The USA – no longer a haven for the foreign bank
| Date | 08 August 2008 |
| Pages | 199-209 |
| Published date | 08 August 2008 |
| DOI | https://doi.org/10.1108/13685200810889362 |
| Author | Iyandra Smith |
| Subject Matter | Accounting & finance |
The USA – no longer a haven
for the foreign bank
Iyandra Smith
Levin College of Law, University of Florida, Miami, Florida, USA
Abstract
Purpose – The purpose of this paper is to examine the current dilemmas facing foreign banks and
countries in the pursuit of eradicating money laundering and international financial crimes.
Design/methodology/approach – The paper discusses the recently enacted Title III of the USA
Patriot Act which regulates foreign banking institutions in order to curb international money
laundering. The paper examines the recent decision of the Second Circuit Court of Appeals discussing
foreign banks’ liability when their depositors have deposited funds obtained as a result of money
laundering.
Findings – The US Government can easily forfeit funds derived from or connected to a money
laundering offence found in correspondent accounts of foreign banks.
Practical implications – Owing to the great risk of seizure in the US of money laundered funds,
foreign banks must decide whether the difficulty of recovering any US seizure from their customers
call for them to implement additional security measures or limit contact with American financial
institutions. Foreign banks may be required to initiate anti-money laundering programs which exceed
what they would have been required to do according to the laws of their home country.
Originality/value – This paper is one of first to examine Title III’s effect on innocent foreign banks,
as it was written shortly after the interpretation of Title III and its applicability to foreign banks and it
examines any defences foreign banks may have in asset forfeiture actions, and any recourse it has in
recovering seized funds.
Keywords Money laundering,United States of America, International banks, Lawsand legislation,
Criminal forfeiture
Paper type Viewpoint
Are banks to blame for the actions of their customers in obtaining the funds that have
been deposited into their accounts? Should an impossible burden be placed on innocent
owners to prove that funds received legitimately and deposited into bank accounts
were not involved in criminal activity? Can the US Government forfeit funds, suspected
to be involved or connected to financial crimes, from the correspondent accounts of
foreign banks? The US Government answers affirmatively in all three instances. The
idea is that the foreign bank will be disinclined from engaging in suspicious financial
transactions and receiving proceeds from illicit activities[1]. However, this logic is
flawed, as money launderers have found varying ways to legitimatize their funds, and
very often, funds derived from the proceeds of a crime end up in the hands of innocent
persons, who then become innocent customers of the foreign bank.
Certainly, many must agree that the burden of proving that funds received
legitimately were never connected to the proceeds of a crime or were not the result of a
crime is extremely difficult and irrelevant for innocent owners who can only affirm that
those funds were acquired by them legitimately. In addition, banks should not be to
blame for the actions of their depositors, when they have exercised due diligence in
complying with the banking and anti-money laundering laws of their home country.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
No longer
a haven for the
foreign bank
199
Journal of Money Laundering Control
Vol. 11 No. 3, 2008
pp. 199-209
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685200810889362
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