Fbme Bank Ltd. v. Lew
125 F. Supp. 3d 109
D.D.C.2015Background
- FinCEN issued a Notice of Finding (NOF) in July 2014 that FBME Bank Ltd. was an institution of "primary money laundering concern," and promulgated a Final Rule under 31 U.S.C. § 5318A on July 29, 2015 imposing the fifth special measure: prohibiting U.S. financial institutions from maintaining correspondent accounts for FBME.
- The fifth special measure effectively blocks FBME’s access to the U.S. financial system and U.S. dollar transactions; many correspondent banks had already suspended or closed ties after the NOF/NPRM.
- FBME and its Cayman holding company sued and moved for a preliminary injunction to prevent the Final Rule from taking effect (scheduled Aug. 28, 2015), alleging APA procedural defects, arbitrary and capricious action, and due process violations.
- The Court reviewed public and classified materials in camera and found substantial deference owed to FinCEN on the ultimate substantive finding, but identified procedural deficiencies: FinCEN withheld significant unclassified, non‑protected documents it relied on during rulemaking, impeding meaningful comment.
- The Court concluded FBME is likely to succeed on (1) its APA notice-and-comment claim and (2) its APA claim that FinCEN failed to consider or explain less‑punitive alternatives (conditions instead of a full prohibition). The court found FBME likely to suffer irreparable harm if the rule takes effect and that equities and public interest favored a preliminary injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| APA notice-and-comment adequacy | FinCEN withheld unclassified, non-protected documents it relied on, denying FBME meaningful opportunity to comment | Agency may withhold classified and statutorily protected info; not required to disclose all underlying detail | Court: Likely for FBME — agency failed to disclose substantial non-classified material it relied upon, violating APA notice requirements |
| Arbitrary and capricious: failure to consider alternatives | FinCEN did not explain why less-punitive or conditional measures (e.g., conditions, fines, monitors) were inadequate | Fifth measure was necessary given national-security risks; other measures were not viable | Court: Likely for FBME as to failure to explain why conditions on correspondent accounts (an obvious statutory alternative) were rejected |
| Arbitrary and capricious: reliance on evidence / statutory factors | FBME says agency ignored its rebuttal evidence and didn't adequately explain statutory determination | Agency relied on classified, protected, and unclassified evidence; court must defer to agency judgment on national‑security matters | Court: Held for government on these points — record (including classified material reviewed in camera) supports FinCEN’s ultimate finding |
| Due process (property/notice/hearing) | FBME claims deprivation of property interest in correspondent accounts without meaningful notice or hearing | Government contests that FBME has sufficient U.S. presence/property to trigger due process and points to national-security interests | Court: Did not decide merits — unresolved factual predicate whether FBME has constitutionally protected interests; constitutional claim avoided because APA claims prevail |
Key Cases Cited
- Winter v. Nat. Res. Def. Council, 555 U.S. 7 (2008) (four‑factor standard for preliminary injunction)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious standard requires rational connection between facts and decision)
- Am. Med. Ass'n v. Reno, 57 F.3d 1129 (D.C. Cir. 1995) (notice must disclose sufficient factual basis to permit meaningful comment)
- Ass'n of Data Processing Orgs. v. Bd. of Governors of Fed. Reserve Sys., 745 F.2d 677 (D.C. Cir. 1984) (critical factual material supporting rule should be made public)
- Ralls Corp. v. Committee on Foreign Investment in the United States, 758 F.3d 296 (D.C. Cir. 2014) (requirement to provide unclassified support and opportunity to rebut in national security designations)
- People’s Mojahedin Org. of Iran v. U.S. Dep’t of State, 613 F.3d 220 (D.C. Cir. 2010) (entities must be able to review and rebut unclassified portions of record in designation proceedings)
- Public Citizen v. Nuclear Regulatory Comm'n, 573 F.3d 916 (9th Cir. 2009) (rulemaking may permissibly rely on non‑public/classified information when disclosure would compromise security)
- Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156 (D.C. Cir. 2003) (use and nondisclosure of classified information upheld in national security labeling and asset blocking)