April 26, 2013 –
2 Lebanese exchange houses named Foreign Financial Institutions of Primary Money Laundering Concern

On April 23, 2013 the U.S. Department of the Treasury (the “Treasury”) named two (2) Lebanese exchange houses, Kassem Rmeiti & Co. For Exchange (“Rmeiti Exchange”) and Halawi Exchange Co. (“Halawi Exchange”), as foreign financial institutions of primary money laundering concern pursuant to Section 311 of the USA Patriot Act (“Section 311”).  This marks the first time that the Treasury has used Section 311 against a non-bank financial institution.

In conjunction with the Section 311 designation of Rmeiti Exchange and Halawi Exchange, Treasury’s Financial Crimes Enforcement Network (“FinCEN”) also issued an order, effective immediately and with a 120-day duration, that requires U.S. financial institutions to report information on any new or attempted transactions by Rmeiti Exchange and Halawi Exchange.  Treasury also issued notices of proposed rulemaking that, if adopted as final rules, would continue the reporting requirement imposed by the order and prohibit any U.S. financial institution from opening or maintaining a correspondent or payable-through account that is used to process a transaction that involves Rmeiti Exchange and Halawi Exchange, effectively cutting off these exchanges from the U.S. financial system. As a condition thereof, the proposed rules require that financial institutions notify their correspondent account relationships that they may not provide Rmeiti Exchange or Halawi Exchange with access to their correspondent account and must implement appropriate risk-based procedures to identify transactions involving these parties.

According to the Notice of Finding (“Finding”) issued by the Treasury, Rmeiti Exchange and Halawi Exchange used their foreign money transmitter businesses to process millions of dollars on behalf of narcotics traffickers and money launderers, and attempted to obfuscate the source of illicit funds by commingling or splitting transactions across a variety of businesses, financial institutions, and continents, including in the United States.

As a result of the foregoing, financial institutions may need to update and enhance their compliance programs to identify, detect, deter and report existing and future transactions involving Rmeiti Exchange or Halawi Exchange.  Moreover, financial institutions should consider notifying their correspondent account relationships in conformance with the special due diligence requirements imposed by the proposed rules.

Read the Notice of Proposed Rulemaking against Halawi Exchange

Read the Notice of Proposed Rulemaking against Rmeiti Exchange

Read the Findings against Halawi Exchange

Read the Findings against Rmeiti Exchange

Read the Order imposing Section 311 Special Measure One against Halawi Exchange

Read the Order imposing Section 311 Special Measure One against Rmeiti Exchange

For more information regarding the aforementioned Section 311 designation and the ensuing updates and enhancements to an institution’s compliance program that are required as a result thereof, please contact Andres Fernandez or Gabriel Caballero.