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U.S. continues aggressive sanctions and anti-money laundering enforcement against non-U.S. banks

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When assessing anti-money laundering risk and exposure, global financial institutions should be mindful of the complex landscape and assertions of broad authority by U.S. authorities and banking regulators.

U.S. banking regulators, in conjunction with U.S. criminal and civil authorities, have traditionally pursued anti-money laundering and sanctions enforcement cases against multinational banks in relation to conduct that occurred in or through a bank’s U.S. entity or branch. In those instances, the financial institution had a banking branch or agency in the United States and transactions relating to customers of non-U.S. branches or affiliates were routed through the U.S. branch or entity for dollar clearing purposes. Because a U.S. branch or entity is obliged to comply with the Bank Secrecy Act’s programmatic anti-money laundering requirements, these branch activities provided a touchpoint for the U.S. banking regulators to exercise jurisdiction alongside criminal and civil authorities.

U.S. banking regulators took one step further in the recent UniCredit settlement. UniCredit relied primarily on third-party correspondent banks to provide USD clearing services to its customers, not its New York branches. Only three nominal New York ‘touchpoints’ with UniCredit’s own New York branches were asserted.  Nevertheless, the U.S. banking regulators asserted jurisdiction over the unrelated core conduct at issue and found that UniCredit had conducted business in an unsafe and unsound manner in violation of New York banking laws.

A number of recent resolutions and ongoing public investigations also serve as an important reminder for multinational banks without a U.S. branch that they are not immune to U.S. civil and criminal exposure. While they are not subject to the oversight of U.S. banking regulators, civil and criminal federal authorities may enter the picture where USD transactions are cleared through the United States or there is some other U.S. nexus. For example, as set out in the press, a Danish bank is currently subject to investigation by a number of U.S. civil and criminal authorities in relation to conduct and transactions originating at its Estonian branch. The basis upon which U.S. authorities are asserting jurisdiction over this matter may be in relation to the USD flows which were cleared through the Danish bank’s U.S. correspondent banks.

 A renewed note of caution

Multinational banks licensed in the United States (especially New York), should be vigilant about the various lines of business that touch their U.S. branch. Like UniCredit, they may find worldwide activities scrutinized by U.S. banking regulators even where the U.S. branch does not service those activities. Moreover, while banks without a U.S. branch are not exposed to U.S. financial regulators, they are not immune to U.S. criminal or civil inquiries for conduct abroad where there are U.S. touchpoints, such as payments cleared through the United States. For more information on these developments please see here.

This blog post is based on an Allen & Overy LLP article authored by David Esseks, Todd Fishman, Rachel Agress and Meghan Boland.  For inquiries regarding U.S. AML and sanctions enforcement please refer to A&O’s U.S. litigation and sanctions practice group heads.