Key Points on FinCEN's Withdrawal of its Section 311 notices against Banca Privada d'Andorra

WASHINGTON, Feb. 20, 2016 /PRNewswire/ -- FinCEN's withdrawal of its Section 311 notices against Banca Privada d'Andorra is a momentous victory for BPA's customers, employees, and all of its shareholders, including the majority shareholders, the Cierco family. Since FinCEN issued its illegal notices nearly one year ago, the Ciercos have fought vigorously to clear their name, bringing suit in federal court against the U.S. Department of Treasury and FinCEN to force the withdrawal the notices.  FinCEN's announcement that they have withdrawn the notices vindicates the Ciercos and BPA. FinCEN's attempts to suggest that the Notice was no longer necessary does not withstand analysis.  FinCEN knew its actions could not stand up to a court challenge.

• Questionable Timing: The Department of Treasury filed their last document in support of their motion¹ to dismiss the Ciercos' case at 9:35 PM on Thursday, February 18, 2016. In 25 pages of argument, the Treasury Department did not seek to support any factual bases for Section 311 notices, but relied exclusively on technical arguments, stating that the Ciercos should not be permitted to challenge their actions. Most remarkably, the Treasury Department, and its money laundering watchdog agency, FinCEN argued that actions by banks and the Government of Andorra to cease doing business with BPA and close its down were entirely voluntary – that FinCEN actions had nothing to do with their actions. And they made this argument notwithstanding the fact that FinCEN is the primary enforcer of AML policies for regulated banks, and that the Notice of Proposed Rulemaking expressly invited foreign governments to take actions against BPA. FinCEN also well knew that Andorra would not and could not take actions contrary to FinCEN's directives and that Andorra had made clear that it would not.
• About face in 12 Hours: On the same day that it made its filing, and in a transparent effort to avoid judicial scrutiny of its action in imposing the Section 311 notices to begin with, the head of FinCEN rescinded its Section 311 Notices against BPA, making its rescission public the next day. This action is a clear and unequivocal indication that the officials taking this action were concerned about:
  • With the completion of briefing on the motion to dismiss, the Court could have ruled at any time. Thus, FinCEN had an immediate need to try to prevent the motion from being decided to avoid a potential adverse ruling – particularly on the issue of whether target banks should be able to challenge Section 311 Notices when they are first imposed – and before they take effect. This is important because once Section 311 notices take effect, banks quickly collapse and thus there is no institution to challenge FinCEN's actions. FinCEN wanted to lock in its ability to do damage to banks without being accountable under the law in court.
  • On March 11, FinCEN was required to file an opposition to the Ciercos' Motion for Summary Judgment, which required it to defend the initial imposition of the Section 311 Notices on the merits. Since FinCEN did not follow the law in imposing the Notices, it needed to find a way to avoid making this response. Indeed, in FinCEN's filing with the Court notifying it of the withdrawal of the Notices, FinCEN went to great pains to inform the Court that it had no intention of responding to the Summary Judgment motion, in light of the withdrawal of the notices.
  • Hiding the Facts: If the case went forward, FinCEN and the Treasury Department would have to file with the Court the basis on which they imposed the Section 311 Notices. In addition, they would subject to discovery in the case. Throughout this process the U.S., Spanish, and Andorran authorities have worked in complete secrecy; only speaking on specifics through one press release as to what they claim was the reason to designate BPA.²
• Nothing New: What is absurd about the U.S. Government's flawed charges is that they are based on cases that the Andorran regulator have been aware of for years. These cases were investigated in depth by KPMG at the end of 2012 and beginning of 2013 and no indications of systemic money laundering issue were found. In fact, BPA provided the Andorran regulators a summary of these cases, that they were already aware of, nearly a year before the FinCEN action.³ The same three cases that were investigated by KPMG and disclosed to the Andorran regulator were the same three cases cited by FinCEN in its notice a year later, without any acknowledgment that it was BPA that had reported these incidents.
• So Much for the Accountants: The Cierco family, as shareholders, and Ramon and Higini Cierco, as Co-Chairmen and members of the Board of Directors, relied on audits from KPMG and Deloitte that approved BPA's money laundering policies and procedures every year for over a decade. In addition, BPA's AML program was certified by the Andorran regulator in 2009 and 2012.
  • Maria Cosan Can't Have it Both Ways: BPA relied on KPMG to be the experts to review and analyze processes underway at the bank as well as their accounts to ensure they were compliant with international AML standards. Shockingly, Maria Cosan, now the head of INAF, approved BPA's annual audits as a KPMG employee. Marie Cosan, the Director of INAF, was fully aware of the three cases cited by FinCEN in 2012. KPMGs 2012 audit of BPA was scrutinized and approved by the most senior KPMG executives, including their Global Head of Anti Money Laundering for Europe, Africa, and the Middle East. To this day, the Ciercos are extremely troubled that KPMG does not seek to bring forward the information regarding which the Ciercos engaged them to research and prepare reports. If KPMG does not stand behind its work when actions are taken that KPMG's report makes clear are wrongful it brings into question the value of anyone seeking such consulting and outside review.
• Sacrificial Lamb and Diplomatic Loose Lips: Of particular embarrassment to the US Government, it is clear that the action against BPA was not about the bank, and more about the fact that the US could not require Andorra to pass US style anti-money laundering laws and regulations. This was an intragovernmental matter and BPA was a sacrificial lamb in a dispute between sovereigns about appropriate money laundering policy.
  • Anton Smith, Economic Counselor at the US Embassy to Spain said it himself, that after the U.S. signaled their discomfort with the system they had to "use the the hammer" against BPA. The hammer was the 311 Notice, reflecting, in diplomatic speak, Andorra's refusal to be responsive to US requests for action on its banking sector.⁴
• When Caught, First Lie, then cover it up and finally say it was all a misunderstanding: When confronted with Anton Smith's slip of the tongue, the U.S. Embassy in Madrid put out his prepared speech that did not have the 'hammer' comments and said no such comments were made. The team working for the Ciercos unearthed the video⁴ of his speech and had it translated. The Embassy then had no comment. Then it walked back the comments as misunderstood. These statements belie the disingenuous arguments that FinCEN made in Court that Andorra's actions were the result of independent sovereign action and were not directly "traceable" to FinCEN's Notices.
• Where's the Beef? The U.S. Government working behind the scenes without review, above judicial accountability and in coordination with Andorran and Spanish regulators launched a haphazard, irresponsible media frenzy designating BPA as a primary money launderer. As mentioned all of the accounts publicized by FinCEN and the others were all well known and being dealt with in the appropriate manner.
  • Came up Empty: The Andorran Government, embarrassed that their only evidence was accounts the bank had reported to it a year earlier and were also reviewed and cleared by AML experts at KPMG, brought in PwC to conduct a massive audit of the bank that lasted for almost a year. Roughly 100 accountants were flown in or scattered around their international network scouring through the bank records charging tens of millions of dollars. What did they find? Obviously nothing of note as nothing has been released to help the agency regain a shred of their credibility. PwC has refused repeated requests by the Ciercos to have access to the report.
• FinCEN runs away at night: The agency waits until late on a Friday news cycle to rescind its Section 311 Notices claiming that they were satisfied with the actions taken by the Andorran Government. It is beyond ironic that FinCEN has justified its action in withdrawing its notices by pointing to the substantial 'good assets' of BPA. Had FinCEN considered those 'good assets' at the beginning of this process, as it was required to do by law, it would never have issued the 311 notices.
  • Why so Quick? In the history of FinCEN issuing 311 notices, they have never acted so quickly in the case of Banca Privada d'Andorra to withdraw a 311 designation⁵. EVER. The chart linked below demonstrates that the fastest time to rescind an order is BPA at 11 months. Most notices are not withdrawn until the bank has been completely sold off many years after the notice. In this case they dropped their charge and acceded to the Ciercos demand to stop this ridiculous effort to destroy their bank just to retain their professional credibility and statutory power.
  • Vall Banc is BPA!: The 311 notice should have never been filed, and had FinCEN considered the legitimate business of the bank, which it didn't, BPA never could have been shut down. In fact FinCEN's claim that, because of the efforts of AREB to transfer the good assets of the bank to Vall Banc, BPA is now clean is incoherent. Vall Banc is BPA! In fact, the assets of BPA have not been transferred to Vall Banc, and remain BPA's property. Because BPA was clean, Vall Banc can be clean. It was wrong and illegal to expropriate a clean bank.
• High Fives and Pats on the Back for Andorra!? FinCEN shamelessly applauds the efforts of Andorra in their withdrawal notice. The level of incompetence and complete subversion of Andorra's rule of law is galling. BPA was illegally expropriated by the state without any evidence of wrongdoing, any due process for the accused, and any accountability for the policymakers and regulators who got it wrong.
  • Andorra failed to share the March 2014 letter with FinCEN and failed to tell FinCEN that BPA had indeed reported these incidents and taken all necessary action. In other words, it appears that FinCEN took its action based upon an egregious failure to disclose by Andorra, leading FinCEN to the conclusion that BPA was hiding money laundering rather than the opposite and correct position—that BPA was proactive in reporting incidents for regulatory follow up.
  • Andorran authorities failed to inform FinCEN that since 2014 they were aware of the three incidents referenced in FinCEN¹s 311 notice.
  • FinCEN "used the hammer" on BPA because Andorra would not agree to impose certain limitation on cash transactions for the system as a whole and Andorra was unresponsive. Faced with the shutdown of the whole system because of their failure to cooperate, Andorran regulators acted by fiat to save themselves from further scrutiny, and pointed to FinCEN every time an attempt at reason were made by the Ciercos. Andorra has stated publicly it is powerless to act against the dictates of FinCEN. Now FinCEN has backed down. It is time to set things right.
• Time for Justice: Given FinCEN's reversal, the Ciercos demand that INAF immediately halt its unjustified proceedings in transferring any assets to Vall Banc, and pursue remedial negotiations that achieve justice and fairness for the Cierco family. The "clean assets" of BPA, proposed to be sent to Vall Banc, should be restored to the Ciercos, the rightful and innocent majority shareholders of BPA.
• It has been nearly one year and the Ciercos, the employees of BPA, the people of Andorra, and the global financial community have a right to know why this drastic action was taken against a law abiding financial institution.
  • At the time of its shutdown BPA had a value of 600 million Euros. Andorra now puts a negative value on the bank, so that it can justify its wasting of assets on fruitless searches for money laundering activities and a low-ball sale to Andorran government cronies who will cooperate in covering up what happened.
  • Over the course of this year, the Ciercos have sought to have all the stakeholders cooperate in salvaging value for this institution on behalf of its depositors, employees and shareholders. The Ciercos have put forward three alternative proposals to prevent Andorra from squandering the resources of the bank while avoiding responsibility for their role in destroying BPA. The Ciercos have asked for the support of FinCEN in achieving a responsible resolution. The Ciercos are still willing to engage in a transparent and constructive process that respects all legitimate regulatory goals while doing justice to all stakeholders, including the innocent employees and depositors of BPA.

¹ Reply in Support of Motion to Dismiss by Defendants Jacob Lew, U.S. Department of the Treasury, Jennifer Shasky Calvery, and the Financial Crimes Enforcement Network - https://www.scribd.com/doc/299871631/REPLY-IN-SUPPORT-OF-MOTION-TO-DISMISS-BY-DEFENDANTS-JACOB-LEW-U-S-DEPARTMENT-OF-THE-TREASURY-JENNIFER-SHASKY-CALVERY-AND-THE-FINANCIAL-CRIMES-ENFO
² FinCEN Names Banca Privada d'Andorra a Foreign Financial Institution of Primary Money Laundering Concern, March 10, 2015
https://www.fincen.gov/news_room/nr/pdf/20150310.pdf
³ March 24, 2014 Self Reporting Letter from BPA to INAF
⁴ Anton Smith en Foro Internacional antiblaqueo de capitales de Ausbanc, May 25, 2015 https://www.youtube.com/watch?v=j2aPNwxlp-w&feature=youtu.be
⁵ Special Measures for Jurisdictions, Financial Institutions, or International Transactions of Primary Money Laundering Concern https://www.fincen.gov/statutes_regs/patriot/section311.html