On February 13, 2018, the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM), pursuant to Section 311 of the PATRIOT Act, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank, located in Riga, Latvia. A final rule may be issued after a 60 day comment period.
The NPRM asserts that ABLV is a “foreign bank of primary money laundering concern.” In particular, FinCEN claims that it has reasonable grounds to believe the following:
ABLV management permits the bank and its employees to orchestrate and engage in money laundering schemes; solicits the high risk shell company activity that enables the bank and its customers to launder funds; maintains inadequate controls over high-risk shell company accounts; and seeks to obstruct enforcement of Latvian anti-money laundering and combating the financing of terrorism (AML/CFT) rules in order to protect these business practices. In addition, illicit financial activity at the bank has included transactions for parties connected to US and UN-designated entities, some of which are involved in North Korea’s procurement or export of ballistic missiles.
According to the NPRM, ABVL does not currently maintain correspondent accounts directly with US banks; rather, it accesses the US financial system through nested US dollar correspondent relationships with other financial institutions that do hold direct US correspondent accounts. If finalized, this action would prohibit such accounts and bar other financial institutions from processing any transactions involving ALBV through correspondent accounts they hold at US financial institutions. To ensure this requirement is enforced effectively, the final rule would require US financial institutions to conduct due diligence on foreign correspondent account holders and to notify them of this prohibition. The NPRM states that the following notice will suffice:
Notice: Pursuant to US regulations issued under Section 311 of the USA PATRIOT Act, see 31 CFR 1010.661, we are prohibited from opening or maintaining in the United States a correspondent account for, or on behalf of, ABLV. The regulations also require us to notify you that you may not provide ABLV, including any of its subsidiaries, branches, and offices with access to the correspondent account you hold at our financial institution. If we become aware that the correspondent account you hold at our financial institution has processed any transactions involving ABLV, including any of its subsidiaries, branches, and offices we will be required to take appropriate steps to prevent such access, including terminating your account.
US financial institutions will not be required to obtain certification from any of its correspondent account holders that such access will not be provided in order to comply with the notice requirement.
Four banks as well as the countries of Burma and North Korea are currently subject to 311 sanctions. Eighteen other banks or jurisdictions have been similarly subject to an NPRM that was either never finalized or was subsequently rescinded.