FinCEN Order Under U.S. Fentanyl Sanctions Act and the FEND OFF Fentanyl Act
Recent developments in U.S. policy giving rise to enforcement action by the U.S. Department of Treasury’s Financial Enforcement Network (FinCEN) sound a cautionary note for U.S. financial institutions. An article we recently posted regarding the U.S. Department of Justice’s updated guidelines regarding the Foreign Corrupt Practices Act, called attention to the Trump administration’s focus to “pursue the total elimination of Cartels and transnational criminal organizations”. This latest FinCEN enforcement action further defines this focus.
In this context, under the authority afforded by the U.S. Fentanyl Sanctions Act and the FEND OFF Fentanyl Act, FinCEN last week named three Mexican financial institutions as engaging in money laundering and facilitating payments in connection with transactions involving fentanyl. The three identified entities are CIBanco S.A., Institution de Banca Multiple (CIBanco), Intercam Banco S.A., Institución de Banca Multiple (Intercam), and Vector Casa de Bolsa, S.A. de C.V. (Vector) – all described in media reports as relatively minor financial institutions.
This is the first time the Treasury Department has invoked these two fentanyl laws, which are designed to prohibit FinCEN covered U.S. financial institutions from engaging in transmittal of funds to or from FinCEN designated foreign financial institutions, such as these three Mexican financial institutions.
Seemingly in response to FinCEN’s actions, Mexico’s Banking and Securities Commission took over the institutions temporarily, ostensibly to minimize the impact on business and hopefully prevent a run on the Mexican institutions.
These FinCEN designations prohibit U.S. persons from initiating or processing transactions with the three institutions. Violations include fines and potential criminal penalties which can be imposed against U.S. persons engaging in the prohibited activities.
As a consequence of the FinCEN order, U.S. businesses need to avoid engaging in commercial arrangements with the entities identified in the order. This is particularly important in cross-border transactions, where various parties may be involved and the chance to trigger implication of FinCEN’s order is enhanced.
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