The recent amendments to the US anti-money laundering legislation let the US obtain banking records on any individual/company worldwide which uses a bank which proceeds payments in USD (effectively any large bank). Such rules are ignorant of banking secrecy and guarded by painful fines.

Request for records: wide powers

  • The Secretary of the Treasury or the Attorney General of the US can request any non-US bank to provide any records related to an account of any of its clients if such bank has a US correspondent account.
  • The records can be requested if they are subject of:

- any investigation on violation of the US criminal law;- any investigation on violation of the US legislation on records/reports on monetary transactions;

- a civil forfeiture action;

- an investigation related to money laundering concerns of the US Treasury (into specific banks, classes of transactions or jurisdictions).

However, the US authorities are not obliged to specify details of such investigation in the request or to prove reasonability of allegations with regard to a holder of an account. The only detail available on such investigation will be a judicial district where it is carried out, so that the requested bank knows in which US court the request can be challenged.

  • At any time before the return date of the request the foreign bank may approach the US district court to modify or cancel the request.

The law directly excludes an option to raise a banking secrecy defense and provides that a conflict with a secrecy provisions of the bank`s native jurisdiction cannot be a sole basis to cancel or modify the request.

An appetite of the banks to litigate over such requests remains to be seen.

Fast procedure

  • The new law allows to address the request to the bank itself without invoking cumbersome means of international cooperation in criminal proceedings. This may dramatically cut timeframe of collecting evidence by the US law enforcement.

Non-disclosure obligations

  • The requested bank is prohibited to notify (directly or indirectly) any account holder / any person named in the request about the latter.
  • Such prohibition may be as well challenged by the bank to the US district court.
  • A failure to comply will trigger a fine amounting to:
  • doubled amount of the suspected criminal proceeds sent through the correspondent account; or
  • if no such proceeds can be identified – up to USD 250 thousand.

Failure to comply with the request

  • Failure to comply with the request will trigger a daily fine amounting up to USD 50 thousand for each day of failure. This penalty may be challenged in a US court.
  • After 60 days of failure to comply with the request the US authorities may approach a US court.

The court may oblige the bank to appear before the US authorities to produce either requested records or testimony on such records as well as punish a failure to obey as a contempt of court.

Termination of a correspondent relationship

  • If the foreign bank (1) did not comply with the request and (2) did not successfully challenge it via court, the US institution where a foreign bank has a correspondent account has to terminate any correspondent relationship with such bank.
  • Failure to terminate a correspondent relationship triggers a fine of up to USD 25 thousand for each day.

All the mentioned penalties (related to non-disclosure, failure to comply with the request etc) can be satisfied via seizing any funds held in the US correspondent account of a bank.

Penalties along with a risk of losing a possibility to make transactions in USD constitutes a very material argument to incentivize banks to disclose information.  

Considering the case law-driven nature of US enforcement, it would be worth keeping eye on the courts` positions on this law.

Such changes maintain a trend on transparency of information on financial flows and assets worldwide and highlight necessity of proper structuring and documenting of transactions to prevent excessive scrutiny.

For further information, please contact Asters Partner Sergiy Grebenyuk and Counsel Orest Stasiuk.

[1] Section 6308 of the National Defense Authorization Act for Fiscal Year 2021