Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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3/20/2006 Fifth Special Measure Imposed Against Commercial Bank of Syria
The Financial Crimes Enforcement Network has finalized a rule against the Commercial Bank of Syria, and its subsidiary, the Syrian Lebanese Commercial Bank, which are institutions of primary money laundering concern. The rule will be effective April 14, 2006, and imposes the fifth special measure against the banks.  Syria has reportedly switched its foreign currency transactions to euros from U.S. dollars to avoid possible settlement problems involving dollar payment systems, apparently in anticipation of FinCEN’s action. Most of the Syrian government’s foreign currency transactions are conducted through the Commercial Bank of Syria. Since 2004, when the Commercial Bank was listed as a primary money laundering concern and the special measure under 31 U.S.C. 5318A(b) was proposed, other financial institutions, particularly private banks, have been established in Syria to engage in international transactions. FinCEN will undoubtedly be reviewing these institutions to determine if some are picking up the money laundering activity formerly conducted through the Commercial Bank of Syria.  Covered financial institutions (which include most banks, broker-dealers, FCMs and introducing brokers, and mutual funds) are to notify correspondent account holders that an account may not be used to provide the Commercial Bank of Syria with access to the covered financial institution.  This notice requirement may be satisfied by sending the following notice to correspondent account holders:
Notice: Pursuant to U.S. regulations issued under section 311 of the USA PATRIOT Act, 31 CFR 103.188, we are prohibited from opening or maintaining a correspondent account for, or on behalf of, Commercial Bank of Syria or any of its subsidiaries (including Syrian Lebanese Commercial Bank). The regulations also require us to notify you that your correspondent account with our financial institution may not be used to provide Commercial Bank of Syria or any of its subsidiaries with access to our financial institution. If we become aware that Commercial Bank of Syria or any of its subsidiaries is indirectly using the correspondent account you hold at our financial institution, we will be required to take appropriate steps to prevent such access, including terminating your account.
The notice can be sent by mail, fax, or email. FinCEN does not “require or expect a covered financial institution to obtain a certification” from a correspondent account holder that it will not provide indirect access.  This development will be discussed in the May issue of the Monitor.

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