On August 27, 2015, the U.S. District Court for the District of Columbia issued an unprecedented preliminary injunction in favor of our client, FBME Bank Ltd, enjoining a United States agency from effectuating a final rule that threatens to deal a devastating blow against FBME. The U.S. agency in question is a bureau of the U.S. Department of the Treasury known as the “Financial Crimes Enforcement Network” or “FinCEN.” According to FinCEN’s final rule, scheduled to take effect on August 28, 2015, any U.S. bank would be prohibited from maintaining a correspondent bank account for FBME directly or indirectly through a third-party financial institution. As a result, FBME stood to be cut off from transacting in U.S. dollars, forcing FBME to fundamentally alter its business and cease functioning as an international bank—if it could survive at all. The preliminary injunction issued by Judge Cooper on August 27 enjoins the final rule from taking effect until he issues a final judgment. In his opinion, Judge Cooper explained that FinCEN may have had valid grounds to issue the rule, but the process by which it issued the rule was sufficiently flawed that FBME is likely to prevail on the merits in challenging the rule.
This is the first successful stand a bank has made against FinCEN’s implementation of this deadly sanction. The authority FinCEN invoked comes from Section 311 of the USA PATRIOT Act, which permits FinCEN to impose any of five special measures against financial institutions that it determines to be “of primary money laundering concern.” In July 2014, FinCEN targeted FBME with a Notice of Finding and Proposed Rulemaking that announced the agency planned to impose on FBME the “fifth special measure,” which cuts an institution off from the U.S. financial system. Over the following year, FinCEN refused to disclose all of the charges against FBME or to provide FBME with the evidence underlying those charges, thereby denying FBME a meaningful opportunity to review the record and refute the allegations against it. Nevertheless, on July 29, 2015, citing classified and other undisclosed evidence to support its vague allegations, FinCEN published the final rule in the Federal Register. After FinCEN promulgated the final rule, FBME hired Quinn Emanuel to challenge the rule and stop it from taking effect, and we prepared and filed a complaint and motion for preliminary injunction less than two weeks later.
Quinn Emanuel persuaded Judge Cooper both that our client faces irreparable harm from implementation of the rule and also that is likely to prevail on the merits because FinCEN’s ruling was procedurally defective, arbitrary and capricious. We succeeded despite being up against classified evidence submitted ex parte and in camera that allegedly establishes FBME’s involvement in money laundering and terrorist financing, as well as the heightened deference that courts accord Executive agencies whenever concerns about national security and foreign policy are invoked, as they have been here. On August 27, the day before the final rule would take effect and effectively put FBME out of business, the court granted our motion for a preliminary injunction. The final rule is now enjoined so as to protect our client while the merits of the case are being briefed and adjudicated.