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Harry Cassin
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Does FinCEN have too much power?

In March, the U.S. Treasury Department’s Financial Crimes Enforcement Network imposed a corporate death sentence on Banca Privada d’Andorra by designating it as a foreign financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act.

FinCEN said senior managers at BPA took bribes for several years and in exchange helped organized crime groups launder money.

After FinCEN’s action, regulators in Andorra —  a tiny, landlocked sovereign country in the eastern Pyrenees mountains bordered by Spain and France — seized BPA. The government fired the bank’s chairman and board. In Spain, the central bank seized a BPA subsidiary, Banco de Madrid.

Now an American lawyer in Washington, DC who represents BPA is asking if FinCEN should be stripped of the power to destroy a bank without due process.

Eric Lewis, a partner in the law firm of Lewis Baach, wrote in the American Banker:

How could an agency, which most people outside of the U.S. have never heard of, issue a “notice of proposed rulemaking” that effectively snuffs out hundreds of jobs and hundreds of millions of dollars of value? It relied on an obscure provision in the PATRIOT Act.

Lewis (Princeton BA, Yale JD) said what happened to BPA may sound like “financial science fiction.”

But “without much explanation or even a hearing for BPA to address FinCEN’s charges, the bank was shut down,” he said.

The USA PATRIOT Act was intended to counter terrorism but contained several financial enforcement measures, including Section 311.

Lewis said,

The provision authorizes the Treasury Department to take “special measures” against foreign banks and entire national banking systems that FinCEN finds to be of “primary money laundering concern,” a term that has no definition in law or regulation.

Once FinCEN designates a bank as a pimary money laundering concern, other banks won’t process its transactions in the U.S. — which Lewis called “the lifeblood of BPA’s international banking business.”

Section 311 has been used on 15 banks, Lewis said, mainly small institutions in small countries. “Eight of these designations were subsequently rescinded, but way too late.”

Before FinCEN’s action, Lewis said, Banca Privada d’Andorra expanded under European Union regulation and earned a good reputation. The trade press had named the bank “Best Wealth Manager” and “Best Private Bank” in Spain.

“Two of the ‘big four’ accounting firms and its home regulator had given the bank thumbs up for its anti-money-laundering efforts,” Lewis said.

Here’s Lewis’s description of what happened next:

BPA’s road to shutdown began in August 2014 when the U.S., through FinCEN, recommended certain AML measures for the Andorran banking sector. Andorra answered the next month, indicating that everything was under control but declining to implement the suggested cash reporting measures. FinCEN tried again in January 2015, but Andorra did not respond. Two months later, FinCEN issued the notice against BPA, designating three instances of alleged money laundering, all of which had been reported by BPA to the Andorran government more than a year earlier.

Lewis said there are concerns that failings by Andorra’s regulators to deal effectively with FinCEN led to BPA becoming a scapegoat.

“What happened to BPA could happen to any bank. Without notice, FinCEN destroyed a viable institution, asset value, jobs and destroyed reputations without legitimate cause or factual basis,” Lewis said.

BPA’s owners are now fighting back for transparency, accountability, and due process, he said.

In October 2015, the majority owners of BPA filed a lawsuit naming the Department of the Treasury and FinCEN as defendants in an effort to save the bank and have the Section 311 action rescinded.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here

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1 Comment

  1. This is not the only case …..First Bank of the míddle east is another….where FinCen has acted without any regard for due process nor the lives and livelihoods of their targets…. Al, without redress

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