On July 23rd, FinCEN designated the Federal Bank of the Middle East (FBME) under Section 311 of the USA PATRIOT Act, applying special measure 5. Special Measure 5, unlike the other special measures, prohibits the maintaining of accounts for FBME, effectively cutting it off from the US financial system. FinCEN was a little less florid – the headline said that FinCEN “severs access” to the financial system.
The news release didn't go into great detail, but stated:
The finding and NPRM also outlined the various factors supporting the action and theproposed measures against FBME, which included: (i) FBME is used by its customers tofacilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctionsevasion, and other illicit activity internationally and through the U.S. financial system; (ii)FBME has systemic failures in its anti-money laundering controls that attract high-risk shellcompanies, that is, companies formed for the sole purpose of holding property or funds and thatdo not engage in any legitimate business activity; and (iii) FBME performs a significant volumeof transactions and activities that have little or no transparency and often no apparent legitimatebusiness purpose.
The Final Rule makes for fascinating reading – it includes a response by FBME, and FinCEN's response to the response, which also drags in audit findings over multiple years. Here. however, is some detail of the effects of the FBME actions/non-actions:
As detailed in the NOF, these activities have included (1) an FBME customerreceiving a deposit of hundreds of thousands of dollars from a financier for LebaneseHezbollah; (2) providing financial services to a financial advisor for a major transnationalorganized crime figure; (3) FBME’s facilitation of the transfers to an FBME accountinvolved in fraud against a U.S. person, with the FBME customer operating the allegedfraud scheme later being indicted in the United States District Court for the NorthernDistrict of Ohio; and (4) FBME’s facilitation of U.S. sanctions evasion through itsextensive customer base of shell companies, including at least one FBME customer that was a front company for a U.S.-sanctioned Syrian entity, the Scientific Studies andResearch Center (SSRC) and which used its FBME account to process transactionsthrough the U.S. financial system.
NOF = Notice of Finding, by the way.
Links:
FinCEN news release
FinCEN Final Rule