W&F Issue 5 2018

Wealth & Finance International - Issue 5 2018 23 Anti-Money Laundering- Blind Justice or Justice That Turns a Blind Eye This has been the pattern when dealing with smaller banks, and the test case for this approach remains that of FBME, the small and foreign-owned bank branch in Cyprus which was “resolved” in 2014 by the Central Bank of Cyprus (“CBC”). FBME had had a 311 Notice issued against it by FinCen imposing the same fifth special measure. CBC used the 311 Notice as its trigger to stop FBME doing business and take it over. In the four years since this occurred, however, CBC has failed to corroborate the validity of any of the cases of alleged money laundering that gave rise to Fin Cen’s 311 Notice. There were no court cases involved in these examples. Authorities took swift actions and closed banks, creating a fait accompli against which there could be no adequate redress for the owners of these banks, even had they had an adequate right to receive redress. The banks were taken over, their ability to do business nullified and their reputation destroyed. The rights of the subject to proper representation during the legal process, to transparency of process, and to a right of appeal have been duly bypassed. Then we have the report on 13th April 2018 that the US authorities considered taking action against China Construction Bank and Agricultural Bank of China for alleged violations of international sanctions against North Korea. In other words there was evidence to hand that these banks were routing payments to and from North Korea, although not necessarily in US$. Given that the US authorities acted so quickly against FBME, ABLV and others, a 311 FinCen Notice imposing the fifth special measure would then have been expected. The US authorities must have had a body of evidence against these Chinese banks, but they apparently have significant latitude in deciding how to apply that evidence and, indeed, whether to use it at all. It seems that the idea of taking any action was quickly shelved, primarily because of fears that punishing banks of that size might send shock waves through the global financial system. Indeed, both China Construction Bank and Agricultural Bank of China are amongst the 30 Global Systemically Important Banks. So what we have here in the AML/CFT area is not an example of the law acting as it should – Blind Justice – but of laws that are applied or not applied, and of available penalties that are varied as regards severity and timing, in accordance with the offender and not the offence. Instead the authorities make up their own mind – frequently behind closed doors - as to which banks to apply the law to and when, and which penalties to apply to a given situation. There is significant recourse to extra-judicial processes like those that sit behind the Notices of FinCen, where the evidence is not made public and where the subject can only see it third-hand, by having a judge review the evidence in camera: neither the subject nor their legal representative can be present. Since FATF itself acts as the ultimate court of arbitration by issuing – without contradiction - its Recommendations and Special Recommendations that lawmakers convert into laws and supervisory regimes, the entire edifice has gone outside democratic control. The edifice may claim to have been successful in reducing money laundering and blocking terrorist financing, but there is no factual evidence either in the form of a placebo test – what would have happened if FATF had never been established – or of a sanity test – what has actually been achieved and what could have been achieved by different means. Instead we have the prima facie evidence that the crassest breaches by the largest banks can go unpunished, that other large banks are fined, supervised, fined again and the breaches continue, but that the roof is brought down on the smaller banks. That does not sound like an ecosystem in which money laundering and the financing of terrorism have been successfully eliminated, or one in which justice is blind to expedience and commercial prejudices.