United States Court of Appeals, District of Columbia Circuit
Ramon Cierco, In his personal capacity and derivatively on behalf of himself and all others similarly situated, et al., Appellants
Steven T. Mnuchin, in his official capacity as Secretary of the Treasury, et al., Appellees
March 13, 2017
from the United States District Court for the District of
Columbia (No. 1:15-cv-01641)
L. Lewis argued the cause for appellants. With him on the
brief was A. Katherine Toomey.
Carroll, Attorney, U.S. Department of Justice, argued the
cause for appellees. With her on the brief were Benjamin C.
Mizer, Principal Deputy Assistant Attorney General at the
time the brief was filed, and H. Thomas Byron, III, Attorney.
Before: Rogers and Srinivasan, Circuit Judges, and Edwards,
Senior Circuit Judge.
EDWARDS SENIOR CIRCUIT JUDGE.
Senior Circuit Judge: In 2015, the Department of
Treasury's Financial Crimes Enforcement Network
("FinCEN") suspected that Banca Privada
d'Andorra S.A. ("the Bank") was being used to
launder money. Pursuant to Section 311 of the USA PATRIOT
Act, FinCEN issued a Notice of Finding and a Notice of
Proposed Rulemaking (the "Notices") proposing to
cut off the Bank's ties to the United States'
financial system. Without completing the rulemaking process
that these Notices contemplated, FinCEN effectively achieved
its goals when the Andorran Government seized the assets of
the Bank and began a process to sell off those assets.
the Andorran Government took control of the Bank, Appellants
- the majority shareholders of the Bank - filed suit in the
District Court, claiming that FinCEN violated the
Administrative Procedure Act ("APA") in issuing the
Notices. Appellants' complaint sought two principal
remedies: (1) an order requiring FinCEN to withdraw the
Notices, and (2) a declaration that the Notices were
unlawfully issued. While the case was pending before the
District Court, FinCEN, satisfied that the Bank no longer
posed a money laundering concern, withdrew both Notices. The
District Court then granted FinCEN's motion to dismiss on
the grounds that the case was moot. Appellants filed an
appeal from that judgment. Subsequent to the District
Court's decision, the Andorran Government finalized the
sale of the Bank's assets to a private investment firm.
agree with the District Court that this case should be
dismissed, but for different reasons. When FinCEN withdrew
the Notices, Appellants received full relief on their first
claim. Therefore, we agree that Appellants' first claim
for relief is moot. Appellants' second claim for relief -
a declaration that the Notices were unlawful - is not moot,
but they no longer have standing to press this claim.
Appellants first filed their law suit, they had standing to
challenge the legality of the Notices. However, once their
claim for the withdrawal of the Notices became moot,
Appellants had the burden to show that they still had
standing to seek a declaratory order that the Notices were
unlawful. They have not met this burden. Even assuming that
Appellants have the requisite injury and causation to support
standing, they have not shown that a judicial order will
effectively redress their alleged injuries. We therefore
dismiss the case because Appellants' first claim is moot
and they lack standing to pursue their second claim.
311 of the USA PATRIOT Act ("the Act") authorizes
the Secretary of the Treasury, upon a finding that a foreign
financial institution is "of primary money laundering
concern, " to impose "special measures" upon
any domestic financial institution that does business with
the foreign institution. 31 U.S.C. § 5318A(b). The
Secretary has delegated his authority under Section 311 to
FinCEN, a bureau of the Department of Treasury. 31 C.F.R.
§ 1010.810(a). The Act provides, inter alia,
In making a finding that reasonable grounds exist for
concluding that a jurisdiction outside of the United States
[or] 1 or more financial institutions operating outside of
the United States . . . is of primary money laundering
concern so as to authorize the Secretary of the Treasury to
take 1 or more of the special measures described in
subsection (b), the Secretary shall consult with the
Secretary of State and the Attorney General.
31 U.S.C. § 5318A(c)(1). The Act also states that
"the Secretary shall consider [additional] information
[determined] to be relevant, " including a number of
"Jurisdictional" and "Institutional"
factors listed in the statute. Id. §
FinCEN determines that a foreign institution is of primary
money laundering concern, Section 311 authorizes FinCEN to
take one or more of five special measures. Four of these
special measures - including recordkeeping and information
disclosure requirements - may be imposed by FinCEN "by
regulation, order, or otherwise as permitted by law."
Id. § 5318A(a)(2)(B). The fifth, and most
severe, measure that FinCEN may take against a foreign
institution is to prohibit the "opening or maintaining
in the United States of a correspondent account or
payable-through account by any domestic financial institution
. . . for or on behalf of [that] foreign banking
institution." Id. § 5318A(b)(5).
"[I]mposing this measure has the effect of eliminating
or curtailing a foreign banking institution's access to
the U.S. financial system and to transactions involving the
U.S. dollar." FBME Bank Ltd. v. Lew, 125
F.Supp.3d 109, 115 (D.D.C. 2015). As such, the fifth special
measure "can be a 'death sentence' for smaller
foreign banks who depend on access to U.S. dollar clearing
through correspondent accounts." Steven Mark Levy,
Federal Money Laundering Regulation: Banking, Corporate and
Securities Compliance § 30.03(E) (2d ed. Supp. 2017).
the other four special measures, the fifth measure may only
be imposed "by regulation." 31 U.S.C. §
5318A(a)(2)(C). The APA requires FinCEN to publish a
"notice of proposed rule making . . . in the Federal
Register, " allowing interested parties an opportunity
to comment. 5 U.S.C. § 553(b)-(c). FinCEN must then
publish a final rule to give effect to the special measure.
See, e.g., 31 C.F.R. § 1010.659 (imposing the
fifth special measure against North Korean financial
practice, however, FinCEN often achieves the intended effects
of the fifth special measure before it completes the
rulemaking process. The Government Accountability Office has
once a proposed rule is issued, almost all U.S. financial
institutions immediately implement it voluntarily, stopping
financial transactions with designated financial institutions
or jurisdictions. . . . U.S. banks often treat proposed
Section 311 rules as final and generally cut off all
financial interactions with the targeted institution. . . .
U.S. banks may be taking this action because the proposed
rule is associated with a finding of primary money laundering
concern and, in many instances, Treasury issued a finding
together with a notice of proposed rule-making. Because it
makes good business sense to protect banks from risks to
their reputation and possible government penalties, banks may
discontinue business with other banks labeled a primary money
laundering concern to reduce their reputational risk.
U.S. Gov't Accountability Office, GAO-08-1058, USA
PATRIOT Act: Better Interagency Coordination and Implementing
Guidance for Section 311 Could Improve U.S. Anti-Money
Laundering Efforts 21 (2008), Joint Appendix ("JA")
236. A notice proposing to impose the fifth special measure
often has effects overseas, as well, as illustrated by the
fact that "several foreign governments have strengthened
their laws and regulations in response to proposed
rules." Id. at 22, JA 237.
FinCEN is able to achieve the objective of imposing the fifth
special measure without completing rulemaking, the agency
typically withdraws the notice of proposed rulemaking.
See, e.g., Withdrawal of the Proposed Rulemaking
Against Lebanese Canadian Bank SAL, 80 Fed. Reg. 60, 575
(Oct. 7, 2015).