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 Treasury Designates Commercial Bank of Syria as Financial Institution of Primary Money Laundering Concern


5/11/2004

FROM THE OFFICE OF PUBLIC AFFAIRS

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311 Action Comes on the Heels of President Bush's Declaration of National Emergency With Respect to Syria

The U.S. Department of the Treasury today designated the Commercial Bank of Syria (CBS), along with its subsidiary Syrian Lebanese Commercial Bank, as a financial institution of "primary money laundering concern," pursuant to Section 311 of the USA PATRIOT Act.

"Todaywe areusing the authority granted by Congress under Section 311 of the PATRIOT Act to help protect theU.S. financial system against rogue financial institutions," saidJuan Zarate, the Treasury Department's Deputy Assistant Secretary for the Executive Office for Terrorist Financing and Financial Crimes. "Thefinancial communityaround the worldis now on notice that thisbankpresents a risk oftainted financial activity thatmust be addressed."

Information garnered shows CBS had been used by terrorists and their sympathizers and acted as a conduit for the laundering of proceeds generated from the illicit sale of Iraqi oil. Specifically more than $1 billion was illegally diverted by Saddam Hussein's regime from the U.N.'s Oil for Food (OFF) program, and some of these proceeds flowed through accounts at CBS.

The Government of Syria also has not taken steps to transfer the CBS accounts containing the proceeds generated from the illicit sale of Iraqi oil to the Development Fund for Iraq (DFI), as required under U.N. Security Council Resolution (UNSCR) 1483. Finally, numerous transactions that may be indicative of terrorist financing and money laundering have been transferred through CBS, includingtwoaccounts at CBS thatreferencea reputed financier for Usama bin Laden.

In conjunction with this designation, Treasury is sending to the Federal Register a notice of proposed rulemaking that would prohibit any U.S. bank, broker-dealer, futures commission merchant, introducing broker or mutual fund from opening or maintaining a correspondent account for or on behalf of CBS. Correspondent accounts involving CBS would have to be terminated without exception. This special measure, which is the most severe measure that can be imposed through Section 311, may be imposed only through the issuance of a regulation.

CBS, based in Damascus, Syria, maintains approximately 50 branches and employs about 4,500 persons. CBS was established in Syria in 1967 as the single, government-owned bank specializing in servicing foreign trade and commercial banking, including foreign exchange transactions. CBS maintains correspondent accounts with banks in countries all over the world, including the United States. CBS has one subsidiary, Syrian Lebanese Commercial Bank, located in Beirut, Lebanon, of which CBS maintains approximately an 84 percent ownership interest. Syrian Lebanese Commercial Bank has two branches and two offices – its main branch in Beirut, a branch in Moussaitbeh and representative offices in Aleppo and Damascus, Syria. Syrian Lebanese Commercial Bank also maintains correspondent accounts with a few banks in the United States.

Title III of the PATRIOT Act amends the anti-money laundering provisions of the Bank Secrecy Act (BSA) to promote the prevention, detection and prosecution of international money laundering and the financing of terrorism. Section 311 authorizes the Secretary of the Treasury – in consultation with DOJ, the State Department and appropriate Federal financial regulators – to designate a foreign jurisdiction, institution, class of transactions or type of account to be of "primary money laundering concern" and to require U.S. financial institutions to take certain "special measures" against the designee.

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 most effectively target specific money laundering and terrorist financing

In additional action against Syria today, President George W. Bush signed an Executive Order declaring a national emergency with respect to Syria, authorizing the Department of the Treasury to block the property of certain persons and directing other U.S. Government agencies to impose a ban on exports to Syria.

This action is in response to the Syrian government's continued support of international terrorism, sustained occupation of Lebanon, pursuit of weapons of mass destruction and missile programs and undermining of U.S. and international efforts in Iraq. Syria's acts threaten the national security, foreign policy and economy of the United States.

The sanctions are imposed under the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act, the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 (SAA) and the United States Code.

Today's executive order imposes the following sanctions on Syria:

  • Authorizesthe U.S. Department of the Treasury to designateindividuals and entities contributing totheGovernment of Syria's problematic behavior. This action would subject designees tosanctions that willblock their property and property interestsand prohibit U.S. persons fromengaging in financial transactions withthem.
  • Prohibits exports and reexports to Syria of most goods, excluding food and medicine. The export ban will primarily be implemented by the U.S. Department of Commerce, which will license the export of limited categories of goods pursuant to the President's exercising of partial waivers of the SAA.
  • Prohibits commercial air services between the United States and Syria by Syria-owned and controlled aircraft. Certain non-traffic stops by such aircraft are also prohibited. The flight ban will be implemented by the U.S. Department of Transportation.

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