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The U.S. Department of the Treasury today finalized its rule against Banco Delta Asia SARL (BDA) under Section 311 of the USA PATRIOT Act. When the final rule takes effect in 30 days, U.S. financial institutions will be prohibited from opening or maintaining correspondent accounts for or on behalf of BDA. This action bars BDA from accessing the U.S. financial system, either directly or indirectly.
"Our investigation of BDA confirmed the bank's willingness to turn a blind eye to illicit activity, notably by its North Korean-related clients," said Stuart Levey, Treasury's Under Secretary for Terrorism and Financial Intelligence (TFI). "In fact, in exchange for a fee, the bank provided its North Korean clients access to the banking system with little oversight or control."
The Treasury's Financial Crimes Enforcement Network (FinCEN) in September 2005 found BDA to be of "primary money laundering concern" under Section 311 and issued its proposed rule, citing the bank's systemic failures to safeguard against money laundering and other financial crimes.
The U.S. Treasury has since been engaged in an ongoing investigation of BDA with the cooperation of Macanese authorities. The information derived from that investigation and the failure of the bank to address adequately the full scope of concerns described in the proposed rule has laid the groundwork for today's action.
Over the past 18 months, the Macanese authorities have taken substantial steps to strengthen Macau's anti-money laundering and counter-terrorist financing regime, notably by passing a new law to strengthen these controls and standing up the jurisdiction's first-ever Financial Intelligence Unit (FIU). Today's regulatory action is targeted at BDA as an institution, not Macau as a jurisdiction.
"We are pleased that Macau has made important progress in strengthening its anti-money laundering controls and safeguarding the Macanese financial system. However, Banco Delta Asia's grossly inadequate due diligence and systematic facilitation of deceptive financial practices have run too deep for the bank to be allowed access to the U.S. financial system," said Levey.
The Treasury would review and, if appropriate, rescind the rule if the concerns laid out in it are adequately addressed, including if BDA were to be brought under the long-term control of responsible management and ownership.
Abuses at the bank included the facilitation of financial transactions related to illicit activities, including North Korea's trade in counterfeit U.S. currency, counterfeit cigarettes, and narcotics. In addition, several front companies may have laundered hundreds of millions of dollars in cash through the bank. The final rule highlights the bank's grossly inadequate due diligence, which facilitated deceptive financial practices by these clients including:
- Suppressing the identity and location of originators of transactions and arranging for funds transfers via third parties;
- Repeated bank transfers of large, round-figure sums both to and from accounts held at other banks that have no apparent licit purpose; and
- The routine use of cash couriers to move large amounts of currency, usually U.S. dollars, in the absence of any credible explanation of the origin or purpose for the cash transactions.
These special measures range from enhanced recordkeeping or reporting obligations to a requirement to terminate correspondent banking relationships with the designated entity. The measures are meant to provide Treasury with a range of options to bring additional pressure on institutions that pose specific money laundering threats.
The Treasury Department has previously issued final rules against the following financial institutions under Section 311, prohibiting U.S. financial institutions from opening or maintaining correspondent accounts for or on their behalf:
- VEF Banka (Latvia)
- Commercial Bank of Syria (Syria) and Syrian Lebanese Commercial Bank (Lebanon)
- Myanmar Mayflower Bank (Burma)
- Asia Wealth Bank (Burma)
A copy of the final rule may be accessed at the following link: http://www.fincen.gov/bda_final_rule.pdf.