Finding That the Lebanese Canadian Bank SAL Is a Financial Institution of Primary Money Laundering Concern, 9403-9406 [2011-3346]

Download as PDF Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices use, including interim trail use. Any request for a public use condition under 49 CFR 1152.28 or for trail use/rail banking under 49 CFR 1152.29 will be due no later than March 9, 2011. Each trail use request must be accompanied by a $250 filing fee. See 49 CFR 1002.2(f)(27). All filings in response to this notice must refer to Docket No. AB 1053 (SubNo. 1X), and must be sent to: (1) Surface Transportation Board, 395 E Street, S.W., Washington, DC 20423–0001; and (2) W. Robert Alderson, 2101 S.W. 21st Street, Topeka, KS 66604. Replies to MAL Railway’s petition are due on or before March 9, 2011. Persons seeking further information concerning abandonment procedures may contact the Board’s Office of Public Assistance, Governmental Affairs, and Compliance at (202) 245–0238 or refer to the full abandonment or discontinuance regulations at 49 CFR pt. 1152. Questions concerning environmental issues may be directed to the Board’s Office of Environmental Analysis (OEA) at (202) 245–0305. Assistance for the hearing impaired is available through the Federal Information Relay Service (FIRS) at 1– 800–877–8339. An Environmental Assessment (EA) (or Environmental Impact Statement (EIS), if necessary) prepared by OEA will be served upon all parties of record and upon any agencies or other persons who commented during its preparation. Other interested persons may contact OEA to obtain a copy of the EA (or EIS). EAs in these abandonment proceedings normally will be made available within 60 days of the filing of the petition. The deadline for submission of comments on the EA will generally be within 30 days of its service. Board decisions and notices are available on our Web site at https:// www.stb.dot.gov. Decided: February 11, 2011. By the Board, Rachel D. Campbell, Director, Office of Proceedings. Jeffrey Herzig, Clearance Clerk. [FR Doc. 2011–3597 Filed 2–16–11; 8:45 am] BILLING CODE 4915–01–P DEPARTMENT OF THE TREASURY jlentini on DSKJ8SOYB1PROD with NOTICES Financial Crimes Enforcement Network Finding That the Lebanese Canadian Bank SAL Is a Financial Institution of Primary Money Laundering Concern Financial Crimes Enforcement Network, Treasury (‘‘FinCEN’’), Treasury. AGENCY: VerDate Mar<15>2010 16:38 Feb 16, 2011 Jkt 223001 ACTION: Notice of finding. Pursuant to the authority contained in 31 U.S.C. 5318A, the Secretary of the Treasury, through his delegate, the Director of FinCEN, finds that reasonable grounds exist for concluding that the Lebanese Canadian Bank SAL (‘‘LCB’’) is a financial institution of primary money laundering concern. DATES: The finding made in this notice is effective as of February 17, 2011. FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs Division, FinCEN, (800) 949–2732. SUPPLEMENTARY INFORMATION: SUMMARY: I. Background A. Statutory Provisions On October 26, 2001, the President signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the ‘‘USA PATRIOT Act’’), Public Law 107– 56. Title III of the USA PATRIOT Act amended the anti-money laundering provisions of the Bank Secrecy Act (‘‘BSA’’), codified at 12 U.S.C. 1829b, 12 U.S.C. 1951–1959, and 31 U.S.C. 5311– 5314 and 5316–5332, to promote the prevention, detection, and prosecution of international money laundering and the financing of terrorism. Regulations implementing the BSA appear at 31 CFR part 103. The authority of the Secretary of the Treasury (the ‘‘Secretary’’) to administer the BSA and its implementing regulations has been delegated to the Director of FinCEN.1 Section 311 of the USA PATRIOT Act (‘‘section 311’’) added section 5318A to the BSA, granting the Secretary the authority, upon finding that reasonable grounds exist for concluding that a foreign jurisdiction, institution, class of transaction, or type of account is of ‘‘primary money laundering concern,’’ to require domestic financial institutions and financial agencies to take certain ‘‘special measures’’ against the primary money laundering concern. Section 311, as amended, identifies factors for the Secretary to consider and Federal agencies to consult before the Secretary may conclude that a jurisdiction, institution, class of transaction, or type of account is of primary money laundering concern. The statute also provides similar procedures, i.e., factors and consultation requirements, for selecting the specific special measures 1 Therefore, references to the authority of the Secretary of the Treasury under section 311 of the USA PATRIOT Act apply equally to the Director of FinCEN. PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 9403 to be imposed against the primary money laundering concern. Taken as a whole, section 311 provides the Secretary with a range of options that can be adapted to target specific money laundering and terrorist financing concerns most effectively. These options give the Secretary the authority to bring additional pressure on those jurisdictions and institutions that pose money laundering threats. Through the imposition of various special measures, the Secretary can gain more information about the jurisdictions, institutions, transactions, or accounts of concern; can more effectively monitor the respective jurisdictions, institutions, transactions, or accounts; or can protect U.S. financial institutions from involvement with jurisdictions, institutions, transactions, or accounts that are of money laundering concern. Before making a finding that reasonable grounds exist for concluding that a foreign financial institution is of primary money laundering concern, the Secretary is required to consult with the both the Secretary of State and the Attorney General. The Secretary is also required by section 311 to consider ‘‘such information as the Secretary determines to be relevant, including the following potentially relevant factors’’: • The extent to which such financial institution is used to facilitate or promote money laundering in or through the jurisdiction; • The extent to which such financial institution is used for legitimate business purposes in the jurisdiction; and • The extent to which the finding that the institution is of primary money laundering concern is sufficient to ensure, with respect to transactions involving the institution operating in the jurisdiction, that the purposes of the BSA continue to be fulfilled, and to guard against international money laundering and other financial crimes. If the Secretary determines that reasonable grounds exist for concluding that a foreign financial institution is of primary money laundering concern, the Secretary must determine the appropriate special measure(s) to address the specific money laundering risks. Section 311 provides a range of special measures that can be imposed individually, jointly, in any combination, and in any sequence.2 The 2 Available special measures include requiring: (1) Recordkeeping and reporting of certain financial transactions; (2) collection of information relating to beneficial ownership; (3) collection of information relating to certain payable-through accounts; (4) collection of information relating to certain correspondent accounts; and (5) prohibition or E:\FR\FM\17FEN1.SGM Continued 17FEN1 9404 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices Secretary’s imposition of special measures requires additional consultations to be made and factors to be considered. The statute requires the Secretary to consult with appropriate federal agencies and other interested parties 3 and to consider the following specific factors: • Whether similar action has been or is being taken by other nations or multilateral groups; • Whether the imposition of any particular special measures would create a significant competitive disadvantage, including any undue cost or burden associated with compliance, for financial institutions organized or licensed in the United States; • The extent to which the action or the timing of the action would have a significant adverse systemic impact on the international payment, clearance, and settlement system, or on legitimate business activities involving the particular institution; and • The effect of the action on the United States national security and foreign policy.4 jlentini on DSKJ8SOYB1PROD with NOTICES B. The Lebanese Canadian Bank SAL The Lebanese Canadian Bank SAL (‘‘LCB’’) is based in Beirut, Lebanon, and maintains a network of 35 branches in Lebanon and a representative office in Montreal, Canada. The bank is eighth largest among Lebanese banks in assets and has over 600 employees. Originally established in 1960 as Banque des Activities Economiques SAL, it operated as a subsidiary of the Royal Bank of Canada Middle East (1968–1988) and is now a privately owned bank. LCB offers a broad range of corporate, retail, and investment products, and maintains conditions on the opening or maintaining of correspondent or payable through accounts. 31 U.S.C. 5318A(b)(l)–(5). For a complete discussion of the range of possible countermeasures, see 68 FR 18917 (April 17, 2003) (proposing special measures against Nauru). 3 Section 5318A(a)(4)(A) requires the Secretary to consult with the Chairman of the Board of Governors of the Federal Reserve System, any other appropriate Federal banking agency, the Secretary of State, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the National Credit Union Administration (NCUA), and, in the sole discretion of the Secretary, ‘‘such other agencies and interested parties as the Secretary may find to be appropriate.’’ The consultation process must also include the Attorney General if the Secretary is considering prohibiting or imposing conditions on domestic financial institutions opening or maintaining correspondent account relationships with the designated jurisdiction. 4 Classified information used in support of a section 311 finding and measure(s) may be submitted by Treasury to a reviewing court ex parte and in camera. See section 376 of the Intelligence Authorization Act for fiscal year 2004, Public Law 108–177 (amending 31 U.S.C. 5318A by adding new paragraph (f)). VerDate Mar<15>2010 16:38 Feb 16, 2011 Jkt 223001 extensive correspondent accounts with banks worldwide, including several U.S. financial institutions. As of 2009 LCB’s total assets were worth over $5 billion.5 LCB has a controlling financial interest in a number of subsidiaries, including LCB Investments (Holding) SAL, LCB Finance SAL, LCB Estates SAL, LCB Insurance Brokerage House SAL, and Dubai-based Tabadul for Shares and Bonds LLC. Additionally, LCB is the majority shareholder of Prime Bank Limited, a private commercial bank and the LCB subsidiary located in Serrekunda, Gambia.6 LCB owns 51% of Prime Bank while the remaining shares are held by local and Lebanese partners. LCB apparently serves as the sole correspondent bank for Prime Bank.7 For purposes of this document and unless expressly stated otherwise, references to LCB include the aforementioned subsidiaries. C. Lebanon Lebanon is a financial hub for banking activities in the Middle East and eastern Mediterranean and has one of the more sophisticated banking sectors in the region. There are 66 banks incorporated in Lebanon,8 and all major banks have correspondent relationships with U.S. financial institutions. The five largest commercial banks account for roughly 60% of total banking assets, estimated at $125 billion.9 According to Treasury information, strong economic growth and a steady flow of diaspora deposits in recent years have helped the Lebanese banking system to maintain relatively robust lending, improve asset quality, and maintain adequate liquidity and capitalization positions. However, banks remain highly exposed to the heavily indebted sovereign, carry significant currency risk on their balance sheets, and operate in a volatile political security environment. Lebanon also faces money laundering and terrorist financing vulnerabilities, according to the International Narcotics Control Strategy Report (‘‘INCSR’’) published in March 2010 by the U.S. Department of State.10 Of particular relevance is the possibility that a portion of the substantial flow of remittances from the Lebanese diaspora, 5 Lebanese Canadian Bank, 2009 Annual Report. 6 Id. 7 https://primebankgambia.gm/index. 8 ‘‘Complete List of Operating Banks in Lebanon,’’ Banque du Liban (https://www.bdl.gov.lb). 9 2010 Index of Economic Freedom, The Heritage Foundation (https://www.heritage.org/index/ country/lebanon). 10 The 2010 International Narcotics Control Strategy Report (‘‘INCSR’’), Lebanon, pp 151–154 (https://www.state.gov/g/inl/rls/nrcrpt/2010/vol2/ 137212.htm). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 estimated at $7 billion—21% of GDP— in 2009, according to the World Bank,11 could be associated with underground finance and Trade-Based Money Laundering (‘‘TBML’’) activities. Laundered criminal proceeds come primarily from Lebanese criminal activity and organized crime.12 Lebanon’s Customs Authority (‘‘Customs’’) supervises two free trade zones operating in the country. However, high levels of corruption within Customs create vulnerabilities for TBML and other threats. Moreover, Lebanon has no cross-border currency reporting requirements, resulting in a significant cash-smuggling vulnerability. Finally, Lebanon has not acceded to the UN Convention for the Suppression of the Financing of Terrorism, though it has adopted laws domestically criminalizing any funds resulting from the financing or contribution to the financing of terrorism.13 However, such laws do not apply to Hizballah, which Lebanon considers to be a legitimate political party and resistance organization, and it is not subject to Lebanese anti-terrorist financing laws. The United States Government (‘‘USG’’) designated Hizballah as a Foreign Terrorist Organization on October 8, 1997. Additionally, on October 31, 2001, Hizballah was designated by the USG as a Specially Designated Global Terrorist under Executive Order 13224.14 II. Analysis of Factors Based upon a review and analysis of the administrative record in this matter, consultations with relevant Federal agencies and departments, and after consideration of the factors enumerated in section 311, the Director of FinCEN has determined that LCB is a financial institution of primary money laundering concern. FinCEN has reason to believe that LCB has been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa, and the Middle East; that Hizballah derived financial support from the criminal activities of this network; and that LCB managers are complicit in the network’s 11 The Daily Star, ‘‘2009 Remittances to Lebanon Reach $7 Billion,’’ November 10, 2009. 12 2010 INCSR. 13 For additional information about Lebanon’s legal framework and special mechanisms for antimoney laundering and terrorist financing measures, see The Middle East and North Africa Financial Task Force (MENAFATF) Mutual Evaluation Report, Lebanese Republic, November 10, 2009 (https://www.menafatf.org). 14 Hizballah is a Lebanon-based terrorist group. Until September 11, 2001, Hizballah was responsible for more American deaths than any other terrorist organization. E:\FR\FM\17FEN1.SGM 17FEN1 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices money laundering activities. A discussion of the factors relevant to this finding follows: jlentini on DSKJ8SOYB1PROD with NOTICES 1. The Extent to Which LCB Has Been Used To Facilitate or Promote Money Laundering in or Through the Jurisdiction The USG has information through law enforcement and other sources indicating that LCB—through management complicity, failure of internal controls, and lack of application of prudent banking standards—has been used extensively by persons associated with international drug trafficking and money laundering. According to this information, this international drug trafficking and money laundering network generally moves illegal drugs from South America to Europe and the Middle East via West Africa, with proceeds laundered through the Lebanese financial system, as well as through TBML involving used cars and consumer goods.15 Specifically, individuals mentioned below 16 (with the assistance of close family members who are key participants in the global drug trafficking and money laundering network) are known to hold or utilize cash deposit accounts at LCB to move hundreds of millions of dollars monthly in cash proceeds from illicit drug sales into the formal financial system, as well as to coordinate the laundering of these funds through key foreign nodes of the network using LCB accounts. The bank’s involvement in money laundering is attributable to failure to adequately control transactions that are highly vulnerable to criminal exploitation, including cash deposits and crossborder wire transfers, inadequate due diligence on high-risk customers like exchange houses, and, in some cases, complicity in the laundering activity by LCB managers. For example, in this global narcomoney laundering network, U.S.designated Ayman Joumaa 17 has 15 For more information on Trade-Based Money Laundering, see ‘‘Advisory to Financial Institutions on Filing Suspicious Activity Reports regarding Trade-Based Money Laundering,’’ Financial Crimes Enforcement Network, FIN02010–A001, February 18, 2010. https://www.fincen.gov/ financial_institutions/advisory.html. 16 These individuals are referred to by name and/ or solely by letter reference (i.e., Individual A, B, C, etc.) depending on the sensitivity of the source. 17 On January 26, 2011, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated members and connected entities of the Ayman Joumaa drug trafficking and money laundering network, as Specially Designated Narcotics Traffickers due to their significant roles in international narcotics trafficking. This action, pursuant to the Foreign Narcotics Kingpin Designations Act (Kingpin Act), prohibits U.S. VerDate Mar<15>2010 16:38 Feb 16, 2011 Jkt 223001 coordinated the transportation, distribution, and sale of multi-ton bulk shipments of cocaine from South America, and laundered the proceeds— as much as $200 million per month— from the sale of cocaine in Europe and the Middle East. In this criminal scheme, the proceeds have been laundered through various methods, including bulk cash smuggling operations and use of several Lebanese exchange houses that utilize accounts at LCB branches managed by family members of other participants in the global money laundering network. Specifically, Ayman Joumaa deposits bulk cash into multiple exchange houses, including the one that he owns, which then deposit the currency into their LCB accounts. He or the exchange houses then instruct LCB to perform wire transfers in furtherance of one of two TBML schemes. For example, some of the funds move to LCB’s U.S. correspondent accounts via suspiciously structured electronic wire transfers to multiple U.S.-based used car dealerships—some of which are operated by individuals who have been separately identified in drug-related investigations. The recipients use the funds to purchase vehicles in the United States, which are then shipped to West Africa and/or other overseas destinations, with the proceeds ultimately repatriated back to Lebanon. Other funds are sent through LCB’s U.S. correspondent accounts to pay Asian suppliers of consumer goods, which are shipped to Latin America and sold and the proceeds are laundered through a scheme known as the Black Market Peso Exchange, in each case through other individuals referred to in this finding or via companies owned or controlled by them. According to USG information, Hizballah derived financial support from the criminal activities of Joumaa’s network. With respect to the exchanges and companies related to Ayman Joumaa, numerous instances indicate that substantial amounts of illicit funds may have passed through LCB. Since January 2006, hundreds of records with a cumulative equivalent value of $66.4 million identified a Lebanese bank that originated the transfer; approximately half of those were originated by LCB, for a cumulative equivalent value of $66.2 million, or 94%, thus, indicating that LCB probably is the favored bank for these exchange houses, particularly in the context of illicit banking activity. persons from conducting financial or commercial transactions with these entities and individuals and freezes any assets the designees may have under U.S. jurisdiction. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 9405 Similarly, a review of all dollardenominated wire transfers with the two primary exchange houses either as sender or receiver between January 2004 and December 2008 showed 72% originated by one of the exchange houses through LCB. Individual A, who owns a wide network of companies manufacturing or procuring consumer goods in Asia, Europe, and the Middle East, the Caribbean, and Lebanon, participates in this money laundering scheme by providing the consumer goods that are used for TBML, as described above. Despite his business being based in Asia, he is believed to have centralized his banking operations in Lebanon, particularly through the use of over 30 accounts at LCB. USG information shows Individual A receiving funds in his accounts from Ayman Joumaa, and exchanging funds with Latin American members of the network discussed below. Individual A is known to be in near daily communication with the bank from his professional base in Southeast Asia. Individual B, based in Latin America, is part of a Lebanese drug trafficking organization that moves large quantities of drugs from Latin America to destinations throughout Africa, Europe, and the Middle East. For over a decade, Individual B and his family have been involved in a variety of TBML schemes with Latin American drug traffickers and Lebanese money launderers. In the criminal schemes, the individuals deposit the local currency proceeds from the sale of imported consumer goods to the accounts of local banks and convert them to hard currency. This completes the Latin America-based Black Market Peso Exchange money laundering cycle, and allows for the repatriation of proceeds for the Latin American drug producers. Individual B then uses accounts at LCB to exchange the funds—usually in suspiciously structured amounts—with previously mentioned individuals and other suspected criminals as part of the global money laundering network. Information available to the USG suggests that Individual B and his family members are supporters of Hizballah. Additionally, USG information indicates that Individual C, connected to both drug trafficking and money laundering, has established a money exchange house in the same building as a key LCB branch. This exchange uses its LCB accounts to deposit bulk cash proceeds of drug sales and then wires the proceeds to U.S.-based used car dealers. Individuals managing this and another LCB branch—each of which houses key accounts accepting bulk E:\FR\FM\17FEN1.SGM 17FEN1 9406 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices cash from exchange houses or wiring funds for the TBML schemes described above—are family members of one of the aforementioned individuals running Asia-based TBML activities. At least one of these individuals has family relationships and personal contact with key LCB managers, in some cases working directly with those managers to conduct his transactions. The USG has information indicating that a minority owner of the bank, who concurrently serves as General Manager, his deputy, and the managers of key branches are in frequent—in some cases even daily—communication with various members of the aforementioned drug trafficking and money laundering network, and they personally process transactions on the network’s behalf. Additionally, LCB managers are linked to Hizballah officials outside Lebanon. For example, Hizballah’s Tehran-based envoy Abdallah Safieddine is involved in Iranian officials’ access to LCB and key LCB managers, who provide them banking services. Finally, information available to the U.S. Government indicates that LCB’s subsidiary, Gambia-based Prime Bank, is partially owned by a Lebanese individual known to be a supporter of Hizballah. In addition to Gambian nationals, Prime Bank serves Iranian and Lebanese clientele throughout West Africa. jlentini on DSKJ8SOYB1PROD with NOTICES 2. The Extent to Which LCB Is Used for Legitimate Business Purposes in the Jurisdiction LCB is one of 49 mostly private Lebanese banks that make up Lebanon’s financial sector. LCB has maintained modest but steady growth since 2000, with total assets of more than $5 billion in 2009.18 LCB also appears to be aware of the risk posed by money laundering, as noted in its Anti-Money Laundering Policy Statement.19 A publicly available source also indicates that U.S. financial institutions maintain correspondent relationships with LCB,20 and it is likely that a high volume of those transactions through those accounts is legitimate. However, numerous instances have been identified where substantial volumes of illicit funds have passed through LCB. Thus, any legitimate use of LCB is significantly outweighed by the apparent use of LCB to promote or facilitate money laundering. 18 Lebanese Canadian Bank, 2009 Annual Report. Canadian Bank, AML Policy Statement, https://www.lebcanbank.com. 20 Bankers Almanac, Lebanese Canadian Bank SAL, June 22, 2010 (https:// www.bankersalmanac.com). 19 Lebanese VerDate Mar<15>2010 16:38 Feb 16, 2011 Jkt 223001 3. The Extent to Which Such Action Is Sufficient to Ensure, With Respect to Transactions Involving LCB, That the Purposes of the BSA Continue To Be Fulfilled, and To Guard Against International Money Laundering and Other Financial Crimes As detailed above, FinCEN has reasonable grounds to conclude that LCB is being used to promote or facilitate money laundering, and is, therefore, an institution of primary money laundering concern. Currently, there are no protective measures that specifically target LCB. Thus, finding LCB to be a financial institution of money laundering concern, which would allow consideration by the Secretary of special measures to be imposed on the institution under Section 311, is a necessary first step to prevent LCB from facilitating money laundering or other financial crime through the U.S. financial system. The finding of primary money laundering concern will bring criminal conduct occurring at or through LCB to the attention of the international financial community and further limit the bank’s ability to be used for money laundering or other criminal purposes. III. Finding Based on the foregoing factors, the Director of FinCEN hereby finds that the Lebanese Canadian Bank SAL is a financial institution of primary money laundering concern. Dated: February 9, 2011. James H. Freis, Jr., Director, Financial Crimes Enforcement Network. [FR Doc. 2011–3346 Filed 2–16–11; 8:45 am] BILLING CODE 4810–02–P DEPARTMENT OF THE TREASURY Internal Revenue Service [REG–100194–10] Proposed Collection; Comment Request for Regulation Project Internal Revenue Service (IRS), Treasury. ACTION: Notice and request for comments. AGENCY: The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, SUMMARY: PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 Public Law 104–13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning the existing proposed regulations, REG– 100194–10, Specified Tax Return Preparers Required to File Individual Income Tax Returns Using Magnetic Media—Taxpayer Choice Statements. DATES: Written comments should be received on or before April 18, 2011 to be assured of consideration. ADDRESSES: Direct all written comments to Yvette Lawrence, Internal Revenue Service, Room 6129, 1111 Constitution Avenue, NW., Washington, DC 20224. FOR FURTHER INFORMATION CONTACT: Requests for additional information or copies of the regulations should be directed to Ralph M. Terry at Internal Revenue Service, Room 6129, 1111 Constitution Avenue, NW., Washington, DC 20224, or at (202) 622–8144, or through the Internet at Ralph.M.Terry@irs.gov. SUPPLEMENTARY INFORMATION: Title: Specified Tax Return Preparers Required to File Individual Income Tax Returns Using Magnetic Media— Taxpayer Choice Statements OMB Number: 1545–2201. Regulation Project Number: REG– 100194–10. Abstract: This document contains proposed regulations relating to the requirement for ‘‘specified tax return preparers,’’ generally tax return preparers who reasonably expect to file more than 10 individual income tax returns in a calendar year, to file individual income tax returns using magnetic media pursuant to section 6011(e)(3) of the Internal Revenue Code (Code). The proposed regulations reflect changes to the law made by the Worker, Homeownership, and Business Assistance Act of 2009. The proposed regulations affect specified tax return preparers who prepare and file individual income tax returns, as defined in section 6011(e)(3)(C). For calendar year 2011, the proposed regulations define a specified tax return preparer as a tax return preparer who reasonably expects to file (or if the preparer is a member of a firm, the firm’s members in the aggregate reasonably expect to file) 100 or more individual income tax returns during the year, while beginning January 1, 2012 a specified tax return preparer is a tax return preparer who reasonably expects to file (or if the preparer is a member of a firm, the firm’s members in the aggregate reasonably expect to file) 11 or more individual income tax returns in a calendar year. The proposed regulations are unrelated to and are not intended to address the requirements for E:\FR\FM\17FEN1.SGM 17FEN1

Agencies

[Federal Register Volume 76, Number 33 (Thursday, February 17, 2011)]
[Notices]
[Pages 9403-9406]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3346]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network


Finding That the Lebanese Canadian Bank SAL Is a Financial 
Institution of Primary Money Laundering Concern

AGENCY: Financial Crimes Enforcement Network, Treasury (``FinCEN''), 
Treasury.

ACTION: Notice of finding.

-----------------------------------------------------------------------

SUMMARY: Pursuant to the authority contained in 31 U.S.C. 5318A, the 
Secretary of the Treasury, through his delegate, the Director of 
FinCEN, finds that reasonable grounds exist for concluding that the 
Lebanese Canadian Bank SAL (``LCB'') is a financial institution of 
primary money laundering concern.

DATES: The finding made in this notice is effective as of February 17, 
2011.

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, FinCEN, (800) 949-2732.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Provisions

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''), 
Public Law 107-56. Title III of the USA PATRIOT Act amended the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified 
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314 and 
5316-5332, to promote the prevention, detection, and prosecution of 
international money laundering and the financing of terrorism. 
Regulations implementing the BSA appear at 31 CFR part 103. The 
authority of the Secretary of the Treasury (the ``Secretary'') to 
administer the BSA and its implementing regulations has been delegated 
to the Director of FinCEN.\1\
---------------------------------------------------------------------------

    \1\ Therefore, references to the authority of the Secretary of 
the Treasury under section 311 of the USA PATRIOT Act apply equally 
to the Director of FinCEN.
---------------------------------------------------------------------------

    Section 311 of the USA PATRIOT Act (``section 311'') added section 
5318A to the BSA, granting the Secretary the authority, upon finding 
that reasonable grounds exist for concluding that a foreign 
jurisdiction, institution, class of transaction, or type of account is 
of ``primary money laundering concern,'' to require domestic financial 
institutions and financial agencies to take certain ``special 
measures'' against the primary money laundering concern. Section 311, 
as amended, identifies factors for the Secretary to consider and 
Federal agencies to consult before the Secretary may conclude that a 
jurisdiction, institution, class of transaction, or type of account is 
of primary money laundering concern. The statute also provides similar 
procedures, i.e., factors and consultation requirements, for selecting 
the specific special measures to be imposed against the primary money 
laundering concern.
    Taken as a whole, section 311 provides the Secretary with a range 
of options that can be adapted to target specific money laundering and 
terrorist financing concerns most effectively. These options give the 
Secretary the authority to bring additional pressure on those 
jurisdictions and institutions that pose money laundering threats. 
Through the imposition of various special measures, the Secretary can 
gain more information about the jurisdictions, institutions, 
transactions, or accounts of concern; can more effectively monitor the 
respective jurisdictions, institutions, transactions, or accounts; or 
can protect U.S. financial institutions from involvement with 
jurisdictions, institutions, transactions, or accounts that are of 
money laundering concern.
    Before making a finding that reasonable grounds exist for 
concluding that a foreign financial institution is of primary money 
laundering concern, the Secretary is required to consult with the both 
the Secretary of State and the Attorney General. The Secretary is also 
required by section 311 to consider ``such information as the Secretary 
determines to be relevant, including the following potentially relevant 
factors'':
     The extent to which such financial institution is used to 
facilitate or promote money laundering in or through the jurisdiction;
     The extent to which such financial institution is used for 
legitimate business purposes in the jurisdiction; and
     The extent to which the finding that the institution is of 
primary money laundering concern is sufficient to ensure, with respect 
to transactions involving the institution operating in the 
jurisdiction, that the purposes of the BSA continue to be fulfilled, 
and to guard against international money laundering and other financial 
crimes.
    If the Secretary determines that reasonable grounds exist for 
concluding that a foreign financial institution is of primary money 
laundering concern, the Secretary must determine the appropriate 
special measure(s) to address the specific money laundering risks. 
Section 311 provides a range of special measures that can be imposed 
individually, jointly, in any combination, and in any sequence.\2\ The

[[Page 9404]]

Secretary's imposition of special measures requires additional 
consultations to be made and factors to be considered. The statute 
requires the Secretary to consult with appropriate federal agencies and 
other interested parties \3\ and to consider the following specific 
factors:
---------------------------------------------------------------------------

    \2\ Available special measures include requiring: (1) 
Recordkeeping and reporting of certain financial transactions; (2) 
collection of information relating to beneficial ownership; (3) 
collection of information relating to certain payable-through 
accounts; (4) collection of information relating to certain 
correspondent accounts; and (5) prohibition or conditions on the 
opening or maintaining of correspondent or payable through accounts. 
31 U.S.C. 5318A(b)(l)-(5). For a complete discussion of the range of 
possible countermeasures, see 68 FR 18917 (April 17, 2003) 
(proposing special measures against Nauru).
    \3\ Section 5318A(a)(4)(A) requires the Secretary to consult 
with the Chairman of the Board of Governors of the Federal Reserve 
System, any other appropriate Federal banking agency, the Secretary 
of State, the Securities and Exchange Commission (SEC), the 
Commodity Futures Trading Commission (CFTC), the National Credit 
Union Administration (NCUA), and, in the sole discretion of the 
Secretary, ``such other agencies and interested parties as the 
Secretary may find to be appropriate.'' The consultation process 
must also include the Attorney General if the Secretary is 
considering prohibiting or imposing conditions on domestic financial 
institutions opening or maintaining correspondent account 
relationships with the designated jurisdiction.
---------------------------------------------------------------------------

     Whether similar action has been or is being taken by other 
nations or multilateral groups;
     Whether the imposition of any particular special measures 
would create a significant competitive disadvantage, including any 
undue cost or burden associated with compliance, for financial 
institutions organized or licensed in the United States;
     The extent to which the action or the timing of the action 
would have a significant adverse systemic impact on the international 
payment, clearance, and settlement system, or on legitimate business 
activities involving the particular institution; and
     The effect of the action on the United States national 
security and foreign policy.\4\
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    \4\ Classified information used in support of a section 311 
finding and measure(s) may be submitted by Treasury to a reviewing 
court ex parte and in camera. See section 376 of the Intelligence 
Authorization Act for fiscal year 2004, Public Law 108-177 (amending 
31 U.S.C. 5318A by adding new paragraph (f)).
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B. The Lebanese Canadian Bank SAL

    The Lebanese Canadian Bank SAL (``LCB'') is based in Beirut, 
Lebanon, and maintains a network of 35 branches in Lebanon and a 
representative office in Montreal, Canada. The bank is eighth largest 
among Lebanese banks in assets and has over 600 employees. Originally 
established in 1960 as Banque des Activities Economiques SAL, it 
operated as a subsidiary of the Royal Bank of Canada Middle East (1968-
1988) and is now a privately owned bank. LCB offers a broad range of 
corporate, retail, and investment products, and maintains extensive 
correspondent accounts with banks worldwide, including several U.S. 
financial institutions. As of 2009 LCB's total assets were worth over 
$5 billion.\5\
---------------------------------------------------------------------------

    \5\ Lebanese Canadian Bank, 2009 Annual Report.
---------------------------------------------------------------------------

    LCB has a controlling financial interest in a number of 
subsidiaries, including LCB Investments (Holding) SAL, LCB Finance SAL, 
LCB Estates SAL, LCB Insurance Brokerage House SAL, and Dubai-based 
Tabadul for Shares and Bonds LLC. Additionally, LCB is the majority 
shareholder of Prime Bank Limited, a private commercial bank and the 
LCB subsidiary located in Serrekunda, Gambia.\6\ LCB owns 51% of Prime 
Bank while the remaining shares are held by local and Lebanese 
partners. LCB apparently serves as the sole correspondent bank for 
Prime Bank.\7\ For purposes of this document and unless expressly 
stated otherwise, references to LCB include the aforementioned 
subsidiaries.
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    \6\ Id.
    \7\ https://primebankgambia.gm/index.
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C. Lebanon

    Lebanon is a financial hub for banking activities in the Middle 
East and eastern Mediterranean and has one of the more sophisticated 
banking sectors in the region. There are 66 banks incorporated in 
Lebanon,\8\ and all major banks have correspondent relationships with 
U.S. financial institutions. The five largest commercial banks account 
for roughly 60% of total banking assets, estimated at $125 billion.\9\ 
According to Treasury information, strong economic growth and a steady 
flow of diaspora deposits in recent years have helped the Lebanese 
banking system to maintain relatively robust lending, improve asset 
quality, and maintain adequate liquidity and capitalization positions. 
However, banks remain highly exposed to the heavily indebted sovereign, 
carry significant currency risk on their balance sheets, and operate in 
a volatile political security environment.
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    \8\ ``Complete List of Operating Banks in Lebanon,'' Banque du 
Liban (https://www.bdl.gov.lb).
    \9\ 2010 Index of Economic Freedom, The Heritage Foundation 
(https://www.heritage.org/index/country/lebanon).
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    Lebanon also faces money laundering and terrorist financing 
vulnerabilities, according to the International Narcotics Control 
Strategy Report (``INCSR'') published in March 2010 by the U.S. 
Department of State.\10\ Of particular relevance is the possibility 
that a portion of the substantial flow of remittances from the Lebanese 
diaspora, estimated at $7 billion--21% of GDP--in 2009, according to 
the World Bank,\11\ could be associated with underground finance and 
Trade-Based Money Laundering (``TBML'') activities. Laundered criminal 
proceeds come primarily from Lebanese criminal activity and organized 
crime.\12\
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    \10\ The 2010 International Narcotics Control Strategy Report 
(``INCSR''), Lebanon, pp 151-154 (https://www.state.gov/g/inl/rls/nrcrpt/2010/vol2/137212.htm).
    \11\ The Daily Star, ``2009 Remittances to Lebanon Reach $7 
Billion,'' November 10, 2009.
    \12\ 2010 INCSR.
---------------------------------------------------------------------------

    Lebanon's Customs Authority (``Customs'') supervises two free trade 
zones operating in the country. However, high levels of corruption 
within Customs create vulnerabilities for TBML and other threats. 
Moreover, Lebanon has no cross-border currency reporting requirements, 
resulting in a significant cash-smuggling vulnerability. Finally, 
Lebanon has not acceded to the UN Convention for the Suppression of the 
Financing of Terrorism, though it has adopted laws domestically 
criminalizing any funds resulting from the financing or contribution to 
the financing of terrorism.\13\ However, such laws do not apply to 
Hizballah, which Lebanon considers to be a legitimate political party 
and resistance organization, and it is not subject to Lebanese anti-
terrorist financing laws. The United States Government (``USG'') 
designated Hizballah as a Foreign Terrorist Organization on October 8, 
1997. Additionally, on October 31, 2001, Hizballah was designated by 
the USG as a Specially Designated Global Terrorist under Executive 
Order 13224.\14\
---------------------------------------------------------------------------

    \13\ For additional information about Lebanon's legal framework 
and special mechanisms for anti-money laundering and terrorist 
financing measures, see The Middle East and North Africa Financial 
Task Force (MENAFATF) Mutual Evaluation Report, Lebanese Republic, 
November 10, 2009 (https://www.menafatf.org).
    \14\ Hizballah is a Lebanon-based terrorist group. Until 
September 11, 2001, Hizballah was responsible for more American 
deaths than any other terrorist organization.
---------------------------------------------------------------------------

II. Analysis of Factors

    Based upon a review and analysis of the administrative record in 
this matter, consultations with relevant Federal agencies and 
departments, and after consideration of the factors enumerated in 
section 311, the Director of FinCEN has determined that LCB is a 
financial institution of primary money laundering concern. FinCEN has 
reason to believe that LCB has been routinely used by drug traffickers 
and money launderers operating in various countries in Central and 
South America, Europe, Africa, and the Middle East; that Hizballah 
derived financial support from the criminal activities of this network; 
and that LCB managers are complicit in the network's

[[Page 9405]]

money laundering activities. A discussion of the factors relevant to 
this finding follows:

1. The Extent to Which LCB Has Been Used To Facilitate or Promote Money 
Laundering in or Through the Jurisdiction

    The USG has information through law enforcement and other sources 
indicating that LCB--through management complicity, failure of internal 
controls, and lack of application of prudent banking standards--has 
been used extensively by persons associated with international drug 
trafficking and money laundering. According to this information, this 
international drug trafficking and money laundering network generally 
moves illegal drugs from South America to Europe and the Middle East 
via West Africa, with proceeds laundered through the Lebanese financial 
system, as well as through TBML involving used cars and consumer 
goods.\15\ Specifically, individuals mentioned below \16\ (with the 
assistance of close family members who are key participants in the 
global drug trafficking and money laundering network) are known to hold 
or utilize cash deposit accounts at LCB to move hundreds of millions of 
dollars monthly in cash proceeds from illicit drug sales into the 
formal financial system, as well as to coordinate the laundering of 
these funds through key foreign nodes of the network using LCB 
accounts. The bank's involvement in money laundering is attributable to 
failure to adequately control transactions that are highly vulnerable 
to criminal exploitation, including cash deposits and cross-border wire 
transfers, inadequate due diligence on high-risk customers like 
exchange houses, and, in some cases, complicity in the laundering 
activity by LCB managers.
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    \15\ For more information on Trade-Based Money Laundering, see 
``Advisory to Financial Institutions on Filing Suspicious Activity 
Reports regarding Trade-Based Money Laundering,'' Financial Crimes 
Enforcement Network, FIN02010-A001, February 18, 2010. https://www.fincen.gov/financial_institutions/advisory.html.
    \16\ These individuals are referred to by name and/or solely by 
letter reference (i.e., Individual A, B, C, etc.) depending on the 
sensitivity of the source.
---------------------------------------------------------------------------

    For example, in this global narco-money laundering network, U.S.-
designated Ayman Joumaa \17\ has coordinated the transportation, 
distribution, and sale of multi-ton bulk shipments of cocaine from 
South America, and laundered the proceeds--as much as $200 million per 
month--from the sale of cocaine in Europe and the Middle East. In this 
criminal scheme, the proceeds have been laundered through various 
methods, including bulk cash smuggling operations and use of several 
Lebanese exchange houses that utilize accounts at LCB branches managed 
by family members of other participants in the global money laundering 
network. Specifically, Ayman Joumaa deposits bulk cash into multiple 
exchange houses, including the one that he owns, which then deposit the 
currency into their LCB accounts. He or the exchange houses then 
instruct LCB to perform wire transfers in furtherance of one of two 
TBML schemes. For example, some of the funds move to LCB's U.S. 
correspondent accounts via suspiciously structured electronic wire 
transfers to multiple U.S.-based used car dealerships--some of which 
are operated by individuals who have been separately identified in 
drug-related investigations. The recipients use the funds to purchase 
vehicles in the United States, which are then shipped to West Africa 
and/or other overseas destinations, with the proceeds ultimately 
repatriated back to Lebanon. Other funds are sent through LCB's U.S. 
correspondent accounts to pay Asian suppliers of consumer goods, which 
are shipped to Latin America and sold and the proceeds are laundered 
through a scheme known as the Black Market Peso Exchange, in each case 
through other individuals referred to in this finding or via companies 
owned or controlled by them. According to USG information, Hizballah 
derived financial support from the criminal activities of Joumaa's 
network.
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    \17\ On January 26, 2011, the U.S. Department of the Treasury's 
Office of Foreign Assets Control designated members and connected 
entities of the Ayman Joumaa drug trafficking and money laundering 
network, as Specially Designated Narcotics Traffickers due to their 
significant roles in international narcotics trafficking. This 
action, pursuant to the Foreign Narcotics Kingpin Designations Act 
(Kingpin Act), prohibits U.S. persons from conducting financial or 
commercial transactions with these entities and individuals and 
freezes any assets the designees may have under U.S. jurisdiction.
---------------------------------------------------------------------------

    With respect to the exchanges and companies related to Ayman 
Joumaa, numerous instances indicate that substantial amounts of illicit 
funds may have passed through LCB. Since January 2006, hundreds of 
records with a cumulative equivalent value of $66.4 million identified 
a Lebanese bank that originated the transfer; approximately half of 
those were originated by LCB, for a cumulative equivalent value of 
$66.2 million, or 94%, thus, indicating that LCB probably is the 
favored bank for these exchange houses, particularly in the context of 
illicit banking activity. Similarly, a review of all dollar-denominated 
wire transfers with the two primary exchange houses either as sender or 
receiver between January 2004 and December 2008 showed 72% originated 
by one of the exchange houses through LCB.
    Individual A, who owns a wide network of companies manufacturing or 
procuring consumer goods in Asia, Europe, and the Middle East, the 
Caribbean, and Lebanon, participates in this money laundering scheme by 
providing the consumer goods that are used for TBML, as described 
above. Despite his business being based in Asia, he is believed to have 
centralized his banking operations in Lebanon, particularly through the 
use of over 30 accounts at LCB. USG information shows Individual A 
receiving funds in his accounts from Ayman Joumaa, and exchanging funds 
with Latin American members of the network discussed below. Individual 
A is known to be in near daily communication with the bank from his 
professional base in Southeast Asia.
    Individual B, based in Latin America, is part of a Lebanese drug 
trafficking organization that moves large quantities of drugs from 
Latin America to destinations throughout Africa, Europe, and the Middle 
East. For over a decade, Individual B and his family have been involved 
in a variety of TBML schemes with Latin American drug traffickers and 
Lebanese money launderers. In the criminal schemes, the individuals 
deposit the local currency proceeds from the sale of imported consumer 
goods to the accounts of local banks and convert them to hard currency. 
This completes the Latin America-based Black Market Peso Exchange money 
laundering cycle, and allows for the repatriation of proceeds for the 
Latin American drug producers. Individual B then uses accounts at LCB 
to exchange the funds--usually in suspiciously structured amounts--with 
previously mentioned individuals and other suspected criminals as part 
of the global money laundering network. Information available to the 
USG suggests that Individual B and his family members are supporters of 
Hizballah.
    Additionally, USG information indicates that Individual C, 
connected to both drug trafficking and money laundering, has 
established a money exchange house in the same building as a key LCB 
branch. This exchange uses its LCB accounts to deposit bulk cash 
proceeds of drug sales and then wires the proceeds to U.S.-based used 
car dealers. Individuals managing this and another LCB branch--each of 
which houses key accounts accepting bulk

[[Page 9406]]

cash from exchange houses or wiring funds for the TBML schemes 
described above--are family members of one of the aforementioned 
individuals running Asia-based TBML activities.
    At least one of these individuals has family relationships and 
personal contact with key LCB managers, in some cases working directly 
with those managers to conduct his transactions. The USG has 
information indicating that a minority owner of the bank, who 
concurrently serves as General Manager, his deputy, and the managers of 
key branches are in frequent--in some cases even daily--communication 
with various members of the aforementioned drug trafficking and money 
laundering network, and they personally process transactions on the 
network's behalf. Additionally, LCB managers are linked to Hizballah 
officials outside Lebanon. For example, Hizballah's Tehran-based envoy 
Abdallah Safieddine is involved in Iranian officials' access to LCB and 
key LCB managers, who provide them banking services.
    Finally, information available to the U.S. Government indicates 
that LCB's subsidiary, Gambia-based Prime Bank, is partially owned by a 
Lebanese individual known to be a supporter of Hizballah. In addition 
to Gambian nationals, Prime Bank serves Iranian and Lebanese clientele 
throughout West Africa.

2. The Extent to Which LCB Is Used for Legitimate Business Purposes in 
the Jurisdiction

    LCB is one of 49 mostly private Lebanese banks that make up 
Lebanon's financial sector. LCB has maintained modest but steady growth 
since 2000, with total assets of more than $5 billion in 2009.\18\ LCB 
also appears to be aware of the risk posed by money laundering, as 
noted in its Anti-Money Laundering Policy Statement.\19\ A publicly 
available source also indicates that U.S. financial institutions 
maintain correspondent relationships with LCB,\20\ and it is likely 
that a high volume of those transactions through those accounts is 
legitimate. However, numerous instances have been identified where 
substantial volumes of illicit funds have passed through LCB. Thus, any 
legitimate use of LCB is significantly outweighed by the apparent use 
of LCB to promote or facilitate money laundering.
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    \18\ Lebanese Canadian Bank, 2009 Annual Report.
    \19\ Lebanese Canadian Bank, AML Policy Statement, https://www.lebcanbank.com.
    \20\ Bankers Almanac, Lebanese Canadian Bank SAL, June 22, 2010 
(https://www.bankersalmanac.com).
---------------------------------------------------------------------------

3. The Extent to Which Such Action Is Sufficient to Ensure, With 
Respect to Transactions Involving LCB, That the Purposes of the BSA 
Continue To Be Fulfilled, and To Guard Against International Money 
Laundering and Other Financial Crimes

    As detailed above, FinCEN has reasonable grounds to conclude that 
LCB is being used to promote or facilitate money laundering, and is, 
therefore, an institution of primary money laundering concern. 
Currently, there are no protective measures that specifically target 
LCB. Thus, finding LCB to be a financial institution of money 
laundering concern, which would allow consideration by the Secretary of 
special measures to be imposed on the institution under Section 311, is 
a necessary first step to prevent LCB from facilitating money 
laundering or other financial crime through the U.S. financial system. 
The finding of primary money laundering concern will bring criminal 
conduct occurring at or through LCB to the attention of the 
international financial community and further limit the bank's ability 
to be used for money laundering or other criminal purposes.

III. Finding

    Based on the foregoing factors, the Director of FinCEN hereby finds 
that the Lebanese Canadian Bank SAL is a financial institution of 
primary money laundering concern.

    Dated: February 9, 2011.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2011-3346 Filed 2-16-11; 8:45 am]
BILLING CODE 4810-02-P
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