBME shall not be prejudiced by a voluntary remand, the judge found, and it will still have recourse to the courts if it objects to the amended rule.

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