WASHINGTON The former owners of the now defunct Banca Privada d’Andorra S.A. are calling for an investigation into why the U.S. Treasury Department labelled the Andorran bank a "primary money laundering concern," a move which helped drive the bank out of business.
A lawyer for the Cierco family, which controlled the bank, sent a letter to Treasury Department's Office of the Inspector General on Tuesday, asking for the office to investigate how the department reached the conclusion that BPA was aiding money launderers.
The Ciercos claim that the naming of the bank as a money launderer by the Treasury's Financial Crimes Enforcement Network (FinCEN) naming of the bank, was "based on an insufficient and inadequate investigation," which they were unable to challenge, according to the letter, which was shared with Reuters.
A FinCEN spokesman declined to comment for the story. The Inspector General did not respond to requests for comment sent through the Treasury Department's press office.
The case illustrates the enormous power U.S. financial regulators can use against foreign banks caught in their sights.
Soon after the FinCEN designation, foreign correspondent banks severed ties with BPA and regulators moved to dismantle the bank. It's remaining assets were sold to a U.S. investment firm last year, an attorney for the Ciercos said.
The USA Patriot Act, passed in response to the 9/11 attacks, gives FinCEN the power to label companies as aiding and abetting money launderers without going through a court process.
Proponents of tough money laundering enforcement say FinCEN needs the power to go after those that help terrorists and drug lords, who are often beyond the reach of U.S. law enforcement.
Ross Delston, a Washington, D.C. based anti-money laundering attorney said FinCEN was given the authority because U.S. authorities needed a tool to place banks off-limits if they are "far outside of the bounds of acceptable behaviour".
In all, FinCEN has designated 19 international banks or companies primary money laundering concerns, according to FinCEN records, a move that has often leads to revoking of banking licenses by national regulators, according to FinCEN records.
In an interview with Reuters, Eric Lewis, an attorney for the family, said he believes the investigation will reveal FinCEN used thin evidence to turn BPA into a "sacrificial lamb" because FinCEN wanted "to teach Andorra a lesson," after the tiny independent European state failed to curb money laundering.
In 2015, FinCEN, Treasury's anti-money-laundering agency labelled the bank a "primary money laundering concern," alleging that BPA executives had assisted Russian organised crime figures and corrupt foreign officials in moving dirty money.
Later that year, the Ciercos sued the Treasury Department in federal court in Washington, D.C., seeking to force FinCEN to release the evidence underlining its claims about the bank.
FinCEN argued that much of the evidence it used to make the determination could not be readily released because it was classified or came from sensitive law enforcement sources. In any case, FinCEN argued it was not required to provide evidence to issue its finding.
But several months after the Ciercos filed the suit, FinCEN withdrew its finding against the bank, saying that the designation had already accomplished its purpose.
Since Andorran authorities were dismantling the bank, BPA no longer posed "a threat to the U.S. financial system," FinCEN said in a February 2016 statement.
After FinCEN withdrew its designation the court dismissed the BPA's suit, ruling that it was no longer relevant. The Ciercos are now appealing the case, asking the court to force FinCEN to publicly declare its earlier ruling unlawful.
Although the bank is already defunct, the Ciercos still seek a ruling against FinCEN to help repair the damage to their reputations, Lewis said.
But the larger issue, Lewis said, is that FinCEN has the power to put a bank out of business without first hearing its defence. "By the time the bank has time to defend itself is usually game, set and match," he said.
(Reporting by Joel Schectman; editing by Clive McKeef)