European companies have paid heavily for the US self-assigned right to adjudicate on a global scale on the activities of non-US businesses and individuals. The disturbing case of Banca Privada d’Andorra offers yet another striking example, writes Dick Roche.
Font:
Autor: Dick Roche
Publicat el: 6 de juliol de 2022
European companies have paid heavily for the US self-assigned right to adjudicate on a global scale on the activities of non-US businesses and individuals. The disturbing case of Banca Privada d’Andorra offers yet another striking example, writes Dick Roche.
Dick Roche is a former Irish minister for European affairs and former Minister for the environment. He also served as chairman of the Irish Commission of Justice and Peace.
On 10 March 2015, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) named Banca Privada d’Andorra (BPA) “as a foreign financial institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act”.
It also issued warnings to banks that had correspondence banking relationships with BPA, a death blow for a small private bank.
FinCEN indicated that its action was based on information spanning “several years”. Jennifer Shasky Calvery, the director of FinCEN, spoke of how “BPA’s corrupt high–level managers and weak anti-money-laundering controls have made BPA an easy vehicle for third–party money launderers”.
The FinCEN identified the activities of three BPA staff as central to the action being taken.
One “high-level manager” was accused of providing “substantial assistance” between 2011 and February 2013 to Andrei Petrov, who FinCEN described as “a third party money launderer working for Russian criminal organisations engaged in corruption”.
A second BPA staffer was accused of accepting “exorbitant commissions to process transactions related to Venezuelan third-party money launderers” including a scheme involving “shell companies and complex financial products to siphon off funds from Venezuela’s public oil company Petroleos de Venezuela”.
Another BPA manager was described as having “accepted bribes in exchange for processing bulk cash transfers for another third–party money launderer”.
While damning in terms of BPA’s credibility FinCEN stopped short of labelling the bank itself or its directors as corrupt.
Reaction to the FinCEN announcements was rapid and, from the viewpoint of Banca Privada d’Andorra and its shareholders, catastrophic.
The Andorran authorities took control of BPA, suspended its board, including the bank’s lead shareholders, the Cierco brothers, and its joint non-executive co-chairmen, arrested the bank’s CEO, capped cash withdrawals, and established a ‘good bank/bad bank’ scheme to manage the bank’s wind up.
In addition, BPA’s Spanish subsidiary, Banco de Madrid, a private bank acquired in 2011, was hit by a rush of customers to withdraw funds and by a decision by Spain’s stock market to suspend reimbursement of investment funds. Banco de Madrid filed for bankruptcy.
Taking on the US Department of Treasury
A further feature of the major extraterritorial cases involving European companies is that the companies accused of wrongdoing reach deferred settlement agreements with the US agencies. This avoids action in the courts and limits the amount of detail as to how settlements are reached: while the cases get headlines, critical details remain hidden.
That did not happen in the BPA case, the Cierco brothers complained to the US Department of Treasury and took their case to the courts.
They made the case that BPA had received no warning of the FinCEN investigation or given an opportunity to respond to the allegations.
They made the point that BPA was regularly audited for anti-money laundering compliance by leading international audit firms and that the Andorran government regulatory office was headed by a former staff member of one of those audit firms, who was familiar with BPA’s AML.
They emphasised that the bank’s compliance with “applicable AML laws and regulations” had been the subject of “regular conformation” and challenged the FinCEN allegations that the bank had been negligent in its application of anti-money laundering (AML) procedures.
Most importantly, they pointed out that the cases at the core of FinCEN’s action had been self-reported to the Andorran authorities by BPA.
FinCEN stonewalled in March 2016 when it issued a “Withdrawal of Finding Regarding Banca Privada d’Andorra”.
FinCEN explained it was reversing its position “because of subsequent developments that have mitigated the money laundering risks associated with BPA”. US Courts went along with the ‘logic’ applied by FinCEN deciding the case was no longer relevant because FinCEN had… withdrawn its order!
The ‘Withdrawal of Finding’ and the court decision provided the US authorities an escape hatch allowing them to avoid a full examination of the legitimacy of the actions against BPA. They provided a convenient shield to hide from questions about its interactions with the Andorran and perhaps Spanish authorities.
Part of a pattern
The BPA case is another example of a pattern of behaviour that has become all too common over the last two decades when US agencies have increasingly assumed the right to adjudicate globally on the activities of non-US businesses and individuals overstepping the presumption against extraterritorial of domestic law.
European companies have paid heavily for this behaviour. The league table of financial penalties imposed by US agencies is regularly dominated by European companies.
As pointed out previously in EURACTIV, the financial penalties meted out are not the only aspect of the remarkable growth in US outreach that gives cause for concern. US agencies have been particularly aggressive in their approach to European companies.
The Banca Privada d’Andorra story may still have ‘some legs’ in it. Investigations underway in Andorra into the Operation Catalonia affair have produced evidence that relates to the BPA case.
The hearings have also highlighted questions as to information on Banca Privada d’Andorra passing between Madrid and Washington that may have a direct bearing on the actions of FinCEN and there is, possibly, more to come.
In 2013 US Chief Justice, John Roberts wrote that “United States laws govern domestically, but do not rule the world.” The BPA case is another reminder to European policymakers of the necessity to find a way of getting that message across to our American friends.