Non-U.S. banks that maintain correspondent accounts in the United States face the prospect of significantly broader subpoenas from the Department of Justice (“DOJ”) and the Department of Treasury (“Treasury”) as a result of the newly passed Anti-Money Laundering Act of 2020 (“AMLA”). The AMLA became law on January 1, 2021 as part of the National Defense Authorization Act of 2021 (“NDAA”). Among its many changes to existing law, the AMLA allows the DOJ and Treasury to subpoena non-U.S. banks that have U.S. correspondent accounts for records relating to any account held at the bank, including records maintained outside of the United States that do not relate to the U.S. correspondent account. The DOJ and Treasury can issue these subpoenas not just in money laundering investigations but in any criminal investigation or civil forfeiture action.
These new subpoenas represent a major expansion of the DOJ and Treasury’s investigative reach, but they are not without limitations. We examine below the expanded subpoena authority under the AMLA, as well as potential ways in which non-U.S. banks can seek to limit or quash these subpoenas.
Background
Correspondent accounts are accounts established by U.S. financial institutions for non-U.S. banks to receive deposits from, make payments on behalf of, or handle other financial transactions related to the non-U.S. bank. Correspondent accounts enable non-U.S. banks to conduct business in the United States even if they have no physical presence in the United States. This allows the non-U.S. bank’s customers to receive many of the same services offered by a U.S. bank without becoming a direct client of the U.S. bank.
Correspondent banking relationships have long been thought to carry significant money laundering risks. In enacting the USA Patriot Act of 2001, Congress identified correspondent accounts as “susceptible in some circumstances to manipulation by foreign banks to permit the laundering of funds by hiding the identity of real parties in interest to financial transactions.” Indeed, the use of correspondent accounts to hide illicit sources of funds is often a central aspect of money laundering and other white collar enforcement investigations.
Under the Patriot Act, the DOJ and Treasury could issue subpoenas to non-U.S. banks with correspondent accounts in the United States, but only for “records related to such correspondent account, including records maintained outside of the United States relating to the deposit of funds into the foreign bank.” However, the DOJ and Treasury could not subpoena records relating to the non-U.S. bank’s other accounts.
Expanded Subpoena Authority Under the AMLA
The AMLA significantly expands the reach of Patriot Act subpoenas to include not just records of the correspondent account, but records of “any account at the foreign bank, including records maintained outside of the United States.” The only limitation on the face of the statute is that the records subpoenaed must be the subject of an investigation into violations of the Bank Secrecy Act or any U.S. criminal law, a civil forfeiture action, or an investigation pursuant to 31 U.S.C. § 5318A (which pertains to jurisdictions, financial institutions, accounts, and transactions “of primary money laundering concern”).
In addition, the AMLA expressly prohibits non-U.S. banks and their agents and employees from notifying the non-U.S. banks’ customer or any person named in a subpoena about the subpoena’s existence or contents. Violations of this prohibition are subject to steep penalties of double the amount of “suspected criminal proceeds sent through the correspondent account” or, if no suspected criminal proceeds can be identified, up to $250,000. Subpoenaed banks may seek relief from this prohibition on disclosure from the U.S. district court in the district in which the investigation is proceeding.
The AMLA provides that a non-U.S. bank that does not comply with a subpoena may be liable for a civil penalty of up to $50,000 per day of noncompliance, with additional penalties if noncompliance continues beyond 60 days. In addition, noncompliance may result in the DOJ or Treasury terminating the correspondent banking relationship by written notice to the U.S. bank providing the correspondent banking services.
Limitations on These Subpoenas
While the AMLA greatly expands the DOJ and Treasury’s authority to subpoena non-U.S. bank records located abroad, prosecutors do not have carte-blanche to use these subpoenas to pursue worldwide fishing expeditions. As an initial matter, the DOJ’s use of these subpoenas is subject to institutional checks. The DOJ’s Justice Manual requires federal prosecutors to obtain written...
