The US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) recently designated Swiss bank MBaer Merchant Bank AG (“MBaer”) as an institution of “primary money laundering concern” under Section 311 of the USA PATRIOT Act and proposed to sever its access to the US dollar. The Swiss Financial Market Supervisory Authority (“FINMA”) swiftly followed FinCEN’s announcement with one of its own—that it had withdrawn MBaer’s license and would be winding down its operations, after a recently concluded enforcement action found that the bank had “serious, systematic shortcomings” in its anti-money laundering (“AML”) and sanctions compliance programs.
FinCEN’s and FINMA’s coordinated announcements underscore the importance of robust due diligence and sensitivity to both US and non-US regulatory expectations for non-US financial institutions. The stakes are especially high when dealing with transactions involving regions of strategic significance to US foreign policy because US regulators will not hesitate to leverage US law to impose their regulatory expectations on non-US financial institutions.
What happened? On February 26, 2026, FinCEN issued a notice of proposed rulemaking (“NPRM”) to designate MBaer as a financial institution of primary money laundering concern and to impose certain “special measures” that would, if implemented, restrict MBaer’s access to the US financial system. Specifically, these special measures would prohibit US financial institutions from opening or maintaining accounts for MBaer, require them to take reasonable steps not to process certain transactions involving MBaer (including those processed through foreign correspondent accounts), and to implement enhanced due diligence to prevent MBaer from accessing the US financial system indirectly.
In support of its determination, FinCEN alleged a long list of compliance shortcomings since MBaer’s founding in 2018—beginning with the facilitation of Venezuelan corruption and money laundering and later extending to Russian money laundering, Iranian money laundering, and terrorist financing. For example, the NPRM describes how a former MBaer Vice Chairperson allegedly used her position to further payments on behalf of her husband that related to a Petróleos de Venezuela, SA (“PdVSA”) corruption scheme; at the time, both the husband and PdVSA were subject to sanctions imposed by the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). For the next several years, MBaer also allegedly maintained accounts for other investors involved in Venezuelan embezzling schemes.
The NPRM also describes how MBaer retained (and attempted to conceal) much of its Russian clientele, including some targeted under US, EU, and Swiss economic sanctions. For example, MBaer allegedly maintained two accounts on behalf of a front for Victor Volodymyrovych Medvedchuk, whom OFAC sanctioned in 2014; the Swiss State Secretariat for Economic Affairs (“SECO”) sanctioned Medvedchuk in 2024, as did the EU. MBaer allegedly continued to process US dollar transactions for these accounts, notwithstanding these overlapping sanctions.
MBaer also facilitated payments for the Iranian Revolutionary Guard Corps (“IRGC”) and its Quds Force (“IRGC-QF”), both sanctioned pursuant to US counterterrorism and other legal authorities. MBaer is alleged to have facilitated more than $50 million relating to Iranian oil smuggling schemes. Just one day after the FinCEN NPRM, FINMA took further severe measures against MBaer by announcing that it had withdrawn MBaer’s bank license and ordered it to enter liquidation proceedings. This announcement represents the culmination of enforcement proceedings begun in 2024, which revealed that 80% of the bank’s business relationships carried increased risks and that 98% of its assets received came from high-risk clients. FINMA’s investigation found that the bank repeatedly ignored its compliance department, failed to properly diligence its clients, and executed transactions on behalf of sanctioned parties. Describing the case as “extremely serious,” FINMA also noted that it had opened proceedings against four individuals involved in these violations.
What is Section 311? Section 311 of the USA PATRIOT Act allows the Treasury Secretary to impose one of five “special measures” against a foreign jurisdiction, financial institution operating outside the United States, class of transaction involving a foreign jurisdiction, or type of account if the Secretary determines that it is of “primary money laundering concern.” These special measures—which range from varying degrees of information collection and reporting for US financial institutions to an outright prohibition on the opening or maintaining of a correspondent or payable-through account—are intended to protect the US financial system from money laundering and terrorist financing risks. FinCEN has invoked Section 311 repeatedly since 2003 to address US concerns regarding a range of institutions and jurisdictions.
What do the MBaer actions mean? With FinCEN and FINMA having many other tools at their disposal, their actions underscore that financial regulators continue to use long-standing legal authorities to enforce compliance with AML requirements. US enforcement risk increases in proximity to jurisdictions viewed as strategic adversaries to, or of foreign policy significance to, the United States. Although the United States often takes the lead in AML enforcement actions, this recent episode shows how it may coordinate with and potentially follow the lead of foreign regulators when US and non-US regulators’ priorities align. Notably, these allegations date back almost eight years, and FinCEN has long had the authority under Section 311 of the USA PATRIOT Act to take this action should it choose to do so. It is possible that the parallel FinCEN and FINMA inquiries, which were sustained over many years, were coordinated in a way to permit Swiss authorities sufficient time and process to liquidate MBaer rapidly after the public announcement of the US measures. For both US and non-US financial institutions, robust due diligence and compliance measures remain as important as ever.
FinCEN’s most recent prior use of Section 311 was in November 2025, when it found that ten Mexican gambling establishments were facilitating or promoting money laundering activities to the benefit of the Sinaloa Cartel; the US government has sanctioned this cartel for its role in the illicit fentanyl trade. If adopted, the proposed November 2025 rule would prohibit US financial institutions from opening or maintaining correspondent accounts for any of the gambling establishments and require enhanced due diligence.
In addition to Section 311, FinCEN has also recently made use of newer AML authorities. In June 2025, FinCEN issued an order to prohibit US financial institutions from engaging in certain funds transmittal transactions with three Mexico-based financial institutions after it found them to be of primary money laundering concern in connection with illicit opioid trafficking. This marked FinCEN’s first use of the Fentanyl Sanctions Act and the FEND Off Fentanyl Act, which incorporate Section 311’s five special measures and provide Treasury with additional tools for targeting money laundering associated with the trafficking of fentanyl and other synthetic opioids, including by cartels, but without the requirement of notice-and-comment rulemaking.
These MBaer actions serve as a reminder that non-US financial institutions should remain alert to US regulatory expectations if they need to retain access to the US financial system. WilmerHale has extensive experience advising on Section 311 and related areas of law and regulation. The firm is actively counseling clients in connection with AML and sanctions compliance and enforcement matters. Please contact Sean Thornton, Michael Leotta, David Horn, or Marik String to discuss these topics.
