February 2020 Foodman website and JD Supra

Before passage of the AML ACT of 2020 (the “ACT”), The US Department of the Treasury, and the US Justice Department (DOJ) had US legal authority to subpoena foreign banks with US correspondent accounts for related US records including records held in a foreign country.

AML ACT of 2020 expands the subpoena reach of the US Treasury and DOJ

The ACT empowers the US Treasury and DOJ to subpoena foreign banks for “records related to their correspondent account or any account at the foreign bank,” including records held in a foreign country. So, if a foreign bank maintains a correspondent account in the US, the US Treasury and the DOJ may now subpoena that bank for records related to any account at the bank, not only its U.S. correspondent account.

According to the ACT, the Secretary of the Treasury or the Attorney General may issue a subpoena to any foreign bank that maintains a correspondent account in the United States for records relating to the correspondent account or any account at the foreign bank, including records maintained outside of the United States, that are the subject of:

  • any investigation of a violation of a criminal law of the United States.
  • any investigation of a violation.
  • a civil forfeiture action.
  • an investigation pursuant to section 5318A (“Special measures for jurisdictions, financial institutions, international transactions, or types of accounts of primary money laundering concern”).

Understanding the expanded subpoena Reach

Following are key takeaways:

  1. PRODUCTION OF RECORDS:  The foreign bank on which a subpoena is served shall produce all requested records and authenticate all requested records with testimony of the Federal Rules of Evidence.
  2. ISSUANCE AND SERVICE OF SUBPOENA:  A subpoena shall designate a return date; the judicial district in which the related investigation is proceeding; may be served in person; by mail or fax in the United States if the foreign bank has a representative in the United States; or in a foreign country under any mutual legal assistance treaty, multilateral agreement, or other request for international legal or law enforcement assistance.
  3. RELIEF FROM SUBPOENA:  At any time before the return date of a subpoena, the foreign bank on which the subpoena is served may petition the district court of the United States for the judicial district in which the related investigation is proceeding, as designated in the subpoena, to modify or quash the subpoena; or the prohibition against disclosure.
  4. CONFLICT WITH FOREIGN SECRECY OR CONFIDENTIALITY: An assertion that compliance with a subpoena would conflict with a provision of foreign secrecy or confidentiality law shall not be a sole basis for quashing or modifying the subpoena.
  5. MAINTAINING RECORDS IN THE UNITED STATES: Any covered financial institution that maintains a correspondent account in the United States for a foreign bank shall maintain records in the United States identifying the owners of record and the beneficial owners of the foreign bank; and the name and address of a person who resides in the United States; and is authorized to accept service of legal process for records.
  6. LAW ENFORCEMENT REQUEST: Upon receipt of a written request from a Federal law enforcement officer for information required to be maintained under this paragraph, a covered financial institution shall provide the information to the requesting officer not later than 7 days after receipt of the request.
  7. NONDISCLOSURE OF SUBPOENA:  No officer, director, partner, employee, or shareholder of, or agent or attorney for, a foreign bank on which a subpoena is served shall, directly or indirectly, notify any account holder involved or any person named in the subpoena and served on the foreign bank about the existence or contents of the subpoena.
  8. DAMAGES:  Upon application by the Attorney General for a violation, a foreign bank on which a subpoena is served shall be liable to the United States Government for a civil penalty in an amount equal to double the amount of the suspected criminal proceeds sent through the correspondent account of the foreign bank in the related investigation; or not more than $250,000.
  9. ENFORCEMENT:  If a foreign bank fails to obey a subpoena issued, the Attorney General may invoke the aid of the district court of the United States for the judicial district in which the investigation or related proceeding is occurring to compel compliance with the subpoena.
  10. COURT ORDERS AND CONTEMPT OF COURT:  A court may issue an order requiring the foreign bank to appear before the Secretary of the Treasury or the Attorney General to produce certified records or testimony regarding the production of the certified records; and punish any failure to obey an order issued as contempt of court.
  11. TERMINATION OF CORRESPONDENT RELATIONSHIP:  A covered financial institution shall terminate any correspondent relationship with a foreign bank not later than 10 business days after the date on which the covered financial institution receives written notice from the Secretary of the Treasury or the Attorney General if, after consultation with the other, the Secretary of the Treasury or the Attorney General, as applicable, determines that the foreign bank has failed  to comply with a subpoena issued  or to prevail in proceedings before.
  12. LIMITATION ON LIABILITY:  A covered financial institution shall not be liable to any person in any court or arbitration proceeding for terminating a correspondent relationship or complying with a nondisclosure order.
  13. FAILURE TO TERMINATE RELATIONSHIP:  A covered financial institution that fails to terminate a correspondent relationship shall be liable for a civil penalty in an amount that is not more than $25,000 for each day that the covered financial institution fails to terminate the relationship. ‘
  14. FAILURE TO COMPLY WITH A SUBPOENA:  Upon failure to comply with a subpoena, a foreign bank may be liable for a civil penalty assessed by the issuing agency in an amount that is not more than $50,000 for each day that the foreign bank fails to comply with the terms of a subpoena.
  15. ADDITIONAL PENALTIES:  Beginning after the date that is 60 days after a foreign bank fails to comply with a subpoena, the Secretary of the Treasury or the Attorney General may seek additional penalties and compel compliance with the subpoena in the appropriate district court of the United States.

Foreign Financial Institutions (FFIs) Need to Start Preparing

FFIs officers, board members, and employees ought to understand the AML ACT of 2020 and be able to determine if their financial institution is ready to comply domestically and internationally. 

Is your Financial Institution ready to comply?

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