FinCEN Announces Notice of Proposed Rulemaking on MBaer

Background

On February 26, 2026, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking (“NPRM”) under Section 311 of the USA PATRIOT Act[1] (“Section 311”) proposing to find that MBaer Merchant Bank AG (“MBaer”), a Switzerland-based financial institution, is a “primary money laundering concern” in connection with its purported provision of financial support to illicit actors linked to Russia, Iran, and Venezuela and to impose special measure five. Section 311 is an extraordinary statutory tool designed to protect the U.S. financial system from money laundering and terrorist financing threats. FinCEN has deployed Section 311 selectively in the past, and special measure five—the “most severe” measure—effectively eliminates MBaer’s access to the U.S. financial system and to transactions involving the U.S. dollar. The measure has been regarded as a “death sentence” for foreign banks that depend on access to U.S. dollar clearing through correspondent accounts.[2]

In the press release accompanying the NPRM, Treasury Secretary Scott Bessent stated, “MBaer has funneled over a hundred million dollars through the U.S. financial system on behalf of illicit actors tied to Iran and Russia,” and emphasized that “[b]anks should be on notice that the U.S. Treasury will aggressively protect the integrity of the U.S. financial system using the full force of our authorities.” The press release further described MBaer as a “critical access node to the U.S. dollar for a wide variety of illicit actors[.]” Indeed, last month the Swiss Financial Markets Supervisory Authority (“FINMA”), MBaer’s primary regulator, withdrew the bank’s license and ordered it to be liquidated after identifying “serious, systematic shortcomings” in anti-money laundering controls that enabled clients to circumvent official sanctions freezes.[3] MBaer appealed the FINMA order, but withdrew the appeal following the publication of the NPRM and is now in the process of being liquidated. FINMA has opened related proceedings against four individuals.

The NPRM invites public comments through April 1, 2026. We expect that the rule will be finalized in short order following the close of the comment period. Although the proposed rule is not yet final, parties should act in accordance with the restrictions set forth in the NPRM.

Authorities

Under Section 311, the Secretary of the Treasury (the “Secretary”) may require domestic financial institutions to take one or more of five “special measures” where the Secretary finds one of the following to be a “primary money laundering concern”: (i) a foreign jurisdiction, (ii) a foreign financial institution, (iii) a class of transactions in or involving a foreign jurisdiction, or (iv) a type of account. The first four special measures generally entail additional recordkeeping or reporting requirements and may be imposed by regulation, order, or “as otherwise permitted by law.” Under the fifth special measure, the Secretary may prohibit, or impose conditions upon, the opening or maintaining in the United States of a correspondent account for or on behalf of a foreign financial institution found to be of primary money laundering concern. The fifth special measure may be imposed only by regulation after consultation with various other Federal government agencies. The Secretary has delegated authority to impose special measures under Section 311 to FinCEN.

Prohibition and Related Requirements for Covered U.S. Financial Institutions

The NPRM would impose the following obligations on U.S. banks, broker-dealers, futures commissions merchants, introducing brokers, and mutual funds (“Covered Financial Institutions”), though it is unlikely to have a significant practical impact because MBaer is currently in liquidation supervised by FINMA:

• Prohibition on Opening or Maintaining Correspondent Accounts. Covered Financial Institutions would be prohibited from opening or maintaining a correspondent account[4] for or on behalf of MBaer.
• Prohibition on Use of Correspondent Accounts Involving MBaer. Covered Financial Institutions also would be required to take reasonable steps not to process a transaction for the correspondent account of a foreign banking institution in the U.S. if such a transaction involves MBaer. The preamble to the NPRM states that reasonable steps include the special due diligence requirements described below.
• Special Due Diligence. Covered Financial Institutions would be required to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against such accounts being used to process transactions involving MBaer. The special due diligence would include, at a minimum: (i) a requirement that a Covered Financial Institution notify any foreign correspondent account holders that it believes provide services to MBaer that MBaer may not use the correspondent account and (ii) taking reasonable steps to identify any use of its foreign correspondent accounts by MBaer. Covered Financial Institutions would be required to take a risk-based approach in determining whether other due diligence measures are appropriate.
• Recordkeeping and Reporting. Covered Financial Institutions would be required to document their compliance with the notification requirement. The NPRM would impose no new reporting obligations, but existing suspicious activity and other reporting obligations would continue to apply.

Observations and Implications

The issuance of the NPRM is noteworthy for several reasons:

• The NPRM, particularly when coupled with the June 2025 orders targeting three Mexican financial institutions under the Fend Off Fentanyl Act,[5] may signal a greater willingness by this Administration to deploy powerful authorities against banking institutions based in “friendly” jurisdictions to further U.S. national security and foreign policy objectives.
• According to the NPRM, MBaer has assets of only about $717 million, only one direct U.S. correspondent relationship, and at least one indirect U.S. correspondent relationship through which it accesses the U.S. financial system. The NPRM also references specific MBaer personnel who allegedly facilitated illicit activity, including money laundering, sanctions evasion, and the deliberate concealment of information from FINMA. The Administration’s rationale for taking action under Section 311 without taking action against the individuals, is unclear, particularly given the recent focus on individual accountability, as reflected in an increase in Office Foreign Assets Control enforcement actions targeting individuals, among other dynamics.[6]
• The NPRM devotes significant attention to MBaer’s alleged exposure to Russian illicit activity as compared to its discussion of Venezuela and Iran, assessing that MBaer has facilitated money laundering efforts enabling certain Russian individuals to engage in sanctions evasion. The NPRM’s characterization of the illicit activity is consistent with the recent escalation of financial pressure against Russia, including OFAC’s October 2025 designation of Russian oil companies Open Joint Stock Company Rosneft Oil Company and Lukoil OAO.[7]
• With respect to Venezuela, the NPRM focuses largely on activity that resulted in the dissipation of assets of the Venezuelan public: MBaer’s key role in handling funds tied to oil corruption schemes involving Venezuela’s state oil company, Petróleos de Venezuela, SA, that “deprived the Venezuelan public of the benefits of these illegal sales.” This focus is consistent with the Administration’s recent focus on safeguarding Venezuelan assets for the benefit of the people, including the recent limited relaxation of sanctions there and the protection of accounts that hold “Foreign Government Deposit Funds.” See “Safeguarding Venezuelan Oil Revenue for the Good of the American and Venezuelan People.“[8]

The NPRM’s discussion of MBaer’s facilitation of Iranian money laundering and terrorist financing is consistent with the Administration’s “maximum pressure” campaign against Iran, including the recent OFAC actions targeting, among other things, Iran’s shadow fleet, and in furtherance of President Trump’s National Security Presidential Memorandum.[9]