Category Archives: FinCEN

June 29, 2017

U.S. Treasury Announces First Money Laundering Designation Against Mainland Chinese Bank

by Jeremy Paner

Today, the U.S. Department of the Treasury announced significant actions targeting Chinese companies and individuals for their commercial involvement with North Korea.  These actions follow Trump’s vague tweet on June 20, in which he stated “[w]hile I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out.  At least I know China tried!”  In light of today’s designations and proposed rulemaking, that message appears to signal a willingness by the United States to directly target China.  Non-U.S. companies should carefully consider this dramatic policy shift with an understanding of the broad scope of the current sanctions authorities.  The Treasury Department may target North Korea’s commercial partners irrespective of their geographic location.

USA PATRIOT Act Section 311

The most significant action is likely the Notice of Proposed Rulemaking (NPRM) by the  Financial Crimes Enforcement Network (FinCEN) to sever China’s Bank of Dandong from the U.S. financial system under its 311 authority.  Although this is not the first listing of a Chinese bank, it will very likely be the most disruptive.  In 2007, the Treasury Department labeled the Macau-based Banco Delta Asia as a financial institution of primary money laundering concern, and in 2012 listed China’s Bank of Kunlun under an Iran-related sanctions authority.  Continue reading

November 15, 2016

Divergent State and Federal Approaches to AML and Sanctions Threats from China

by Jeremy Paner

empire-state-buildingOn November 4, the  Friday before the U.S. election, the New York Department of Financial Services (DFS) and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced separate enforcement actions targeted at the AML and sanctions threats emanating from China. While DFS explicitly set forth its allegations against a Chinese state bank, the U.S. Treasury Department indirectly signaled its increased pressure on China. FinCEN and the Office of Foreign Assets Control (OFAC) will likely directly target China in the near future.

Agricultural Bank of China

DFS announced that the Agricultural Bank of China, that country’s third largest bank, entered into a Consent Order to resolve violations of New York law requirements involving its compliance program (3 N.Y.C.R.R. § 116.2), books and records (New York Banking Law § 200-c), and reports to the DFS Superintendent (3 N.Y.C.R.R. § 300.1). The bank agreed to pay $215 million and engage an independent monitor to  implement an effective compliance program and conduct an 18-month look-back into additional potential violations. The bank will likely pay significantly more than the initial $215 million required to maintain its New York banking license. Continue reading

February 2, 2016

Continued International and Domestic Coordinated Focus on Money Laundering

by Jeremy Paner

stack_100_dollar_bills_iStock_000005509580XSmallYesterday, the U.S. Drug Enforcement Agency (DEA) announced an unspecified number of arrests of Hizballah money launderers, including Mohamad Noureddine. These arrests followed the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designation of Noureddine pursuant to its counterterrorism authority. The OFAC press release for this designation identifies Noureddine as a key Hizballah money launderer. According to OFAC,  Noureddine and his company Trade Point International S.A.R.L. established a money laundering network across Asia, Europe, and the Middle East that provides bulk cash shipping and black market currency exchange services for those seeking to hide their ill-gotten gains.

Hizballah International Financing Prevention Act of 2015

Irrespective of the detention of Noureddine, foreign financial intuitions that knowingly facilitate or conduct significant financial transactions for Trade Point International S.A.R.L. may have their U.S. correspondent or payable through accounts severed. OFAC has this authority under Section 102 of the Hizballah International Financing Prevention Act of 2015, which authorizes secondary sanctions on Hizballah. Continue reading

January 13, 2016

U.S. Anti-Money Laundering Regulator Targets Shell Company Purchasers of Residential Real Estate

miami by Jeremy Paner

Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders (GTOs) to impose anti-money laundering (AML) recordkeeping and reporting requirements on certain title insurance companies in the Manhattan borough of New York City and Miami-Dade County, Florida. These orders require certain title insurance companies to identify and report the “beneficial owners” of shell companies used in cash purchases of high-end residential real estate.

nycSince her arrival at FinCEN, Director Shasky has aggressively used the GTO authority, especially on businesses located in Miami, Florida. In addition to today’s orders, FinCEN has issued and renewed GTOs over the past two years on the following businesses:

  • Electronics exporters in and around Miami, Florida;
  • Common carriers of currency operating around the United States-Mexico land border in Texas, between and including the Del Rio/Amistad Dam and Brownsville/Los Indios Ports of Entry and Departure;
  • Common carriers of currency operating around the land border between San Diego County, California, and the United Mexican States at the San Ysidro and Otay Mesa Ports of Entry and Departure;
  • Cashers of Federal tax refund checks in Miami-Dade County and Broward County, Florida; and
  • Businesses in the Los Angeles Fashion District.

Section 5326 of the Bank Secrecy Act (BSA) authorizes the Treasury Department to issue orders requiring certain reporting and recordkeeping necessary to prevent evasion of the Act.  These orders may be imposed upon both domestic financial institutions and non-financial trades or businesses in a specified geographic area. FinCEN’s regulatory implementation of this BSA authority is found in 31 C.F.R. 1010.370.
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July 27, 2015

Week in Review and Look Ahead

by Jeremy Paner

The U.S. Department of the Treasury was quite active last week in its efforts to tighten sanctions against the Lebanese-based terrorist group Hizballah and the rogue state of North Korea, combat money laundering used to hide terrorism and narcotics finance, and enforce economic sanctions against proliferators of weapons of mass destruction (WMD). The Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), and the Federal Deposit Insurance Corporation (FDIC) all took action to safeguard the U.S. financial system. Once again, it is apparent that Treasury continues to concentrate and coordinate its actions on Hizballah.

Last week also signaled a recent significant shift at FinCEN that will result in a drastic increase in its 311 actions. Businesses that rely on foreign banks – especially those in Central and South America and the Middle East – should be on notice that they are now much more likely to be cut off from the U.S. financial system.

The Office of Foreign Assets Control  

On July 21, OFAC designated four individuals for their roles in Hizballah’s support of the Assad regime. Three of the individuals were designated pursuant to Executive Order (EO) 13582 for providing high-level military support to the Assad regime in Syria. OFAC designated the fourth designee pursuant to EO 13224 (the counterterrorism authority). In its press release announcing the designations, Treasury describes this person as “Hizballah’s point person for the procurement and transshipment of weapons for the group and its Syrian partners for at least 15 years.”

On July 23, OFAC designated Singapore-based Sanat Shipping Company and its President for providing material support to a shipping company previously designated by the United Nations and OFAC for smuggling arms into North Korea. OFAC made these designations pursuant to EO 13551, which blocks those that send weapons to North Korea. In addition to adding these new listings, OFAC updated the List of Specially Designated Nationals (SDN List) with new aliases used to evade sanctions against a designated North Korean weapons shipper and bank officials.

OFAC announced on July 24 that it reached an agreement with Great Plains Stains (GPS) Co. to settle apparent violations of sanctions imposed against a designated proliferator of WMD. According to the announcement, GPS agreed to pay $214,000 to settle violations arising from its use of a blocked vessel to transport goods from Shanghai to Dubai. Interestingly, OFAC concluded that the violations were non-egregious, irrespective of its finding that GPS willfully stripped references to the blocked vessel from the trade documents and did not follow explicit instructions OFAC provided about the same. The non-egregious determination was probably a result GPS’s inability to pay the $250,000 maximum base penalty per violation which results from egregious violations of WMD-related sanctions that are not self-disclosed to OFAC.

Financial Crimes Enforcement Network

On July 23, FinCEN issued a Final Rule (31 C.F.R. 1010.658) pursuant to Section 311 of the USA PATRIOT Act, imposing “special measure five” against FBME Bank Ltd. (FBME). Although it is a subsidiary of the Federal Bank of Lebanon, a private Lebanese bank, FBME is headquartered in Tanzania and holds the vast majority of its assets in Cyprus. FBME is owned by the same two individuals that own the Federal Bank of Lebanon. FinCEN explains in its Final Rule that FBME has deposited hundreds of thousands of dollars from a Hizballah financier and has an extensive customer base of shell companies. Although FinCEN provides a multitude of bases for the 311 action,  this Hizballah connection clearly led to the bank’s formal severance from the U.S. financial system.

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