Banking and Finance Law Daily Bank shareholders’ ability to challenge FinCEN anti-money laundering actions evaporates
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Tuesday, May 23, 2017

Bank shareholders’ ability to challenge FinCEN anti-money laundering actions evaporates

By Richard A. Roth, J.D.

Shareholders of an Andorran bank lost their ability to challenge a Financial Crimes Enforcement Network finding that the bank was a money laundering threat when Andorra closed the bank and FinCEN withdrew its notices, the U.S. Court of Appeals for the District of Columbia Circuit has decided. One of the shareholders’ two claims was rendered moot by FinCEN’s withdrawal, and they no longer had standing to raise the other, the court said (Cierco v. Mnuchin, May 23, 2017, Edwards, H.).

FinCEN notices. Acting under authority of the USA PATRIOT Act, FinCEN issued two notices related to Banca Privada d’Andorra S.A. in March 2015. The first was a Notice of Finding that asserted the bank posed a high risk of money laundering and in fact had facilitated money laundering for some customers. The second was a Notice of Proposed Rulemaking that would impose the "fifth special measure" against the bank. This would have prevented U.S. banks from maintaining correspondent accounts for Banca Privada, which essentially would have denied it access to the U.S. financial system.

Within the next few months, the government of Andorra seized the bank and created a bridge bank to hold Banca Privada’s legal assets.

Suit rejected. While Andorra was sorting Banca Privada’s licit assets from the illicit, the bank’s principal shareholders sued FinCEN to gain relief from the notices. They asked the court to take two steps: order FinCEN to withdraw the notices and declare that the notices had been issued unlawfully.

Due to the Andorran government’s actions, FinCEN decided the regulatory actions were no longer necessary, withdrew both of them, and asked the district court judge to dismiss the suit. Before the district court judge could rule, the bridge bank was sold. The judge then decided the case was moot and dismissed it.

Moot claim. The request that FinCEN be ordered to withdraw the notices was moot, the appellate court agreed. The shareholders had the relief they had sought—the notices had been withdrawn.

There were two exceptions to mootness, the court said, but both relied on the possibility that the shareholders could be subject to the same injury in the future. Since Banca Privada had been closed and sold, that could not happen, the court said.

No standing. A plaintiff’s standing to sue is an essential part of federal court jurisdiction, the appellate court noted. Standing has three elements:

  1. that the plaintiff has suffered an injury in fact;
  2. that the injury is fairly traceable to the challenged conduct; and
  3. that it is likely the injury can be redressed by the court.

Even if the shareholders could establish the first two elements, they could not show the third, according to the court. Perhaps the court could decree that the notices had been issued unlawfully, but there essentially was nothing that could be done about it.

Banca Privada’s assets had been sold by the government of Andorra nearly a year earlier, and the shareholders had not suggested any way the sale could be undone. Moreover, there was no reason to believe that the decision sought by the shareholders would induce Andorra to unwind the sale if it could. Any arguments the shareholders could raise about how the court could offer them relief were speculative because they depended on the decisions of a foreign, sovereign government, the court concluded.

The case is No. 16-5185.

Attorneys: Eric L. Lewis (Lewis Baach Kaufmann Middlemiss PLLC) for Ramon Cierco. Sarah Carroll, U.S. Department of Justice.

Companies: Banca Privada d’Andorra S.A.

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