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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 -
A statement by a foreign regulator that it might penalize banks that drop businesses due to heightened supervisory risk has spooked U.S. institutions who worry domestic agencies could follow suit.
May 7 -
For more than a decade, U.S. regulators have been advising bankers to know more about their customers than who they are. In the next five years that may become the global norm as technology allows more granular transaction monitoring.
April 27
WASHINGTON - A foreign bank that sued the U.S. Treasury's Financial Crimes Enforcement Network won a preliminary injunction suspending an action that would have cut off the bank's access to dollar funding.
Last month, Fincen finalized a rule designating FBME, which is the largest bank in Tanzania but operates mostly in Cyprus, as a "primary money laundering concern" and invoked a special measure that would deny the bank access to the U.S. financial system.
The bank contended that Fincen's actions were capricious and did not constitute due process. It said that the agency withheld both confidential and nonconfidential information that would have assisted the bank in addressing its missteps that allowed illicit funds to flow through the bank. It said that if the special measures went into effect as planned, they would effectively kill the bank.
Ultimately, Judge Christopher Cooper of the U.S. District Court of the District of Columbia, found the bank's case compelling, saying it may not have correctly followed the Administrative Procedures Act.
"Fincen's reliance on nonpublic and classified evidence to impose a serious sanction against a single institution required it to hew even more closely to the APA demands than it might have in a garden-variety rulemaking," the judge said. "Because the agency does not appear to have satisfied those requirements, and because FBME has demonstrated that it will likely be irreparably harmed should the final rule take effect, the court will grant FBME's Motion for a Preliminary Injunction."
Challenges to Fincen are extremely rare, observers said, and FBME's victory was unexpected. At a court hearing on Tuesday, Judge Cooper had said the bank faced an uphill battle in its case and suggested he would have to defer to Fincen's judgment.
A Fincen spokesman did not immediately return calls for comment.
Derek Shaffer a partner at Quinn Emanuel Urquhart & Sullivan who is representing FBME, said in a statement that "this is not the end of our challenge to what we contend was unfair, invalid action by Fincen."
