The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, issued a notice of proposed rulemaking on March 2, 2026, finding reasonable grounds to conclude that MBaer Merchant Bank AG, a small private bank based in Zurich, Switzerland, is a financial institution operating outside the United States of primary money laundering concern. Under Section 311 of the USA PATRIOT Act, codified at 31 U.S.C. 5318A, FinCEN proposes imposing the fifth special measure, which would prohibit U.S. financial institutions from opening or maintaining correspondent accounts for or on behalf of MBaer. This measure also requires U.S. institutions to apply special due diligence to prevent processing transactions involving MBaer through foreign correspondent accounts. The proposal stems from evidence that MBaer has facilitated money laundering for Venezuelan corruption schemes, Russian oligarchs evading sanctions, and Iranian entities supporting terrorist financing. Announced in the Federal Register Volume 91, Number 40, this action underscores efforts to safeguard the U.S. financial system from international illicit finance risks, with comments due by April 1, 2026.
Background and Statutory Authority
Section 311 of the USA PATRIOT Act empowers the Treasury Secretary, delegated to FinCEN, to designate foreign jurisdictions, institutions, transaction classes, or account types as primary money laundering concerns if reasonable grounds exist. Upon such a finding, FinCEN can impose one or more of five special measures, ranging from enhanced recordkeeping to prohibitions on correspondent accounts. For MBaer, FinCEN proposes the fifth measure after consulting with agencies including the Federal Reserve, State Department, and Attorney General, as required by 31 U.S.C. 5318A(c)(1) and (a)(4)(A).
MBaer, founded in 2018 and regulated by Switzerland's Financial Market Supervisory Authority (FINMA), offers services like depository accounts, funds transmission, and wealth management. With assets around 650 million Swiss francs (about $717 million) as of mid-2023, it is a minor player in Switzerland's banking sector. However, FinCEN's assessment, based on public and non-public information, reveals MBaer's involvement in high-risk activities since its inception, including handling funds tied to sanctioned entities and corrupt networks.
Key Factors in FinCEN's Finding
FinCEN evaluated institutional factors under 31 U.S.C. 5318A(c)(2)(B), focusing on MBaer's facilitation of money laundering. Evidence shows MBaer has processed transactions linked to Venezuelan state oil company PdVSA corruption, where billions were embezzled through schemes involving sanctioned individuals like Alessandro Bazzoni. Press reports, such as those from El Nacional and Transparencia Venezuela, detail how former MBaer Vice Chairperson Siri Evjemo-Nysveen allegedly used the bank to launder PdVSA proceeds post-2019 U.S. sanctions. MBaer also held accounts for figures like Jose Luis Chavez Calva, implicated in laundering PdVSA funds for OFAC-sanctioned Alex Saab.
Russian exposure is significant, with Russian clients comprising a large portion of MBaer's assets. FinCEN notes MBaer's ties to sanctioned oligarchs like Sergey Kurchenko and Victor Medvedchuk, who used MBaer accounts for sanctions evasion and money laundering. For instance, Medvedchuk-controlled accounts remitted funds to entities attempting to seize Ukrainian state property, continuing after 2014 U.S. sanctions and 2021 press reports. MBaer also facilitated payments for companies involved in stealing Ukrainian grain and procuring military equipment for Russia.
Iranian links include over $37 million in transactions tied to IRGC-Quds Force oil smuggling via entities like Turkoca Import Export Transit Co LTD, as per a 2022 Treasury press release. MBaer enabled sanctions evasion in Iran's oil sector, including payments to shadow fleet tankers.
While MBaer engages in some legitimate business, FinCEN determined that illicit activities outweigh these, posing risks to U.S. financial integrity.
Proposed Special Measure and Considerations
The fifth special measure prohibits U.S. correspondent accounts for MBaer and requires due diligence to block indirect access. FinCEN considered alternatives like enhanced reporting but deemed them insufficient given MBaer's history of obfuscation. Factors under 31 U.S.C. 5318A(a)(4)(B) include no similar actions by other nations yet, minimal competitive disadvantage for U.S. institutions, low systemic impact due to MBaer's small size, and enhanced national security by restricting illicit flows.
Perspectives vary: supporters see it as vital for combating transnational crime, while critics may argue it burdens compliant Swiss banks or overlooks Switzerland's AML framework. FinCEN consulted interagency partners, emphasizing alignment with U.S. foreign policy.
Implications and Broader Context
Short-term, the rule could isolate MBaer, prompting clients to seek alternatives and increasing scrutiny from FINMA, which opened an enforcement proceeding in 2024. Long-term, it may deter other banks from high-risk clients, strengthening global AML standards. This fits precedents like actions against Banco Delta Asia (2005) and ABLV Bank (2018), where Section 311 designations led to institutional collapses or reforms. Different views exist: some experts highlight effectiveness in disrupting networks, others note potential for driving activity underground without international coordination.
