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Regulation of Foreign Banks and Affiliates in the United States

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Regulation of Foreign Banks and Affiliates in the United States Regulation of Foreign Banks and Affiliates in the United States 2013 Edition Chapter 13: Anti-Money Laundering and Economic Sanctions Laws © 2013 Thomson Reuters Reprinted from Regulation of Foreign Banks and Affiliates in the United States (2013 edition). Copyright © 2013 Thomson Reuters. For more information about this publication please visit http://legalsolutions.thomsonreuters.com/law-products/. For authorization to photocopy, please contact Copyright Clearance Center at 222 Rosewood Drive, Danvers, MA 01923, USA (978) 750-8400; fax (978) 646-8600 or West’s Copyright Services at 610 Opperman Drive, Eagan, MN 55123, fax (651) 687- 7551. Please outline the specific material involved, the number of copies you wish to distribute and the purpose or format of the use. This publication was created to provide you with accurate and authortative information concerning the subject matter covered; however, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional. About the Authors KINI, SATISH M. is a partner at Debevoise & Plimpton LLP, Co-Chair of the firm’s Banking Group and a member of the Financial Institutions Group. Mr. Kini is based in the Washington, D.C., office and advises domestic and international financial institutions on a wide range of regulatory and transactional banking issues. He has represented large financial services firms in transactional matters, including to secure regulatory agencies, counseled banks and securities firms in money laundering and other types of examination and enforcement proceedings, and worked extensively with clients on data use, privacy, and data security issues. Mr. Kini also has represented a wide range of firms and industry trade associations on regulatory reform issues, including those arising out of the Dodd- Frank Act, and has assisted clients to participate in the policymaking process before the federal banking regulators. He has also represented clients on these matters before the U.S. Securities and Exchange Commission and Treasury Department. Mr. Kini graduated from Columbia Law School in 1992, where he was a Harlan Fiske Stone Scholar, a John M. Olin Fellow in Law and Economics, and the Managing Editor of the Columbia Law Review, and magna cume laude from Colgate University in 1985. On graduating from law school, Mr. Kini clerked with the Hon. Richard J. Cardamone, U.S. Court of Appeals for the Second Circuit. [email protected] LEE, PAUL L. is of counsel and a member of the Financial Institutions Group at Debevoise & Plimpton LLP. He is also a member of the adjunct faculty of Columbia Law School and a former member of the adjunct faculty of the University of Pennsylvania Law School. Mr. Lee received his B.A. summa cum laude from Georgetown University in 1969 and his J.D. magna cum laude from the University of Michigan Law School in 1972, where he was the Editor-in-Chief of the Michigan Law Review. He served as law clerk to Judge Walter R. Mansfield, U.S. Court of Appeals for the Second Circuit, from 1973 to 1974. He also served as Special Assistant to the General Counsel of the U.S. Department of the Treasury from 1977 to 1978 and as Executive Assistant to the Deputy Secretary of the Treasury from 1978 to 1979. Mr. Lee thereafter served as Deputy Superintendent and Counsel of the New York State Banking Department from 1980 to 1981. He was a partner of Shearman & Sterling from 1981 through 1994 when he joined Republic New York Corporation as General Counsel. Upon the acquistion of Republic New York Corporation by HSBC Holdings in 1999, he became Senior Executive Vice President and General Counsel of HSBC USA Inc. where he served as the senior legal officer in the United States advising senior management in the United States and London on legal regulatory and compliance matters. He served in that position until 2004 when he joined Debevoise & Plimpton LLP. Mr. Lee is a member of the Board of Editors of the Banking Law Journal and a frequent contributor. [email protected]. MICARELLI, CARL is counsel at Debevoise & Plimpton LLP in the New York office. Mr. Micarelli is a member of the firm’s Litigation Department. His practice has included international domestic commercial arbitration and litigation, litigation aspects of insurance regulation, and advising on compliance with economic sanctions regulations. Mr. Micarelli received his J.D. from Yale University in 1990 and his A.B. from Princeton University in 1987. He served as a Law Clerk to the Honorable Robert L. Carter, US District Court for the Southern District of New York, from 1990 to 1991. [email protected] Chapter 13 Anti-Money Laundering and Economic Sanctions Laws Paul L. Lee* Satish M. Kini** Carl Micarelli*** § 13:1 Introduction [1] Anti-Money Laundering Measures [2] Economic Sanctions Laws § 13:2 Overview of U.S. Anti-Money Laundering Statutes [1] Bank Secrecy Act [2] Money Laundering Control Act of 1986 [3] Annunzio-Wylie Anti-Money Laundering Act [4] Money Laundering Suppression Act of 1994 [5] Money Laundering and Financial Crimes Strategy Act of 1998 [6] USA PATRIOT Act § 13:3 Anti-money laundering program requirement [1] Statutory Provisions [2] Regulatory Provisions [a] FinCEN Regulations [b] Federal Banking Agency Regulations [3] Supervisory and Examination Process [4] Enforcement Actions § 13:4 Suspicious activity reporting requirement [1] Statutory Provisions [2] Regulatory Provisions [a] FinCEN Regulations [i] Banks [ii] Broker-Dealers and Other Financial Institutions [b] Federal Banking Agency Regulations [3] Supervisory and Examination Process [4] Enforcement Actions *Of Counsel, Debevoise & Plimpton LLP, New York. **Partner, Debevoise & Plimpton LLP, New York. ***Counsel, Debevoise & Plimpton LLP, New York. 1167 U.S. Reg. Foreign Banks & Affiliates § 13:5 Customer identication program requirement [1] Statutory Provisions [2] Regulatory Provisions [3] Supervisory and Examination Process [4] Enforcement Actions § 13:6 Shell bank prohibition [1] Statutory Provisions [2] Regulatory Provisions [3] Supervisory and Examination Process [4] Enforcement Actions § 13:7 Record-keeping for foreign correspondent accounts [1] Statutory Provisions [2] Regulatory Provisions [3] Supervisory and Examination Process § 13:8 Sharing of information [1] Statutory Provisions [2] Regulatory Provisions [3] Supervisory and Examination Process [4] Enforcement Actions § 13:9 Special measures for jurisdictions, nancial institutions, or international transactions of primary money-laundering concern [1] Statutory Provision [2] Regulatory Provisions [3] Supervisory and Examination Process § 13:10 Due diligence requirement for foreign correspondent accounts [1] Statutory Provisions [2] Regulatory Provisions [3] Supervisory and Examination Process [4] Enforcement Actions § 13:11 Due diligence requirement for foreign private banking accounts [1] Statutory Provisions [2] Regulatory Provisions [3] Supervisory and Examination Process [4] Enforcement Actions § 13:12 Foreign assets control and economic sanctions laws [1] Legal Basis for Economic Sanctions [2] Persons Required to Comply with U.S. Sanctions Laws [3] Summary of Current Sanctions Programs [4] General and Specic Licenses [5] Blocked and Rejected Transactions 1168 Anti-Money Laundering § 13:1 [6] Reporting, Record-keeping and Screening Requirements [7] Penalties [8] Application of United States Sanctions Regulations to Banks Outside the United States; Prohibitions on Evasion or Facilitation. [9] Enforcement Actions Against Foreign Banks [10] Sanctions Against Foreign Companies and Financial Institutions Doing Business with Iran [a] Sanctions Not Specic to Financial Institutions [b] Sanctions Specic to Financial Institutions § 13:13 Conclusion KeyCiteL: Cases and other legal materials listed in KeyCite Scope can be researched through the KeyCite service on WestlawL. Use KeyCite to check citations for form, parallel references, prior and later history, and comprehen- sive citator information, including citations to other decisions and secondary materials. § 13:1 Introduction [1] Anti-Money Laundering Measures Anti-money laundering measures and economic sanctions have long been a matter of legal and regulatory focus in the United States. Concern with anti-money laundering measures and eco- nomic sanctions, however, acquired a new sense of urgency in the United States after the events of September 11, 2001. The focus of concern also expanded with the realization of the dangers pre- sented by the virulent new strain of terrorist nancing. This new sense of urgency found its rst and perhaps most dramatic expression in the passage of the USA PATRIOT Act in October 2001.1 Economic sanction provisions, which have been in U.S. law for many decades, also acquired a renewed and expanded focus in the period after September 11, 2001, with a particular focus on terrorist activities. The regulatory and law-enforcement authori- ties in the United States rigorously enforce the requirements of U.S. law relating to anti-money laundering measures and eco- nomic sanctions against U.S. banks and foreign banks operating in the United States. The passage of the USA PATRIOT Act brought wide-ranging [Section 13:1] 1 Uniting and Strengthening America by Providing Appropriate Tools
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