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​The Treasury's Power to Combat Money Laundering and Terrorism Financing

The Treasury Department’s Financial Crimes Enforcement Network

The Financial Crimes Enforcement Network, more commonly known as FinCEN, is a bureau within the U.S. Treasury Department that analyzes and examines financial transactions in order to combat money laundering and promote national security. The Secretary of the Treasury appoints the director of FinCEN, who reports to the Treasury Under Secretary for Terrorism and Financial Intelligence.

Section 311 of the USA PATRIOT Act

Title III of the PATRIOT Act addresses money laundering and terrorism financing. Section 311 of the Act authorizes the Secretary of the Treasury (through FinCEN) to require financial institutions and agencies to take “special measures” against foreign institutions to combat and protect against money laundering. There are five categories of special measures, ranging from recordkeeping and reporting certain transactions, to prohibitions on U.S. institutions from maintaining correspondent accounts for the designated foreign institution. In order to require a financial institution to enact such measures, the Secretary of the Treasury must find that there are “reasonable grounds” that the institution, foreign government, or particular transaction or account is “of primary money laundering concern.” The Secretary then issues a Notice of Proposed Rulemaking (NPRM) and order through FinCEN directing U.S. financial institutions to take whatever special measures are determined to be appropriate.[1] Ultimately, Section 311 of the PATRIOT Act gives the executive branch of the government power to unilaterally diagnose and sanction alleged money laundering or terrorism-financing activity.

In The News

In July of 2017, FinCEN used its power under Section 311 to label the Chinese Bank of Dandong an institution of “primary money laundering concern” due to its alleged use “as a gateway for North Korea to access the U.S. and international financial systems despite U.S. and UN sanctions.”. The rule was made final in November after allowing time for comments and for the bank to address FinCEN’s concerns. The rule prohibits U.S. financial institutions from opening or maintaining correspondent accounts in the U.S. for or on behalf of the Bank of Dandong—the fifth, most stringent special measure. Special measures were enacted against North Korea itself at the end of 2016. More recently, FinCEN issued an NPRM indicating its intent to direct U.S. institutions to take the same “fifth” measure against Latvia’s ABLV Bank due to FinCEN’s finding that “ABLV executives, shareholders, and employees have institutionalized money laundering as a pillar of the bank’s business practices.” The NPRM was released in February 2018, and the rule has not yet been made final.

[1] 31 U.S.C. § 5318A (a)(4)(B) identifies the considerations that the Secretary must make when determining the appropriate special measure.

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