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William Byrnes (Texas A&M) tax & compliance articles

Judge grants FinCEN a “do over” for its FBME Bank determination, but will FinCEN release the evidence?

Posted by William Byrnes on November 10, 2015

Several of my blog readers have been following FinCEN’s first use (and abuse alleges the FBMEFinCEN-logo-shieldbank, defendant of this contentious matter) of the PATRIOT Act’s power allowing FinCEN to block a foreign financial institution from the US financial market.  Over the past year, FinCEN has published a couple press releases referring to its action against FMBE, and that its action is justified based on the nefarious behavior of some of FBME’s clients.  See FinCEN Cuts FBME Bank from Access to U.S. Financial System

But, there are generally two or more perspectives for any story.  FBME has fought back against FinCEN’s determination, and at least convinced a judge that there is more here going on than meet’s the eye.  See FBME Bank Obtains Preliminary Injunction Against FinCEN

On Friday, FinCEN agreed to a “do-over” of its determination with FBME, and to disclose ‘four’ items of the substantial evidence upon which it relied (but not the other evidence).  Of course this heightens the interest in the evidence that FinCEN will not disclose.

At the core of this case for FBME is whether FinCEN must disclose to FBME all the evidence that it relied upon to make a determination to ban FBME from the US financial system.  Who is to determine if such evidence is protected by national security interests?  FinCEN itself, or the judiciary?  Should a defendant have to defend against non-reviewed evidence?  What if the evidence is hearsay, by example – newspaper accounts?

So, now I am curious if the doctrine of due process has been afforded FBME bank?  And if the rules of evidence have been followed?

Some respondents will point out that a civil action, such as FinCEN, does not require the heightened protections of the doctrine of due process and the rules of evidence that apply to an individual’s criminal investigation.  “The government giveth the license to carry on commerce, and the government taketh away that license.”  Though I disagree with that bifurcation from a political philosophy and from a rule of law perspective, the Courts lean in the respondents’ favor.

In FBME’s situation, this FinCEN determination impacts FBME maintaining a correspondent banking relationship in the US, and also implies to other regulators that they should evaluate FBME’s activities in light of FinCEN’s determination.  It is the equivalent of a banking death sentence.

Given the public nature of FinCEN’s allegations, not sure how FBME can obtain a correspondent U.S. banking relationship in the future.  But BNP pled guilty to funding genocidal regimes and Iran, was given a setence of five year probabtion and nearly $10 billion in fines.  No BNP employees went to prison, or even paid a fine.  And BNP is operating in the US.  (see BNP Paribas Criminally Sentenced for Financing Sudan, Iran and Cuba)  A search of this blog will find numerous like situations of criminal activity at banks, a non-prosecution agreement, and the bank continues on.

Why is FBME being treated differently?  Should it be?  Questions that we cannot provide an opinion upon because we have limited information.

In consideration of the many other banks that have been fined for AML and/or OFAC transgressions, the FBME case stands out because of the severity of the sanction and the lack of background information about FinCEN’s action.

FBME states in its press releases that it has been cooperating with FinCEN over the course of FinCEN’s investigation.  However, alleges FBME, FinCEN has not been cooperating with FBME because FinCEN will not present the evidence at the heart of the matter upon which FinCEN bases it allegations against FBME upon.  FBME argues that it cannot defend against “secret” evidence.  FinCEN retorts that the evidence is required to remain secret as a matter of national security.  Sounds reminiscent of a Star Chamber.  I thought we don’t like Star Chambers in America?  

If this is national security protected evidence, should at least the FISA tribunal be presented with it and agree?  It’s not the correct forum, but better than a single executive branch serving as its own prosecutor, judge, and executioner.

Read the court documents and excerpts from the Judgement – Is FinCEN Becoming a Star Chamber? The Curious FBME case

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