The U.S. Financial Crimes Enforcement Network (“FinCEN”) recently issued a final rule that severs Al-Huda Bank, an Iraq-based bank that has allegedly facilitated terrorist financing, from the U.S. financial system. The measure, which was issued under section 311 of the USA PATRIOT Act, prohibits U.S. financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank. According to Brian Nelson, the U.S. Secretary of the Treasury for Terrorism and Financial Intelligence, this action “severs this key channel for money laundering and terrorist financing” and ensures the integrity of both the Iraqi and international financial systems. FinCEN proposed the final rule in January 2024 after Al-Huda Bank was identified as a foreign financial institution of primary money laundering concern after investigators found that the Bank had exploited its access to U.S. dollars to support several designated foreign terrorist organizations, including the Iran’s Islamic Revolutionary Guard Corps (“IRGC”), the IRGC-Qods Force as well as the Kata’ib Hizballah and Asa’ib Ahl al-Haq, two Iran-aligned Iraqi militias.
In addition to prohibiting the opening or maintaining of correspondence accounts, the final rule requires covered financial institutions “to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving Al-Huda Bank.”