Tuesday, June 05, 2007

Patriot Act Section 311 Moves to the Forefront of the North Korea/BDA Issue

Via Arms Control Wonk , the Russians are also offering to step up and handle North Korea’s $25 million if...

... if the U.S. side provides a written guarantee that they will not introduce any sanctions against our financial institutions, we may be in a position to look at the possible transfer of these funds to a Russian bank where the North Korean government has an account,” Alexander Losyukov said.

To me, this is no more—or less—than the Russians weighing in on the side of the State Department and pushing the Bush administration to override whatever objections raised by the Treasury Department and/or hardliners and resolve this issue.

By my count, China, Russia, and South Korea have all expressed various degrees of impatience with the United States in the last few days, an indication of their frustration and perhaps also a response to some lobbying from the State Department looking for help pushing the Six Party process out of the BDA ditch.

With the deadlock over this piddling sum approaching its third month, it’s starting to look embarrassing for the United States—something that President Bush is probably unhappily aware of.

A reader pointed me toward the June 4 State Department press briefing , in which a questioner stated that Bill Richardson (New Mexico governor, Democratic candidate for president, and recent visitor to North Korea) says the BDA matter will be resolved in a about two weeks.

Governor Richardson might be passing on optimistic State Department spin; I would be surprised if he would have the inside scoop on what President Bush is actually going to do on this issue.

The press briefing also included the amusing spectacle of reporters struggling to get a grip on the very complicated question What’s holding up the remittance of North Korean funds out of Banco Delta Asia (and the Six Party Agreement)?:

QUESTION: Can we then conclude that using this 311 section of the Patriot Act
is like a far more powerful tool than anybody imagined? That it's one that
people just can't turn off once you turn it on?

MR. MCCORMACK: It is a powerful tool.

How powerful is Patriot Act Section 311?

It seems it’s more than an un-turn-offable tool.

Like the Shadow, Patriot Act Section 311 has the power to cloud men’s minds, as I learned to my cost in a futile exchange on the Marmot’s Hole with a poster determined to spread the hardliner canard that executing the remittance is impossible without breaking or bending U.S. law.

I asserted that Patriot Act Section 311 special measures are executive branch administrative rules that can be imposed—and can be revoked or modified—unilaterally at the discretion of the Treasury Department without the need for any legislative or judicial action.

Was I right?

Determined to lay this issue to rest, I contacted the Treasury Department spokesperson Molly Millerwise and asked her what it would take to waive, modify, or rescind a Patriot Act 311 ruling.

She kindly directed me to a Treasury web page that summarizes the status of the various Patriot Act Section 311 special measures, and advised me to read the Federal Register notices for previously lifted rules in order to understand the process.

Sixteen banks and jurisdictions have been targeted by a Patriot Act Section 311 Finding or Notice of Proposed Rulemaking.

Two—Multibanka (a bank in Latvia) and Ukraine—have seen their special measures rescinded.

In the July 12, 2006 notice announcing the rescission of Multibanka’s notice, the Treasury Department acknowledged the efforts of Latvia and the bank itself to crack down on money laundering and stated:

If a financial institution that is the object of a proposed section 311 special measure is determined to no longer be of primary money laundering concern, we have the authority to withdraw the finding and to withdraw any related proposal to impose a special measure.

In the case of the Ukraine, in response to passage of new money laundering legislation that passed Treasury muster, Treasury announced:

In light of the further legislative enhancements, the commitment of Ukraine to further efforts to implement its anti-money laundering legislation, and the FATF [Financial Action Task Force]’s decision to rescind the call for counter-measures, Treasury has decided to revoke the designation of Ukraine as a primary money laundering concern under section 5318A [added to the U.S. Code by Patriot Act Section 311 for the designation of “banks of primary money laundering concern”--ed.].

At the end of the notice is the statement:

Revocation of the Designation of Ukraine as a Primary Money Laundering Concern

For the foregoing reasons, the designation of the country of Ukraine as a primary money laundering concern for purposes of section 5218A of title 31, United States Code, is hereby revoked.

(Signed)
James F. Sloan
Director
Financial Crimes Enforcement Network

That’s pretty cut and dried.

Banks and jurisdictions do bad stuff, Treasury announces a Patriot Act Section 311 designation.

Banks and jurisdictions do good stuff to the satisfaction of the Treasury Department, the designation is rescinded. It’s up to Treasury’s discretion.

There was one final area of uncertainty.

In addition to Banco Delta Asia, five other banks and jurisdiction have been the subject of a Final Rule: Asia Wealth Bank (Burma), Burma (the whole country), Commercial Bank of Syria, Myanmar Mayflower Bank (Burma), and VEF Banka (Latvia).

None of these banks have ever had their Final Rules rescinded.

Could it be that a Final Rule was permanent and could never be rescinded?

Ms. Millerwise obliged with the answer:

Yes, the Treasury’s Financial Crimes Enforcement Network can rescind a final rule.

Doubtless, the Treasury Department has standards to uphold, guidelines to respect, and processes to follow. And they are probably not happy to see the Patriot Act Section 311 designation—which has been apparently been applied conservatively and judiciously in other instances—thrown on the table by the State Department as a bargaining chip in the Six Party talks.

But it would seem there is no legal obstacle to Treasury waiving the Patriot Act Section 311 measures against Banco Delta Asia and allowing the North Korean money to be remitted to another bank.

10 comments:

David said...

Of course UST can rescind the rule, any time they wish.

They have said so publicly:

"The Treasury would review and, if appropriate, rescind the rule if the concerns laid out in it are adequately addressed, including if BDA were to be brought under the long-term control of responsible management and ownership. "

http://www.ustreas.gov/press/releases/hp315.htm

I read the final ruling text with a degree of amusement.

http://www.fincen.gov/bda_final_rule.pdf

The UST say that they are happy that Macau has taken actions to try to counter UST allegations.

However, the fact that Macua took the actions (eg imposing an oversight committee) means that UST is right!

"Despite our comments about the jurisdictional developments in section II.B., above, Macau’s imposed oversight of the bank
not only does not negate our original findings but, to the extent such action indicates a lack of faith in the bank’s ability to autonomously address its
significant money laundering vulnerabilities, may be viewed as
supporting our finding of primary
money laundering concern."

In the UST world, you are damned if you do and damned if you don't try to improve things.

That kind of power is very dangerous, and can be abused.

How fortunate then that the US has (and has had) such a high quality, and honest, administration:

-Bush
-Cheney
-Gonzales
-Libby
-Bolton
-Asher et al

Comforting isn't it?

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