Would Require Non-U.S. Banks to Comply with U.S. Subpoenas on Pain of Losing Ability to Conduct U.S. Correspondent Banking
The U.S. Senate is advancing legislation that could create substantial challenges for non-U.S. banks operating in the United States. Senate Bill 1241, known as the “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017,” has strong bipartisan support and could be passed and signed by the President into law in this year.
If enacted, the measure will require many non-U.S. financial institutions to devote resources to complying with U.S. subpoenas and will expose the financial institutions’ dealings with their clients to greater scrutiny by U.S. authorities.| Non-U.S. banks should take particular note of Section 15, entitled “Obtaining Foreign Bank Records from Banks with United States Correspondent Accounts.” As its name suggests, these provisions are intended to routinize U.S. law enforcement’s procurement of records from non-U.S. banks. Under the new legislation, law enforcement may serve a grand jury (investigative) subpoena or a trial subpoena on “any foreign bank that maintains a correspondent account in the United States and request any records relating to the correspondent account or any account at the foreign bank, including records maintained outside of the United States.”
The bill provides two means by which the U.S. authorities will be able to enforce compliance by non-U.S. banks. First, the bill provides that a non-compliant bank may be held in contempt of court and may be sanctioned accordingly. Still more severe is the provision that the non-compliant bank must be cut off from U.S. correspondent banking. A U.S. correspondent bank must “terminate any correspondent relationship with a foreign bank not later than 10 business days after the date on which the covered financial institution receives written notice from the Secretary of the Treasury or the Attorney General.”
Not only will the U.S. authorities be able to subpoena the records of any bank in the world that maintains a U.S. correspondent bank account, but non-U.S. banks will be prohibited from informing their customers that they have received the subpoena and turned over the customers’ records. Further, the banks will be required to certify the records that they produce so that the authorities can introduce them into evidence in U.S. courts. Finally, the statute expressly rules out reliance on any “foreign secrecy or confidentiality law” to avoid compliance with a subpoena.
This new legislation will require many non-U.S. financial institutions to devote resources to complying with U.S. subpoenas and will expose the financial institutions’ dealings with their clients to greater scrutiny by U.S. authorities.