The Anti-Money Laundering Law of 2020: The remarkable expansion of the US government’s subpoena power over foreign financial institutions | Perkins Coie


On New Years Day 2021, Congress passed the Anti-Money Laundering Law of 2020 (AMLA). As we reported last April, the 2020 LBA included sweeping reforms aimed at strengthening protections against money laundering, terrorist financing, and other illegal activities. In previous episodes of this series, we have discussed the new extended beneficial ownership requirements, significant improvements to the Banking Secrecy Act (BSA) whistleblower program under the AML and Extension BSA / anti-money laundering (AML) obligations to antique dealers.

In this fourth opus, published by the law school of New York University Corporate Compliance and Enforcement Program blog, we take a look at this remarkable expansion of the Department of Justice (DOJ) and Treasury (DOT) subpoena authority over foreign financial institutions, which has important implications for foreign financial institutions that maintain records. accounts of American correspondents.

Prior to enactment of the LBA, the Patriot Act authorized the DOJ and DOT to issue subpoenas to foreign banks that hold foreign correspondent accounts in the United States for records related to those correspondent accounts, including records kept outside the United States. The AMLA significantly expands the subpoena power of government departments to include records relating to “any account in the foreign bank, including records kept outside the United States.” This new power improves the access that US regulators can have to foreign financial records and creates substantial complexity and potential risks for foreign financial institutions, which can face serious consequences in the event of non-compliance. Below, we review the main issues raised by this new subpoena authority.

Access in the United States to all files of foreign banks with American correspondent relationships

The subpoenas now extend to all records, not just the records of the corresponding accounts. The only substantive limitation to this subpoena power is that the subpoena must relate to an investigation of BSA violations, US criminal law, civil forfeiture action, or investigation under 31 USC § 5318A. Indeed, this limitation imposes little or no restriction on US prosecutors.

Conflicts of law. AMLA 2020 explicitly requires that foreign data privacy laws cannot be the sole basis for rescinding a subpoena issued under this new authority. In line with recent guidance issued by the DOJ in the context of other matters, this provision highlights the skeptical stance with which U.S. regulators approach claims that foreign restrictions on data privacy may prevent disclosure of documents and information in connection with law enforcement investigations in the United States. The AMLA recognizes that a subpoenaed foreign bank may apply to the United States Federal District Court where the action is under investigation to vary or rescind the subpoena, but prescribed by the law that foreign data privacy laws “should not be the only basis” for rescinding or modifying a subpoena. . This can raise difficult issues for foreign financial institutions in jurisdictions with onerous data privacy restrictions.

Penalties for notice of summons Targets. Account holders whose information is under investigation cannot be notified of any summons, or the foreign bank will be subject to civil penalties. Unauthorized disclosures can result in a civil penalty of double the amount of suspected criminal proceeds passing through the foreign bank’s US correspondent account or, if no such proceeds can be identified, up to $ 250,000.

Important consequences in the event of non-compliance. Failure to comply with a subpoena may result in termination of US correspondent banking relationships. Under the extended subpoena authority, a U.S. financial institution is required to terminate any correspondent banking relationship with a foreign bank within 10 days or to receive notice from U.S. authorities that the foreign bank has failed. is not in compliance with the summons. Any US bank that does not comply with such a notice can be fined up to $ 25,000 per day as long as the correspondent relationship remains active. Any foreign bank that does not comply with a subpoena may be subject to civil contempt and a civil penalty of up to $ 50,000 per day if the foreign bank does not comply with others. sanctions, which may be requested at the discretion of the appropriate United States. district court.

Key points to remember

AMLA’s extension of DOJ and DOT subpoena power demonstrates the US government’s commitment to use access to the US financial system as a gateway to expand US jurisdiction over data and records held outside of United States in support of US law enforcement efforts to combat money laundering, terrorism and other criminal misconduct involving the global banking system. Given the importance of these provisions to high-profile enforcement priorities in the United States, we can expect U.S. regulators to continue rigorous enforcement in the event of non-compliance with these provisions, including requests to terminate US correspondent relationships with non-compliant foreign banks. Almost all of the world’s major banks that operate across borders (with the exception of banks based in countries sanctioned by the Office of Foreign Asset Control (OFAC)) have a correspondent relationship in the United States and are therefore concerned.

Stakeholders should consider the potential implications of this expanded subpoena power. In particular, foreign banks with correspondent relationships in the United States should review their subpoena response procedures to ensure that they are prepared to comply with the new requirements and have mechanisms in place to prevent unlawful disclosures to subpoenas. account holders concerned. Foreign institutions should also consider any potential conflicts with local data privacy laws and any necessary disclosure to clients regarding the potential for mandatory disclosure to US regulators. Given the potential repercussions of a misstep, banks should consider addressing these issues proactively before facing a conflict of laws offering the choice to comply with local laws or lose their U.S. correspondent status. .

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