WASHINGTON — An arm of the Treasury Department violated the U.S. Constitution by singling out a Tanzanian bank as a money-laundering concern without due process, the bank claimed late last week.
At a U.S. District Court hearing on Friday, FBME said the Financial Crimes Enforcement Network's use of Section 311 of the Patriot Act – which allows the agency to effectively sanction foreign banks – constituted "a perfect storm of due process degradation."
The largest bank in Tanzania was slapped in July 2015 with an order that required U.S. banks to cut off ties with the company and its correspondent accounts. But Derek Shaffer, an attorney for the bank, said the order was issued without a hearing, not allowing the bank to offer a defense.
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Congress should consider placing restrictions on the Financial Crimes Enforcement Network as the agency targets foreign banks it deems money laundering risks.
April 15 -
WASHINGTON After being forced by a court to withdraw its enforcement action against Tanzanian bank FBME, the Treasury Department's Financial Crimes Enforcement Network has once again finalized a rule requiring U.S. institutions to cut off ties with the bank.
March 29 -
How could an agency most people outside of the U.S. have never heard of effectively shut down an overseas bank without much explanation or even a hearing?
November 18 -
The largest bank in Tanzania has sued the U.S. Treasury Department to halt a rule that designates the bank as a "primary money laundering concern," which cuts off its access to dollar funding and may prove to be a death sentence for the institution.
August 26
It was "an administrative decision relying critically on classified information," Shaffer said.
U.S. District Judge Christopher Cooper said if that was true, "doesn't it mean that the statute itself is unconstitutional?"
Shaffer replied, "I wouldn't try to talk you out of that holding, your honor."
At issue is the damage done to FBME once Fincen finalized the order in September 2015. The bank's correspondent banking relationships dried up and its ability to survive has been called into question.
Shaffer also said that FBME owned nearly $300,000 in funds held in an escrow account, as well as liens on several lots in North Carolina. Those are now blocked in the country, which Shaffer said effectively constituted a deprivation of property without due process.
"That money is basically gone," he said.
Justice Department attorney Lynn Yuhee Lee replied that the funds were still in FBME's ownership.
"Nobody is going to seize the account," she said. "There is nothing stopping them from at least withdrawing their funds in cash."
Lee added that FBME had been given advance notice that it was being closely watched for money laundering issues.
"It's somewhat disingenuous to say that this took them by surprise," she said.
Fincen did not have to justify individual pieces of evidence in the case, Lee argued.
"This has been done according to the book, if you will, the notice-and-comments procedure," said Lee. The measure to cut off the bank's correspondent accounts from the U.S. banking system is "not imposed lightly or capriciously," she added.
But Cooper appeared skeptical.
"You're saying that I can trust the agency because it has the expertise? What's my job?" he asked.
FBME also accused Fincen of not consulting with fellow government entities, including the Attorney General and Department of State, as is required by the Section 311 provision, before imposing the measure on FBME.
"They have not taken the requisite consultations," Shaffer charged.
Lee argued that the agency did so. Cooper ordered the defendants to produce documentation that proved the consultations had taken place.
Fincen's original order was withdrawn because of a stay from Cooper and reissued in March.
It has nearly destroyed the bank, Shaffer said. "Much as it was hanging by a thread previously," he said, "we are now facing liquidation."
