WASHINGTON — The Treasury Department blacklisted a Lebanese bank Thursday under a little known provision in the USA Patriot Act, marking the first time the Obama administration has used a tool that critics charge violates due process guarantees.
Lebanese Canadian Bank SAL and its subsidiaries were declared a "primary money laundering concern" under Section 311 of the Patriot Act. This designation requires all financial institutions doing business in the U.S. to sever all ties with the bank and its subsidiaries. This effectively locks it out of the global financial system since most large foreign institutions have U.S. subsidiaries or sister banks.
The U.S. Drug Enforcement Administration and Treasury both accused the Beirut-based bank of complicity in the international drug trade. By willfully failing to monitor financial transactions, the bank allegedly has allowed drug traffickers to launder their illicit proceeds, the two agencies said Thursday.
The action follows individual sanctions on Jan. 26 against Ayman Joumaa of Lebanon, allegedly a foreign drug kingpin whose criminal activities helped fund Hezbollah, a Shiite Muslim radical movement operating in Lebanon with ties to Iran.
"This is the first (Section) 311 that's ever been done under the Patriot Act for narcotics, but what it shows is an intimate relationship between drug trafficking and money and terrorism financing," said Rusty Payne, a DEA spokesman, adding that the action grew out of money laundering investigations in Miami. "What it shows is our ability to get our expertise and resources together to attack them at different levels and different ways."
The bank maintains a representative bank in Montreal, and its head, Bouchara Moussa, told McClatchy, "We are not aware of these allegations." A bank representative in Beirut said a statement would be released Friday.
Not only is Thursday's action the first use of the provision to go after drug traffickers, it's also the first time that the administration of President Barack Obama, a former constitutional law professor, has used a provision that critics say flies in the face of the Constitution.
The provision of the Patriot Act, passed during the Bush administration, gives Treasury a blunt tool to go after suspected sources of terrorist financing. During the Bush era, however, it was only used once for that reason — against a Syrian bank.
Instead, it's been used to discourage human rights abuses in Myanmar; corruption in Belarus; offshore banking havens in the 10-square-mile Pacific island of Nauru; and to isolate the North Korean dictatorship by targeting a bank in the Chinese gambling enclave of Macau.
Critics of the Patriot Act, such as the New York-based Center for Constitutional Rights, charge that the act and a host of related powers designed to fight terrorists and terror financing violate the presumption of innocence, a basic tenet of U.S. law.
"Under the constitution, whenever the government imposes serious constraints on an individual or organization's property it is obliged to tell the entity the basis for its actions and give it an opportunity to defend itself meaningfully. Without that, you have summary process that fails to accord with the constitutional commitment we have long held here," said David Cole, a Georgetown University law professor who's involved in several constitutional challenges to the Patriot Act.
Under Section 311, the accused don't get to see, evaluate or challenge the evidence used against them in determining their guilt. Much of the information is classified, making it difficult to challenge in federal court.
Obama's Treasury Department Thursday didn't provide any hard evidence against the Lebanese Canadian Bank and instead outlined general accusations and reasons for taking action to protect the U.S. financial system. It said the links between drug trafficking and Hezbollah come from law enforcement.
Treasury said there's "reason to believe that LCB has been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa, and the Middle East; that Hezbollah derived financial support from the criminal activities of this network; and that LCB managers are complicit in the network's money laundering activities.
Lebanese Canadian Bank was once the Lebanon-based branch of Royal Bank of Canada, but was sold off in 1988. The bank has assets of about $5 billion, according to the Treasury Department, which would make it a small to midsize bank in Lebanon, which boasts 66 incorporated banks and is a banking hub for the Middle East.
ON THE WEB
Treasury's detailed accusation
Treasury fact sheet on Section 311
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